In March, 2008 I lost my job and couldn’t been able to pay my lease every month. During one of my telephone conversation with company representative that I leased the car from, I was advised to return the car back. So I did. I returned the car with mint condition. A month later I received the letter from the same company informing that they lost all my personal information in the way of transporting to the credit burro. They also worried about as it is against the code of confidentiality and if my personal information goes to bad people they can do an Identity fraud. Another month passed I received invoice notifying that I have to pay to the company $16000 CAD as they sold the car with $14000. When I started my own research in OMVIC regulation I found out that before selling the car company should contact with me and ask my opinion about an offer that they have for the car. (Of course if I knew about the $16000 gap I would take my car back) So now collection agency is terrorizing me always motioning that they will take me to the Court. What should I do please help me with your advice. Thank you very much.
If I understand you correctly, you were going to default on your lease so you returned the car back to them. And now you are being faced with a charge you do not understand.
Allow me to explain, I may be wrong so I would advise to go over your original contract. When terminating your lease early you are responsible for any fees and penalties. This includes a very important factor called the residual value. When you obtained your lease they estimated the residual value of the car, the higher the value the lower your lease payments would have been. However there's a downside to that after voluntarily surrendering your leased vehicle, the bank or leasing company sells it. Usually, the vehicle is sent to a dealer-auto auction. Once the vehicle is sold, the net proceeds are applied to your balance at the time of surrender. This balance is not the same as your lease-end residual balance; it equals the lease-end residual plus the remaining payments on your lease contract.
In short, don't default on a car lease. Especially when car prices have dropped which means your car depreciated much faster over the years.
What you should do now depends on your current financial situation. Your credit score is probably very poor so trying to finance out of it will be difficult and it's ill advised unless you want to make 15-20% interest payments. If you have little assets i would declare bankruptcy, but please do check the rules in your province and know how you would be affected before doing so.
http://www.canadian-money-advisor.ca/threadview/4007.html
Wednesday, January 12, 2011
Thinking about investing in a second house for investment purposes. Have some Q's
What are the investor rules for purchasing an investment single family dwelling?
Does my existing house's rental income count as part of my income qualifications? What about the potential income from the investment house?Does that count to qualify for the mortgage? I know you can't do this for your principal dwelling, but is it different for investment/rental housing?
I know I need a min. 20% down, but if I go only the min 20%, do I still need CMHC mortgage insurance as it is below the 25% level?
I know that all expenses can be written off against rental income, but if I have more expenses than rental income, can I write it off against my employment income? If so, how far (ie how long, how many years) can I do this before CRA deems it an investment not having a reasonable expectation of making a profit, or does that even come into play with real estate?
Yes, existing rental income does count, but only a percentage.
Yes, potential rental income does count, but only a percentage.
20% is the minimum that may waive you from CMHC. However, there are other consideration too. Bank may insist that you need CMHC regardless. One of my friend needs 35% down to waive the CMHC requirement.
Yes, you can write against employment income.
You can claim a loss indefinitely under certain circumstances (far too many variables to answer that the same for everyone) but of course you would not be able to use any portion as principle residence at any time.
i.e. if this is a duplex and you rent out both units and take a loss, then you can claim a loss indefinitely . If you were to live in one unit, then no.
- only part of your current and potential income will be included for qualification purposes
- if you are struggling to qualify under current conditions you probably should forget this idea
- residential real estate is one of the most risky options out there today
- current real estate costs are unsubstantiated and could fall dramatically costing you a fortune
- many other investments let you sleep at night, why get into an investment that could
wake you up with gross and trivial emergencies or have you subsidizing a
deadbeat that you can't evict?
You're willing to part with 100% of your money to gain < 50% back as a deduction?
You are hedging on asset appreciation bailing you out of negative cash flow real estate holdings... good luck with that gamble.
- unless you're prepared to do some unsavory things, big profits may be hard to come by
your deductions will not be denied for failing the 'reasonable expectation of profit' test. its pretty dumb to buy a property that is not instantly cash-flow positive especially at today's extremely low interest rates.
What your lender requires as a downpayment is between you and your lender, including the requirement of CMHC insurance. 20% is the minimum without CMHC insurance at a Canadian chartered bank.
I found this to pose a very interesting question and it ends with cra being able to deny expenses which do not have the "pursuit of profit" in mind.
To go back to the OP, it would depend on what sort of expenses he's claiming. If he's actually reinvesting money into the property and the payoff is when he sells for a large profit later, then it makes sense. As stated before he is losing cash flow in the attempt to reduce taxable income.
Does my existing house's rental income count as part of my income qualifications? What about the potential income from the investment house?Does that count to qualify for the mortgage? I know you can't do this for your principal dwelling, but is it different for investment/rental housing?
I know I need a min. 20% down, but if I go only the min 20%, do I still need CMHC mortgage insurance as it is below the 25% level?
I know that all expenses can be written off against rental income, but if I have more expenses than rental income, can I write it off against my employment income? If so, how far (ie how long, how many years) can I do this before CRA deems it an investment not having a reasonable expectation of making a profit, or does that even come into play with real estate?
Yes, existing rental income does count, but only a percentage.
Yes, potential rental income does count, but only a percentage.
20% is the minimum that may waive you from CMHC. However, there are other consideration too. Bank may insist that you need CMHC regardless. One of my friend needs 35% down to waive the CMHC requirement.
Yes, you can write against employment income.
You can claim a loss indefinitely under certain circumstances (far too many variables to answer that the same for everyone) but of course you would not be able to use any portion as principle residence at any time.
i.e. if this is a duplex and you rent out both units and take a loss, then you can claim a loss indefinitely . If you were to live in one unit, then no.
- only part of your current and potential income will be included for qualification purposes
- if you are struggling to qualify under current conditions you probably should forget this idea
- residential real estate is one of the most risky options out there today
- current real estate costs are unsubstantiated and could fall dramatically costing you a fortune
- many other investments let you sleep at night, why get into an investment that could
wake you up with gross and trivial emergencies or have you subsidizing a
deadbeat that you can't evict?
