Men and Women are different

Kim Kargus was recently divorced and looking for a home to buy for herself and her daughter. The 36-year-old child protection worker loved the look of a three-bedroom house in Cobourg, but was a bit nervous about putting in an offer.

She had always rented and was concerned about taking on the debt, a mortgage and the day-to-day responsibilities, from plumbing to electrical, of home ownership.

“When you are renting and something goes wrong, you can call your landlord to come and fix it. But when you buy a house, it all falls on you,” she says. After doing some research, she knew she was ready to take the plunge.

“I had heard lots of other people’s stories, both good and bad. And so I was kind of anxiously waiting and hoping everything was going to go well,” she says.

Kargus’ situation is a good example of how men and women differ in attitudes towards buying a house. Studies by Genworth Financial Canada found more women than men want an easy to understand mortgage structure, and low monthly payments.

Women are also more anxious about their financial future, find shopping fora home more stressful then men, but like men find the notion of home ownership comforting.

A recent Bank of Montreal study made similar findings, noting that women are more likely to report feeling overwhelmed by the home buying process. This trend – and the fact that more women are buying their own homes – has led to a rise in services catering to women.

Banks are focusing on female buyers in their marketing materials and mortgage brokers, such as Marcy Berg, have sprung up. Berg runs the Cobourg-based Mortgages for Women, which courts female clients.

Berg’s clients include separated and divorced women as well as the never-married, single crowd. The latter group is on the rise. A 2007 Royal LePage survey found that 30 per cent of women who have never been married already own their own home. And of those who didn’t, 31 per cent said they planned to purchase a home within three years.

Kargus met Berg three years ago and was preapproved by a mortgage company for a mortgage but the interest rate was fairly high – partly because rates were generally higher at the time but also because Kargus had some debt.

Berg encouraged Kargus to postpone her purchase and pay off her debt to improve her credit rating. She also suggested Kargus wait at a year to buy to give housing prices and rates a chance to drop. “It was one of the best pieces of advice that I ever got,” Kargus says.

Two years later, when she returned to Berg, houses were more affordable. Thanks to paying off her debt and interests rates dropping, Kargus received a lower rate.

Looking back, Kargus says, it was worth the wait. “I don’t regret it all. I absolutely love my house.”

Some single women are purchasing a home with a friend or friends, says Laura Parsons, Bank of Montreal’s manager of specialized sales.

“We just put three waitresses into a mortgage last year,” said Parsons. “They work together. They were all paying rent at $1,200 a month. Why would they not go together? It’s an investment.”

Regardless of whether women who are buying real estate are single, separated, divorced, or coupled up, the home-buying process should begin the same way, Parsons and Berg say.

Sit down with a mortgage specialist or mortgage broker to find out what you can afford. Don’t get rushed through the process over the phone. “There is so much disappointment in that,” Parsons says.

With a mortgage, don’t just focus on the monthly payments. Pay attention to the amortization schedule, which shows, over the entire term of your loan, how much of each payment goes towards interest and how much goes towards principal. (The allocation will change over time.)

“You have to look at how much money this is going to cost you over the life of the mortgage,” Berg says. “People look at the monthly payment and say, ‘I can afford this.’ Well, you can afford the payment, but is it the smartest payment to make?”

After meeting with a mortgage specialist or mortgage broker, don’t be discouraged if the conclusion is that now isn’t the best time for you to buy. Get help setting up a plan that will lead you towards home ownership, Parsons and Berg say.

Naomi Carniol is a Toronto freelance writer.

http://www.moneyville.ca/article/879753--how-women-differ-from-men-in-home-buying-stress

David Pylyp; When you are ready, lets work out your financing details, and without any pressure or drama, find a place for you, your place to start building your own equity. Call or email.

Struggles with Larry the Landlord and Marijuana

Larry the Landlord and his Illegal Marijuana House

Larry the Landlord has a number of misadventures that are sometimes his own doing and sometimes absolutely at the invitation of others.

Larry [A Fictitious Person] has a rental property available for a reasonable amount of money and finds himself a suitable tenant. The Tenant pays cash for a few months ahead of time and everything seems fine.

The Neighbourhood Watch committee decides that there might be too many cars frequenting the house for short duration visits; so the property must be a) operating as a take out restaurant b) involved in the sale and distribution growth of illegal substances.

The Police take note of the lead from the neighbourhood vigils and start surveillance, obtain a search warrant, serve the warrant, discover the illegal growth of marijuana in the property and promptly arrest all those seemingly [allegedly] involved. The Landlord now has a property with a grow op in his basement and is looking for a solution.

WELL….. The hydro has been disconnected by the local utility as the grow operation may or may not have tampered with the wiring and service panel, Theft of Hydro services may have occurred, inspections need to be made but not before an Environmental Assessment has been made. Removal of the Hydro meter effectively terminates your ability to occupy the property or live in. The Hydro will not be reinstated till the Air Quality Testing has been completed. (Your power tools and lights do not work in an un-powered house; there is no heat.

