We have word that the Canadian bond market rates are going up, which means mortgage rates will follow suit. If you are shopping for a mortgage, try to get a commitment issued asap.
Ross
Tuesday, December 29, 2009
Tuesday, December 22, 2009
Ottawa mulling mortgage rule changes
This rumour has got traction. It sounds like it will come to pass and that the government is trying to pre sell the notion in the court of public opinion. If you or your children are planning a low downpayment purchase transaction soon, with a long amortisation period, (30-35 years), now would be a good time to do so. Here is an article from CBC 's website, with input from Canadian Press.
Ottawa mulls tighter mortgage rules
Ottawa is considering new measures to tighten mortgage standards and prevent would-be homebuyers from taking on more debt than they can afford.
Finance Minister Jim Flaherty said in an interview with CTV he's worried about people piling up debt while interest rates are low and then getting into trouble when interest rates rise, as they inevitably must.
Finance Minister Jim Flaherty says he worries about Canadians taking on too much debt. (CBC)As a result, the Conservative government is considering increasing the minimum down payment from five per cent "to a higher figure," he said, and Ottawa may also reduce the amortization period from a maximum of 35 years "to something less."
Twenty-five-year mortgages used to be the norm, until lenders started making 30-, 35- and 40-year mortgages available to stimulate demand. In mid-2008, the Department of Finance moved to trim the maximum paydown period to 35 years and to require a minimum five per cent down payment for new federally insured mortgages.
Even so, 18 per cent of Canadian mortgages are for terms longer than 25 years, and 10 per cent are amortized over 35 or 40 years, a recent Scotiabank report estimated.
The average price of a resale home in Canada hit $337,231 in November, the Canadian Real Estate Association said last week. That's 19 per cent higher than the depressed levels of a year earlier.
Flaherty's comments echo Bank of Canada governor Mark Carney, who last week urged consumers to get their financial houses in order to prepare for when the central bank inevitably raises its key policy rate from its current emergency record low of 0.25 per cent.
Word that Ottawa might step further into the red-hot real estate market had housing watchers buzzing Monday.
"You could basically shut down 25 per cent of the market," CIBC economist Benjamin Tal told CBC's The Lang and O'Leary Exchange. "It's going to be significant because we're talking about a lot of money that took advantage of those rates."
"What the Bank of Canada and Finance Department are saying is that people are abusing these rates, but they need to be careful not to risk this fragile recovery."
Though he admits more lending caution would be prudent, he advocates Ottawa be wary of anything as drastic as a hard cap of 30-year amortizations, or minimum 10 per cent down payments, for example.
"If you want to do it, do it in a gradual way that you do not kill housing [because] housing is the only thing ticking in this market," he said. "The timing is tricky."
With files from The Canadian Press
Ottawa mulls tighter mortgage rules
Flaherty and Carney getting nervous
Last Updated: Monday, December 21, 2009 | 10:17 PM ET Comments317Recommend95
CBC News
Ottawa is considering new measures to tighten mortgage standards and prevent would-be homebuyers from taking on more debt than they can afford.
Finance Minister Jim Flaherty said in an interview with CTV he's worried about people piling up debt while interest rates are low and then getting into trouble when interest rates rise, as they inevitably must.
Finance Minister Jim Flaherty says he worries about Canadians taking on too much debt. (CBC)As a result, the Conservative government is considering increasing the minimum down payment from five per cent "to a higher figure," he said, and Ottawa may also reduce the amortization period from a maximum of 35 years "to something less."
Twenty-five-year mortgages used to be the norm, until lenders started making 30-, 35- and 40-year mortgages available to stimulate demand. In mid-2008, the Department of Finance moved to trim the maximum paydown period to 35 years and to require a minimum five per cent down payment for new federally insured mortgages.
Even so, 18 per cent of Canadian mortgages are for terms longer than 25 years, and 10 per cent are amortized over 35 or 40 years, a recent Scotiabank report estimated.
The average price of a resale home in Canada hit $337,231 in November, the Canadian Real Estate Association said last week. That's 19 per cent higher than the depressed levels of a year earlier.
