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No ugly downturn for condo market, even in Toronto: report

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TARA PERKINS – REAL ESTATE REPORTER

The Globe and Mail

Vancouver Mortgage BrokerA new report from the Conference Board of Canada predicts that the much-watched condo sector will avoid an ugly downturn, even in Toronto.

Economists and policy-makers are keeping a close eye on condos, especially in the country’s most populous city, where cranes dot the sky. A number of economists say that too many units are being built, a development that would put pressure on prices. The Bank of Canada has highlighted the risks that this market could pose to the economy.

Condo sales plunged in most Canadian cities last year, and are expected to be down again this year.

But Wednesday’s report, which was done for mortgage insurer Genworth Canada, argues that the market will not sink too low, and will be propped up in part by population growth and modest employment gains.

While the report does say that higher mortgage rates could cool things off later this year or early next year, it adds that “a flood of foreclosures, and subsequent sharp supply increases, is simply not in the cards.”

Homeowners are taking advantage of low interest rates to pay down their mortgages, offering a cushion when it comes time for them to renew, it says.

“Markets in Toronto and Montreal are cooling, but we think they will avoid major downturns, partly because, on the demand side, demographic requirements remain decent,” the report says. “Also, the banks will continue to require builders to have healthy pre-sale levels before advancing construction financing, keeping supply somewhat in check.”

Vancouver’s condo market, it notes, is already well into a slowdown.

“While regional markets clearly vary in strength, all will benefit from an expanding population and a rising share of condominium-loving empty-nesters aged 55 or more,” the report adds.

It also says that “weak pricing will help affordability.” It predicts that principal and interest payments will drop in at least five major cities this year, led by a 2.5 per cent decline in Victoria.

While payments are expected to rise in Alberta, the report says that Calgary and Edmonton are still the most affordable condo markets when local incomes are taken into account, with mortgage payments taking only about 9 per cent of household income. “By contrast, we expect payments to eat up roughly 20 per cent of Vancouver incomes,” it says.

The report forecasts a 0.5 per cent drop in Vancouver resale condo prices this year, to $364,593. Victoria and Montreal are also expected to record price declines, with Montreal’s average resale price dropping 0.7 per cent to $265,344. Toronto is forecast to see its average price remain flat this year, at $305,239.

The report predicts that all cities will see some price growth, ranging from 1.4 to 3.6 per cent, in 2014.

101 Series: Money Lessons for Kids – Ask Bruce Coleman, Vancouver Mortgage Broker

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Money lessons for kids – Friday, August 23, 2013

Vancouver Mortgage BrokerIt’s that time of year again. With summer winding down and vacations coming to an end, many families are getting ready for the back-to-school season.
For kids, this means settling back into the school routine — and for many parents, it means back-to-school shopping.
These shopping excursions are a great opportunity to chat about money with your kids.
It’s important to teach financial concepts from a young age to help kids learn money management and good financial habits.
While you’re getting organized for the first day, consider involving your kids in the process.
If you have a budget for school supplies, share it with your child to explain that when you spend money on one item, that means there is less available for another.
Go through flyers together to look for back-to-school sales, and discuss the costs of similar products made by different brands.
There are many ways to teach financial basics to your kids.
Parents can find more tips and resources in the “Teaching children about money life” event at itpaystoknow.gc.ca.

Lucie Tedesco
Acting commissioner
Financial Consumer Agency of Canada
Ottawa

B.C. First-Time New Home Buyers’ Bonus – Consult with a Vancouver Mortgage Broker

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B.C. First-Time New Home Buyers’ Bonus

Vancouver Mortgage BrokerIf you just bought first home in Vancouver between February 21, 2013 and before April 1, 2013 you could be eligible for a one time B.C. First Time Home Buyers Bonus for as much as $10,000!

Who Qualifies For the First Time Home Buyers’ Bonus?

The first requirement that must be met to qualify for this bonus is that you, the buyer, must be an individual who has never owned a home or primary residence before – and that means not just in B.C., but anywhere in the world.

To qualify for this one time bonus you must also meet the following additional qualifications which include:

·         Whether you are single, have a spouse or a common-law partner, or the home purchase involves multiple partners then you and/or your spouse, common law partner or other partners must all be a first time home buyer.

·         The house you purchase or are building must be located in the province of B.C.

·         You must have filed a 2011 resident personal income tax return as a B.C. resident or a 2012 B.C. resident personal income tax return. You will not be eligible for this bonus if you moved to B.C. anytime after December 31, 2012.

·         You must also be eligible for B.C. HST New Housing Rebate, and you must also be using your home as the primary residence.