Mold, Mold may be in the basement caused by the high humidity or the mold could have contaminated the entire property. Inspectors need to be called. Inquiries made. Air Mass sensor are used to measure the PPM parts per million of mold in the air and if the staff can be permitted into a hazardous (toxic) work environment with or without protective suits and masks. A normal home inspection will not suffice. A base line of air quality (outside) is taken to compare with interiors. There will be mold. Mold is in bread, Mold spores are everywhere, not all mold is harmful. Some mold is deadly.

How to identify a Grow House

Remedial action must be performed that may include chemical washing agents, removal of drywall to the joists, removal of all ductwork and wiring, (so that the nooks and crevices can be accessed) possibly sand blasted to clean off the mold. There may be required filtration with HEPPA filtering.

I neglected to mention that the Bank has issued a Power of Sale demand letter on your residential mortgage; You have changed the quality and value of their security, they have added additional insurance premiums for their risk during this period. If you have the financial wherewithal you need to refinance (lenders are available to a max of 50% advance to value, rate is not cheap).The lawyer’s fees for “Correspondence” are added to the Claim amount. You will need a different lawyer to discharge the mortgage. If you owe more the property would actually become a power of sale and revert to the Bank. They may at this point in time become responsible for the remediation.

So lets recap. You have cleaned, remediated, inspected every electrical outlet junction box, light switch and socket; have run new wiring in the basement to all the circuits and upstairs where possible and are awaiting the re inspection and re-certification of your property. You are waiting to remedy any deficiencies found on your ESA Statements. You still have the stigma of being an illegal grow house.

This must be disclosed to the Prospective Purchaser prior to an offer;

The Buyer acknowledges that the property and buildings and structures thereon have been used for a criminal use or activity and acknowledges that the Seller makes no representations and/or warranties with respect to the state of repair of the premises and the Buyer accepts the property and the buildings and structures thereon in their present state and in an "as is" condition.

This offer is conditional upon the Seller providing to the Purchaser's Lawyer to review and find satisfactory in the Buyer's Lawyer's sole and absolute discretion. This documentation shall show evidence that the Seller has had the proper government required inspections of the home completed, and that the home has passed such inspections. These inspections are specific to homes that have been found to contain or used for the growth of illegal substances, regular home inspection reports will not be accepted. The Seller shall also provide receipts and records that all fines have been paid in full and that any other fines that arise due to the manufacture and growth of illegal substances in the house before buyer's completion date shall be paid in full by the Seller. Unless the Buyer gives notice in writing to the Seller personally or in accordance with any other provisions with 10 (ten) business days of acceptance that this condition is fulfilled, this offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

This creates the STIGMA of Grow House, and this will need to be disclosed when you are selling again in 8 or 18 years.

But in reality, this house is cleaner, wired up to the standards that are applicable to today’s wiring, inspected for air quality, thermal efficiency (HVAC was all reinstalled remember) City Permits to start and complete the work; Various fines and penalties all paid. In theory Buyers should be lining up to make this purchase.

The Purchaser will find a challenge in obtaining new financing on this property as a high ratio mortgage. Mona Rafiq Mortgage Specialist with CIBC Mortgages was successful in funding a recent purchase with 15% down, a paid CMHC fee, and a slightly elevated interest rate. CMHC will insure previous grow op properties as they understand the remediation and re inspection process.

Do you have a landlord story to share?

If this is not the type of information you are getting from your agent... What are you paying for?

Managing Your Money

It is basic – an RRSP is good for you

When it comes to investing and saving on taxes, you have options. Within your financial planning process, you should look at all of them and select those that work best for your unique situation. But there is one investment option that’s a no-brainer. The Registered Retirement Savings Plan (RRSP), since being introduced 53 years ago, has become the basic foundation of almost every financial plan. RRSPs have stood the test of time as the best tax-saving, incomebuilding vehicle for most Canadians.

Here are the keys to making the most of your RRSP opportunity.

• Contribute to the max Always make your maximum allowable contribution each taxation year to get the most in immediate tax savings and to maximize the potential long-term growth of your RRSP investments. You’ve still got some time to contribute for 2009 – the deadline is March 1, 2010 – and you’ll find your maximum allowable contribution room on the Notice of Assessment sent to you from the Canada Revenue Agency (CRA) after filing last year’s income taxes.

• Contribute regularly Making automatic monthly contributions to your RRSP is much more rewarding than contributing a lump sum once a year. Here’s how: By investing $250 regularly each month at a compound rate of return of 8%, you’ll have $372,590 in your retirement nest egg 30 years from now.* But if you wait until the end of each year to invest a $3,000 lump sum, you’ll have only $339,850. By investing monthly, you’ve added $32,740 at retirement without contributing a dollar more.