You're willing to part with 100% of your money to gain < 50% back as a deduction?
You are hedging on asset appreciation bailing you out of negative cash flow real estate holdings... good luck with that gamble.
- unless you're prepared to do some unsavory things, big profits may be hard to come by
your deductions will not be denied for failing the 'reasonable expectation of profit' test. its pretty dumb to buy a property that is not instantly cash-flow positive especially at today's extremely low interest rates.
What your lender requires as a downpayment is between you and your lender, including the requirement of CMHC insurance. 20% is the minimum without CMHC insurance at a Canadian chartered bank.
I found this to pose a very interesting question and it ends with cra being able to deny expenses which do not have the "pursuit of profit" in mind.
To go back to the OP, it would depend on what sort of expenses he's claiming. If he's actually reinvesting money into the property and the payoff is when he sells for a large profit later, then it makes sense. As stated before he is losing cash flow in the attempt to reduce taxable income.
home ownership tax question...
so we are trying to sell our condo, which is our primary residence. we will be dropping the price which will eventually lead to a loss. (buying this place has not really worked out and we really want to get out after staying here for more than 3 years)
can i write off the losses from this transaction with my income? in other words, do i get any tax benefit for the losses i will incur on account of the sale of the condo?
and if i move out into another place, make this an investment property, and sell at a loss... i can probably get the tax benefit????
No, you can not deduct the loss from your income. Because it was your principal residence you will be denied claiming a capital loss.
If you convert to an investment property, the adjusted cost base for determining gain / loss will be the fair market value as of the day you convert it.
It will technically remain a principal residence for taxation purposes until the year end.
can i write off the losses from this transaction with my income? in other words, do i get any tax benefit for the losses i will incur on account of the sale of the condo?
and if i move out into another place, make this an investment property, and sell at a loss... i can probably get the tax benefit????
No, you can not deduct the loss from your income. Because it was your principal residence you will be denied claiming a capital loss.
If you convert to an investment property, the adjusted cost base for determining gain / loss will be the fair market value as of the day you convert it.
It will technically remain a principal residence for taxation purposes until the year end.
ebay question about taxes
hey guys
just got a quick question
so basically im letting my friend use my ebay account/paypal
to post stuff on ebay cause i have over 50+ feedback from 2 years of using ebay
and now hes doing about 12,000 in sales a month
and then he transfers it to my bank account via paypal
and i withdraw it for him
im worried about taxes? as im not claiming it nor is he
what are the possible outcomes as far as taxes goes?
i read that the cra now audit ebay sales
this has been going on for about a month and a half
any info would help
thannks
Yeah eventually you will attract the CRA, and will be asked to provide some sort of accounting between your cost of inputs, and the sales revenue you receive. If you sell >$30k in a year you also have an obligation to register for, and collect GST on the entirety of your sales.
You need to a) stop sharing your eBay account with others (this is a violation of your eBay agreement), and b) tell your friend to start keeping records that can be audited on his own account, or the CRA might just send him a tax assessment for the entirety of his reported eBay sales.
just got a quick question
so basically im letting my friend use my ebay account/paypal
to post stuff on ebay cause i have over 50+ feedback from 2 years of using ebay
and now hes doing about 12,000 in sales a month
and then he transfers it to my bank account via paypal
and i withdraw it for him
im worried about taxes? as im not claiming it nor is he
what are the possible outcomes as far as taxes goes?
i read that the cra now audit ebay sales
this has been going on for about a month and a half
any info would help
thannks
Yeah eventually you will attract the CRA, and will be asked to provide some sort of accounting between your cost of inputs, and the sales revenue you receive. If you sell >$30k in a year you also have an obligation to register for, and collect GST on the entirety of your sales.
You need to a) stop sharing your eBay account with others (this is a violation of your eBay agreement), and b) tell your friend to start keeping records that can be audited on his own account, or the CRA might just send him a tax assessment for the entirety of his reported eBay sales.
Selling Stock Shares on EI
Hi. I'm currently on EI and stocks I've purchased with my previous company is doing well right now.
They were purchased through an employee stock purchase plan. They collected a bit from our checks for a period of time. At the end of the period, they look at the market value at the start and end of the period. We buy at the lowest of those two points.
I'm thinking about selling them (about $18k right now) and wanted to know if I had to report it as earning on EI. I called EI, they didn't know and would have a specialist call me back. But I was hoping to sell today and it's up again.
Thanks in advance.
Investment income is not considered to be employment income.
If you were on welfare then obviously it would be a different story.
If they had a matching % contribution then it would have already been a factor in your income.
They were purchased through an employee stock purchase plan. They collected a bit from our checks for a period of time. At the end of the period, they look at the market value at the start and end of the period. We buy at the lowest of those two points.
I'm thinking about selling them (about $18k right now) and wanted to know if I had to report it as earning on EI. I called EI, they didn't know and would have a specialist call me back. But I was hoping to sell today and it's up again.
Thanks in advance.
Investment income is not considered to be employment income.
If you were on welfare then obviously it would be a different story.
If they had a matching % contribution then it would have already been a factor in your income.
About mortgages, Please help
I have a mortgage with TD. The last mortgage payment day is April 1st 2011.
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
Q2: When do I need to shop around?
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
Thanks for any input.
Great questions and I hope you'll find my answers helpful. I work with TD so remember you can always give us a call at 1-866-222-3456 or come and talk to us at a branch http://www.tdcanadatrust.com/locator/index.jsp
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
If April 1 2011 is your maturity date, then your new term begins on April 2 2011, and your first monthly payment on the new term will be due on May 1, 2011. TD mortgage payments are collected in arrears and not in advance, hence your payment for May 1 2011, will reflect the new term/rate.
Q2: When do I need to shop around?
You will receive a renewal notice 60 days in advance of your maturity. However, I would advise that you meet with your local TD branch, up to 120 days in advance to discuss all your available options.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
When you stay with TD, and opt to renew your mortgage on maturity (not refinance for additional funds), your charge will remain as is. If however, you refinance or take out additional equity (provided you are qualified/approved for the increase) your mortgage charge would be updated to the new collateral mortgage charge.