·         You cannot claim for the bonus if someone else has claimed the bonus for the home as it can only be claimed once.

Which New Homes Are Eligible?

The new home you buy must also meet the following qualifications including:

  • Any newly constructed home or one which has received substantial renovations which you have bought from a builder. The term “substantial renovations” means that 90% or more of the interior must have been removed or replaced.

  • Any home which was built by the owner.

Homes which are eligible for the bonus include both detached and semi-detached homes, townhouses and duplexes, any residential condo unit or residential units in a coop housing unit, and also includes mobile and floating homes.

Qualifications for Constructed and Renovated Homes

For a newly constructed or renovated home to qualify you must also meet the following criteria which includes:

  • You must have a written agreement of purchase and sale during the period on or after February 21, 2012 and before April 1, 2013.

  • The home requires that HST is payable

  • Possession or ownership of the home must be transferred before April 1, 2013.

 For owner-built homes the same written agreement of purchase and sales dates apply, and the home must be substantially completed or occupied before April 1, 2013.

The amount of bonus will be dependent on the income of either the single purchaser or couple, or partners.

To claim the bonus you must first have claimed the B.C. HST Housing Rebate. Once you have done so you can the claim the bonus by completing the Application for the B.C. First-Time Home Buyers Bonus which is also know as the FIN 520 form Bonus Calculation (For single home buyers), or the FIN 520A form if you are a couple.

You will also have to provide proof of tax assessment returns for the applicable years, a copy of the applicable GST/HST Housing Rebate application, and a copy of the signed purchase and sales agreement for the home.

The final due date to apply for the bonus must be on or before March 31, 2015.

How to reduce mortgage penalties – Ask a Vancouver Mortgage Broker

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How to reduce mortgage penalties

Vancouver Mortgage BrokerBacking out of a mortgage early? You probably won’t be able to avoid fees entirely, but you can limit them.

A rise in interest rates appears imminent, so folks with big mortgages might want to lock in the current low rates now! But for some, that means getting out of an existing mortgage early. Trying to discharge your mortgage early comes with a cost. After all, banks are in the business of making money, right? The sad truth is banks can be very greedy when it comes to calculating the interest penalty on a mortgage you’re trying to renew early.

Once upon a time, the standard in the industry was to charge a three-month interest penalty for early discharges. CMHC paved the road for that because they had it written into their policy. But when they removed it back in 1999, they’ve created a feeding frenzy among banks who now want to charge what’s called the Interest Rate Differential: a calculation they can do any way they want because there’s no uniform system among lenders or regulation by the Bank Act.

The idea behind the IRD is to compensate the lender for any loss due to a mortgage being paid out early and then the funds being lent again at a lower rate.

Common practice has banks comparing your interest rate to their current interest rate for the term closest to the amount of time left on your mortgage. So if you had two years and four months left on your mortgage, the bank should be using their three-year rate. But they don’t always do that. Sometimes they use a lower rate they’re offering for the calculation.

Since there’s no rule about which rate to use, they can use any rate they want. With a 2% different between one- and five-year rates, that’s a lot of wiggle room. On a $450,000 mortgage, that 2% would cost you $9,000 in penalty interest.

There is something you can do however. You know that annual prepayment you’re allowed to make on your mortgage? It’s usually between 10% and 20% of your initial mortgage amount. Make sure that your bank has applied that prepayment before they calculate the IRD. While this should be standard practice, banks only do it if you make ‘em!

You could also make it clear to your lender that if they make it painful to renew with them, you’re happy to go shopping to find a new lender for your mortgage. Make sure you’re ready to do some work; don’t just make the threat.

The government knows that banks are making record profits on the backs of average Canadians by playing the renewal penalty game. In fact, they promised three years ago to make the calculation consistent. But promises are easy to make, not so easy to keep, so nothing has changed. You’re going to have to advocate for yourself if you don’t want to be taken to the cleaners.

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LINDA STERN- WASHINGTON — Reuters

Vancouver Mortgage BrokerSome financial advice is so oft-repeated that everyone takes it for granted: You shouldn’t bring debt into retirement. Debit cards are safer than credit cards. Older folks should invest more conservatively. As they used to say on Seinfeld: yadda, yadda, yadda.

The problem is a lot of that is bad advice. At best, it fit a bygone era; at worst, it was never right and is dangerous.

Here is a list of my least favourite financial chestnuts.

“Don’t take a mortgage into retirement with you.”

That may have made sense when interest rates were high but, even after recent hikes, mortgage rates are still close to their historic lows. Anyone who refinanced in recent years is probably paying less for that money than they will on any other loan they could get now or ever again in the future.

