Situations Where Debt is Good

Being debt free is the ultimate financial goal for most people. There are many articles advising us how to get out of debt, that we may automatically assume that debt is a bad thing. However, not all borrowing is bad.

There are many occasions when debt can actually be a good thing, here are a few examples.

1. Buying a home
Many people cannot afford to buy a house without borrowing.  A mortgage is a big debt, but it is a better financial proposition than renting. Getting a mortgage is like having an investment for the future. It offers the prospective of living debt free in 25-30 years. Furthermore, because it is secured against the value of your house, the interest rate is likely to be relatively low.

Carefully consider how much you can afford to put down and how much of a loan you can carry. The more you put down, the less you'll owe and the less you'll pay in interest over time.

2. Student loans
It is unfortunate that taking a student loan is almost an essential aspect of going to University or College, however, the gain is a good long term investment. A good degree or diploma creates the potential for higher earning power and this extra income is greater than the debt incurred.

It is unwise to borrow against your home to cover for your children’s tuition. If you run into financial difficulties down the road, you may risk losing your home. Your best bet is to save what you can for your kids' educations without compromising your own financial health. Then let your kids borrow what you can't provide, especially if they are eligible for a government-backed student loans. Such loans have guaranteed low rates; no interest payments are due until after graduation; and interest paid is tax-deductible under certain circumstances.
 
3. Building your credit history
Borrowing through loans or credit cards helps you build your credit history. However, in such cases, you should arrange to pay the credit card balance on monthly basis and avoid paying high interest on the purchasers made on your credit card.

4. Loans for investments
Some of your debt might be considered an investment. If you took on the debt to purchase something that will increase in value and can contribute to your overall financial health, then it’s very possible that debt is a good one.

Avoiding debt at any cost is not wise if it means depleting your cash reserves for emergencies. If the debt is used to purchase an asset, make sure that the utility or financial return from the asset is higher than the cost of debt. It is also important to ensure that you are not overleveraged where your borrowings exceed your assets or where you have trouble servicing the loans. Any debt which is taken after you are overleveraged is not advisable, regardless of its purpose.
 

Condominium or House: Which is Right for You?

For some people, a condominium lifestyle is the only way to live—no lawn maintenance, access to a pool and tennis court, and extra security features you might not have in a single-family home. Other people simply can’t breathe in a condo because their neighbours are too close for comfort. Consider the pros and cons and your specific needs and desires before deciding on whether to buy a condo or a house.

Because of all of the advantages of home ownership in comparison to renting, many of you will soon be reaching a point where you want to buy a home. However, you may not be sure whether you should actually buy a house or if you should look into buying a condo instead. This is especially true for younger home buyers who might want the benefits of living in a more communal situation that a condo environment provides.

Should you join the condo club or go for a more traditional home ownership?

A condo is probably the right choice for you if:

• You don’t have a lot of money to spend but still want to invest in home ownership.
• You are interested in being part of a small community living in the same complex.
• You are comfortable living in close proximity to your neighbours.
• You are a single individual or a couple that is looking for a small home rather than a large property.
• You don’t mind having certain aspects of your home ownership regulated by a committee (a home owner’s association made up of some of the tenants who own in the condos).
• You live in an urban area where condos are common (such as Toronto or Vancouver).
• You run a busy lifestyle and prefer to enjoy amenities like a pool or a shaded grounds area but aren’t able to maintain such amenities yourself either because of the time that it takes or the cost.

A house is more likely to be a better choice for you if:

• You have (or plan to have) a large family.
• You are a very private person who does not like living close to your neighbours, or having your home choices regulated by an association.
• You are investing in home ownership primarily for the purpose of resale of the home in the future (since property values are usually higher than condo values).
• You are seeking to purchase a large home and/or you need outdoor areas for things like large pets.
• You enjoy maintaining your own yard or garden.
• You live in a rural area or in a location where there are not many condos on the market.

Although there are always exceptions, condo purchases are usually best for single individuals who have neither the money to invest in a house nor the time to maintain the upkeep of a house. These tend to be young people who don’t mind apartment-style living in close quarters with their neighbours, who are comfortable having some regulation by the home owner’s association and who enjoy sharing common areas with others. Often, condo buyers are first time home buyers. If, in contrast, you are an older adult who has (or may soon have) a family and would like the freedom and privacy of a home with its own property, then a house is probably the right choice for you.

