Starting April 19th, borrowers will have to qualify for a five-year fixed-rate mortgage even if they opt to apply for a lower variable rate. You will also only be able to borrow up to 90% of the value of your home, instead of the previous 95%. Finally condominium investors will need 20% down to invest instead of the previous 5%.
So, how does this effect us? Well, hopefully it doesn't. Hopefully you've made the decision to live well within your means.
I think variable rate mortgages are a great thing. The reason I like them is because they're generally lower than the 5 year fixed rate, which means I have more money to put towards the principle. That's right I'm still paying the 5 year fixed rate or more when I don't have to. By buying a house I can afford and paying it off quickly I actually end up owning the larger house sooner. All this I discussed in Home Sweet Home.
As for borrowing 95% of your home, I don't really see that as a problem, as long as you're not digging a deeper hole. Debt doesn't have to be a bad word. It all depends on what the money is to be used for. Consumer debt on the other hand is a very bad word. I'll come back to this in a future post. Overall though 90% is not going to hurt us that much and protects the poor decision makers a little from themselves.
Finally, the only way you're making money investing in real estate with 5% down, is if your speculating and flipping. I'm not an investor yet myself, but common sense tells you this is just a bad idea. I saw the effects of this when the housing market crashed here last and people were left owning condos they couldn't afford. Too much risk for me!
I've been researching owning a rental property which I plan to do in the future. Even with 20% down the profit margin is very small. The real money is made only when the property sells and you have to be able to stick it out long term. With 5% down you're using your own money while you wait for prices to rise. If it doesn't happen for years to come, how long can you afford multiple mortgages?
Overall, I think these changes are for the best. They won't cause a major crash or restrict the market too much, which could be devastating to the economy right now. They still allow people to overspend, which while not very smart, is everyone's prerogative. They do prevent the majority of Canadians from going overboard though and seeing as these mortgages are backed by the government, it helps prevent the rest of us from being stuck with their bill.
So what are your thoughts? Is it enough? Should they have done more? Did they do too much?
Showing posts with label World News. Show all posts
Showing posts with label World News. Show all posts
Monday, February 22, 2010
Thursday, February 4, 2010
The Olympics are Almost Here
Like it or not, the Olympics are almost upon us. Roads are closing, buses are crowded, and the costs have escalated. So you have to wonder if it's all really worth it.
My wife asked me the other night whether I thought the Vancouver Olympics were going to make money or not. So I figured I'd be remiss to not write about it.
I guess the first part is determining how you actually calculate a profit or loss when you're looking at the Olympic games. I read an interesting article in this months CGA magazine that said things like the road improvements and increased security won't be included in the costs for the Olympic committee (VANOC). In other words, these costs are going to be coming from us, the tax payers.
The article also mentioned that costs have increased while sales were lower than expected due to the recession. However, it is yet to be seen if this will result in a loss or not. Even though there have been a lot of games recorded to have made a profit, there has been a lot surrounding these games that have made things more difficult for VANOC. My personal feeling is that the games will probably be around the break-even point. I guess we'll have to wait and see though.
I think more importantly, the benefits will go far beyond the actual events. Athletes, crews, officials, family members, and fans will all be crowding our streets. More people means increased revenues for surrounding businesses. For example, I talked to an employee at a local McDonald restaurant and she told me they already noticed a large increase in business and had to actually change some of their processes to account for it. Hopefully when people see how beautiful it is here tourism and immigration will increase bringing higher than expected future profits.
Also, while a lot of these projects were done specifically for the Olympics, they're not going anywhere after the Olympics is over. If planned well these new facilities will be able to bring in future profits. Plus we all get to enjoy the new roads to Whistler.
The timing for a lot of construction workers probably couldn't have been any better considering the slow down in the housing market and the recession. These projects all mean lower unemployment. This leads to less employment insurance payouts and more income tax revenue for the government. These workers then spend the money they earn which gets taxed and gives another business more money. In economic terms this is called an economic multiplier. Government spending increases income, which people spend, which increases income, etc, etc.
Of course the government will tax this increase in income, for both individuals and businesses. This of course brings in more revenue for the government and allows them to recoup the cost surrounding the games. Even the worst case predictions that I read expect this money to be recouped in no more than 10 years in tax revenue alone.
I know one complaint was that the money was not spent on the homeless or health care. While I think these are noble expenses I don't think these things would have paid for themselves like the Olympics will be able to. To me this is like saying paying down the mortgage is the most important expense. That doesn't mean you don't buy groceries or keep your eyes and ears open for investment opportunities.
So while this is going to be inconvenient for us for the next little while, I do think its going to be a good thing for this city, province and country. As always I'd love to hear your thoughts? Don't be shy!
My wife asked me the other night whether I thought the Vancouver Olympics were going to make money or not. So I figured I'd be remiss to not write about it.