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
If you refinance for additional funds, where the old charge is replaced with a new collateral charge and you choose to register your collateral charge for more than the approved principal amount of the mortgage, by up to 125% of the property value, you could then increase your future borrowings without having to re-register the charge under certain circumstances. This would save you money on your future refinance activity against the same property.
So in your example:
Your house is worth $400K today and you hold a mortgage of $300k, but you decide to set up a charge for $500K, and in 2014 your property value has increased to $450K and you would like to refinance some additional equity. Provided you qualify for the added amount and the property value supports the new request, your can refinance your mortgage and re-use the collateral charge if the following criteria still applies:
The mortgage was registered with a collateral charge.
The property value supports the new request.
The amount of the collateral charge will support the customer's new lending application request.
The borrowers on the new application match the property and the existing registration.
There has been no subsequent lending on the property.
This eliminates any Solicitor/In-House Registration fees.
And the other benefit is that you can switch between a mortgage and a Home Equity Line of Credit without having to re-register the charge – offering you more flexibility and choice
Best of luck,
Farhaneh Haque, Regional Sales Manager, TD Canada Trust
The last mortgage payment would be the day that the balance is due in full. Should be on your paperwork.
Q2: When do I need to shop around?
Sooner, the better. Preferably, you don't want to be 'under the gun' and forced to accept something that's not optimal.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Maybe. The collateral mortgage change applied to all new mortgages issued by TD, but not renewals of existing ones.
TD might offer you a line of credit for $20k, secured by your house, under a collateral mortgage charge. I would be wary of really having flexibility and choice because if you refinance for 125% property value you will be tied to it because will need to pay that off fully before being able to transfer to another institution.
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
Q2: When do I need to shop around?
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
Thanks for any input.
Great questions and I hope you'll find my answers helpful. I work with TD so remember you can always give us a call at 1-866-222-3456 or come and talk to us at a branch http://www.tdcanadatrust.com/locator/index.jsp
Q1: Which day is the start day of the new mortgage term? April 1 or May 1
If April 1 2011 is your maturity date, then your new term begins on April 2 2011, and your first monthly payment on the new term will be due on May 1, 2011. TD mortgage payments are collected in arrears and not in advance, hence your payment for May 1 2011, will reflect the new term/rate.
Q2: When do I need to shop around?
You will receive a renewal notice 60 days in advance of your maturity. However, I would advise that you meet with your local TD branch, up to 120 days in advance to discuss all your available options.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
When you stay with TD, and opt to renew your mortgage on maturity (not refinance for additional funds), your charge will remain as is. If however, you refinance or take out additional equity (provided you are qualified/approved for the increase) your mortgage charge would be updated to the new collateral mortgage charge.
Q4: If the new mortgage is a collateral one, what benefit I can get? For example the house worth 400k and have 300k mortgage balance left.
If you refinance for additional funds, where the old charge is replaced with a new collateral charge and you choose to register your collateral charge for more than the approved principal amount of the mortgage, by up to 125% of the property value, you could then increase your future borrowings without having to re-register the charge under certain circumstances. This would save you money on your future refinance activity against the same property.
So in your example:
Your house is worth $400K today and you hold a mortgage of $300k, but you decide to set up a charge for $500K, and in 2014 your property value has increased to $450K and you would like to refinance some additional equity. Provided you qualify for the added amount and the property value supports the new request, your can refinance your mortgage and re-use the collateral charge if the following criteria still applies:
The mortgage was registered with a collateral charge.
The property value supports the new request.
The amount of the collateral charge will support the customer's new lending application request.
The borrowers on the new application match the property and the existing registration.
There has been no subsequent lending on the property.
This eliminates any Solicitor/In-House Registration fees.
And the other benefit is that you can switch between a mortgage and a Home Equity Line of Credit without having to re-register the charge – offering you more flexibility and choice
Best of luck,
Farhaneh Haque, Regional Sales Manager, TD Canada Trust
The last mortgage payment would be the day that the balance is due in full. Should be on your paperwork.
Q2: When do I need to shop around?
Sooner, the better. Preferably, you don't want to be 'under the gun' and forced to accept something that's not optimal.
Q3: If I still stay with TD, the new mortgage will become a collateral mortgage, is that right?
Maybe. The collateral mortgage change applied to all new mortgages issued by TD, but not renewals of existing ones.
TD might offer you a line of credit for $20k, secured by your house, under a collateral mortgage charge. I would be wary of really having flexibility and choice because if you refinance for 125% property value you will be tied to it because will need to pay that off fully before being able to transfer to another institution.
TD HELOC: can you still get one that increases as you pay mortgage?
I have read elsewhere on the web that TD used to offer a HELOC whose limit increased concomitantly as you paid down your mortgage. Do they still offer this? My TD lady is not aware of it, but she didn't seem too sure.
What you can do is get a HELOC for 80% of your home's value and within that HELOC create what's called a Fixed Rate Advantage Option (FRAO), which is essentially a mortgage (mortgage rates, mortgage terms/ammortization, closed). As you pay it down, availability on the revolving part of the line of credit increases.
Example:
-Purchase a $300K house, $60K down, $240K on a HELOC.
-Initially the $240K will be revolving at a rate of Prime +1%.
-After the purchase you lock in that $240K to a FRAO with a 25 year ammortization for a 5 year term at a regular mortgage rate
-Each payment you make reduces the balance of that FRAO below $240K, the difference is available on the revolving credit line (just as if you didn't fix it in, if you make a payment on the HELOC, it makes credit available).
What you can do is get a HELOC for 80% of your home's value and within that HELOC create what's called a Fixed Rate Advantage Option (FRAO), which is essentially a mortgage (mortgage rates, mortgage terms/ammortization, closed). As you pay it down, availability on the revolving part of the line of credit increases.
Example:
-Purchase a $300K house, $60K down, $240K on a HELOC.
