A run down of what's going on in the market and the company.

Friday, September 30, 2011

Fixer-upper or money pit?

Joyce was sure her handyman’s special was a steal. But $30,000 in repairs later, it’s becoming a nightmare

By Romana King | From MoneySense Magazine, Summer 2011

The “fixer-upper.” The “handyman’s special.” The home that needs “tender, loving care.” Some buyers run in the other direction when they see a listing containing those phrases. The handyman buyer starts salivating at the thought of big savings.

After all, if you’re good with your hands you can buy a fixer-upper for a song and transform it into the home of your dreams. It’s a chance to create a custom home that you’d never be able to afford otherwise. At least, that’s how it works in theory.

Problem is, lurking among those handyman specials are the dreaded money pits. These homes have massive hidden problems that suck your bank accounts dry before you even get started on the work you were intending to do. To save your finances, and your sanity, here are four tips on how to spot—and avoid—the money pit.

Beware rock bottom prices
For Joyce Wayton and her husband Craig, that low, low price was the reason they bought their four-bedroom, two-bathroom home in Lower Sackville, N.S. Located in a neighbourhood where homes usually sell for $250,000, the Waytons snapped up their bungalow for only $120,000. (We changed their names to protect their privacy.)

They knew the home had issues: for almost 15 years it had been rented out and, as Joyce says, “it was not well-maintained.” There were broken windows. The garden was overgrown and the kitchen and bathrooms needed updating. But it had potential, says Joyce. “I could definitely see our kids growing up in that house.”

Initially, the Waytons planned to gut the basement and update the main floor, eventually adding a second-floor addition to accommodate their four young children. They had a modest budget of $40,000, but they were willing to do a lot of the work themselves.

Once they moved in and started opening up walls, however, their plans got shelved. Almost immediately they found knob and tube wiring throughout the house. Then they discovered there was no insulation in their ground-level basement. The fireplaces were inoperable. Worse, the basement demolition exposed a big crack in the foundation that ran the length of the house.

Charles Sezlik, an Ottawa-based realtor, says the too-good-to-be-true price that the Waytons paid should have raised big red flags. If a home is much cheaper than other similar homes in the area, “you need to dig to learn what’s wrong with the place,” he says. At the end of the day, dramatically underpriced homes usually mean big problems.

Get it inspected
Joyce confesses they didn’t bother having the home inspected by a professional before they bought. Instead, they relied on her husband’s construction experience. But even if you have some knowledge of home building and repair, it’s worth paying for an objective outsider’s second opinion, says Sezlik.

If you’re looking at a real fixer-upper, he suggests finding a home inspector with a background in structural engineering. “You’ll pay more up front but you’ll save thousands in the long run,” he says, because such an inspector is more likely to find hidden, expensive-to-fix structural issues.

The biggest money-sucking problems to look for during the inspection include foundations built on mixed granular, pervasive musty smells (which indicates a mold-infestation), and foundation cracks that appear to have widened over time.

Is your fix-it-up budget realistic?
You can’t tell if a fixer-upper is a good deal unless you know how much it will cost to turn your diamond in the rough into a gem, so it’s important that you get that estimate right. Your home inspector’s report, along with various online tools, can help you get a grip on what your renovation budget should be. But these tools can’t estimate the complexity of a project—and complexity adds to cost.

So once you’ve created a budget, experienced renovators say you should add another 50% to it, as a contingency fund. Then add that larger budget to the cost of your fixer-upper. If the total is more than the price of similar homes in the area that have already been renovated, it may not be a deal.

Know when to walk away
If, like the Waytons, you have already bought a place and it’s slowly dawning on you that you’ve bought a money pit, at some point you have to decide whether to keep moving forward.

The key here is to be honest with yourself. If you have a history of being overly optimistic about how much it would cost to complete various renovations, get a professional in to help cost it out. Then ask yourself: Do you really have enough time, patience and money to do the renos you need to do? If not, you might want to put that money pit right back on the market.

The Waytons had hoped to do all the work they needed on their house, plus add a second floor for their kids, for $40,000. But they ended up spending $30,000 just to fix unexpected plumbing, electrical and roofing issues. Eventually, they realized there was no way they were going to get the extra bedrooms they needed. So they’ll spend another $15,000 completing the last of the necessary repairs, then list their home for sale. If they’re lucky, sighs Joyce, they’ll at least break even.

