Refinancing may still be an option

To no one’s surprise The Bank of Canada has left its key interest rate unchanged at 0.5%. After reading the latest Monetary Report, it doesn’t sound like it will raise its policy rate any time soon. Inflation is flat, as is wage and export growth, and there is still uncertainty in the US and globally.

Despite record low interest rates, some new home buyers are finding it challenging to qualify for a mortgage due to a new round of rule changes announced late last year. These changes have also affected existing mortgage holders who may want to refinance to get a lower rate.

While low interest rates and robust regional housing, markets continue to be the norm, Canadians are still burdened with record-high debt loads. The ratio of debt to disposable income rose to 167.3% by the end of 2016. That means Canadians owe $1.67 for every dollar of disposable income, up from $1.66 the year prior.

If you’re sitting with equity in your home yet can’t seem to manage your debt payments, refinancing could still be an option. With credit card interest rates often pushing the 20% range and unsecured lines of credit in the 7% and higher range paying off high-interest debts can make sense.

Let’s review a refinance. Specifically, you are increasing the amount of your mortgage to pay off debt. Your actual mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm, but your overall monthly payments should decrease. You could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

Here are some reasons to consider a refinance:

Decrease your overall monthly debt payments by using your equity to pay off those high-interest credit cards or unsecured loans, which can help you better manage your budget.
You can refinance to purchase another property. Using the existing equity in your home can be a great way to buy a rental property which, if done right, can also make the interest you pay tax deductible.
You could also take out some of the equity for investment purposes.
Or you may want to refinance to renovate.

As you can see there are many factors to consider before deciding to refinance. Each individual’s financial situation is different. Call me and we can discuss the options available to you.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

What’s going on with my appraisals

Changes in mortgage rules for home buyers and insurers certainly have had an impact on the housing market, and those changes have impacted property appraisals as well. Conventional mortgages – up to 80% of the value of the property – historically, were required to have a full appraisal. Now, in many areas of the country, an appraisal may also be required on insured mortgages — 80 to 95% loan-to value.

The decision to approve a conventional mortgage, after all other lending criteria have been satisfied, is made on a property’s fair market value. This is defined as the market value of an interest in land at the highest price reasonably expected, when sold by a willing seller to a willing buyer, after an adequate amount of time and exposure to the market.

So who determines the value of that property? One could argue that the market itself determines the value, which is true, but from a lender’s perspective that number must come from an independent third-party – the appraiser. An appraiser, who is specifically trained and has sufficient experience, will be asked to offer an impartial, written opinion of the property’s value.

Realtors normally use a comparative market analysis (CMA) to evaluate a property’s value based on local market data. Agents analyze listing and sales data for comparable properties in the area to recommend a price to list or to offer. However a CMA is not an appraisal. Although appraisers use the CMA approach, they use it in combination with other factors to determine the value of a property.

The major difference is that appraisals are done for a specific client — the lender. Because real estate is the major security for mortgages, the market value estimate needs to be as accurate as possible. Appraisers use ‘sold’ properties information only and compare similar property types, in close proximity, that have sold within a relatively short period of time – usually 90 days.

Not all residential properties are subject to a traditional appraisal. If the property is in an established area with similar properties then sometimes the price can be validated electronically. This model of appraising property, called automated valuation model (AVM), has become quite popular in the last 10 years.

However, given the nature of the housing market these days, mortgage lenders have moved away, in many areas, from AVMs for conventional mortgages, and for some high-ratio mortgages as well, and are asking for live, full on-site appraisals.

At the end of the day, an appraisal must reflect a property’s realistic true market value and needs to be backed up with accurate data.

So why does an appraisal come in lower than expected?

With the introduction of bidding wars, where, in some areas, prices may be artificially inflated, appraisers are still tasked with coming up with a property’s fair market value. Rapidly changing markets can be very challenging for an appraiser to properly evaluate a home’s worth.

Appraisers will try to get to the purchase price when evaluating a property. However, sometimes the sale is a few weeks ahead of the market. If prices are increasing, it may not show up in their analysis yet and the appraisal will reflect a lower value.