Instead of making extra payments to burn the mortgage early, stash those extra dollars in a retirement investment account. Invested prudently, it’s hard to believe that money wouldn’t earn you more than the 3 or 4 per cent you’re paying in mortgage interest.

Having the cash on hand, instead of the paid-up mortgage, could help with retirement expenses down the road when you’re not ready to sell your house but have unexpected expenses. If you think you want to stay in your house through your dotage, paying off a low-rate mortgage slowly while you bank money is a much better solution than paying it off now and finding you need a costly reverse mortgage in the future.

“The older you get, the less you should have invested in the stock market.”

Sixty may not be the new 30, but it isn’t the old 60 either. If you thought you had to withdraw all of your money on the day you retired, you’d have to keep it safe and invested in guaranteed instruments like bank certificates of deposit (issued in the U.S.). If those CDs were paying 11 per cent a year in interest, as they were in the early 1980s, there would be no need to invest in anything else.

Now, depositors are lucky when they don’t have to pay the bank to hold their money. Bond yields are near historic lows and also present the risk that investors will lose value if interest rates rise while they are holding bonds. Furthermore, the average 60-year-old is told to prepare for a retirement that will last 25 or 30 years, so she has some time to invest for the long term. Even if you’re 90, if you plan to leave money to heirs, you aren’t investing for the short term.

With that long a time horizon, you need to keep money invested in stocks, which, over time, still outperform other investments. Large company stocks returned just a shade under 10 per cent a year between 1970 and 2012, a period that covers several market meltdowns.

The old rule of thumb – 100 (or 120) minus your age is the percentage you should keep in stocks – is too conservative for this era.

“A debit card is safer than a credit card.”

That’s only true if “safer” is code for “will protect you from yourself if you’re profligate.” If you have the discipline to charge only what you can afford to pay off, you can’t beat a credit card. You’ll get incentives like cash rewards. If the number gets stolen, your issuer will make you whole. If you lose control of your debit card, your bank is probably going to make you whole, too, but your checking account could be a mess for a while. And you aren’t going to hit overdraft fees with a credit card.

“Be practical about your college major.”

The latest thinking on college is that you shouldn’t spend a lot of money to go get a degree in communications or social work. Maybe that’s true. But don’t change your major to engineering if you really want to be a dancer or a kindergarten teacher. Some of the most successful business professionals studied philosophy (famed Fidelity fund manager Peter Lynch, financier George Soros and ex-TimeWarner head Gerald Levin) or English (Mitt Romney, former Disney head Michael Eisner and National Cancer Institute head Harold Varmus).

Spend less by going to a less expensive college, and follow your bliss.

Editor’s Note: An earlier online version of this article incorrectly referred to mortgage interest being tax deductible. That reference has been removed.

Bridge financing can ease closing day stress – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Bridge financing could have saved the day last month when a series of disasters on closing day caused three related real estate deals to fall apart.

Vancouver Mortgage BrokerPublished on Fri Aug 16 2013

Bridge financing could have saved the day last month when a series of disasters on closing day caused three related real estate deals to fall apart.

When a bank pulled the financing from one buyer at the last minute, it caused all the deals to fall apart because each one was contingent on the previous seller getting the money to close their own sale. This is what real estate lawyers refer to as a train wreck.

If bridge financing had been used, it is likely that this could have all been avoided. In a typical bridge situation, the buyer closes their purchase a few days before their sale. They go to their bank and ask for a loan, to pay for the entire purchase, with the understanding they will repay the loan as soon as their sale closes. The interest is usually prime plus 3 or 4 per cent per day. By closing a few days early, the interest cost is typically $100 to $200.

One of the benefits of closing a few days early is that you can slowly move into your new home. I have heard plenty of stories where buyers are moving out and moving in on the same day and while they are packed up at 1 p.m., they cannot get into the new home until after 6 p.m., resulting in additional moving costs, since you typically pay by the hour.

In my client’s situation, we were fortunate to be able to extend their purchase agreement because our seller did not need the money on closing to buy another property. Still, the sellers could have cancelled the contract and sued for the deposit and any losses that they may have incurred in any resale of the home. In order to extend the closing, my clients had to pay interest on the money owed to the seller during the period of the extension. They also had to pay extra moving and storage costs because their furniture had already been picked up from their home when they found out that the deals could not close.

You might wonder how a lender can cancel a loan at the last minute. You would be surprised how often this happens. When a buyer is pre-approved for financing, or even given a commitment from a lender on a specific purchase, it is still conditional on the buyer satisfying all of the lender’s conditions before the closing. This could include providing proof of income, employment letters, as well as proof that they have the entire down payment from their own resources, and are not receiving it from third parties. If there is any suspicion on the part of the lender that their conditions have not been properly satisfied, they have the right to cancel the loan, even at the last minute.