Flaherty's comments echo Bank of Canada governor Mark Carney, who last week urged consumers to get their financial houses in order to prepare for when the central bank inevitably raises its key policy rate from its current emergency record low of 0.25 per cent.
Proceed with caution: CIBC
Word that Ottawa might step further into the red-hot real estate market had housing watchers buzzing Monday.
"You could basically shut down 25 per cent of the market," CIBC economist Benjamin Tal told CBC's The Lang and O'Leary Exchange. "It's going to be significant because we're talking about a lot of money that took advantage of those rates."
"What the Bank of Canada and Finance Department are saying is that people are abusing these rates, but they need to be careful not to risk this fragile recovery."
Though he admits more lending caution would be prudent, he advocates Ottawa be wary of anything as drastic as a hard cap of 30-year amortizations, or minimum 10 per cent down payments, for example.
"If you want to do it, do it in a gradual way that you do not kill housing [because] housing is the only thing ticking in this market," he said. "The timing is tricky."
With files from The Canadian Press
Monday, December 21, 2009
Mortgage rule changes ahead?
Toronto — The Canadian Press Published on Monday, Dec. 21, 2009 6:28AM EST Last updated on Monday, Dec. 21, 2009 11:53AM EST
CTV says Ottawa is considering raising the minimum down payment
for home buyers as well as reducing the amortization period in order to stop some consumers from taking on too much debt.In an interview with CTV Question Period, to be aired next week, Finance Minister Jim Flaherty says the measures will be taken if there's evidence of excessive demand in the housing market.
Flaherty says the new measures would target consumers “who are taking on obligations that they will not be able to handle in the future when the interest rates
do rise.”He says the likely measures the government will take is to increase the size of the down payment
from 5 per cent “to a higher figure” and to reduce the amortization period “from a maximum of 35 years to something less.”Those measures would increase the monthly payments, making it more difficult for some people to take on a mortgage and purchase a home, without having to increase the interest rate.
Last week, the central bank warned that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements
Wednesday, December 16, 2009
Canadians in debt deeper than ever before
Canadians deeper in debt than ever before
Encouraged by low interest rates, household debts have risen, but economists say they are manageable
Madhavi Acharya-Tom Yew
Business Reporter
Published On Tue Dec 15 2009
A new report from Statistics Canada carries a sober message: collectively, Canadians are deeper in debt than ever before.
But economists say record-low interest rates mean that debt loads are still manageable and will likely improve as the economy begins to recover from the recession.
The StatsCan report, issued Monday, comes on the heels of a stern warning about rising debt issued last week by the Bank of Canada.
Surging stock markets pushed up Canadians' net worth in the third quarter, StatsCan said.
The S&P/TSX Composite Index rose 9.8 per cent in the third quarter. That's on top of a 19 per cent gain in the previous three months.
Household net worth, the value of families' assets such as cars, homes, savings accounts and investments, minus what they owe, reached $5.72 trillion at the end of September. That's an increase of 2.3 per cent, marking two quarters of gains after three consecutive drops.
But household debt, mainly mortgages and consumer credit, rose from July to September as Canadians rushed to take advantage of low interest rates. Personal sector liabilities rose to $1.41 trillion, up 1.6 per cent.
"Falling mortgage rates, along with increased sales of existing homes and renovations, sustained increases in mortgage demand," StatsCan said. "Strength in auto purchases led to a further increase in consumer credit."
The result is a record debt-to-income ratio of 145 per cent, the agency said. That means for every $100 of income, Canadians owe $145.
The central bank has made a pledge to stand pat on interest rates until June 2010 to preserve the nascent economic recovery that is taking root. Still, the Bank of Canada warned last week that rising debt levels will make Canadian households more vulnerable when interest rates do go up.
"All this time the Bank of Canada was urging banks to lend. Now it's saying slow down a little," said Benjamin Tal, senior economist with CIBC World Markets. "The Bank of Canada is trying to remind people those are emergency interest rates that will rise. It's not a matter of if, but when. The theme is to be prudent."