I guess the first part is determining how you actually calculate a profit or loss when you're looking at the Olympic games. I read an interesting article in this months CGA magazine that said things like the road improvements and increased security won't be included in the costs for the Olympic committee (VANOC). In other words, these costs are going to be coming from us, the tax payers.
The article also mentioned that costs have increased while sales were lower than expected due to the recession. However, it is yet to be seen if this will result in a loss or not. Even though there have been a lot of games recorded to have made a profit, there has been a lot surrounding these games that have made things more difficult for VANOC. My personal feeling is that the games will probably be around the break-even point. I guess we'll have to wait and see though.
I think more importantly, the benefits will go far beyond the actual events. Athletes, crews, officials, family members, and fans will all be crowding our streets. More people means increased revenues for surrounding businesses. For example, I talked to an employee at a local McDonald restaurant and she told me they already noticed a large increase in business and had to actually change some of their processes to account for it. Hopefully when people see how beautiful it is here tourism and immigration will increase bringing higher than expected future profits.
Also, while a lot of these projects were done specifically for the Olympics, they're not going anywhere after the Olympics is over. If planned well these new facilities will be able to bring in future profits. Plus we all get to enjoy the new roads to Whistler.
The timing for a lot of construction workers probably couldn't have been any better considering the slow down in the housing market and the recession. These projects all mean lower unemployment. This leads to less employment insurance payouts and more income tax revenue for the government. These workers then spend the money they earn which gets taxed and gives another business more money. In economic terms this is called an economic multiplier. Government spending increases income, which people spend, which increases income, etc, etc.
Of course the government will tax this increase in income, for both individuals and businesses. This of course brings in more revenue for the government and allows them to recoup the cost surrounding the games. Even the worst case predictions that I read expect this money to be recouped in no more than 10 years in tax revenue alone.
I know one complaint was that the money was not spent on the homeless or health care. While I think these are noble expenses I don't think these things would have paid for themselves like the Olympics will be able to. To me this is like saying paying down the mortgage is the most important expense. That doesn't mean you don't buy groceries or keep your eyes and ears open for investment opportunities.
So while this is going to be inconvenient for us for the next little while, I do think its going to be a good thing for this city, province and country. As always I'd love to hear your thoughts? Don't be shy!
Wednesday, January 6, 2010
Living Wage...More Like Living Nightmare
Wow, my wife told me about this yesterday and I'm still fuming over it today. As part of her public nursing she had to sit in on a "lesson", "sermon", I'm not sure what to call it. She was afraid to speak up and I can't blame her. It would be like ending up in a gay bar and trying to spout off the sins of a homosexual relationship. Or on the flip side shouting the benefits of a homosexual relation in a strict southern baptist church. No matter how absurd the comments seem to you, you either look for an exit or bite you tongue and wait for the end to come.
So, what am I so upset about. Well the whole thing actually. The horrible treatment of the poor, including not taxing the rest of us enough to buy them a nice home and fancy clothes for one. Minimum wage being too low to live off of (which I had already planned to address in some future post anyhow). Along with a slew of other things that just get my blood boiling.
What really took the cake though is the Living Wage suggestion. If you don't know what it is, it's a minimum wage that is set based on the cost of rent. They've determined that rent should be affordable for everyone that is working 40 hours a week at no more than 30% of your total income. Unlike the minimum wage it doesn't require legislation to rise. So if the cost of rent goes up, so does your wage.
That equates to $16/hour in Vancouver!!
So why does this get me so upset? Well, it's because I picture some 12 year old kid working at McDonalds earning $16/hour, while a Software Developer that just spent 20,000 on an education is doing a co-op for $20.
I see the potential disaster for this being incredible! How much does a Big Mac cost when you have to pay your employees that much? How many people do you think a company can keep employed at that wage? Why would anyone go to post-secondary when you can get a job that pays that well out of high-school? Heck, why finish high-school?!?
What happens to the rest of the industry? Does a Doctor's wage sky-rocket the same amount as well? If so, they still have the same margin over the minimum wage person as they did before. Which means they buy more, which pushes prices higher until the minimum wage isn't enough again. "That will be 1 million dollars for that milk please sir." Crazy!!!
Finally this is just an escalating nightmare. With the increase in people able to afford rentals while the supply remains the same the rents are going to sky-rocket. Which of course increases the wage again. Can you say "spiral of death"?!?
Another problem that occurs with increased wages is that it becomes cheaper to replace the labour. Already we're seeing self-checkouts at grocery stores, but it wouldn't be that big of a stretch to see these at fast food places. Automated floor cleaners like the automated vacuums, etc, etc. Entrepreneurs are a resourceful bunch after all.
If labour isn't replaced, the other option to the business owner is to not hire full time employees. After all the living wage only applies if you work 40 hours a week. So more jobs end up going part time and people are then forced to work 2 part time jobs at $8/hour a piece. Not exactly the solution they were hoping for eh?