If you are considering selling and buying on the same day, first ask your seller whether they need the money to buy another property. Ask the same question of the person buying your home. If the answer to either question is yes, consider closing your purchase a few days earlier and obtaining bridge financing so that you do not become involved in your own train wreck.

Buying and selling on the same day is normally a stressful experience even if it all works out, but by taking extra precaution, you can avoid unwelcome surprises later, provided that everyone is properly prepared in advance.

Mark Weisleder is a Toronto real estate lawyer. Contact

Top 6 real estate scams – and how to avoid them – Consult with Bruce Coleman, Vancouver Mortgage Broker

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CHRISTOPHER MYRICK

The following article is from Canadian Real Estate Wealth Magazine.

Vancouver Mortgage Broker

Foreclosure home and for sale sign hangs on house.
(Andy Dean/Photos.com)

Fraud and investment scams abound at all levels of the real estate market – whether it be a contractor who charges hundreds of dollars for work not done to an “investment agent” who embezzles hundreds of millions – protecting yourself can require a measure of vigilance and legwork, but it can also come down to exercising skepticism and common sense

1. Title fraud.
Although relatively rare, one of the most devastating frauds for property owners is title fraud. This type of fraud starts with identity theft. The scammer will use false documents to pose as the property owner, registers forged documents transferring a property to his or her name, and then gets a new mortgage against the property. After securing a mortgage or line of credit, the criminal takes the cash and leaves the owner on the hook for future payments.

While an identity thief may get a forced discharge of an existing mortgage, it is generally held that fraudsters are more likely to go after homes that are free and clear of mortgages: these have fewer complications and they tend to be held by older people who may be less aware about how to guard against identity theft. Criminal Services Intelligence Canada notes that homeowners who rent out their homes or who have no existing mortgages on high-value properties are more vulnerable to being targeted in title-fraud schemes as a large mortgage can be secured with the property.

Sale of a fraudulently held property may also occur, but it is much rarer as potential buyers are unlikely to consider a purchase without inspecting a property.

Title insurance” is the best protection against this type of fraud. As well as protecting against title fraud, it also guards a new owner from against existing liens against a property’s title (such as unpaid debts from utilities, mortgages and unpaid property taxes), encroachment issues (a structure on a property needs to be removed because it is on your neighbour’s property) and errors in surveys and public records.

The other key to prevent being a victim is to engage in protection of personal data (see box). Taking precautions can also mitigate against more common types of identity theft –related losses (such as credit card fraud. As well as protecting their own information, investors and homeowners should ensure that trusted parties are taking proper security measures.

Canada’s Office of the Privacy Commissioner of Canada (OPC) launched a probe in 2009 after mortgage brokerages reported 14 data breaches in the space of a few months. Among the OPC’s findings: some brokers stacked files containing personal information on the floor or on desks within accessible offices; brokers lacked shredders capable of securely destroying documents; credit reports were sometimes obtained prior to consent from a client being recorded and there was no ability for clients to opt out of secondary uses of their personal information, such as marketing; there was a lack of training about privacy responsibilities.

In addition to title fraud by strangers, there have been cases where fraud has been perpetrated by spouses and business partners. For instance, one spouse may mortgage a property for their own benefit by using an accomplice to impersonate their spouse. Fraud can also occur through breach of an undertaking, where the lawyer or notary fails to pay off and obtain a discharge of a mortgage, instead absconding with the funds that had been intended to be used to pay an existing mortgage.

2. Foreclosure and home-equity fraud.
Criminals and criminal enterprises can take advantage of property owners who find themselves in a cash crunch, being short on funds for liabilities such as mortgage payments or other purposes. Two common scams that exploit a victim’s need for cash are foreclosure fraud and home-equity fraud.

The Financial Consumer Agency of Canada (FCAC) warns that foreclosure fraud occurs when a property owner who is having difficulty making mortgage payments is approached by a criminal offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title. However, in contrast to real debt consolidation programs, the FCAC says, the criminal will keep all the payments made by the owner and ignore bills and taxes. The criminal then remortgages the property and absconds with the money, leaving the former property owner without the home but still in debt.

Cash-crunched property owners or investors seeking can be vulnerable to other scams or unscrupulous behaviour to tap equity. There is always risk when leveraging properties, but a legitimate bank, broker or private lender should be forthright when explaining risks. However, those looking to borrow on equity should be alert for less scrupulous lenders, such as those who invite owners to embellish their application by exaggerating income, down payment or property assessment value sources in order to secure a larger loan.