Despite the increase in borrowing, the household debt-to-net worth ratio is edging downward as the asset gains offset the increase in liabilities, said David Onyett-Jeffries, an economist with the Royal Bank of Canada's RBC Economics. "It's showing that households aren't as over-leveraged, especially compared with U.S. households."
The debt-to-income ratio in the U.S. is 175 per cent.
The net worth figures don't capture the full rise in the housing market, Onyett-Jeffries added. Seasonally adjusted existing unit sales and average prices are up 11.8 per cent and 7.1 per cent, respectively.
Economists also expect to see the debt-to-income ratio improve in the coming year as interest rates rise and the economy recovers.
Household per capita net worth is now $168,800, below the peak of $179,000 in the second quarter of 2008, Statistics Canada said.
Canada's national net worth, which includes business and government assets and liabilities, fell 1.3 per cent to $5.89 trillion as governments and consumers took on more debt, the report said.
Encouraged by low interest rates, household debts have risen, but economists say they are manageable
Madhavi Acharya-Tom Yew
Business Reporter
Published On Tue Dec 15 2009
A new report from Statistics Canada carries a sober message: collectively, Canadians are deeper in debt than ever before.
But economists say record-low interest rates mean that debt loads are still manageable and will likely improve as the economy begins to recover from the recession.
The StatsCan report, issued Monday, comes on the heels of a stern warning about rising debt issued last week by the Bank of Canada.
Surging stock markets pushed up Canadians' net worth in the third quarter, StatsCan said.
The S&P/TSX Composite Index rose 9.8 per cent in the third quarter. That's on top of a 19 per cent gain in the previous three months.
Household net worth, the value of families' assets such as cars, homes, savings accounts and investments, minus what they owe, reached $5.72 trillion at the end of September. That's an increase of 2.3 per cent, marking two quarters of gains after three consecutive drops.
But household debt, mainly mortgages and consumer credit, rose from July to September as Canadians rushed to take advantage of low interest rates. Personal sector liabilities rose to $1.41 trillion, up 1.6 per cent.
"Falling mortgage rates, along with increased sales of existing homes and renovations, sustained increases in mortgage demand," StatsCan said. "Strength in auto purchases led to a further increase in consumer credit."
The result is a record debt-to-income ratio of 145 per cent, the agency said. That means for every $100 of income, Canadians owe $145.
The central bank has made a pledge to stand pat on interest rates until June 2010 to preserve the nascent economic recovery that is taking root. Still, the Bank of Canada warned last week that rising debt levels will make Canadian households more vulnerable when interest rates do go up.
"All this time the Bank of Canada was urging banks to lend. Now it's saying slow down a little," said Benjamin Tal, senior economist with CIBC World Markets. "The Bank of Canada is trying to remind people those are emergency interest rates that will rise. It's not a matter of if, but when. The theme is to be prudent."
Despite the increase in borrowing, the household debt-to-net worth ratio is edging downward as the asset gains offset the increase in liabilities, said David Onyett-Jeffries, an economist with the Royal Bank of Canada's RBC Economics. "It's showing that households aren't as over-leveraged, especially compared with U.S. households."
The debt-to-income ratio in the U.S. is 175 per cent.
The net worth figures don't capture the full rise in the housing market, Onyett-Jeffries added. Seasonally adjusted existing unit sales and average prices are up 11.8 per cent and 7.1 per cent, respectively.
Economists also expect to see the debt-to-income ratio improve in the coming year as interest rates rise and the economy recovers.
Household per capita net worth is now $168,800, below the peak of $179,000 in the second quarter of 2008, Statistics Canada said.
Canada's national net worth, which includes business and government assets and liabilities, fell 1.3 per cent to $5.89 trillion as governments and consumers took on more debt, the report said.
Monday, December 7, 2009
Interest rates to stay low till mid 2010 at least
Ottawa — Reuters Published on Sunday, Dec. 06, 2009 10:57AM EST Last updated on Sunday, Dec. 06, 2009 4:56PM EST
The Bank of Canada is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth will speed up in the fourth quarter after a disappointing third-quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.