OK, so maybe a little dramatic. I realize that this would probably balance out in the long run. After all, I'd want to get in on these higher rent prices while I can. Builders will jump at the chance to build more apartments to rent out and investors will jump at the chance to supply them at that cost. Of course increased demand in real estate will force that market up too.
I'm all for helping someone get on their feet, but I don't see why we feel the need to help someone sit their fat ass on the couch. We're saying it's OK, not to push yourself, not to go to school. It's OK to piss your money away on drugs and alcohol. It's OK to make horrible decisions. Because no matter how little ambition you have you will be able to afford rent, be given clothing, and given a job that pay 3 times what it's worth.
Phew! Glad I got that off my chest. Now I probably made other people that are reading this feel like my wife did in that meeting. However, if you disagree I promise to be gentle. ;)
I was trying to keep the blog to once a week, but I have too much bottled up, so I'm going to up this to twice a week for now. Monday and Thursday I think.
So, what am I so upset about. Well the whole thing actually. The horrible treatment of the poor, including not taxing the rest of us enough to buy them a nice home and fancy clothes for one. Minimum wage being too low to live off of (which I had already planned to address in some future post anyhow). Along with a slew of other things that just get my blood boiling.
What really took the cake though is the Living Wage suggestion. If you don't know what it is, it's a minimum wage that is set based on the cost of rent. They've determined that rent should be affordable for everyone that is working 40 hours a week at no more than 30% of your total income. Unlike the minimum wage it doesn't require legislation to rise. So if the cost of rent goes up, so does your wage.
That equates to $16/hour in Vancouver!!
So why does this get me so upset? Well, it's because I picture some 12 year old kid working at McDonalds earning $16/hour, while a Software Developer that just spent 20,000 on an education is doing a co-op for $20.
I see the potential disaster for this being incredible! How much does a Big Mac cost when you have to pay your employees that much? How many people do you think a company can keep employed at that wage? Why would anyone go to post-secondary when you can get a job that pays that well out of high-school? Heck, why finish high-school?!?
What happens to the rest of the industry? Does a Doctor's wage sky-rocket the same amount as well? If so, they still have the same margin over the minimum wage person as they did before. Which means they buy more, which pushes prices higher until the minimum wage isn't enough again. "That will be 1 million dollars for that milk please sir." Crazy!!!
Finally this is just an escalating nightmare. With the increase in people able to afford rentals while the supply remains the same the rents are going to sky-rocket. Which of course increases the wage again. Can you say "spiral of death"?!?
Another problem that occurs with increased wages is that it becomes cheaper to replace the labour. Already we're seeing self-checkouts at grocery stores, but it wouldn't be that big of a stretch to see these at fast food places. Automated floor cleaners like the automated vacuums, etc, etc. Entrepreneurs are a resourceful bunch after all.
If labour isn't replaced, the other option to the business owner is to not hire full time employees. After all the living wage only applies if you work 40 hours a week. So more jobs end up going part time and people are then forced to work 2 part time jobs at $8/hour a piece. Not exactly the solution they were hoping for eh?
OK, so maybe a little dramatic. I realize that this would probably balance out in the long run. After all, I'd want to get in on these higher rent prices while I can. Builders will jump at the chance to build more apartments to rent out and investors will jump at the chance to supply them at that cost. Of course increased demand in real estate will force that market up too.
I'm all for helping someone get on their feet, but I don't see why we feel the need to help someone sit their fat ass on the couch. We're saying it's OK, not to push yourself, not to go to school. It's OK to piss your money away on drugs and alcohol. It's OK to make horrible decisions. Because no matter how little ambition you have you will be able to afford rent, be given clothing, and given a job that pay 3 times what it's worth.
Phew! Glad I got that off my chest. Now I probably made other people that are reading this feel like my wife did in that meeting. However, if you disagree I promise to be gentle. ;)
I was trying to keep the blog to once a week, but I have too much bottled up, so I'm going to up this to twice a week for now. Monday and Thursday I think.
Thursday, December 10, 2009
In Favour of the HST
I was getting ready for work this morning and watched the news as I normally do. This morning I was watching the Restaurants take on the government as they try to get the HST removed from dining out. I'm actually all for their fight, but I thought some of the scare tactics they used to be little over the top.
I probably won't make any friends saying this, but I'm actually all for the HST in general. I'd like to see a fee more exceptions added like hair cuts and dining out, but on the whole I think it's a good idea.
Combining the GST and PST in it's own just makes sense from a collection and administration stand point. The less government workers we have to pay the better. My apologies to any government workers out there, but from a tax payer stand point it just makes sense.