-Initially the $240K will be revolving at a rate of Prime +1%.
-After the purchase you lock in that $240K to a FRAO with a 25 year ammortization for a 5 year term at a regular mortgage rate
-Each payment you make reduces the balance of that FRAO below $240K, the difference is available on the revolving credit line (just as if you didn't fix it in, if you make a payment on the HELOC, it makes credit available).
Group rrsp, DPSP and pension adjustment
Can someone educated me how this works. Ive read http://www.cra-arc.gc.ca/tx/bsnss/tp.../bx52-eng.html but dont understand.. how to calculate it.
I contribute to a company group rrsp $500 and they match dollar for dollar.
If my employer contributed $500 to the DPSP (deferrred profit sharing plan), it says I will receive a "pension adjustment" and will reduce my next years rrsp contribution limit.
if my annual income is $50,000 my rrsp contribution limit should be $9000 (18% of income). because of the $500 DPSP, it will be reduced to $8500? ($9000-500) am i right?
Let's assume your income was $50,000 in 2009 and that you began participating in the program in 2010.
*
Your 2010 RRSP contribution room is $9,000. In 2010, you contributed $500 to a GRRSP and your employer matches the contribution dollar for dollar.
*
Your employer also contributes $500 to a DPSP.
*
Again your 2010 RRSP contribution room is $9,000. You contributed $500 to an RRSP and your employer contributed $1,000 ($500 as a matching contribution and $500 as a DPSP contribution).
*
Your PA is your employers contributions, or $1,000.
*
At the end of 2010, your carryforward room is $9,000 - $500 (your contribution) - $1,000 (PA) = $7,500.
I contribute to a company group rrsp $500 and they match dollar for dollar.
If my employer contributed $500 to the DPSP (deferrred profit sharing plan), it says I will receive a "pension adjustment" and will reduce my next years rrsp contribution limit.
if my annual income is $50,000 my rrsp contribution limit should be $9000 (18% of income). because of the $500 DPSP, it will be reduced to $8500? ($9000-500) am i right?
Let's assume your income was $50,000 in 2009 and that you began participating in the program in 2010.
*
Your 2010 RRSP contribution room is $9,000. In 2010, you contributed $500 to a GRRSP and your employer matches the contribution dollar for dollar.
*
Your employer also contributes $500 to a DPSP.
*
Again your 2010 RRSP contribution room is $9,000. You contributed $500 to an RRSP and your employer contributed $1,000 ($500 as a matching contribution and $500 as a DPSP contribution).
*
Your PA is your employers contributions, or $1,000.
*
At the end of 2010, your carryforward room is $9,000 - $500 (your contribution) - $1,000 (PA) = $7,500.
Quick question about RBC CC History and what happens to it...
Hi there...
Thanks in advance to all the experts in this forum... I've been able to take advantage of some pretty creative minds in here...
Quick question for you... I've been meaning to upgrade my current RBC Gold Visa card to the Platinum AVION and have been approached a few times by the bank to upgrade, but am concerned that I would lose all my credit history with my older Gold card (12 yr history) if I switch. I understand that it's the length of time that is important for your credit score... I'm sitting around 740 right now and don't want it to drop...
By upgrading the card, will my credit history automatically get transferred over to it, or will it start new? just wondering...
Thanks
if you upgrade your card the accounts will be linked on your report.
for sure you won't lose your history unless you request to close it and then apply for a new card.
Thanks in advance to all the experts in this forum... I've been able to take advantage of some pretty creative minds in here...
Quick question for you... I've been meaning to upgrade my current RBC Gold Visa card to the Platinum AVION and have been approached a few times by the bank to upgrade, but am concerned that I would lose all my credit history with my older Gold card (12 yr history) if I switch. I understand that it's the length of time that is important for your credit score... I'm sitting around 740 right now and don't want it to drop...
By upgrading the card, will my credit history automatically get transferred over to it, or will it start new? just wondering...
Thanks
if you upgrade your card the accounts will be linked on your report.
for sure you won't lose your history unless you request to close it and then apply for a new card.
R9 to R1
Recently one one of my credit card companies agreed to change the R9 rating it gave to the respective account in my credit profile to a R1. Does anyone know, once it has changed to a R1 in the credit profile, how long it takes to improve my credit rating?
That's an unusual change. Generally once the trade line is rated R9 it can't be changed unless the creditor made a big mistake. Make sure you don't fall for any mambo jumbo given to you by a phone rep and that you get this in writing from your credit card company. Such changes typically take 30 to 60 days. Check your profile on Equifax and Transunion in about two months. No need to pay unless you need access to it right away. You can order your report for free by mail.
I will also say thats one of the oddest things ive ever seen or heard of.
It usually takes 4-6months for an account to go to R9 status. That means all phones calls and mailing notices have been ignored and the creditor has no choice but to deem the account uncollectable, or whats internally called a charge-off.
A R9 is much more than than just a negative mark on you the card holder. For the bank its an important process. It moves the delinquent account from accounts receivable ledgers to bad debt/uncollectable ledgers. This must be done in a timely manner (4-6mths) to prevent inflated quarterly earnings by banks as set out by the currency comptroller banking regulations.
So once the R9 is registered its pretty well impossible to have the account reversed. (almost impossible if your story is in fact true)
I would pay very close attention to who you are paying your balance to.
That's an unusual change. Generally once the trade line is rated R9 it can't be changed unless the creditor made a big mistake. Make sure you don't fall for any mambo jumbo given to you by a phone rep and that you get this in writing from your credit card company. Such changes typically take 30 to 60 days. Check your profile on Equifax and Transunion in about two months. No need to pay unless you need access to it right away. You can order your report for free by mail.
I will also say thats one of the oddest things ive ever seen or heard of.
It usually takes 4-6months for an account to go to R9 status. That means all phones calls and mailing notices have been ignored and the creditor has no choice but to deem the account uncollectable, or whats internally called a charge-off.