All 12 of Canada's primary securities dealers, surveyed by Reuters after the jobs report Friday, forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year.
The bank releases its rate decision and accompanying statement at 9 a.m. ET Tuesday.
Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.
“They will lean over backward to make their conditional forecast come true,” said David Laidler, an economist with the C.D. Howe Institute.
“What they might start doing between now and June or July, is they might start making more and more public noises about the need to raise interest rates immediately afterward. That's the kind of thing you'll see but not in this announcement,” he said.
Others think the bank's job will be to dampen any speculation that it will abandon its zero-rate policy at the earliest opportunity.
“We expect the bank to attempt to temper early rate hike expectations at next Tuesday's policy announcement,” said Sheryl King, head of Canadian economics and strategy at Bank of America Merrill Lynch.
The Bank of Canada will be pleased with the November job gains, not just because its prophecy of a robust 3.3 per cent fourth quarter may be fulfilled but because it lessens the bank's concerns about the strong Canadian dollar hindering a robust recovery.
The Bank of Canada is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.
Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth will speed up in the fourth quarter after a disappointing third-quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.
All 12 of Canada's primary securities dealers, surveyed by Reuters after the jobs report Friday, forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year.
The bank releases its rate decision and accompanying statement at 9 a.m. ET Tuesday.
Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.
“They will lean over backward to make their conditional forecast come true,” said David Laidler, an economist with the C.D. Howe Institute.
“What they might start doing between now and June or July, is they might start making more and more public noises about the need to raise interest rates immediately afterward. That's the kind of thing you'll see but not in this announcement,” he said.
Others think the bank's job will be to dampen any speculation that it will abandon its zero-rate policy at the earliest opportunity.
“We expect the bank to attempt to temper early rate hike expectations at next Tuesday's policy announcement,” said Sheryl King, head of Canadian economics and strategy at Bank of America Merrill Lynch.
The Bank of Canada will be pleased with the November job gains, not just because its prophecy of a robust 3.3 per cent fourth quarter may be fulfilled but because it lessens the bank's concerns about the strong Canadian dollar hindering a robust recovery.
Friday, December 4, 2009
Bullish outlook for real estate
Residential real estate sales should recover in almost all major Canadian cities by the end of 2009, while average prices should post new records in an improved economic climate, according to a new housing report.
The Re/Max Housing Market Outlook survey for 2010 predicts the uptick in sales will be lead by an anticipated 45 per cent increase in Greater Vancouver, while Ottawa and Quebec City are expected to hit historic highs in the number of homes sold.
The report also says average prices are expected to improve in 65 per cent of markets as economic performance picks up.
Eighty-three per cent of markets are expecting sales to increase over 2009 levels while housing values are predicted to rise in 91 per cent of Canadian centres in 2010. The remaining markets are predicted to match 2009 levels.
The average price of a home is also expected to go up in the future, rising two per cent to $325,000.
The Re/Max report examined residential real estate trends in 23 markets.
This article was originally published in the Globe and Mail online December 04, 2009
sales should recover in almost all major Canadian cities by the end of 2009, while average prices should post new records in an improved economic climate, according to a new housing report.The Re/Max Housing Market
Outlook survey for 2010 predicts the uptick in sales will be lead by an anticipated 45 per cent increase in Greater Vancouver, while Ottawa and Quebec City are expected to hit historic highs in the number of homes sold.The report also says average prices are expected to improve in 65 per cent of markets as economic performance picks up.
Eighty-three per cent of markets are expecting sales to increase over 2009 levels while housing values are predicted to rise in 91 per cent of Canadian centres in 2010. The remaining markets are predicted to match 2009 levels.
The average price of a home is also expected to go up in the future, rising two per cent to $325,000.