• Play catch (up) If you have unused contribution room, fill it up as soon as possible for additional tax savings and longer-term tax-deferred, compound growth. You can fill your unused contribution room in a single year or over a number of years until you reach age 71.

• Borrow to save An RRSP loan can be a smart way to maximize this year’s contribution or to play catch up on your past contributions – but you must get the loan at a low interest rate and pay it back as quickly as possible. A best practice: Use your RRSP tax savings to pay off the loan.

• Spousal savings A higher-earning spouse can contribute to an RRSP for the benefit of his or her partner and enjoy a tax reduction on the contributions.

There are other RRSP strategies that can work for you – the right ones, incorporated into your overall financial plan, will help you save on taxes every year, retire with more and enhance your estate. Talk to your professional advisor about what’s best for you.

* The rate of return is used only to illustrate the effects of the compound growth rate and is not intended

to indicate future returns on investment.

John Scholl B. Mathematics, CGA, Consultant - Investors Group Financial Services Inc.

Smith Manoever Final Answer IS....

Beware of mortgage tax deduction claims

Earlier this month, the Supreme Court of Canada issued a decisive ruling that clarifies once and for all that the interest paid on a mortgage taken out to purchase a principal residence cannot be tax deductible under any circumstances (unless part of the house is used for business purposes.)
The ruling in the case of Lipson v. Canada relates to a complicated series of transactions put into place by Earl and Jordanna Lipson back in 1994.

Initially, Jordanna borrowed $562,500 from the Bank of Montreal to buy shares in her husband's company at market value. She paid the proceeds of the share purchase loan directly to her husband.

The next day, the couple bought a home for $750,000 and obtained a Bank of Montreal mortgage on it for another $562,500. Right after the house closing, the Lipsons used the proceeds of the mortgage to pay off the share purchase loan completely.

In 1994, 1995 and 1996, the husband deducted from his taxable income a total of more than $104,000 in interest expenses on the mortgage loan.

The Minister of National Revenue disallowed the deductions and reassessed Lipson accordingly. The government's position was that the complicated series of transactions amounted to "abusive tax avoidance."

In this country, evading tax is illegal, but avoiding tax is – generally – acceptable, except when the avoidance is abusive. If the minister believes a tax avoidance scheme is an abuse and misuse of the Income Tax Act, the government can invoke the general anti-avoidance rule (GAAR) and deny the taxpayer's claimed deductions. That's what happened in the Lipson case.

When his deductions were disallowed under the GAAR rules, Earl Lipson took the minister to Tax Court, then the Federal Court of Appeal and ultimately, the Supreme Court of Canada.
In a 36-page judgment with two separate dissents, the Supreme Court sided with the government and the two lower courts in a 4-3 ruling.

The Lipson case may have serious ramifications for taxpayers who use schemes like the Smith Manoeuvre to attempt to convert the interest on their principal residence mortgage to a tax-deduction.

The seductive pitch for the Smith Manoeuvre on the promoter's website, www.smithman.net, reads, "Go ahead, make your mortgage tax deductible. Yes, it can be done. Yes, it's legal."
The essence of the Smith Manoeuvre strategy is that each month the homeowner pays down a little bit of the principal owing on the home mortgage, and then borrows it back. The borrowed money is then invested and the carrying charges on that newly borrowed money only are tax-deductible.

But, according to Melanie and Robert McLister at canadianmortgagetrends.com, "it's not for everyone. There are both investment risks and serious tax risks. Your (investment) returns could be insufficient, CRA (Canada Revenue Agency) could invalidate your application of the strategy, or you could wind up in a negative amortization scenario if your house value falls."
(A negative amortization occurs when the balance owing on the mortgage exceeds the value of the house.)

In my opinion, strategies like the Smith Manoeuvre are far too risky for the average homeowner.

After the Lipson decision was released, tax specialist Dan White wrote me to say that taxpayers simply "cannot convert their mortgage to tax-deductible interest. The final verdict is in. ... The primary purpose of an activity dictates the final results in tax deductibility.

"They can borrow money against their house to invest and write off the interest ... so long as it is not just a manoeuvre."

Anyone tempted to participate in the Smith Manoeuvre or other strategies to try and make interest on a home mortgage tax-deductible should obtain tax advice from a qualified accountant or tax lawyer who is not selling anything except unbiased advice.

Tax advisers who make a commission from selling participation in schemes like the Smith Manoeuvre may be in a conflict of interest and their advice may not be impartial.

Above all, taxpayers should not be misled by promises, which appear to make all their home mortgage interest tax-deductible.

Bob Aaron is a Toronto real estate lawyer and a director of the Tarion Warranty Corporation. He can be reached by email atbob@aaron.ca, phone 416-364-9366 or fax 416-364-3818. Visit the column archives at http://aaron.ca/columns/toronto-star-index.htmfor articles on this and other topics.