A R9 is much more than than just a negative mark on you the card holder. For the bank its an important process. It moves the delinquent account from accounts receivable ledgers to bad debt/uncollectable ledgers. This must be done in a timely manner (4-6mths) to prevent inflated quarterly earnings by banks as set out by the currency comptroller banking regulations.
So once the R9 is registered its pretty well impossible to have the account reversed. (almost impossible if your story is in fact true)
I would pay very close attention to who you are paying your balance to.
Making a return on your mortgage in RRSP? Not sure how it works...thoughts?
Below is the article and link...my questions are as follows (I can't see to get my head around it):
1) How does Mortgage and RRSP mix? (if someone can explain the idea below to me in dummy terms...would be appreciated)
2) How does RRSP contribution room come in to play?
May have follow on questions depending on answer.
http://www.theglobeandmail.com/globe...1815416/page2/
Making a return on your mortgage
Now to the question of whether it makes sense to put your mortgage in your RRSP from an investment point of view. If we take all the startup fees mentioned above, we end up with a cost of roughly $1,000 to $2,000 in the first year, assuming a $100,000 mortgage. Essentially, you could have a first-year fee of up to 2 per cent if you decide to pay your mortgage insurance upfront.
The cost looks more attractive in subsequent years, when the $225 annual admin fee works out to a fee of just 0.23 per cent.
These fees tell us that conservative investors earning 2 to 3 per cent in their retirement savings should not find it hard to get a better return from the mortgage-RRSP strategy.
“If you have fixed income in your RRSP and if it’s generating a very low yield, then this may be something worth looking at,” Mr. Tsai said. “The greater the difference, the more economic sense it might make to do this.”
Mr. Wise, the Calgary investment adviser, said the mortgage-RRSP strategy works best if you use the mortgage to replace the bonds and GICs in your portfolio while leaving your holdings in the stock market.
If putting your mortgage in your RRSP leaves you light on equities, take the mortgage payments flowing into your retirement plan and invest them in stocks, funds and so forth. In fact, investing each successive mortgage payment gives you a nice little dollar-cost averaging program.
Making mortgage payments into your retirement plan does not affect your RRSP contribution room. So you can further diversify your retirement savings using the money you annually add to your RRSP, separate from your mortgage.
One of the challenges in putting your mortgage in your RRSP is to find a trustee for the plan. In addition to TD Waterhouse, the online brokerages CIBC Investor’s Edge, RBC Direct Investing, Scotia iTrade and ScotiaMcLeod Direct Investing all allow this. Bank of Montreal says it no longer offers this program. If you have an investment adviser, he or she should be able to find a trust company to hold your mortgage RRSP.
Don’t forget the usual strategizing if you’re putting your mortgage into your RRSP – amortization period, biweekly versus monthly payments and so on. An interesting question arises here: Do you put the priority here on getting your mortgage paid off as quickly as possible, or on building your RRSP?
“If I can get a fixed income investment in my RRSP that will give me 5 per cent, I think I’d want to keep that as long as possible,” Mr. Wise said.
---------
HOW TO DO IT
Investing your registered retirement savings plan in the mortgage on your home is not for everyone, but it can generate steady returns that beat what bonds and term deposits offer.
Step One
Find a bank, investment dealer, trust company that offers this service; some investment advisers may also be able to help you set this up.
Step Two
Tally up fees – expect to pay a set-up fee, an annual mortgage administration fee, legal fees to set up the RRSP mortgage, mortgage insurance fees and possibly discharge fees if you're breaking your current mortgage.
Step Three
Pick mortgage terms. Expect rules guiding the rate you can use, the mortgage terms available and so forth.
Step Four
Use the money you're paying into your RRSP to diversify your RRSP investments, possibly by making regular purchases of stocks or equity funds and ETFs
WHAT YOU SHOULD KNOW
Four things to keep in mind about investing your retirement savings in your mortgage:
1. You can invest RRIF money in your mortgage, but you must have enough cash on hand to fund the required minimum annual RRIF withdrawal.
2. Some banks will allow you to use RRSP money to buy a residential investment property, while others allow this only for an owner-occupied residence.
3. It may be possible to invest in a mortgage on someone else's property.
4. You'll need mortgage default insurance even though you're lending to yourself and even if you have a lot of equity in your home.
sounds like you're confused with all the numbers.
First thing you should know is that if you plan to buy a house with a 200k mortgage and fund it with your rrsp
u need 200k in your rrsp.
there's the hbp which will allow you to loan 20k to help your purchase but this method says forget that i'm going to hold my entire mortgage in my rrsp and pay myself back.
that's the essential the article goes on to list the pros and cons which you should know.
i would highlight in the article it says that if you have to sell your stocks/bonds/whatever yielding 5% then it's probably not a good idea.
2, it wouldn't affect your contribution room.
The basic idea is that you can loan the money you've put in your RRSP to other people to make a return (interest), i.e., loan it to the bank in a GIC, or via bonds to other companies/governments/etc.
With your mortgage, you borrow money from other people and pay them interest to buy a house.
An RRSP mortgage is a way to lend yourself the money to buy a house from your RRSP. You become both the lender and the borrower, and the interest you pay on the mortgage becomes a return for your RRSP.
If you have enough in your RRSP to lend out to cover your mortgage, then the payments you make on that mortgage are treated as, well, payments on your mortgage. They're not "contributions", so you can still contribute to your RRSP on top of the mortgage repayments. From the mortgage side, it's just like if you were paying the mortgage off to the bank -- you have to make your payments every month. On the RRSP side, it's just like if you loaned the money out to anyone else: you expect to get back a stream of interest and principal repayments.
1) How does Mortgage and RRSP mix? (if someone can explain the idea below to me in dummy terms...would be appreciated)
2) How does RRSP contribution room come in to play?
May have follow on questions depending on answer.
http://www.theglobeandmail.com/globe...1815416/page2/
Making a return on your mortgage
Now to the question of whether it makes sense to put your mortgage in your RRSP from an investment point of view. If we take all the startup fees mentioned above, we end up with a cost of roughly $1,000 to $2,000 in the first year, assuming a $100,000 mortgage. Essentially, you could have a first-year fee of up to 2 per cent if you decide to pay your mortgage insurance upfront.
