24 Sep

LIVING PAYCHECK TO PAYCHECK?

General

Posted by: Tracy Price

LIVING PAYCHECK TO PAYCHECK?

Well you are not alone. In fact over 30% of Canadians are struggling, big time, according to a Rainy Day Survey by BMO. We see it all the time in our business and suspect that reality is more like 40 to 50 per cent. 27 % have savings that would last only a month or less. 40% have less than $5,000 saved. The majority would likely have to borrow to meet an emergency. Conclusion? Too many Canadians are totally vulnerable to financial collapse and many are already under water, meaning they spend more than they earn.

So what is the ideal emergency fund you ask? The answer is six months of income. How realistic is that for most Canadians? It would appear to be an impossible task right? Further investigation reveals that the answer lies with poor cash flow management, something which most of us know little about.

So how did we get into such a sad state of affairs? Well back in the 1950’s credit cards were non-existent. People could only buy things from savings. Fast forward to the 80’s and 90’s everything changed. The availability of credit and buying things ‘on time’ exploded with easy credit and with most women working, so two incomes instead of one. Look honey we can now afford a bigger home, a cottage, more vacations and a brand new car every four years…lol.

We are encouraged at every turn to consume, consume, consume because it’s good for the economy AND THE BIG BANKS who continue to amass record profits, largely at the expense of consumers who find themselves unable to pay off high interest credit cards, loans and lines of credit, the latter which is the more recent vehicle to dupe us into more debt.

Did you know that Financial Problems are now the number one reason, ahead of infidelity, for divorce. Yes it’s true!

You are a good person, you are honest and you work hard but you can’t make ends meet. If you are at the financial brink or feeling you are about to crash, please do not despair.

There is a total answer that we will reveal in next week’s article. It is not Debt

2 Sep

FIRST TIME FEEDING FRENZY BY BANKS

General

Posted by: Tracy Price

 

First time home buyers are such easy prey for the banks. They know so little and if the bank can put them in a mortgage that keeps them in debt, they have done their job. Maximizing profits on the little guy is what the banks are all about. One of their favourite products to push is the cash back mortgage. Flashing $15,000 is so enticing to a newbie who buys a $300,000 house. “Wow get into a house with no money where do I sign?”, the new clients say. The bank may discuss the pitfalls. But it is more likely glossed over in the fine print. With cashback mortgages , the rate is much higher pay, as much as

5.34% on a five year, compared to a competitive 5 year fixed at 2.99% with us right now.

But that’s not the worst part. There is never a three month penalty on these cashback mortgages if you ever attempt to pay them out early. An interest rate differential (the licence to steal your equity by the bank because of the insidious way it is calculated) is always triggered. Beyond that if you get out of a cashback mortgage you have to pay back all or some of money that was advanced in the first place. The statistics are all in the bank’s favour….over half of mortgages in Canada never make it to maturity, due to marital breakdown, selling and purchasing again, relocation of jobs, too much debt and a myriad of other reasons. So the bank makes billions off of these types of mortgages because half don’t make it to the end. They know it. They push them on unsuspecting, uninformed first time home buyers usually young people just starting out in life. Geez and if you can’t afford to pay us all of our money back, ‘the bank’, will figure out how to blend your rate with a higher rate. Oh, we will leave the never ending bank blending story to another day.

Another bank tactic is simply to give the client fixed rate mortgage, higher than the competitors, namely us the mortgage brokers. They will plant fear in the new homebuyer’s head , by saying things like they (meaning us ) could go out of business and you won’t have your mortgage. Your bank will always be here but they won’t. Just fear mongering so they can justify charging newbies higher interest on their mortgages. Now with this bank fixed rate comes their famous claw back of any so called ‘discount’ they have given the poor first time homebuyer should they decide to exit early. All the major banks are using an inflated posted rate for calculating a penalty. And as we said earlier, the banks know that half of all mortgages they set up will trigger a penalty and those penalties are double and triple what other