CSIC has noted that organized crime groups often pretend they are buying or selling properties that are much larger, newer or more recently renovated than other homes in the area. These properties receive fraudulently inflated values through illicit property flipping from which a large mortgage is obtained. When the criminals deliberately default on the mortgage, financial institutions and end buyers are left with an overvalued mortgage (or worse, former property owners are without holdings, in debt and possibly implicated in the fraud).

Criminal activity can also be in the form of money laundering, a process where dirty money from criminal activity is transformed into “clean” assets. Financial Transactions and Reports Analysis Centre of Canada(FINTRACT), the agency responsible for tracking money laundering, warns that criminal or terrorist groups will purchase big-ticket items such as real estate for laundering purposes. FINTRACT requires that real estate brokers, Realtors, developers and others involved in suspicious transactions (such as large all-cash purchases or “buyer unseen” transactions).

3. Online rental/sale scams.
In these scams, rental property is advertised (usually at low costs) on online classified sites like Craigslist or Kijiji. The ads use information and photos describing the property that has been “scraped” from legitimate ads, such as those on the MLS. A scammer will impersonate the landlord, property manager or estate agent and will respond to emails and calls from prospective tenants. The scammer indicates he or she is unable to meet a prospective renter at the property, and instead proposes a meeting off site to exchange keys, sign a tenancy agreement and collect rental deposits. Victims may only learn they’ve been duped when they show up at a property to discover that it is already occupied.

Provincial and regional Realtor and real estate associations have warned members to be alert for this type of fraud, which has been common in major markets, but there is little a property owner can do to prevent image or data scraping. Property owners can search for the addresses of their units on search engines and they can use services like Google Image Search to help discover if a scraped picture from MLS or another online source is being used illicitly. Property owners should also digitally watermark any photos they use in rental ads, including business contact details and website.

While rental scams are common, online classified advertising and social media have also been used for investment scams and property fraud. Things to be alert for in such listings include claims of urgency, such as “must sell now,” promises of high returns or “low-cost/no-cost” financing. These sort of claims are usually too good to be true, and they also can be prevalent in off-line scams.

4. Property investment seminars and courses.
Educating yourself about property investment can be essential for success, but prospective investors should be alert and do their research on seminar providers. There are legitimate speakers and seminars that provide beneficial information, others exist primarily to take money from the credulous … and there are some that are in between.

Prospective investors should be cautious when it comes to seminars or courses that offer investor education. The value of the information provided can vary wildly, as can the costs. Some may be free, with sponsorship by a company or association, others will charge money, ranging from nominal amounts to upwards of tens of thousands of dollars. Still, even if someone pays for a course that provides basic information that could be found through a simple Internet search, it does not mean that the seminar was a scam. A rip-off may charge excessive prices but be completely illegal, but a scam typically involves legal wrongdoing, misrepresentation or fraud.

One common type of seminar is designed to hook buyers into “sure-fire” investments that are promoted by the seminar hosts. Potential investors may be invited to these seminars through an ad in a newspaper or magazine, a phone call, an email or other method. These seminars may include a motivational speaker, an “investment expert” or a “self-made millionaire.”

Some seminars may make money by charging attendance fees, selling highly priced reports or books and selling property and investments through high-pressure sales tactics. Real estate investment companies holding the seminars may suggest attendees follow high-risk investment strategies, such as borrowing huge sums of money, to buy into an investment offered by the seminar hosts.

Some companies have been known to fly prospective investors to view real estate developments. This could be a tactic to pressure commitment to a deal without time to obtain independent information or advice. Investors sometimes end up having to pay for their travel and accommodation if no investment is made.

The relatively booming market in Alberta has been a hotspot for these scams, and the Alberta Security Commission has issued a list of “red flags” to look out for when approaching a property investment seminar (see box). The basic advice, be skeptical of claims and do your due diligence before committing any money to an expensive course or investment.

5.Home Improvement scams.
As well as being cautious about big investments, property owners should be alert to smaller-level scams. The Canadian Council of Better Business Bureaus listed “rogue door-to-door contractors” as among their top 10 scams of 2013.

These operators may come with unsolicited offers and deals that are too good to be true. Typical approaches include: offers to seal or repave a driveway, or a roofer who can work cheaply using leftover material from a previous job. BBB warns that fraudulent “contractors” will use high pressure sales tactics and offers of a one-time deal to entice consumers.

The BBB advises that property owners take the time to do due diligence. Property owners should get the company, name, address and ensure that all verbal promises are backed by a written contract. A scammer may ask for pay in cash or via a cheque and offer to come back at another time to finish the job. After cash changes hands, the BBB says, “you will probably never see them or your money again.”