By: Romana King | From MoneySense Magazine, Summer 2011
Article Link: http://www.moneysense.ca/2011/09/30/fixer-upper-or-money-pit/

Saturday, September 17, 2011

Should I go Variable for Fixed?

The Fixed / Variable Conundrum

"To get anywhere, or even to live a long time, a person has to guess, and guess right, over and over again, without enough data for a logical answer." — Robert Heinlein

Mortgage rates are doing things that few people expected one year ago. Variable discounts have been sliced in half and those cunning banks are persuading us to pay disproportionately high fixed rates despite near-record-low funding costs.

Looking forward...

Read More here:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/09/the-fixed-or-variable-mortgage-conundrum.html

Thursday, September 8, 2011

Most Canadians are Living Paycheque to Paycheque

Most workers living 'close to the line': survey

Majority would be in difficulty if paycheque were delayed even one week, payroll association says. A majority of Canadian employees are living paycheque to paycheque and report they would be in financial difficulty if their pay were delayed by even a week, according to a new survey on the financial health of the country's workers.

The survey by the Canadian Payroll Association also found 40 per cent of Canadians now report they expect to retire later than they had previously planned, acknowledging they are not saving enough for retirement.

The main reason for low savings is that most workers are living "close to the line," the CPA reported, with 57 per cent reporting they would be in difficulty if their pay were delayed by even a week. That number jumps to 63 per cent for
workers aged 18 to 34, and to 74 per cent for single parents.

The regions with the highest percentages of people living paycheque to paycheque were Atlantic Canada, at 64 percent, and Ontario, at 60 per cent, which the CPA said could be the result of their slower recovery since the last
recession.

Almost three-quarters of the 2,070 employees who responded to the CPA online survey this summer said they have saved less than a quarter of their retirement goals.
"This is particularly troubling when you realize that 71 per cent of the respondents are over the age of 35, with the bulk in their main saving years between 35 and 54," said CPA chairman Dianne Winsor.

The survey found 63 per cent of workers estimate they will need more than $750,000 in savings to retire, and 38 percent estimated they need over $1-million. However, 50 per cent of workers also reported they are saving less than 5
per cent of their net pay, and 40 per cent reported they were not even trying to save more than that amount.

The CPA report said the good news is that workers appear to understand what they could do to improve their financial situation, saying they should spend less, pay off credit card debt, reduce their mortgage and contribute more to
retirement savings. Almost 70 per cent said their first or second priority would be to pay off their debt if they won $1-million from a lottery.

Posted: September 8, 2011
Title: Most workers living 'close to the line': survey
By: JANET MCFARLAND
Globe and Mail Update
Link: http://www.theglobeandmail.com/globe-investor/personal-finance/most-workers-living-close-to-the-line-survey/article2157089/

Wednesday, September 7, 2011

Sept 7 2011 - Variable Rate Remains Constant at 3%

No Change to Rates

The Bank of Canada kept Canada’s key lending rate at the same place it’s been for a year: 1.00%.

As a result, variable-rate mortgage holders can expect prime rate to also stay put at 3.00%.

The BoC said this about its decision:

•“In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished.”
•“Core inflation is expected to remain well-contained…”
•“Largely due to temporary factors, Canadian economic growth stalled in the second quarter.”
•“The Bank continues to expect that (domestic) growth will resume in the second half of this year…”
•“…U.S. growth will be weaker than previously anticipated.”
•“Growth in emerging-market economies has been robust…”
The main takeaway here is that the BoC is no longer talking tough about rate increases, as it has recently. That supports the market’s thesis that rates will remain lower for longer.

As always, the Bank of Canada’s overriding goal is to keep inflation near 2% “over the medium term.”

Its next interest rate meeting is October 25. The financial markets expect no rate increase then either. In fact, traders are currently pricing in a 20% probability that the Bank of Canada will cut rates at this meeting (that number is highly volatile and may change by the time you read this).

The benchmark 5-year bond (which leads 5-year fixed mortgage rates) is trading at 1.435%, up 4 basis points on today’s news. It sits just over 13 bps above its all-time low of 1.302%.

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Posted: Sept 7, 2011
Author: Rob McLister, CMT
Website: http://www.canadianmortgagetrends.com
Article Link: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2011/09/no-change-to-rates.html