The Re/Max report examined residential real estate
trends in 23 markets.Mississauga — The Canadian PressPublished on Thursday, Dec. 03, 2009 9:07AM ESTLast updated on Thursday, Dec. 03, 2009 10:42AM EST
This article was originally published in the Globe and Mail online December 04, 2009
Wednesday, December 2, 2009
One more year of strength in the housing market
Thanks to Steve Ladurantaye, of the Globe and Mail, for the following article
Globe and Mail Update Published on Tuesday, Dec. 01, 2009 10:10AM EST Last updated on Tuesday, Dec. 01, 2009 7:00PM EST
A recovery in the Canadian housing market
, which was “as V-shaped as you can be,” has been based on fundamentals, although TD Economics warns that things could get carried away if the recent enthusiasm continues.Sales and average prices have recovered from the recession, with each 5-per-cent higher than their previous peak set in late 2007 as of the end of October. Prices had pulled back 12 per cent through the recession.
“Viewing this sharp two-year cycle as a blip is misleading,” the bank's economists wrote in a report Tuesday. “The price adjustment in the downturn was partly warranted by fundamentals, which leaves the current market value
in a state of mild over-valuation similar to that of late 2007.”The economists concluded current prices were not too high, but they did warn that “current market momentum has the potential to lead to significant price overshoot.”
The next year should see the market transition to a more balanced situation, with higher prices drawing more supply. And as houses become more expensive, fewer will be willing to engage in pricey bidding wars.
“By 2011, housing and the overall economy will experience role reversal,” they concluded. “While the economy will strengthen, resale housing market conditions
will weaken.”Addendum from Ross Taylor
The above view of housing prices dovetails with the prevailing view that interest rates have at most one more year at these very low levels. If and when rates rise, this will dampen the enthusiasm of many home buyers.
Tuesday, December 1, 2009
Money tips for couples
Larry MacDonald
Published on Monday, Nov. 30, 2009 6:19AM EST Last updated on Monday, Nov. 30, 2009 6:32PM EST
This article is the third in a series on personal finance and investing at different stages of your life. As some issues may overlap the different stages of life, they could be covered in a prior or subsequent article.
Money tips for engaged and married couples
After starting a career, the next life-cycle stage to begin for many people is marriage. Some say it is the most important in terms of financial success. No, they don't mean marrying someone wealthy (although this wouldn't hurt!). What they are referring to is financial compatibility between two individuals.
“Probably my best financial move has been choosing a spouse with similar money habits and views on personal finances,” says Scott McKibbon, a do-it-yourself investor in Hamilton, Ontario. “This seems to be particularly important in this day and age as broken marriages have destroyed more personal balance sheets than poor markets.”
Here are 10 tips to help sort through the financial risks and rewards of married life.
1. It takes two to tango. As a married person, one needs to realize they are not saving and investing just for themselves. Their spouse will likely have a different tolerance for risk and that should be taken into account.
| The Invest for Life series: |
York University professor Moshe Milevsky, a leading expert in financial mathematics, came to the conclusion his personal exposure to stocks should be leveraged by 300 per cent to offset the predominately bond-like nature of his personal wealth (tenured job and pension plan).
“Are you out of your mind?” was his wife's reaction (as quoted in the November issue of the Journal of Financial Planning). And so Mr. Milevsky went with a much lower level of leverage.
2. Set compatible goals. Also realize that one's spouse may have different financial objectives, and compromise is in order on this count as well. On Tim Stobb's blog, Canadian Dream: Free at 45, a recent post recounts a frugal husband's attempt to interest his wife in buying a Tumbleweed Tiny House, which range from 65 to 800 square feet in living space.
The husband thought they could live in such a tiny house since they had no plans for children. His wife responded with: “I will not live in a garden shed, no matter how cool you think it is.” The solution settled upon in the end was a thousand-square-foot townhouse.
3. Talk about money, even if it hurts. Some spouses don't like to compromise and may hide what they are doing with the family finances. They don't communicate and that is when money issues can really spiral toward the tragedy of separation and divorce.
In Jonathan Chevreau's financial novel, Findependence Day , the central character, Jamie, decides to borrow $60,000 – without telling his wife – to invest in stocks. But after taking the plunge, the market crashes hard. When his wife finds out about the losses, she tells her husband: “I can't believe you'd be so stupid. That is the last straw.” A while later, Jamie receives an envelope from his wife's lawyers requesting a split.