The cost looks more attractive in subsequent years, when the $225 annual admin fee works out to a fee of just 0.23 per cent.
These fees tell us that conservative investors earning 2 to 3 per cent in their retirement savings should not find it hard to get a better return from the mortgage-RRSP strategy.
“If you have fixed income in your RRSP and if it’s generating a very low yield, then this may be something worth looking at,” Mr. Tsai said. “The greater the difference, the more economic sense it might make to do this.”
Mr. Wise, the Calgary investment adviser, said the mortgage-RRSP strategy works best if you use the mortgage to replace the bonds and GICs in your portfolio while leaving your holdings in the stock market.
If putting your mortgage in your RRSP leaves you light on equities, take the mortgage payments flowing into your retirement plan and invest them in stocks, funds and so forth. In fact, investing each successive mortgage payment gives you a nice little dollar-cost averaging program.
Making mortgage payments into your retirement plan does not affect your RRSP contribution room. So you can further diversify your retirement savings using the money you annually add to your RRSP, separate from your mortgage.
One of the challenges in putting your mortgage in your RRSP is to find a trustee for the plan. In addition to TD Waterhouse, the online brokerages CIBC Investor’s Edge, RBC Direct Investing, Scotia iTrade and ScotiaMcLeod Direct Investing all allow this. Bank of Montreal says it no longer offers this program. If you have an investment adviser, he or she should be able to find a trust company to hold your mortgage RRSP.
Don’t forget the usual strategizing if you’re putting your mortgage into your RRSP – amortization period, biweekly versus monthly payments and so on. An interesting question arises here: Do you put the priority here on getting your mortgage paid off as quickly as possible, or on building your RRSP?
“If I can get a fixed income investment in my RRSP that will give me 5 per cent, I think I’d want to keep that as long as possible,” Mr. Wise said.
---------
HOW TO DO IT
Investing your registered retirement savings plan in the mortgage on your home is not for everyone, but it can generate steady returns that beat what bonds and term deposits offer.
Step One
Find a bank, investment dealer, trust company that offers this service; some investment advisers may also be able to help you set this up.
Step Two
Tally up fees – expect to pay a set-up fee, an annual mortgage administration fee, legal fees to set up the RRSP mortgage, mortgage insurance fees and possibly discharge fees if you're breaking your current mortgage.
Step Three
Pick mortgage terms. Expect rules guiding the rate you can use, the mortgage terms available and so forth.
Step Four
Use the money you're paying into your RRSP to diversify your RRSP investments, possibly by making regular purchases of stocks or equity funds and ETFs
WHAT YOU SHOULD KNOW
Four things to keep in mind about investing your retirement savings in your mortgage:
1. You can invest RRIF money in your mortgage, but you must have enough cash on hand to fund the required minimum annual RRIF withdrawal.
2. Some banks will allow you to use RRSP money to buy a residential investment property, while others allow this only for an owner-occupied residence.
3. It may be possible to invest in a mortgage on someone else's property.
4. You'll need mortgage default insurance even though you're lending to yourself and even if you have a lot of equity in your home.
sounds like you're confused with all the numbers.
First thing you should know is that if you plan to buy a house with a 200k mortgage and fund it with your rrsp
u need 200k in your rrsp.
there's the hbp which will allow you to loan 20k to help your purchase but this method says forget that i'm going to hold my entire mortgage in my rrsp and pay myself back.
that's the essential the article goes on to list the pros and cons which you should know.
i would highlight in the article it says that if you have to sell your stocks/bonds/whatever yielding 5% then it's probably not a good idea.
2, it wouldn't affect your contribution room.
The basic idea is that you can loan the money you've put in your RRSP to other people to make a return (interest), i.e., loan it to the bank in a GIC, or via bonds to other companies/governments/etc.
With your mortgage, you borrow money from other people and pay them interest to buy a house.
An RRSP mortgage is a way to lend yourself the money to buy a house from your RRSP. You become both the lender and the borrower, and the interest you pay on the mortgage becomes a return for your RRSP.
If you have enough in your RRSP to lend out to cover your mortgage, then the payments you make on that mortgage are treated as, well, payments on your mortgage. They're not "contributions", so you can still contribute to your RRSP on top of the mortgage repayments. From the mortgage side, it's just like if you were paying the mortgage off to the bank -- you have to make your payments every month. On the RRSP side, it's just like if you loaned the money out to anyone else: you expect to get back a stream of interest and principal repayments.
What's the typical monthly/annual expense for owning a Condo?
Talking about a 1 bedroom + den around 700 sqft or more specifically http://www.studiocondos.ca/vip/
-maintenance fee
-utilities
-property tax
can anyone provide a guestimate? any other fees?
You can rent a 700 sqft condo built within the past 4 years for about 1400 in Toronto with underground subway access.
Condo fees alone at a few places run about $450-500. Add on tax, etc.. if it's eating about $600 total, you may be hard pressed to have a comparable mortgage for $800.. it may be better to rent instead.
My condo is about this size and these three items are 575 per month.
Keep in mind that the cost of property tax, water and electricity may or may not be part of the condo fees.
Make sure you factor in the cost of condo owner's insurance. Mine is about $200/yr.
Condo fees have become hard to compare. Some places include electricity in their condo fee. You've got to read carefully. For that size, I think you're looking at $400-$600 a month in condo fees and utilitiess together. Utilities is hard to gauge. When it's shared, people tend to be more wasteful and as a whole, everyone pays more.
For property tax, it's based on government's tax assessment value of your property. Not sure how much that condo's worth, but I'd expect between 2.5-3.2k a year based on just size.
Other fees to think about
-They charge an arm and some kidneys to replace keys. Take good care of them as you can't simply make a copy of them
-Some condos charge a fee for party room usage
-Public liability insurance. I totally forgot how much this was. $200 a year?
