Canadian Personal Finance Blog

Archive for the ‘House Prices’ Category

For my regular readers, I am so lazy swamped over the holidays that I am taking some time off and putting up a “Best of” anthology until the New Year (January 4th to be exact). Enjoy two Best of posts a day over the Holidays and have yourself a Merry Christmas and Happy New Year.

The year ticks down, I trust you have completed all of your essential end of year stuff, and yes here is some other interesting things to think about too!

Eating Your Own Dog Food (2009/06/30)

Interesting turn of phrase I have seen used to mean a few different ideas in the software development world and in a few other places as well……

Click here for the complete Post

Don’t Buy the Model Home  (2009/03/18)

I was chatting with my fellow financial bloggers a few days ago and mentioned to Larry MacDonald about how I had purchased one of the model homes in my area and the issues I had run into having done this and he encouraged me to expand on this for a post here….

Click here for the Complete Post

Registered Disability Savings Plan(2009/11/04)

This relatively new savings vehicle introduced by the Government a while ago, has been taking a while to appear as a Savings Vehicle in many of the banks. I have been checking with TD for a while, but they have finally come out with their version of the RDSP . …….

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As the Magic 8-Ball tells us (OK Stats Canada tells us, but it sounds like the Magic 8-Ball), indications are good that the economy may be turning around. Yesterday stats Canada announced that the Leading Indicators jumped 1.3% , which suggests things may be turning around slowly in our economy.

The index seems a bit of a mish-mash of a lot of information, but as usual if you read closer you’ll see that there are some very interesting tid-bits of information in there.

• The housing index is up 2.5% from last month, which means it is costing more to buy a house, so someone must be able to buy them if the prices are going up.
• The TSX S&P is up 2.0% from last month and if you look back to June 2009, it is up 18% over that period, which is a big number (but it did have a long way to go as well, after the great drop of ‘08)

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Stocks and Houses

So two areas of “investment” are up a fair amount which is good, and the questions now are, will this last? We shall see is the only answer, but with stocks returning to pre-crash valuations in some areas (some will never come back folks, remember that), is it safe again? Can’t tell, and we’ll only really know looking back in a few years whether this was the start of the recovery or a “suckers rally”.

Given I bought my house a long time ago, fluctuations in it’s value mean little to me, as I don’t plan on refinancing it.

Christmas Laziness and Cheer

I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).

Busy week again, here is a piece from last year asking that ever present question:

RRSP or Mortgage?

After last week’s “show and tell” about Mortgage worksheet calculators, the next question to ask yourself is which is more important to pay into your Retirement Fund (RRSP or 401k) or pay off your Mortgage (and debts)? Since the U.S. model has tax implications for paying off your Mortgage, and I do not wish to mention the Smith Manoeuvre for Canada, let’s just concentrate on the Canadian model.

In a lot of cases this question is of no real value since a lot of people can only afford to pay for their living expenses and do not have free money to pay for their retirement or speed up their debt payments, for those folks, the job is hard enough, but I encourage you to find savings somewhere and do something more with your found money than “party” with it.

Arguments For Paying Down Mortgage

Some of the reasons I have heard and espouse for paying down your mortgage first would be:

1. Carrying debt is dangerous no matter what the economic times, and the sooner debt is removed from your plate, the sooner you can relax about your finances.
2. Once your mortgage is paid off then you can start saving for your retirement, knowing that you will not have that expense in your golden years.
3. Paying off your Mortgage is like investing in Real Estate, which is usually a good investment.
   • I don’t view my house as an investment, I view it as an essential of life, as in shelter is somewhere you live, not where you invest.
4. You are increasing your liquidity, by having more credit available to you, in case of emergencies.

Arguments For Retirement Money

The reasons to put money in your retirement funds are many as well:

1. Retirement saving is like Golf, the sooner you start doing it the better you will be at it later. Money saved at age twenty has much longer time to double than money invested at age 50.
2. With current interest rates, you can invest your money and make more with it, than if you pay off your Mortgage (typical Mortgage rate is about 6% whereas the Stock Market’s normal rate of return is about 7%, so you are ahead in the game).
3. You get tax money back for putting money in your RRSP, but you don’t if you put that same money into your mortgage. This is important since the major expense for most of us, is still taxes.

Best Choice?