At the end of the day, the appraisal has to be a realistic evaluation of a property’s true market value and be backed up with data.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

Every company needs a money manager and so might every wealthy investor

The Canadian Dollar and MONEY.CA
Money in Canada

Managing an investment portfolio was relatively easy in the 1980s and 1990s, but there has been a significant increase in complexity over the past decade. The investment climate and markets is more volatile and demanding, and today’s low interest rate and returns don’t look like they are going to change anytime soon. To get better returns, the wealthy are adding non-traditional investments such as private equity, real estate and hedge funds to their portfolios, as well as diversifying globally, which just increases the potential complications.

It’s tempting then to turn the whole thing over to someone else to manage if you can get through the sheer volume of asset managers, products and strategies to pick someone. But even among wealthy investors, there is still a lot of confusion about whether they should have discretionary or non-discretionary investment portfolios. In other words, should you and your family manage the investments, or outsource the decisions to an individual or a firm of experienced professionals? For those who lack the investment experience, time or discipline to be involved with dayto-day decision making, discretionary investment management services are a popular option. Firms that provide this are called outsourced chief investment officers and should be licensed as portfolio managers with a provincial securities regulator such as the Ontario Securities Commission.

But not all discretionary services offered by the country’s myriad banks, brokers and portfolio managers are the same and there are at least eight important factors to consider when choosing one. Does the firm: Have the skill, experience and resources to evaluate and manage assets across public and private markets? Have an “open architecture” approach, or the ability to allocate capital without conflict-of-interest to any independent asset manager from around the world in areas such as direct lending, real estate, private equity and hedge funds? Have the ability to access “best-in-class” institutional quality traditional and alternative asset managers? Provide a culture centred on client relationship management and strong communication? Offer robust performance reporting along with relevant custom benchmarks? Allow for clients to meet or speak with underlying asset managers? Take tax considerations into account to optimize returns on an after-tax basis? Offer more than a one-size-fits-all approach that utilizes just one or a few asset classes, such as stocks and bonds?

If the answer to any of these questions is no, you should probably look elsewhere, or, at the very least, realize you’ll have to compensate for that lack of ability in some other way at your own expense and time. But if your family hires an outsourced CIO, you and the advising representative (a registered individual who can provide investment advice at a portfolio management firm) will start your relationship by discussing and documenting your unique investment objectives and constraints. Topics covered should include how much investment risk you are willing to take, the desired level of return for taking on that risk, liquidity needs, tax considerations, performance reporting and benchmarks, and the asset classes and markets you will allow your portfolio to be invested in. A written investment policy statement is then provided as a best practice that documents all of the above.

Your advising representative is then authorized to make all the necessary investment decisions (within the agreedupon guidelines) and will not require consent for individual transactions. This service, which also consists of regular communication through methods that best suit your family — whether it’s in-person meetings, webcam meetings, telephone conversations, emails and newsletters — forms an important part of the ongoing relationship. The relationship is of prime importance, since your investment objectives and strategy may need to change to provide a tailored fit as conditions within your family change.

Original publication: http://business.financialpost.com/financial-post-magazine/every-company-needs-a-money-manager-and-so-might-every-wealthy-investor 

A Few Ways To Save Money With Your Home Office

It’s important to have an office set up in your home if you work from home. Not only does this make your home business look more professional, but it will also help you stay more focused when it comes to getting your work done each day. Setting up a home office doesn’t need to be pricey.

Many people think that it’s cheaper just to work from the couch, but not only does that affect your focus, it can also cause you back and neck pain. You don’t have to go broke setting up your office, though. Here are some tips on what you’ll need and how to save getting them.

The Internet

You need to have the internet in your home office, but that doesn’t mean you have to have satellite or cable internet. There are other options. No matter your option you want to be able to be connected via wifi since sometimes you might be emailing from your phone in other rooms of the house.

If you want to stay connected even when you leave your office, maybe to go to a restaurant or coffee shop, you may want to invest in a wifi hotspot. This can also cut down on your need for an internet bill. Some companies only offer you internet as a packaged deal or charge you more if you opt for internet only.