Also, what most of us don't realize is that you're already paying the PST on a lot of items that are "exempt". If someone has to pay PST on a component somewhere along the line and they're not allowed to claim it back, it becomes part of their cost. They're not going to lose money so they increase the price. Not only that, if that product is bought by a manufacturer, they pay the PST on the component that already includes PST and because they can't claim it back they pass it on to you. So in some cases you're paying PST multiple times over.
Once these companies are able to claim the PST back they'll be able to exclude this from their prices. Now, every time I've said this people tell me that companies won't do this. Well, now that I'm knee-deep in my Economics class, I'm reminded of what these people are forgetting or are unaware of. The Laws of Supply and Demand.
All other things being equal, if the price of a product increases the demand will decrease. Pretty straightforward. People polled are already saying they expect to spend less once the HST is implemented. So, if this happens businesses will start to sell less. Given they have the ability now to lower their prices without an impact to their bottom line, which will in turn increase demand, they'd have to be stupid not to. All other things being equal, if the price drops the demand will increase.
In fact some products like computer hardware and lumber exports are already looking for every opportunity to get their prices lower. This gives them that opportunity and I don't think you'd have to wait that long to see these drops.
On the other hand, services like haircuts and restaurants don't have this cascading tax to draw from. So they're left having to lower prices without the savings, or live with a reduced demand. So I can understand them being concerned.
It's possible that the decrease in prices elsewhere will alleviate the strain people will feel in these areas and they won't decrease their demand. Although I don't really see I have an alternative to getting my hair cut other than doing it myself (like I said no alternative). As for food...
We're still going to have the PST portion exemptions on certain products, not completely finalized yet. Also, if you didn't pay GST on something before you're not going to pay the HST on it either. I'm not going to stop eating out because of an extra $2 on a $30 bill either. Eating out has always been much more expensive than the alternative of eating at home. But we do it when we're in a hurry, to celebrate, to see friends, etc. I don't see those things changing.
I'd still like to see the restaurant exception added, but I don't like the restaurants saying people will be let go, tips will go down, etc. Restaurants will close, carnage, end of the world in 2012!
Like everyone, I'd rather pay less taxes. However, as taxes go, this is probably the best one I've seen.
Love to hear your comments, although I do expect a little backlash. Assuming anyone is reading this ;)
I probably won't make any friends saying this, but I'm actually all for the HST in general. I'd like to see a fee more exceptions added like hair cuts and dining out, but on the whole I think it's a good idea.
Combining the GST and PST in it's own just makes sense from a collection and administration stand point. The less government workers we have to pay the better. My apologies to any government workers out there, but from a tax payer stand point it just makes sense.
Also, what most of us don't realize is that you're already paying the PST on a lot of items that are "exempt". If someone has to pay PST on a component somewhere along the line and they're not allowed to claim it back, it becomes part of their cost. They're not going to lose money so they increase the price. Not only that, if that product is bought by a manufacturer, they pay the PST on the component that already includes PST and because they can't claim it back they pass it on to you. So in some cases you're paying PST multiple times over.
Once these companies are able to claim the PST back they'll be able to exclude this from their prices. Now, every time I've said this people tell me that companies won't do this. Well, now that I'm knee-deep in my Economics class, I'm reminded of what these people are forgetting or are unaware of. The Laws of Supply and Demand.
All other things being equal, if the price of a product increases the demand will decrease. Pretty straightforward. People polled are already saying they expect to spend less once the HST is implemented. So, if this happens businesses will start to sell less. Given they have the ability now to lower their prices without an impact to their bottom line, which will in turn increase demand, they'd have to be stupid not to. All other things being equal, if the price drops the demand will increase.
In fact some products like computer hardware and lumber exports are already looking for every opportunity to get their prices lower. This gives them that opportunity and I don't think you'd have to wait that long to see these drops.
On the other hand, services like haircuts and restaurants don't have this cascading tax to draw from. So they're left having to lower prices without the savings, or live with a reduced demand. So I can understand them being concerned.
It's possible that the decrease in prices elsewhere will alleviate the strain people will feel in these areas and they won't decrease their demand. Although I don't really see I have an alternative to getting my hair cut other than doing it myself (like I said no alternative). As for food...
We're still going to have the PST portion exemptions on certain products, not completely finalized yet. Also, if you didn't pay GST on something before you're not going to pay the HST on it either. I'm not going to stop eating out because of an extra $2 on a $30 bill either. Eating out has always been much more expensive than the alternative of eating at home. But we do it when we're in a hurry, to celebrate, to see friends, etc. I don't see those things changing.
I'd still like to see the restaurant exception added, but I don't like the restaurants saying people will be let go, tips will go down, etc. Restaurants will close, carnage, end of the world in 2012!
Like everyone, I'd rather pay less taxes. However, as taxes go, this is probably the best one I've seen.
Love to hear your comments, although I do expect a little backlash. Assuming anyone is reading this ;)
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