Over Half of Canadian Retirees Are in Debt, but That Doesn’t Have to Include You

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A recent poll done by CIBC and Harris/Decima has found that 59% of Canadian retirees are still in debt. Worse yet, the poll finds that 55% of people that carry debt into retirement have seen their debt levels either increase or remain unchanged over the past year.

As you can imagine, it only becomes more difficult to repay your debt once you have lost the bulk of your income due to retirement. So it stands to reason that every effort should be made to repay your debt before retirement, right? Easier said than done, of course, but it is possible. The earlier you start paying down your debt the better, but there are options, even if you are on the cusp of retirement. Continue reading

Canadians saving more, paying off mortgages faster

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Who says Canadians can't save?

According to an article from The Globe and Mail, the Canadian personal savings rate is twice that of our neighbors to the south, and nearly six times higher than it was 10 years ago.

"All the talk about the Canadian household being tapped out or out of shape is a bit overdone," Doug Porter, chief economist at BMO Nesbitt Burns, told the news source.

Data from Statistics Canada shows that the savings rate during the first quarter of 2013 was 5.5 percent, up from 5.4 percent during the final three months of 2012. That may not seem like a large improvement, but it's important to keep in mind that the original forecast for the savings rate during the fourth quarter of last year was 3.8 percent, according to Statscan. Continue reading

Mortgage rates present opportunity

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Historically low mortgage rates are continuing to make homeownership affordable for Canadians, according to the Royal Bank of Canada.

Data from the RBC's Housing Trends and Affordability report shows that low mortgage rates are keeping Canadian homeowners from entering dangerously unaffordable territory. Additionally, the report stated that rate increases are likely not on the horizon.

"Exceptionally low mortgage rates have been the main factor preventing affordability from reaching dangerous levels in recent years; yet, we believe that the likelihood of a surge in rates is slim at this stage," the report stated.

Continued low mortgage rates are good news for Canadians, especially as a report from the Certified General Accountants Association of Canada shows that while many Canadians are satisfied with their finances, they're not necessarily keeping on top of them. Continue reading

Programs for affordable housing

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Regardless of how low mortgage rates remain, buying a home is still a large financial responsibility. Between the expense of home loans and closing costs, not to mention renovation and maintenance, it’s important to make sure you’re taking advantage of every opportunity to save. Fortunately there are a number of programs geared toward helping Canadian home buyers find an affordable deal.These are not the only programs available to home buyers looking to save money, but they are some of the most popular. For Canadians looking to make the home buying process more affordable, the smart move would be to research all your options when it comes to qualifying for special programs and rebates. Finding one that suits your needs can result in significant savings.

Home Buyers’ Plan
The Home Buyers’ Plan allows Canadians buying their first home, people with disabilities, or people buying on behalf of someone with disabilities, to take money out of their registered retirement savings plans in order to buy or build a qualifying home. The amount that can be withdrawn goes up to $25,000 per calendar year. This program allows borrowers to take out the money without having to pay tax at the time. Typically, the money must be repaid over the course of no more than 15 years, with a certain amount repaid into the savings plan each year until the balance is zero. Continue reading

First-time buyers wary of affordability


While the mortgage restrictions put in place by Finance Minister Jim Flaherty have made home buying more difficult for all Canadian citizens, the tightening rules have affected first-time home buyers in particular. As a group, first-time home buyers are typically less secure than other demographics. They generally have less income and lower credit scores. This already puts them at a financial disadvantage. Now the latest round of mortgage restrictions has added yet another obstacle in their path to home ownership.

The latest restrictions put in place by Flaherty included lowering the maximum amount homeowners can borrow against the value of their homes from 85 percent to 80 percent, as well as shortening the maximum amortization period on government-insured mortgages from 30 years to 25 years.