Regardless of whether you buy a house or a condo, it's important to do your homework and consider the future of the neighbourhood you're buying into. The old saying of "location, location, location" remains true for both. Each is a significant investment, and you need to find a safe and vibrant neighbourhood capable of nurturing your investment into the future.

Six Pricing Tricks To Sell Your Home Faster

When you decide to sell your home, setting your asking price is one of the most important decisions you will ever make. Depending on how a buyer is made aware of your home, price is often the first thing he or she will look at. Many homes are discarded by prospective buyers as not being in the appropriate price range before they even have a chance of a showing.

Your asking price is often your home's "first impression", and if you want to receive the most money you can for your home, it's imperative that you make a good first impression.

Setting the asking price of your property is as much about knowing how buyers think as it is about how much the property is worth.

1. Price it right
In order to set the right price, check out your competition first. A little real-estate research can be handy. Take a look at homes sold in your neighbourhood. Ask yourself: what are they selling for? How long have they been on the market? Study the supply and demand within your neighbourhood to consider whether to price your home above or below the market value.

Pricing your home lower than your competitors can essentially generate more offers, thereby driving the price higher. On the other hand, price it too high and you risk buyers going into “sticker shock”.

2. The missing penny trick
To grab the attention of potential buyers, Take a pricing tip from discount retailers like Wal-Mart. Take, for example, $19.99 vs. $20.00. While it is only a penny difference between the two, the $19.99 price seems like a better deal! Why? Because when people see a price, they make judgements in a fraction of a second whether it is a good or bad deal. And, since we read from left to right, the first number receives the most focus. Therefore, a home listing for $199,999 will generate more attention then $200,000 because people will perceive $199,999 to be a better deal. Retailers have been using this proven strategy for a long time; make it work for you.

3. Raise the reference point
You can raise people’s reference point by asking for a higher price. People use that information in setting their reference price. In addition, you can affect the reference price of buyers by telling them the price of competing properties in the neighbourhood. However, pass along this information only if the comparisons are in your favour.

On the other hand, if you set a price that is implausibly higher, the impact will be less than if you set a price that's more reasonable.

4. Send the right message
People associate precise numbers with bargains. If a house should sell for around $300,000, then offering a round number like $295,000 will convey quality and willingness to negotiate, and choosing a higher but precise number like $295,485 would indicate a bargain.

A precise number may also signal that you have given careful consideration to the price and you aren't inclined to negotiate, however, you may want to use this trick with caution.

5. Setting the asking price.
If your home is in a new development and you want to give the impression of prestige, go for a nicely rounded (up) price. But if you're going for a quick sale and you want to give the impression of a bargain, go for a precise number.

6. Make the price cuts easy-to-understand
We perceive easily computable discounts as better than larger discounts. A discount from $395,485 to $385,485 might seem better than from $395,485 to $378,495.

When a home has been on the market too long and very few offers have been made, the logical option is to reduce the asking price. But by how much? The trick here is to reduce the price by a nice, easy-to-calculate number so buyers can easily calculate their savings.

The longer your house sits on the market, the less cash it commands. Use these expert tricks to sell your house fast and maximize your profit.

How to Deal With Mortgage Payment Difficulties

When unforeseen financial circumstances impact your ability to make regular mortgage payments, you need to take quick action. With early intervention, cooperation, and a well-executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.

If you or your spouse has lost employment and no longer makes as much money, and you see that meeting your mortgage payment obligations is going to be problematic, the first step is to take a deep breath. There are literally millions of people who face the same problem. Fortunately, there are ways to avoid default and keep your home, so read on for more information on how to avoid a mortgage default.

1- Get moving on a solution. Your first option is to find a way to make up the back payments and continue fighting to make your payment on time every month. Although not an attractive option, it is an option.

Explore options to decrease expenses and increase income, such as an additional job, selling possessions, and looking to community resources for help. You may have to temporarily cut back on things like dining out, internet, and cable.

If you have a basement or spare room, you may consider renting it out. The extra income could be up to 50% of your mortgage payment.