Generally, for the hiring of any contractor, it is advisable for a property owner to check references and ensure that the company or person has a reputation for fair dealing and quality work. This can be good sense when dealing with legitimate contractors, ensuring that you are likely to receive such as on-time and on-budget estimates.

“It could never happen to me”
Perhaps the biggest mistake people make when it comes to scams is to think “it could never happen to me.” It’s a common perception that investment scams are fly-by-night operations that prey on the gullible and operate in dark, unmonitored corners of the economy. That may be often true, but some of the most outrageous scams have operated openly, under regulatory supervision and have swindled the best and brightest.

Bernard L. Madoff Investment Securities, for instance, ran a Ponzi scheme that was regulated by the U.S. Securities and Exchange Commission and swindled corporate luminaries such as DreamWorks’ CEO Jeffrey Katzenberg, New York property developer Larry Silverstein, director Stephen Spielberg as well as global banks and hedge funds. This was a high-profile entity, watched by regulators (though poorly watched) and many of the investors were highly successful and brilliant people.

Closer to home, in 2011-12 there have been more than 20 Alberta-focused property investment firms that have folded or been shuttered resulting in shareholder losses of up to C$20-billion. Many of these firms advertised openly, were licensed by regulators such as the Alberta Securities Commission (ASC) and they offered RRSP-eligible investments. Dozens of lawsuits have been filed against and shareholder groups have formed to seek compensation. It’s up to the courts and regulators to decide on the finer details of each case: some were high-risk ventures that went bust, while others may have used misleading practices, and the ASC has fined others for outright fraud.

What to do if scammed 
Federal and provincial law can provide some recourse to Canadians who are victims of a fraud or scam, although losses are almost never made whole and the recovery process can be long and burdensome. For scams involving out-of-country or overseas investments, the recovery of losses may be impossible… and the perpetrators may not be prosecuted.

From Canadian Real Estate Wealth Magazinea monthly publication focused on building value through property investment, covering topics such as values and trends, mortgages, investment strategies, surveys of regional markets and general tips for buyers and sellers.

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By Gail Vaz-Oxlade | MoneySense

Vancouver Mortgage BrokerWhere to draw the line between providing for your children and saving for your own retirement.

Remember the line in Spiderman where Aunt May says, “You do too much…you’re not Superman, you know?”

Some parents think they’re Superman. Determined to set their children off on the right foot, they commit buckets of money to helping them achieve their goals. From private schools to smartphones, laptop computers and post-secondary education, even home down payments and on-going financial support, parents will dig deep to buffer their young’uns. Hey, I’m all for meeting your responsibilities to your children. After all, they didn’t ask to be born (or so I’ve been told). But some parents take “helping the kids” a tad too far.

When it comes to using your financial resources smartly, one of the trickiest aspects to master is balancing priorities. You want to provide a great place for your family to live. You want to create opportunities for your kids to have mind-expanding experiences. You want to plan for the future.

Planning for the future includes saving for school, getting the mortgage paid off, having some money set aside for retirement.

But how will you decide how much goes where?

Lesson No. 1 has to be living within your means. If you’re taking on any debt at all, that’s got to be the first to go. And if that means no more piano lessons, so be it. Some things are a little important; some things are very important. Being consumer debt free falls into the latter category. And living within your means is the basis for all the rest.

When it comes to deciding whether to pay down the mortgage or set aside savings, the timeframe you’re looking at has the greatest impact. When you took on the mortgage, you chose an amortization of, let’s say, 25 years. As long as that amortization gets you to mortgage free before you retire, stick with the mortgage payments and build your savings for the future. Unless you plan to sell your home (and you don’t care all your assets are tied up in one investment), you have to build savings so you not only have a place to live, but money to eat.

If you’re starting in your 20s save 6% a year throughout your life and you should be fine. Starting in your 30s, you’ll have to go with the much-quoted 10%. In your 40s you’ll have to set aside 18%. Have a group retirement savings plan at work? That counts towards your savings. Have a plan at work you’re not using? Are ya nuts?

Now that you’re paying your rent or your mortgage and you’re setting aside money for your own future so you don’t have to be beholding to your children you can consider paying hockey fees, saving for their future school needs, picking up dinner on the fly as you rush from piano lessons to karate.

If you’ve got the resources to cover it all, go right ahead. You’ve taken care of the big details, so have the life you want. It’s your money to spend as you wish. If you don’t have the resources to have it all at once, you’re going to have to make some choices.