Electronic Devices

You are going to need a good smartphone for your home business, as well as a computer. You may just want a laptop or you might want both that and a desktop computer. When it comes to savings money on these items you should shop around. Know when the best months of the year are to get good deals on computers.

You’re also going to need a printer, and an all-in-one is the best bet if you need to be printing, scanning, and making copies. If you spend time set-up at business expos you might want to invest in a tablet or even a portable TV with a DVD player. These allow you to show videos, slideshows and more to attract more customers.

Office Furniture And Decor

Those electronic devices aren’t the only things you need to make a home office. You also want to have a desk that has room for all of the work you’re going to need to do. You want a desk chair that promotes good posture.

Desk lamps, paper cutters, and lots of pens and pencils are also things you’re going to need a lot of. Consider shopping for office supplies during the “back to school” sales when you can get great discounts. This includes things as small as push pins and staples.

Debt and debt settlement services

The debt-to-income ratio has hit the headlines again. This time the ratio rose to 167.3 % in the fourth quarter of 2016 compared to 166.8% in the third quarter. That means for every dollar of disposable income, consumers owe $1.67. Approximately 63% of that debt is in mortgages.

While this increase worries some policy-makers, studies have shown that consumers have been able to pay their debt relatively easily. Low interest rates have allowed consumers to pay down more of their mortgage principal, with payments split almost evenly between interest and principal in the fourth quarter.

But for some, the debt load is unmanageable and they search for solutions. You are no doubt familiar with advertisements from debt settlement services that promise to settle a consumer’s outstanding debt, for a fee. The caveat is buyer beware. If you’re considering this option, make sure to do your research and find a reputable company to work with. Or, I may be able to refer you.

Before you pay upfront fees or service charges, I may be able to help. Much of what debt settlement services offer can overlap with the services of a licensed mortgage broker.

Here’s how it works. Mortgage brokers can arrange debt consolidation on a mortgage renewal or on a refinance. When arranging a consolidation mortgage loan on a refinance or renewal the amount of the mortgage principal may be increased to pay out the total debt amount. This becomes part of the mortgage commitment and a condition of the mortgage loan. On closing, your lawyer will disburse the funds to your creditors and register the new mortgage.

What you need to know
A refinance alters the terms and conditions of your mortgage; specifically you are increasing the amount of your mortgage to pay off debt. Your mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm. Depending on your current mortgage you could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

As with all renewals, it’s always a good idea to review your mortgage with a mortgage broker who can shop the rates for you and get you the best deal, tailored to your particular situation. And, if you decide to switch lenders, there are no penalties at renewal time.

One of these options may be the perfect solution if you’re struggling with debt. Call me today for more information.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

Impact Investing

“If the head has been making investments and the heart giving it away, it’s time to unite the head and heart and make money more” – The Case Foundation

The following is a brief summary of the panel discussion entitled Families Embracing the Future at The Campden North American Family Office Conference held in Boston this past November. The moderator was Northland Wealth Management’s CEO, Arthur Salzer. Arthur’s panellists were Justin Rockefeller and Antonio Ermirio de Moraes Neto.

An estimated 60% of families lose their wealth by the second generation and 90% by the third. Many multi-generational families are exploring what they can do in order to improve these odds by uniting families around values and positive legacies, thereby more closely involving family members in responsible long-term investing. Over the past few years, “impact investing” has gained in awareness and popularity with families of significant wealth. 

Impact investing is when investments are made into companies , organizations, and funds with the intention to generate measurable social and/or environmental impact alongside a financial return. The key is that the impact gets measured along with the financial component, because, as the saying goes, “what gets measured gets done”.

Mr. Moraes,  27 years old, and a member of the Brazilian family that the industrial conglomerate, Votorantim, believes that impact investing can be one of the crucial components to generate financial wealth for families. Done prudently, impact investing can deliver the required financial return but at the same time have the potential to excite the passion and dedication of the next generation.  By encouraging the participation  of the next generation impact investing attempts to create an environment  conducive to fostering the commitment necessary    for maintaining the wealth of the family.   