4. Two heads are better than one. But marriage, of course, is not all sacrifice and strife. A team working together can accomplish more than the individual members separately. “The other huge success I've had is finding a partner who enjoys taking part in our financial decisions,” declares Brad Ferris, the author of the blog: Triaging My Way to Financial Success.
He illustrates with an example. “As I mentioned in a post a while ago about investing in the stock of Reitmans Canada, my partner's shopping experience and insights into their products … helped me see a different side of the fundamentals than what any analyst could pass on.”
5. No ‘I do's' without a financial chat first. It is no revelation that money issues are a leading cause of martial discord and dissolution. So head them off before getting married (if one is still at the stage of clubbing around). Don't be blinded by those beefy biceps and a twinkle in the eye. Look for extremes in financial behaviour before saying “I do.” For a guide, check out the “lighthearted” Valentine quiz from the Australian Securities & Investments Commission.
Here's a sampling on what to look for: Is your prospective partner up most the night trading oil futures on margin or do they keep “banknotes in the freezer, some gold bullion in the underwear drawer, and regard bank deposits as high-risk?” Do moths fly out of their wallet on the rare occasion they are forced to open it or “have they already spent more than the gross domestic product of a small nation?”
6. Get educated. For Emil Saumier, divorce was the worse thing that happened to him financially. He never paid much attention to the intricacies of family law in his province or realized how much marriage breakdown could devastate one's financial situation. “I really think I would have been better prepared if I had been better educated in finance,” says Mr. Saumier, the owner of a martial-arts school in Ottawa.
Christine Van Cauwenberghe, director of tax and estate planning with Investors Group in Winnipeg, would likely agree. She observes that family law can indeed hold some surprises. For example, “In a few provinces the marital home is shareable even if acquired prior to the time of marriage.” Her book, Wealth Planning Strategies for Canadians: 2010 , points out other surprises that lurk in family legislation.
7. Know thy spouse-to-be. “It is surprising how many couples have never discussed finances before their wedding,” notes Brenda MacDonald, an independent financial counsellor living in Victoria. In the June, 2009, issue of Canadian MoneySaver, she offers a comprehensive checklist of topics that engaged couples should discuss before walking down the aisle. They include: financial goals (and how to reach them), where to invest savings, and debts brought into the marriage.
She also recommends comparing credit scores. If both persons have similar scores, above 750, shout “Hurray for us!” If one or both score lower than 650, the caution flag is waving. Not only could it signal an irresponsible personality but it may diminish the couple's ability to borrow for a house, car and other items.
8. Use your spousal status as a benefit. Marriage presents many opportunities to protect assets and enhance after-tax income. An entrepreneur can protect the family house from creditors by putting it in the other spouse's name. And they can split income by employing a spouse. Other income-splitting moves include contributions to a spousal registered retirement savings plan (RRSP).
The higher income spouse should pay household expenses while the lower income spouse uses their income for investing. If he or she doesn't have enough funds, a loan from the higher income spouse (at “prescribed” loan rates) can be invested without attribution back to them. As well, contributions can be made to the other spouse's tax-free savings plan (TFSA) without attribution.
9. A prenup shouldn't be such a dirty word. Second and blended marriages raise additional considerations. Notably, one or both parties in such unions may be bringing substantial assets to the marriage. A properly executed prenuptial agreement can provide protection (family law may have grey areas and can be changed). And in blended families (both spouses have kids from previous marriages), prenups and other arrangements may be necessary for ensuring an estate is left behind for one's children from the previous relationship.
10. Those who save together, stay together. A study, Fatal (Fiscal) Attraction: Spendthrifts and Tightwads in Marriage, conducted by researchers at Wharton Business School and Northwestern University, found that spendthrifts and tightwads tended to marry each other. Go figure. Anyway, that was not a good thing, the study said, because the greater the difference on the spending continuum, the more likely the marriage would encounter turbulence.