2- Work with your lender. Contact your mortgage lender. Banks do not want to foreclose on properties. The process is long and costly, and in the end, mortgage lenders lose money. Instead, they would rather work alongside borrowers who are slightly behind on payments and come up with a practical solution.

Consider extending your mortgage term to reduce your monthly payments. The downside is that you will end up paying more in the long term. However, if it means you are able to continue meeting the minimum mortgage payments, it is worth doing.

Set up a repayment plan. If you are unable to pay your mortgage payment for one or more months, the lender may agree to a repayment plan. The mortgage lender adds additional money to each subsequent mortgage payment until the loan is up-to-date.

Your lender may also suggest an Interest-Only Mortgage. This will also reduce your monthly mortgage payments, often quite substantially. However, again the disadvantage is that, in the long term, you will need to find an alternative investment plan to pay off your mortgage capital, which might be a good short-term option.

3. Refinance your mortgage. 
This is perhaps the easiest and most effective method. If you happen to be on your bank’s existing standard rate, the chances are you will be able to find a much better deal.

4. Talk to a Financial Advisor. 
If the situation is becoming overwhelming and you are really in danger of defaulting, you may need to consider speaking to a financial consultant or accountant. This will arm you with expertise and resources with which to approach planning your financial future and make the most of your current circumstances.

5. Resell – Downsize. 
This option is probably the most drastic and is to be undertaken only when the others have failed. If you can sell your house, you can temporarily rent somewhere cheaper or buy a cheaper house in a different location. The money saved can be used to pay off your mortgage. This option is not easy, due to the costs involved in moving, but it might be worth doing in the long term.

If you can see that things are going to get bad in relation to meeting your mortgage payment obligations, take a deep breath and take action now—it will help in the long run.

 

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Buying New Construction vs. Older Homes

When deciding whether to buy an older home or a newly constructed one, many questions come to mind. Start by educating yourself and knowing the pros and cons of each.

In most cases, existing homes have a touch of character with their own charm and details.  They are usually located in more established neighbourhoods with mature trees and desirable landscaping, and may be closer to city services such as schools, libraries, hospitals, shopping centres and public transportation.

Older homes may have better quality materials and workmanship that are too costly for newer homes, and may come with window coverings and appliances which are often included with the home. If you are lucky, you may still get an updated kitchen and bathrooms if the home has been renovated.

However, existing homes are generally less energy efficient and are typically more costly to heat and cool. They may need updating and require expensive repairs, and sometimes it may be difficult to find or match older building materials.

Newer homes usually have bigger rooms, more built-in wardrobes and closets, and more bathrooms. If you are building a new home, you can also influence the layout and the finishes within the home as part of the negotiations with the builder or developer.

Whereas with an existing home, you will inherit what the previous owner built or remodelled over time. Very rarely will an existing home be built and finished exactly to your liking. Think about how much renovating you'll need to do to an existing home. If you can buy an existing home that's been totally renovated in a great neighbourhood within a good school district, this might be a better choice than moving into a newer neighbourhood with an unestablished school district.

On the other side, buying a newly-built home tends to cost more than an existing home, unless you buy outside of the city, where land is cheaper. Of course, you will have to consider the price of gas to get to your job.

And it isn't just about getting to your job. You'll also want to think about how long it will take to get to a grocery store, dry cleaners, your kids' school, your house of worship and other places you get to by car.

While new homes are more expensive, they might also increase in value faster than an existing home. That said, it may be challenging to buy a new home in your neighbourhood of choice, unless you buy a vacant lot, hire a developer and build your own home, which can get quite costly.

However, with new homes, you get warranties and guarantees on appliances that come with the new home. Dangerous building materials, such as lead and asbestos, will likely not be a problem. A new home will meet modern safety and building codes and usually use building materials that offer improved insulation, thereby reducing your heating bill.

You may be able to upgrade or customize such features as floor coverings or paint colours, and sometimes the floor plan. New homes often have more closets and storage space, and most importantly, don't require as much maintenance.

New homes though, have their own disadvantages. Higher taxes could be required to bring water, gas or electrical services to a still under-populated area. Resale could be difficult if the entire neighbourhood is not yet complete, and you may have to cope with construction noise, dust and mud. New neighbourhoods frequently lack the relaxing appearance of mature trees, and your new subdivision may require costly landscaping.