Antonio shared his thoughts on why he was drawn to impact investing and how it  lead him to form his firm, Vox Capital.

“Being a 4th generation member of a large family business in Brazil, I was since young inspired by the example of great entrepreneurs and innovators. As my own path, it became absolutely clear, when I was 16, that my purpose in life is to reduce social inequalities in the world. And nothing better to do this than an innovative and scalable business model, with a new mindset to serve society”.

Vox is targeting investment in companies that serve Brazil’s household with  a monthly income of less than $1,500 USD – this demographic represents  nearly 160 million people or 85% of Brazil’s population. Vox is investing in companies that operate in the healthcare, education and the housing sectors. So far, it has made 4 private equity investments and 5 convertible debt investments. While the track record of Vox is just under 4 years, it has been generating more than acceptable double digit returns since its founding.

Mr. Rockefeller, at 36 is a member of the Board of Trustees for the Rockefeller Brothers Fund – an international philanthropic organization. The fund  was formed in 1940 in New York City by Mr. Rockerfeller’s grandfather and great uncles.   The Rockefeller Brothers Fund drew some large media attention recently as it divested of its oil & gas investments this past fall – this is a monumental change as the Rockefeller wealth came largely due to its ownership of Standard Oil. Standard Oil  was the largest oil refiner and first multinational company in the world during the early 1900s. Before its divestiture, Standard Oil eventually gained control of nearly 90 percent of theUnited States’ oil production.

However, it is Justin’s new venture, The ImPact (www.impact.org), which he co-founded, to which Mr. Rockerfeller is dedicating much of his attention.

“The ImPact is a non-profit/NGO membership organization comprised of investors who pledge to make impact investments, track their social impact and financial performance, and share that data with others who have made The Pact. The mission of The ImPact is to increase the probability and pace of solving social problems by improving the flow of capital to businesses that have measurable social impact.”

While every family’s motivations, operational context and goals are unique, impact investing may not fit every family. Therefore, rather than prescribing a single approach, there are many approaches available. Using groups such as The Impact, or investing in private equity funds that specialize in this area may be a start.   

Rest assured that impact investing will be an area that Northland Wealth will be exploring further and sharing its findings as to how it may benefit your family.

How To Manage Digital Assets As A Financial Planner

Financial planners have traditionally managed physical wealth of their clients that includes real estate, business ownership, movable property (cars, for instance) and cash. But with a growing clientele that owns digital assets like websites, software programs and digital content (like photos and videos), the scope of wealth managed by financial planners has increased as well. As with physical assets management, the ownership of digital assets is also complicated by contracts and agreements that your client may have signed with other stakeholders. Please note that nothing in this article may be construed as legal advice. Readers are advised to consult their own attorneys for legal advice.

Platform Owner

Content creators are the de factor owners of all digital content, including photos and videos. However, the equation may change depending on where this content is hosted. A photo that is shared on a social media platform like Facebook or Twitter may still retain the content creator as the owner. However, the act of submitting the content to these platforms may provide these third party entities a free license to financially benefit from this content in any way. Not only do the platforms themselves get the right to use these photos, the terms and conditions of usage may also make it okay for other users to share and use your photo in any way that they may deem fit.

The role of a financial planner in this case should be to identify the opportunity cost of sharing content and identify the middle path. A client in the photography business may be advised to reserve a 10-15% of their content for social media promotional purposes while retaining complete ownership and licensing rights on the rest. It may also be pointed out that the expenses incurred in the production of these content assets and the potential loss of income from the promotion of these photos on social media may be written off for tax purposes.

Consolidating Your Digital Wealth

Digital assets, especially content like images and videos, are voluminous and it may be difficult to monitor and manage all such content for an enterprise client. Investing in a digital asset management tool allows a financial planner to consolidate all the wealth and prepare a monetization strategy. At the same time, a DAM provides the client with the necessary tools to manage these assets. This includes setting clear usage guidelines, streamlining processes and collaborating on its usage.