Saving for school is your best bet. The free money (the Canada Education Savings Grant) the government is willing to give you should be incentive enough. You put in $100 a month (you can actually put in up to $2,500 a year to get the max) and the government will give you the equivalent of $20 a month. Where else are you going to get a 20% return on your money? And that’s before you’ve invested it. For more on this, check outMoneySense’s updated RESP Calculator.

Then you’ll have to decide whether you’re going to pay for hockey and piano or soccer and summer camp. Yup, you’re going to have to choose.

While it’s great that you want to give kids everything you can, doing so at the cost of your own future is short-sighted and, well, dumb. Propping them up when they become young adults and refuse to live within their means is even dumber.

And yet so many parents do just that, supplementing their children’s incomes, paying their rent, letting them tap their accounts or their credit as they wish. Imagine letting your kid blow through thousands of dollars of your money because you feel sorry about their “hard life.” Hey, we all have had hard times; learning that we can live through them is an important lesson.

Each of us has to learn lesson No. 1: Live within our means. That includes Darling Daughter and Sonny Boy. If you keep sticking your hand in your wallet, draining your own resources to keep them afloat and you’ll both end up sunk.

Balancing priorities and deciding where to best use our financial resources is a very important step in managing our money, yet so few people stop to think about it. Instead we knee-jerk respond to each call on our wallets. Ultimately, our savings suffer as we seek to keep up with the demand.

Today, stop and think about how you’re using your money. Are you living within your means? Setting aside money for your future needs? Choosing what’s most important over what’s most recently demanded?

Home Series: Six renovations that don’t add value to your home – Ask Bruce Coleman, Vancouver Mortgage Broker

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Vancouver Mortgage BrokerEvery homeowner must pay for routine home maintenance, such as replacing worn-out plumbing components or staining the deck, but some choose to make improvements with the intention of increasing the home’s value. Certain projects, such as adding a well thought-out family room – or other functional space – can be a wise investment, as they do add to the value of the home. Other projects, however, allow little opportunity to recover the costs when it’s time to sell.

Even though the current homeowner may greatly appreciate the improvement, a buyer could be unimpressed and unwilling to factor the upgrade into the purchase price. Homeowners, therefore, need to be careful with how they choose to spend their money if they are expecting the investment to pay off. Here are six things you think add value to your home, but really don’t.

1. Swimming Pools
Swimming pools are one of those things that may be nice to enjoy at your friend’s or neighbour’s house, but that can be a hassle to have at your own home. Many potential home buyers view swimming pools as dangerous, expensive to maintain and a lawsuit waiting to happen. Families with young children in particular may turn down an otherwise perfect house because of the pool (and the fear of a child going in the pool unsupervised). In fact, a would-be buyer’s offer may be contingent on the home seller dismantling an above-ground pool or filling in an in-ground pool.

An in-ground pool costs anywhere from $10,000 to more than $100,000, and additional yearly maintenance expenses need to be considered. That’s a significant amount of money that might never be recouped if and when the house is sold.

2. Overbuilding for the Neighborhood
Homeowners may, in an attempt to increase the value of a home, make improvements to the property that unintentionally make the home fall outside of the norm for the neighbourhood. While a large, expensive remodel, such as adding a second story with two bedrooms and a full bath, might make the home more appealing, it will not add significantly to the resale value if the house is in the midst of a neighbourhood of small, one-story homes.

In general, home buyers do not want to pay $250,000 for a house that sits in a neighbourhood with an average sales price of $150,000; the house will seem overpriced even if it is more desirable than the surrounding properties. The buyer will instead look to spend the $250,000 in a $250,000 neighbourhood. The house might be beautiful, but any money spent on overbuilding might be difficult to recover unless the other homes in the neighbourhood follow suit.

3. Extensive Landscaping
Home buyers may appreciate well-maintained or mature landscaping, but don’t expect the home’s value to increase because of it. A beautiful yard may encourage potential buyers to take a closer look at the property, but will probably not add to the selling price. If a buyer is unable or unwilling to put in the effort to maintain a garden, it will quickly become an eyesore, or the new homeowner might need to pay a qualified gardener to take charge. Either way, many buyers view elaborate landscaping as a burden (even though it might be attractive) and, as a result, are not likely to consider it when placing value on the home.

4. High-End Upgrades
Putting stainless steel appliances in your kitchen or imported tiles in your entryway may do little to increase the value of your home if the bathrooms are still vinyl-floored and the shag carpeting in the bedrooms is leftover from the ’60s. Upgrades should be consistent to maintain a similar style and quality throughout the home. A home that has a beautifully remodelled and modern kitchen can be viewed as a work in project if the bathrooms remain functionally obsolete. The remodel, therefore, might not fetch as high a return as if the rest of the home were brought up to the same level. High-quality upgrades generally increase the value of high-end homes, but not necessarily mid-range houses where the upgrade may be inconsistent with the rest of the home.