You can make the case for and against buying either a new home or a "used" home. It's great to live in a brand new home, but there's nothing like the feel of an established neighbourhood. The bottom line is: Don't buy someone else's problems unless you can tackle the solutions.

 Find a house you like, consider its pros and cons — objectively, as well as emotionally — and think about the compromises you're willing to make. The more logically you approach buying the house, the more you're going to love living in it.

 

Tips for Buying Outdoor Furniture

Great patio furniture brings comfort and function to your outdoor spaces. With a spacious table and comfortable chairs, a basic patio can be transformed into a cozy area for entertaining.

Choosing patio furniture should not be a hard decision. There are many types of outdoor furniture to choose from.  Taking a walk through a home improvement store, a patio furniture store, or a garden centre during the spring and summer months will remind you of the many types and styles of furniture that are available.  With so many options, selecting outdoor patio furniture or accessories to suit your decorating style should be a breeze.

Several factors should be taken into consideration, including price, style, and maintenance.

When it comes to price, you need to examine your budget carefully. While it’s true you get what you pay for, it is possible to get an excellent deal for a high quality product. Your comfortable patio furniture should not be a place where you skimp on money because it is an investment that will last for years to come. It is important to remember though, price doesn’t always equate to quality.

There are several different styles of comfortable patio furniture and what you choose will depend on your personal taste. Outdoor furniture is most commonly made out of wood, metal, plastic, wicker or a combination thereof. Choose a style you like that fits your budget. Focus mostly on the cushions themselves–some sets may not come with them–because this is where your comfort is going to come from. Some sets may offer more comfortable cushions than others. Who wants to sit on bare furniture? When you choose the material, consider the climate you live in and how well it will hold up against the elements.

Depending on how many people you wish to seat and the available space, you will need to choose a suitable outdoor furniture set from the many options on the market. It's a good idea to choose something that has matching seats, benches and canopies if you want a co-ordinated look. For some people, outdoor tables may be all that is required, either because they already have other outdoor furniture and simply want to accommodate more people or because they want to have additional table space for all the extra food, drinks, and tableware that goes with outdoor entertaining.

You should measure and plan where you will put the furniture to ensure you have room for the entire set, including an umbrella to provide shade.

Finally, it is important to remember that most outdoor furniture requires maintenance.  It may require re-staining, steam-cleaning or covering during harsh weather periods.  Be sure to know what maintenance your outdoor furniture requires, as this will add to the cost of the furniture over the long run.

How to Choose Your Next Neighbourhood

If you’re buying a new home, the neighbourhood you choose can be just as important as the choice of home. Keep in mind that you're not just buying a house, you're investing in a neighbourhood. The two are synonymous so you need to be extra careful in choosing the area you'll be living in. So, how do you choose the right neighbourhood?

Factors to Consider When Evaluating a Neighbourhood
When evaluating a neighbourhood, you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others:

• Style of homes
• Quality of schools
• Property values
• Traffic
• Crime rate
• Future construction
• Proximity to: Schools, Employment, Hospitals, Shopping, Public transportation, Cultural Activities (museums, concerts, theatres, etc.), Highways, Airports, Beaches, Parks, Stadiums

Neighbourhood Search Strategies
If you’re a first-time buyer with limited financial resources, it’s a wise purchasing strategy to buy a home that meets your primary needs in the best neighbourhood that fits within your price range.

You can maximise your home purchase location by incorporating some of the following strategies into your neighbourhood search:

• Look for communities that are likely to become "hot neighbourhoods" in the coming years. They can often be discovered on the periphery of the most continuously desirable areas.
• Look for a home in a good neighbourhood that is a bit farther out of the city. If commuting is a concern, purchase a home that is close to public transportation.
• Look at the neighbourhood demand by asking us whether multiple offers are being made, whether the gap between the list price and sale price is decreasing, and whether there is active community involvement. You can also drive around neighbourhoods and see how many "sold" signs there are in a particular area.
• Look into purchasing a condominium or co-op, rather than a house, in a desirable neighbourhood. This way, you still may be able to purchase in a prime area that you otherwise could not afford.