Creating A Monetization Plan

As a financial planner, it is important to create a monetization plan for assets like website source codes, domain names and content. A recurring income stream (through licensing and leases) is ideally preferred over outright sale of such content to interested buyers. This way, your clients can build a more sustainable and predictable income stream. However, this advice is not universally applicable. For instance, consider a domain name like ‘HillaryForPrez.com’ – such an asset may have had significant value in the run up to the US Presidential elections last year but may have no value now. In such cases, it is a good idea for a planner to recommend the sale of these assets when the interest levels are high and then reinvest the proceeds in other digital or physical assets.

The Four Types of Creditor Insurance

Home is more than a place you live. It’s your family’s haven from the world. But what if something happened to you? What would happen to the home you’ve invested so much in? You wouldn’t think about owning a home without insuring it, yet the odds of your house burning down is more remote compared to the odds of experiencing a life-changing event such as a job lay-off or a disabling accident.

Mortgage payments don’t stop when you’re unable to work so many home owners opt-in for mortgage creditor insurance. This type of mortgage protection insurance preserves ownership of your family’s home by making sure the mortgage keeps getting paid – even during the most difficult times.

Here are four types of mortgage insurance available:

Life Coverage: Mortgage life insurance provides security to both you and your insured co-borrower. If your co-borrower does not qualify for life insurance, you can still apply. Also known as mortgage insurance or creditor insurance, it’s offered by lending institutions and us. It is a life insurance policy that pays the balance of your mortgage to the lending institution if an insured person listed on the mortgage passes away.

Disability Coverage: This insurance is designed to pay a portion or all a homeowner’s mortgage payment if they become disabled — up to 24 months per occurrence. Individuals who opt to take advantage of this type of insurance need to take care to understand the policy completely. Determine the length of time the policy will pay mortgage payments during an episode of short-term or long-term disability. What dollar amount of the mortgage does the policy pay? Is there a waiting period associated with payment from the policy?

Critical Illness Coverage: What if it happens to you? When you survive a critical illness, you may not be able to return to work and your expenses could increase dramatically. If you are diagnosed with one of the 15 covered critical illnesses, based on our service provider’s criteria, which includes certain types of cancer, your mortgage payments are covered for 24 months, whether you return to work or not. Key questions to ask: What critical Illnesses are covered? What happens if I have an acute heart attack, recover in a few weeks or months, and return to work? Does my disability insurance cover me for living benefits? What cancers are covered? Do I need to take a medical examination? Mortgage Critical Illness Insurance is a benefit you enjoy while you are alive. It builds on your Mortgage Life Insurance to complete your protection.

Accidental Job Loss Coverage: If you are injured or are unable to work or become involuntarily unemployed, your monthly mortgage payments will be covered up to six months per occurrence.

If you don’t have any of these coverages now on your mortgage, we may be able to add them on.

Call me for more information.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

3 Tips for Dieting While Maintaining a Budget

meal planningTwo of the most stressful things in a person’s life are money and health. And for many people, these two things may appear to be mutually exclusive; If you don’t have a lot of money, you can’t afford to be healthy. However, this is definitely not the case. If you’re determined to live a healthy life, you can do so even without spending a lot of money. To show you how, here are three tips for dieting and maintaining healthy eating habits while simultaneously sticking to your budget.

Plan Meals Around Current Prices

Many people who plan meals before hitting the grocery store or farmer’s market have a list of meals prepared before they get to the store and then purchase whatever they need on their list. While this is a good way to make sure you purchase healthy items, this isn’t the best course if you’re wanting to spend as little money as you can on your diet. Rather, Kelli Foster, a contributor to TheKitchn.com, recommends checking the sales at your local stores first before deciding what to cook for meals. This will ensure you get all your items at great prices as well as bringing home the healthiest food. Just make sure you check all the circulars in your area to make sure you’re finding the lowest prices for the healthy food you want.