-maintenance fee with annual adjustments most likely a slight increase
-utilities
-property tax
-additional condo/content insurance
-pay-per-use fees (parking fees, party room, elevator moving rental)
-one time special assessments or charges relating to the condo
-extras: parking spot rental, key/garage fobs, lock/key replacement - has to be done by condo corp or approved by the condo corp (in most cases)
Also, if you're comparing rent versus buying a condo, you need to add an amount for interior maintenance of the condo. A landlord will replace the carpets and appliances periodically, while, if you own, you're on the hook. This is an item that is not included in a condo fee, and unfortunately, not even included in many of those rent vs. buy calculators.
Some comments,
Condo Fee: Really depends on how old your condo is and where it is located... older condos cost more to maintain... I've seen fees ranging from $550-770 per month of the same size of condo with similar amenities but varying age and location. If you're condo does not have swimming pool the fees will be slightly cheaper. If you have additional parking your condo fee will be more expensive too.
Property Tax: Can't avoid paying the tax man, but if I remember correctly new condos often quote property tax ~1% of the sales price it is slightly over budget for me but it can be use as a good proxy.
Hydro Bills: Depending on whether if you have separate meters you might have to pay this on top of your condo fee. I have not lived at my place long enough to have a stable read but I hear $50 bucks per month for average use. Make sure you time your heavy appliance use if you're in Ontario due to the recent change in time based energy billing.
Condo Insurance: This is optional, insure your contents and damages from your neighbors. Some people say it is good to get some people say it is waste of money. For me. It helps me lower my car insurance while having condo insured as added benefit so I see why not. This will depend on varying factors such as how far is your place to the nearest fire station, community safety... etc. ~350 per YEAR maybe over estimate but as good budgeting practice you want to have a decent buffer
Banks: Unlike that radio channel game show, unless you pay all your money up front to buy the place, you can't beat the bank. While you're enjoying your place, the bank is also enjoying the interest they reap off you. You can know this by getting pre-approved mortgage quoted so you know how much interest you'll be paying.
Fixes and Renovation: Light bulb goes out, kitchen sink crack... things that are not covered either by Condo Management Corp. or the insurance. Difficult to budget unless you can tell the future of when things will break. If you are willing to pick up that DIY book and learn a thing or two you can save things by doing minor adjustment yourself. Wall mounting a shelf, custom closet unit maybe, just leave the tough stuff to the pro even if you have any doubt about your ability to handle it (i.e. pipes, electric wires... etc)
-maintenance fee
-utilities
-property tax
can anyone provide a guestimate? any other fees?
You can rent a 700 sqft condo built within the past 4 years for about 1400 in Toronto with underground subway access.
Condo fees alone at a few places run about $450-500. Add on tax, etc.. if it's eating about $600 total, you may be hard pressed to have a comparable mortgage for $800.. it may be better to rent instead.
My condo is about this size and these three items are 575 per month.
Keep in mind that the cost of property tax, water and electricity may or may not be part of the condo fees.
Make sure you factor in the cost of condo owner's insurance. Mine is about $200/yr.
Condo fees have become hard to compare. Some places include electricity in their condo fee. You've got to read carefully. For that size, I think you're looking at $400-$600 a month in condo fees and utilitiess together. Utilities is hard to gauge. When it's shared, people tend to be more wasteful and as a whole, everyone pays more.
For property tax, it's based on government's tax assessment value of your property. Not sure how much that condo's worth, but I'd expect between 2.5-3.2k a year based on just size.
Other fees to think about
-They charge an arm and some kidneys to replace keys. Take good care of them as you can't simply make a copy of them
-Some condos charge a fee for party room usage
-Public liability insurance. I totally forgot how much this was. $200 a year?
-maintenance fee with annual adjustments most likely a slight increase
-utilities
-property tax
-additional condo/content insurance
-pay-per-use fees (parking fees, party room, elevator moving rental)
-one time special assessments or charges relating to the condo
-extras: parking spot rental, key/garage fobs, lock/key replacement - has to be done by condo corp or approved by the condo corp (in most cases)
Also, if you're comparing rent versus buying a condo, you need to add an amount for interior maintenance of the condo. A landlord will replace the carpets and appliances periodically, while, if you own, you're on the hook. This is an item that is not included in a condo fee, and unfortunately, not even included in many of those rent vs. buy calculators.
Some comments,
Condo Fee: Really depends on how old your condo is and where it is located... older condos cost more to maintain... I've seen fees ranging from $550-770 per month of the same size of condo with similar amenities but varying age and location. If you're condo does not have swimming pool the fees will be slightly cheaper. If you have additional parking your condo fee will be more expensive too.
Property Tax: Can't avoid paying the tax man, but if I remember correctly new condos often quote property tax ~1% of the sales price it is slightly over budget for me but it can be use as a good proxy.
Hydro Bills: Depending on whether if you have separate meters you might have to pay this on top of your condo fee. I have not lived at my place long enough to have a stable read but I hear $50 bucks per month for average use. Make sure you time your heavy appliance use if you're in Ontario due to the recent change in time based energy billing.
Condo Insurance: This is optional, insure your contents and damages from your neighbors. Some people say it is good to get some people say it is waste of money. For me. It helps me lower my car insurance while having condo insured as added benefit so I see why not. This will depend on varying factors such as how far is your place to the nearest fire station, community safety... etc. ~350 per YEAR maybe over estimate but as good budgeting practice you want to have a decent buffer
Banks: Unlike that radio channel game show, unless you pay all your money up front to buy the place, you can't beat the bank. While you're enjoying your place, the bank is also enjoying the interest they reap off you. You can know this by getting pre-approved mortgage quoted so you know how much interest you'll be paying.
Fixes and Renovation: Light bulb goes out, kitchen sink crack... things that are not covered either by Condo Management Corp. or the insurance. Difficult to budget unless you can tell the future of when things will break. If you are willing to pick up that DIY book and learn a thing or two you can save things by doing minor adjustment yourself. Wall mounting a shelf, custom closet unit maybe, just leave the tough stuff to the pro even if you have any doubt about your ability to handle it (i.e. pipes, electric wires... etc)
Young sister received cheque. Don't have bank account
Hello folks. I was wondering if any of you opened up accounts for kids.