That would be telling, I’ll write some more about this tomorrow, but I am open to discussion, pointers to good articles, and any other comments folks might have about what the right choice for them was and is (remember at the end of this, it is a personal choice on your part).

How Many Mortgages Do I have to Buy?

Interesting things you can buy at Costco are aplenty, however, my wife informs me that on Saturday she and a friend saw that you can get a Mortgage from Costco (kind of).

My wife and Michael James‘ wife actually went to Costco to see what the Portable Massage Tables (another interesting thing that Costco sells) looked like (they don’t keep them in stock evidently, not a high number of sales of that product, but you can order it on line). Given that part of their shopping expedition was fruitless they looked around and after picking up Pizza on the way out (another interesting thing sold at the commisary at Costco), they saw a young man advertising Mortgages.

I have checked on the Costco web site, and you can’t seem to order your Mortgage on line, you must go to Costco to get it (the kiosk may not really be associated with Costco, since Primus sells their wares the same way (and they are selling Internet, Cell and home phone something else to check I guess)), but my wife was unable to get any more information on it, as the young man at the Kiosk was busy with another potential customer.

Does anybody know about this “Mortgage”? Do I get points with it? Do I have to get 10 Mortgages since it is Costco? Do I get free food samples? Do I have to buy a trailer home? Anybody has any info on this “mortgage” or on the Primus Internet stuff, please comment.

I was chatting with my fellow financial bloggers a few days ago and mentioned to Larry MacDonald about how I had purchased one of the model homes in my area and the issues I had run into having done this and he encouraged me to expand on this for a post here.

Don’t Buy the Model Home

When my wife and I bought the current home we live in, we were actually quite excited to find out that it was one of the five model homes for the community we were moving into and even more excited to know we were buying the house from the original owner.

The excitement started to wear off a few months after we moved in when we started to do some simply DIY tasks around the house.

We first wanted to repaint one area, so my wife attempted to remove the wall paper that was in place, only to find out that the paper had actually been put up on top of the dry wall with NO paint primer in between, so we started tearing off the paper from the actual dry wall.

Sadly, the ceilings seem to be suffering from the same issues. Due to no primer or sealant being used on the ceiling dry wall all the “stippling” that was sprayed on is now “flaking off” in many areas, exposing untreated dry wall. This is going to be messy and time consuming to fix (and a pain to work on the ceilings as well).

Looking at some of the blinds and window adornments we thought of replacing those, but then we remembered they were put up with Velcro strips (we did notice this beforehand, but it is something else to watch for), if we wanted anything more permanent we would have to replace the temporary mounting hardware with something more permanent.

The wiring in the house seems to have been done with great speed and occasionally one or two things were not quite up to code, but we fix those as we trip over them. I would not say this was time to call Mike Holmes, however I think in the rush to get the model home ready to show, a few code violations may have been missed.

The landscaping of the house was at best “hodge podge” at worst, “welcome to the jungle”, because the previous owner enjoyed a lot of bushes and such (I have spent 10 years ripping them out). When the model homes were sold the developer was disposing of a lot of the plants they had used as display and the previous owner took them and planted them EVERYWHERE.

The carpeting is also badly worn, because MANY people wandered through this house when it was the model, and I doubt the carpet was replaced when it was sold. Even if a better grade of carpet was put in, it was worn heavily when it was the model home.

On the positive side there can be upgrades from the standard home lay outs, but most of these “upgrades” are cosmetic in our case. One that does come to mind is the master bedroom doesn’t have a shower, but it does have a jacuzzi-like tub. At first this was a great idea, but only having 1 shower to share between me and two teenagers in the morning suggest a shower in the en suite bathroom instead.

As with any home  you purchase (including newly built) have your model home inspected by a licensed inspector. Can builders get around having the model home inspected since no one will be living in it right away? I don’t know, but it is always a very good idea to get your home inspected BEFORE you close the deal.

Why Tell This Story

Keep these issues in mind if you are looking at a model home, is the reason for this post. I would never have thought of these issues before I bought the house, but now I see them I can see why they may have happened, given that most model homes need to be up quickly, to get the developer models to show, so they can sell houses to get money to start developing (thus speed is of the essence, once the developer decides to move forward). 

Check for these issues and keep in mind other areas where speed might cause workmanship to suffer (say not letting the foundation cure for long enough, or something like that), when you buy be diligent in your inspection and get a licensed inspector to check the house as well.