The amortization limit had already been shortened twice since 2008, lowered from 40 years. For first-time buyers, shortened amortization periods mean larger monthly payments, making it that much more difficult to afford a home. Continue reading

Saving for a small house will cost less in long-run

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Despite the attractive housing climate that has convinced Canadians of all ages that now may be the ideal time to buy, some people would rather save up enough cash to purchase their dream home. This ideal property likely has room for a growing family, enough space for visiting relatives and meets all the needs – or future needs – that a person may have.

Heck, it might even have room to build on in the future.

But some mortgage experts are encouraging people to take advantage of the housing market and buy small. Not only will it take less time to save up for a smaller mortgage, but owning a small home can be rewarding for some people, too. Continue reading

Downsize your home to save money

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With the prospect of decreased income on the horizon, older Canadians are hastening to find a way to ensure financial stability during retirement. Of course, it’s not just retirees who are searching for ways to cut down on costs. With household debt rising and the housing market cooling down, many homeowners have their eyes on strategies to save money.

One method Canadians should consider is downsizing their home. While the initial prospect of moving into a smaller home may leave a bad taste in your mouth, the savings that can be incurred make it an attractive solution for homeowners looking to build up their nest egg. Continue reading

Paying off your mortgage before retirement

The popular view of retirement involves playing golf, visiting with family and sipping drinks on front porches. For many Canadians, however, the dream of a hassle-free retirement is seeming more and more like just that – a dream.

A survey from the Bank of Montreal Retirement Institute shows that nearly one-third of Canadians see living comfortably during retirement as their life’s most important financial goal. However, four out of 10 respondents aren’t confident in their ability to save for retirement. 

Meanwhile, older Canadians are approaching retirement with more debt than ever before, and are accumulating it at a much faster pace.

“In particular, the 65-plus age group racked up debt at three times the average pace,” reads a TD Economics report. “What’s more, Canadians approaching retirement (i.e., those aged 45-64) also showed an above-average penchant to accumulate debt, suggesting that the trend to holding debt later in life has some staying power.” Continue reading

Bank of Canada warns against counting on home values

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It’s often said that buying a home is more than just a purchase, it’s an investment. The value of a home is a reassuring trump card for consumers, a back-up plan for rainy days and a nest egg for long-term financial stability. In today’s uncertain economic climes, the comfort a home’s value can impart to homeowners is doubly appreciated.

According to Bank of Canada Governor Mark Carney, that comfort runs the risk of disappearing like so much dust in the wind.

Speaking to the Senate banking committee, Carney said that despite the fact that household worth is high, since household assets are tied to a real estate market that can fluctuate wildly, homeowners shouldn’t depend on home values to take care of rising debt.

"We've seen it over and over and over again, most recently in the United States, where people get sucked into a balance sheet analysis that says, 'I'm very wealthy because my assets are worth more than my debts,' " Carney said. "But they are illiquid and they can't service their debts because they lose their jobs or interest rates go up or both. And that causes the default." Continue reading

Pay now, save later

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Whether it’s a new outfit, tickets to a sporting event or a family vacation, it’s safe to assume that most people would rather be spending their hard-earned cash on anything but bills. 

Thanks to dramatic decreases in mortgage interest rates, many Canadians are doing just that. Mortgage rates are currently half of what they were in 2007, and according to The Globe and Mail, if today’s rates were applied to a 25-year mortgage of $200,000 from 2007, homeowners would save $101,700.

As interest rates tumbled and monthly payments dropped, most Canadians took the extra money they would have been spending on their mortgage and applied it somewhere else. And who can blame them? It seems as if there’s always an unexpected expense popping up in our daily lives. Medical bills, school supplies, car trouble – the list goes on and on. Besides, even if the money was going somewhere less serious, who wouldn’t rather drop a large sum on a gourmet meal than send in extra money on a mortgage?

According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), nearly 60 percent of Canadians only pay the monthly minimum on their mortgages. While this means small savings in the short term, the truth is these homeowners are costing themselves much more money down the line. Continue reading