This martial tendency is all the more reason for engaged and married couples to zero in on the financial aspect of their relationship. One step often recommended for resolving disputes is to have separate and joint chequing accounts. But, above all, communication is the crucial factor.
“During marriage, I think one of the most important things that spouses need to do in dealing with financial issues is to communicate,” advises Ms. Van Cauwenberghe. “If the couple is experiencing financial difficulty, there are usually ways of resolving those issues, but many couples simply choose to ignore them and allow [problems like] debt to pile up. In many cases the solution is to speak to a neutral third party. A financial adviser is often able to state the obvious things that spouses don't want to admit to each other.”
Year end tax planning
Time is running out to qualify for Ottawa's $1,350 home renovation tax credit, and you have even less time to make use of year-end tax strategies. So here a few timely reminders.
You have until Feb. 1 to spend $10,000 on qualifying items or work to earn the maximum renovation credit, and more than $1,000 to get any of the 15 per cent tax credit. Qualifying expenditures include repairs, alterations and preventative maintenance for a home or apartment suite you own, including the cost of labour, materials and equipment rentals.
Remember that labour costs for home repairs, as well as the cost of heating your home, will be going up next July 1 when Ontario adopts the harmonized sales tax.
But going into debt to renovate, insulate or replace a furnace – particularly credit card debt – will negate some of the value of the tax credit.
Anyone who bought his or her first home after Jan. 27, 2009, will be eligible for a $5,000 federal tax credit, which would put $750 back in your pocket, but only temporarily because you now own a house.
Anyone who turns 71 this year should remember to transfer money from their registered retirement savings plans to a registered retirement income fund or annuity before the end of the year. If you don't, the RRSP will be taxed as though it was all withdrawn as income in a single year.
If you turned 55 or older this year you will now be eligible to convert locked-in money from a former employer's pension plan to a life income fund (LIF), and start withdrawing a prescribed minimum or maximum as regular income.
It would be better to wait as long as possible before age 71 to start spending retirement savings, particularly in the wake of the investment losses of 2008 and the low rate of interest paid on investments.
But these are hard times and Ontario does permit a one-time withdrawal of 25 per cent of a new LIF for whatever reason. After Jan. 1, Ontario will also permit a second withdrawal of 25 per cent or an initial withdrawal of 50 per cent.
In addition, you may apply for withdrawals from locked-in accounts that have small amounts of money or if you are in financial hardship. See www.fsco.gov.on.ca for details or call the Financial Services Commission of Ontario.
Executors and heirs should be aware that losses on registered savings that occurred after the death of a person in 2009 or later, and before distribution of the estate, may be carried back and counted as a reduction in the taxable income that would have been declared on behalf of a deceased person who had no surviving spouse or dependant.
Things that must be done before Dec. 31 to qualify for a tax refund next spring include making charitable and political donations, paying post-secondary tuition, buying monthly or annual transit passes, spending up to $500 per child for eligible sports and fitness programs and paying charges for a safety deposit box.
If you operate a business, the end of the year is a good time to purchase computers, cars and other equipment for which you may claim a capital cost allowance. The entire cost of a computer purchased after Jan. 27, 2009, and before February 2011 may be written off in the first year.
Parents and other relatives who want to see children in their family obtain a post-secondary education have until the end of the year to contribute to a registered education savings plan. You will not get a tax refund, but the child will qualify for a federal grant equal to 20 per cent of the contribution, or substantially more if the parent contributing has a low income.
To make the most of that government assistance, be careful to consider the sales and management fees that will be deducted from investments. Bonds and other safe investments are not earning much of a return these days.
Anyone investing outside of an RRSP should be careful about buying mutual funds that may pay a taxable year-end distribution of recent investment gains.
If you have sold investments at a profit this year, and have no losses to carry forward from previous years, consider selling investments before late December that would produce an off-setting capital loss.
Be sure to wait more than 30 days before repurchasing the investment sold at a loss or it will be considered a superficial loss. There may be situations where a superficial loss might be advantageous to a couple, but seek professional tax advice first.