Your Produce Doesn’t Have to Be Fresh

When people think about eating healthy food, they often conjure up pictures in their mind of fresh fruits and vegetables in abundance. And although these are great options for eating healthy, fresh produce can be very expensive. Luckily, Taylor of NerdFitness.com shares that you don’t have to get fresh fruits and vegetables to get the benefits of eating fruits and vegetables. Frozen or even canned vegetables and fruits can give you just as many vitamins and nutrients as fresh produce for less money. This is the perfect solution for those wanting to get their servings of fruits and veggies without having to spend money at the grocery store multiple times a week.

Get Those Shakes Going

meal planning_1One of the best ways to stick to a modern diet without spending too much money is to take advantage of shakes. JJ Virgin, a contributor to the Huffington Post, shares that starting your day with a shake that contains ingredients like flax seed, frozen fruit, and leafy greens is a great way to eat healthy foods that don’t cost you a lot of money and can help keep you full until you’re ready for a real meal. You could even purchase an inexpensive protein powder to get maximum vitamins and nutrients all in one glass.

If you’ve been wondering how you can eat healthy while maintaining a budget, consider implementing some of the tips mentioned above today.

How To Manage Your Finances As A Millenials – Tips From Lowell Crabb CFP®

Financial planning is a challenge to every generation. Someone in the Millennial age bracket is especially buffeted by student loan debt because tuition has shot up over the past few years. Plus the cost of living has risen alarmingly in the past ten years. Americans under the age of sixty on average have less than one thousand dollars in their savings accounts.

No matter what your age, retirement is a reality that must be faced financially sooner or later. The sooner you start to plan and save for it, the better off you’ll be in your twilight years. What’s the best financial strategy for Millennials to be following right now? Here’s a look at two different scenarios:

Spend less than you earn

Millennials are prone to look for ways and means to supplement their income. This is the mindset they have grown up with in America, where the emphasis for the past thirty years has been on how to monetize your talents, hobbies, and free time. While this is a legitimate way to pursue additional wealth, it’s not the only one.

Another way, an older more traditional way — a way that goes back to Benjamin Franklin and Samuel Smiles — is to live within your means, whatever your means are. In today’s world of instant gratification and artificially inflated expectations, this is hard to do. But not impossible. Looking to the Baby Boomers and their parents, you find men and women in menial positions that managed to save huge amounts of money for their retirement because they had one iron rule — never get into debt for anything but a mortgage. No credit cards. No car loans. No student loans. Just a mortgage to pay off. And they did that, and raised a family, and managed to retire with enough money to live comfortably. Sure, the world is a different place today than it was fifty years ago, and you’ve already got that monster student loan you have to pay, and how can you show your face at work driving a used car, and how can you  survive without Jai Alai camp and teeth whitening, etc.? But stop a moment and ask yourself if the stress engendered by the constant striving to earn more, instead of to save more, is worth it. If the answer is no, then start looking for ways to cut back your expenses. It may be as simple as skipping that Starbucks each morning. Add up the savings in a year and you’ll be surprised at the amount that suddenly frees up for better things, like money in your savings account!

Invest in yourself

Okay. You’re still fighting this whole ‘save money’ thing, mostly because it cuts back on your social life. Right? And you’re absolutely correct. Once you discipline yourself to save rather than spend, going out for drinks or seeing a movie each night suddenly doesn’t seem like such a good idea. You may even experience a certain sense of isolation, because once the money faucet is turned off you’ll find that some of your ‘friends’ lose interest in your sparkling personality. Don’t cry about or mope around. Instead, go back to school. NOT getting another loan and quitting your job school — but night school and/or online school. No one has ever gone broke paying for more training in their career field, because it inevitably leads to more confidence in your field, which can lead to raises, bonuses, and promotion. Also, if there’s a dream you have, such as writing the great American novel or discovering a new comet that can be named after you, which has no direct bearing on your career path, go for it with low priced classes at your local community college or online. Because the more diverse your knowledge and expertise, the better you’ll enjoy your life, and the more mentally fit you’ll remain when you do finally retire.

About Drive Wealth Management:

Drive Wealth Management is an independent wealth advisory firm. Lowell Crabb, CFP® is the founder. We specialize in serving business owners, corporate executives, and high net worth individuals.