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.