In addition, specific high-end features such as media rooms with specialized audio, visual or gaming equipment may be appealing to a few prospective buyers, but many potential home buyers would not consider paying more for the home simply because of this additional feature. Chances are that the room would be re-tasked to a more generic living space.

5. Wall-to-Wall Carpeting
While real estate listings may still boast “new carpeting throughout” as a selling point, potential home buyers today may cringe at the idea of having wall-to-wall carpeting. Carpeting is expensive to purchase and install. In addition, there is growing concern over the healthfulness of carpeting due to the amount of chemicals used in its processing and the potential for allergens (a serious concern for families with children). Add to that the probability that the carpet style and colour that you thought was absolutely perfect might not be what someone else had in mind.

Because of these hurdles, wall-to-wall carpet is something on which it’s difficult to recoup the costs. Removing carpeting and restoring wood floors is usually a more profitable investment.

6. Invisible Improvements
Invisible improvements are those costly projects that you know make your house a better place to live in, but that nobody else would notice – or likely care about. A new plumbing system or HVAC unit (heating, venting and air conditioning) might be necessary, but don’t expect it to recover these costs when it comes time to sell. Many home buyers simply expect these systems to be in good working order and will not pay extra just because you recently installed a new heater. It may be better to think of these improvements in terms of regular maintenance, and not an investment in your home’s value.

The Bottom Line
It is difficult to imagine spending thousands of dollars on a home-improvement project that will not be reflected in the home’s value when it comes time to sell. There is no simple equation for determining which projects will garner the highest return, or the most bang for your buck. Some of this depends on the local market and even the age and style of the house. Homeowners frequently must choose between an improvement that they would really love to have (the in-ground swimming pool) and one that would prove to be a better investment. A bit of research, or the advice of a qualified real estate professional, can help homeowners avoid costly projects that don’t really add value to a home.

No more tightening needed after measures averted housing bubble: Flaherty – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Vancouver Mortgage BrokerFinance Minister Jim Flaherty said he isn’t planning new measures to restrain the country’s housing market because his past four rounds of action have already worked to avoid a bubble.

‘A tale of two markets’: Condominium prices falling while low-rise homes continue to soar

A housing crash based on the type of home you have? Is that really possible?

It certainly didn’t happen that way in the early 1990s. When the real estate market crashed in Toronto, the entire housing sector saw prices plunge. Even commercial real estate tanked in the high-interest rate environment.

Continue reading.

“So far, I’m satisfied that we have a balance in the real estate sector,” Flaherty told reporters in Wakefield, Quebec, at the start of a policy retreat with business leaders. “There are some bumps along the road in Toronto and Vancouver, in particular in the condo markets, but overall, I’m satisfied,”

Flaherty has warned consumers to avoid mortgages that could become unaffordable when borrowing costs rise, after Canadians took on record household debts relative to disposable income.

Flaherty said that “we have been watching the condo market and the housing market very closely for at least five years.” He also said that he does have “contingency plans” he can use if the need arises.

The Bank of Canada has identified household finances as the biggest risk to the domestic economy, while Governor Stephen Poloz has said there are recent signs of a “constructive evolution” in that area.

Flaherty today also reiterated his own commitment to pare the federal budget deficit and spoke out against the extraordinary monetary stimulus seen in the U.S. and Europe.

“We are going to balance the budget without doubt in 2015,” Flaherty said, adding that this will “put Canada in a position of strength” to react to any future global weakness.

Not Fans

“We in Canada haven’t been fans of quantitative easing, unlike the United States and elsewhere,” Flaherty said. “The danger in the longer term to me as a finance minister is inflation.” He said the policy may be discussed at the next meeting of Group of 20 officials.

Canada has been a destination for global bond investors because of the country’s top credit ratings, deficit reduction and stable economy, Flaherty said.

“We can sell anything we produce in Canada around the world, whether it’s in Canadian dollars, U.S. dollars or euros,” Flaherty said in reference to sales of his government’s bonds.

He attributed the record $19-billion divestment of Canadian bonds by foreign investors in June to “some weakness in the Canadian dollar,” without elaborating.

Canada’s dollar depreciated by 1.4% against the U.S. dollar in June following a May decline of 3%. Investors and economists attributed the bond sale to concerns that interest rates will rise as the U.S. Federal Reserve scales back its bond purchases and signs of faster growth in the U.S. and Europe.

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