My 11 year old sister received cheque in her name and bank teller said he can not cash it because she did not have ID (I wanted to deposit it into my own account with same last name).
She has OHIP which was not understandingbly accepted. She has no DL obviously, no SIN card and passport is expired for a long time. Is there any way to cash the cheque?
And second part ofthe question, are there any benefits to opening up kids account? Which bank would be more ideal for that? It just seems iffy to me opening up an account for a child.
Kids don't need a SIN to open a youth bank account. My GF just opened one for her son and he doesn't have a SIN yet. The way she talked, the bank would have preferred it, but it wasn't necessary. (edit. he's 12.)
To answer the OPs question. Just have her sign the back and give it to you. You give her the cash and then you can just deposit it in your bank account.
Why is it "iffy"? I had a bank account when I was like 6. It teaches kids about money. Youth accounts don't cost anything so there isn't really any reason a kid shoudl not have one. And this kid is 11??? Jebus she may be in middle school next year??? I can't believe she doesn't already have one in this day and age to be frank.
EDIT: As far as the SIN goes, banks are required by law to collect the SIN for any interest-bearing account. It is not an option. Most youth accounts are interest bearing so that they can learn about interest (even if it is next to nothing), so yes you will likely have to give her SIN. But again, she is freaking 11 - when I was that age I had a SIN, of course since I had my own paper route and was making $200 / month. 11 is not as young as you seem to think it is. Shes nearly a teenager.
My son is 10 and got a paper route just before summer. I have an account with RBC. We decided to add him to my account. He has a child's savings account and I can easily add his allowance from my chequing account into his online. I had to show 2 pieces of ID but my son only needed his birth certificate. He could've gotten his own account but the lady at RBC said since he just has a paper route this could be easier to keep track off since it's attached to my account.
My 11 year old sister received cheque in her name and bank teller said he can not cash it because she did not have ID (I wanted to deposit it into my own account with same last name).
She has OHIP which was not understandingbly accepted. She has no DL obviously, no SIN card and passport is expired for a long time. Is there any way to cash the cheque?
And second part ofthe question, are there any benefits to opening up kids account? Which bank would be more ideal for that? It just seems iffy to me opening up an account for a child.
Kids don't need a SIN to open a youth bank account. My GF just opened one for her son and he doesn't have a SIN yet. The way she talked, the bank would have preferred it, but it wasn't necessary. (edit. he's 12.)
To answer the OPs question. Just have her sign the back and give it to you. You give her the cash and then you can just deposit it in your bank account.
Why is it "iffy"? I had a bank account when I was like 6. It teaches kids about money. Youth accounts don't cost anything so there isn't really any reason a kid shoudl not have one. And this kid is 11??? Jebus she may be in middle school next year??? I can't believe she doesn't already have one in this day and age to be frank.
EDIT: As far as the SIN goes, banks are required by law to collect the SIN for any interest-bearing account. It is not an option. Most youth accounts are interest bearing so that they can learn about interest (even if it is next to nothing), so yes you will likely have to give her SIN. But again, she is freaking 11 - when I was that age I had a SIN, of course since I had my own paper route and was making $200 / month. 11 is not as young as you seem to think it is. Shes nearly a teenager.
My son is 10 and got a paper route just before summer. I have an account with RBC. We decided to add him to my account. He has a child's savings account and I can easily add his allowance from my chequing account into his online. I had to show 2 pieces of ID but my son only needed his birth certificate. He could've gotten his own account but the lady at RBC said since he just has a paper route this could be easier to keep track off since it's attached to my account.
AMEX cards up for renewal. Don't want to pay annual fee.
My Amex Business Gold card and AMEX SPG card are both up for renewal. I don't want to pay the annual fees. I read somewhere that it wasn't worth transferring the points to Aeroplan. Any suggestions? I have over 20,000 points.
Where in the world did you hear it wasn't worth transferring the points to Aeroplan? 15,000 points gets you a free short-haul flight to a neighbouring province or state. 25,000 points gets you a free flight to anywhere in North America. (still have to play fees and taxes).
If this is mostly about the AMEX fee, AMEX SPG can't be up for renewal for a number of months (April) so you don't need to be in a rush.
If you provide more info on your spending, what type of rewards you'd like, how much you'd like to travel and how you like to purchase travel (with points or find your own deal), we could provide useful recommendations.
Even if you cancel the card, you still keep your SPG points. With the Gold card, transferring the points to Aeroplan is worth it if you need Aeroplan points.
I typically cancel the card if they don't provide a large incentive - assuming you have another credit card. Wait 3 months and reapply and get all of the bonuses again
Where in the world did you hear it wasn't worth transferring the points to Aeroplan? 15,000 points gets you a free short-haul flight to a neighbouring province or state. 25,000 points gets you a free flight to anywhere in North America. (still have to play fees and taxes).
If this is mostly about the AMEX fee, AMEX SPG can't be up for renewal for a number of months (April) so you don't need to be in a rush.
- Transfer your Amex MR points to Aeroplan. (I think you just missed the opportunity to get a 25% bonus)
- Then cancel the Amex Business Gold
- When you get closer to the AMEX SPG renewal, apply for a new Amex Business Gold (and get another 25K bonus points as long as you don't have another small business card) or an Amex small business SPG card (and get 10,000 SPG bonus points). Yes they will give you another new card this soon after cancelling.
- Cancel your Amex SPG
If you provide more info on your spending, what type of rewards you'd like, how much you'd like to travel and how you like to purchase travel (with points or find your own deal), we could provide useful recommendations.
Even if you cancel the card, you still keep your SPG points. With the Gold card, transferring the points to Aeroplan is worth it if you need Aeroplan points.
I typically cancel the card if they don't provide a large incentive - assuming you have another credit card. Wait 3 months and reapply and get all of the bonuses again
Subscribe to:
Posts (Atom)