One thing you may be asked to consider at this time of year is any pitch for tax shelters built around some charitable activity.
You may get a tax refund before Canada Revenue gets around to checking out the scheme, but tax authorities have made clear they will eventually hunt down and disallow every one of them.
We wish to thank James Daw of the Toronto Star for writing the above column November 10, 2009. It has been reprinted here verbatim
jdaw@thestar.ca
You have until Feb. 1 to spend $10,000 on qualifying items or work to earn the maximum renovation credit, and more than $1,000 to get any of the 15 per cent tax credit. Qualifying expenditures include repairs, alterations and preventative maintenance for a home or apartment suite you own, including the cost of labour, materials and equipment rentals.
Remember that labour costs for home repairs, as well as the cost of heating your home, will be going up next July 1 when Ontario adopts the harmonized sales tax.
But going into debt to renovate, insulate or replace a furnace – particularly credit card debt – will negate some of the value of the tax credit.
Anyone who bought his or her first home after Jan. 27, 2009, will be eligible for a $5,000 federal tax credit, which would put $750 back in your pocket, but only temporarily because you now own a house.
Anyone who turns 71 this year should remember to transfer money from their registered retirement savings plans to a registered retirement income fund or annuity before the end of the year. If you don't, the RRSP will be taxed as though it was all withdrawn as income in a single year.
If you turned 55 or older this year you will now be eligible to convert locked-in money from a former employer's pension plan to a life income fund (LIF), and start withdrawing a prescribed minimum or maximum as regular income.
It would be better to wait as long as possible before age 71 to start spending retirement savings, particularly in the wake of the investment losses of 2008 and the low rate of interest paid on investments.
But these are hard times and Ontario does permit a one-time withdrawal of 25 per cent of a new LIF for whatever reason. After Jan. 1, Ontario will also permit a second withdrawal of 25 per cent or an initial withdrawal of 50 per cent.
In addition, you may apply for withdrawals from locked-in accounts that have small amounts of money or if you are in financial hardship. See www.fsco.gov.on.ca for details or call the Financial Services Commission of Ontario.
Executors and heirs should be aware that losses on registered savings that occurred after the death of a person in 2009 or later, and before distribution of the estate, may be carried back and counted as a reduction in the taxable income that would have been declared on behalf of a deceased person who had no surviving spouse or dependant.
Things that must be done before Dec. 31 to qualify for a tax refund next spring include making charitable and political donations, paying post-secondary tuition, buying monthly or annual transit passes, spending up to $500 per child for eligible sports and fitness programs and paying charges for a safety deposit box.
If you operate a business, the end of the year is a good time to purchase computers, cars and other equipment for which you may claim a capital cost allowance. The entire cost of a computer purchased after Jan. 27, 2009, and before February 2011 may be written off in the first year.
Parents and other relatives who want to see children in their family obtain a post-secondary education have until the end of the year to contribute to a registered education savings plan. You will not get a tax refund, but the child will qualify for a federal grant equal to 20 per cent of the contribution, or substantially more if the parent contributing has a low income.
To make the most of that government assistance, be careful to consider the sales and management fees that will be deducted from investments. Bonds and other safe investments are not earning much of a return these days.
Anyone investing outside of an RRSP should be careful about buying mutual funds that may pay a taxable year-end distribution of recent investment gains.
If you have sold investments at a profit this year, and have no losses to carry forward from previous years, consider selling investments before late December that would produce an off-setting capital loss.
Be sure to wait more than 30 days before repurchasing the investment sold at a loss or it will be considered a superficial loss. There may be situations where a superficial loss might be advantageous to a couple, but seek professional tax advice first.
One thing you may be asked to consider at this time of year is any pitch for tax shelters built around some charitable activity.
You may get a tax refund before Canada Revenue gets around to checking out the scheme, but tax authorities have made clear they will eventually hunt down and disallow every one of them.
We wish to thank James Daw of the Toronto Star for writing the above column November 10, 2009. It has been reprinted here verbatim
jdaw@thestar.ca
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