Canadian Mortgages, Insurance, Investment, Tax Planning

Giving up the Bank Kool-aid.

2012-12-03T00:38:00.003-05:00

December 2, 2012 — Steve Garganis

Recently, I’ve had several new clients contact me about getting out of their higher rate BANK mortgage… No surprise here… with interest rates reachingnew all-time lows, it only makes sense to look into this further…

But I’ve noticed a very familiar pattern developing….See if this sounds familiar:

1-First, you hear about these record low fixed rates… maybe online, from a friend, or from one of my current clients…

2- You contact your Bank to see what they can do…

3-Your Banker gives you 2 options… 1- pay an inflated prepayment penalty (BIG SIX BANKS make you pay for any rate discount) and get into a new 5 yr fixed rate of 3.29% (this is the best advertised rate today by a BIG SIX BANK). OR 2- they’ll blend the penalty into a new mortgage but your rate will be higher… (this never works to your advantage.. there is NO assurance the Bank will offer you the absolute best discounted rate when calculating your new rate.. it’s been a favorite tactic of the Banks for decades…don’t drink this kool-aid… it will cost you $$thousands).

Most of us will stop right there and go no further…We’ve consumed so much Bank kool-aid that it’s turned us into a flock of sheep… But if you’ve started to become immune to the Bank tactics and want to explore further, then read on…

4- You call a Mortgage Broker, maybe me… you discover that today’s best 5 yr fixed rate is under 3.00%… (That’s today’s best 5 year wholesale mortgage rate with NO ADDITIONAL RESTRICTIONS OR LIMITATIONS…It’s important to understand this fine point.) And you discover it’s now worth paying the penalty to get into this new mortgage.

5- Everything is going great… but come payout time, your Banker contacts you… They make a last-minute plea to save your business… Somehow, they miraculously offer to match the Broker rate…

Every heard of this before? What would you do?

Most of my clients, that go through this process, quickly discover who has their best interests at heart. They realize it’s better to deal with ‘rate-setters’ vs ‘rate-matchers’. But oddly enough, I have seen some clients stick with their Bank… Like other addicts, they can’t seem to explain it.. Even after going through the entire mortgage review and approval process (or what I refer to as the Bank detox process). When asked why they stayed, they couldn’t give any logical reason. They just keep going back to the Bank for another fix.

10 years ago, this happened more often. But times have changed. Kool-aid is out. Protein shakes and Red Bull are in. Today’s consumer is more educated… information flows faster. Even the Bank of Canada said “borrowers who use a mortgage broker pay less, on average, than borrowers who negotiate with lenders directly”. (February 2011 entitled ‘Competition in the Canadian Mortgage Market’’).

As always, if you have any questions or comments or are just looking for a better mortgage, please free to contact me anytime.

Debt Management Plan – Pros, Cons and Options

2012-11-14T02:03:00.001-05:00

Continuing in our Debt Management Series, we now have a better understanding of what a debt management plan is. Today we will talk more about debt management plan pros and cons and what other options you may have.
Deciding if a debt management plan, or any other debt relief option, is right for you requires a careful consideration of your individual situation. Make a list of your debts, how much you owe and how much you think you can afford to pay each month. With that information in mind, consider these advantages and disadvantages of a Debt Management Plan (DMP).

Debt Management Plan advantages

A DMP is an informal arrangement with your creditors that allows you to avoid bankruptcy or other insolvency proceedings.
You make one lump sum payment to your not-for-profit credit counselling service agency and the monthly payment is usually less than you are paying now.
Creditors may freeze or waive interest payments reducing the total amount you will have to repay. Often they will only agree to waive interest at the end of the plan assuming you have made all of your monthly payments on time.
A DMP may have less of an impact on your credit score (assuming you make your payments regularly) although a note is usually placed on your credit report stating that you are paying your account through a debt management plan.
If you choose your credit counsellor carefully, you will be able to take advantage of budgeting and credit management education to help you manage your finances better once your DMP is complete.

Debt Management Plan disadvantages

A DMP is an informal arrangement. Creditor participation is entirely voluntary and they can change their mind.
It will not stop wage garnishments and other court proceedings.
You will need to pay back 100% of your debt plus an administration fee and likely some interest.
You will not likely be able to obtain new credit while enrolled in your debt management plan as a condition for reducing or waiving interest.
You will need to be sure you make all of your monthly payments. If you are late you will potentially invalidate your agreement with your creditors and may lose out on any negotiated benefits including lower interest.
Missed payments under a debt management plan will affect your credit score and will likely remain on your credit report for up to 7 years.
You must do a lot of research to find a reputable and reliable credit counselling agency to administer your debt management plan. You should beware of debt settlement companieswho offer too good to be true settlement programs.

If based on your personal situation and a review of these debt management plan pros and cons you feel that you are not able to pay back all of your debts, are dealing with the potential for a wage garnishment or may not be able to make all of your payments as suggested by your credit counsellor you may want to consider making a consumer proposal. Consumer proposals are a formal action under the Bankruptcy and Insolvency Act, administered by a Consumer Proposal Administrator. There are several differences between a consumer proposal and a debt management plan that may provide a better debt relief option for you.
The post Debt Management Plan – Pros, Cons and Options appeared first on Money Solutions Blog.

Fewer Canadians missing loan payments but high debt still a concern

2012-11-08T09:44:00.001-05:00

Fewer Canadians are missing or defaulting on loan payments according to a report from Equifax Canada. This despite the fact that the average debt balance owed by Canadians continues to grow.

The number of Canadians missing loan payments fell to 1.22% in the third quarter 2012, the lowest level since before the recession. This would seem like goods news except for the fact that Canadian debt levels continue to rise. The Equifax report also reveals that non-mortgage consumer debt increased by 2.6%. And according to Statistics Canada consumer credit continues to expand, increasing by 2.7% in August over the same month in 2011.
Nadim Abdo, Vice President, Consulting Solutions, Equifax Canada says seeing “serious delinquencies drop to a record low of 1.22 per cent is a very positive sign that consumers are doing a great job at managing their debt obligations”.
What the drop really says is that Canadians are managing to meet their monthly loan payments – not that they are managing their overall debt. Consumer debt levels have continued to burgeon in Canada with the debt-to-income ratio reaching a record 163% in the most recent quarter.
The main reason more Canadians are, for now, not missing more loan payments is because interest rates are at historical lows. The question becomes how will Canadians with too much debt be able to cope when interest rates increase? Will interest rate increases cause more Canadians to have to file bankruptcy in the long run because they are not reducing their total debt levels fast enough?
In the report Mr Adbo also states that “Debt is increasing at a slower rate, the actual delinquencies are improving, they’re going down. That to me actually shows responsibility of some sort.” Mr Adbo adds “You could actually argue that people are paying off at least a bit of their credit card debt now.”
If your debt is growing, it’s growing. Growing at a slower rate on a much larger number is still something to be concerned about. Eliminating high interest credit card debt is only the first step in managing debt. Shifting debt from one form to another is not a long term debt solution. The overall objective should still be to reduce your debt in total.
So while the Equifax report gives some hope that Canadians are, for the moment, able to meet their loan payments, these findings unfortunately are just an interest rate hike or unemployment rate increase away from reversing. And at the moment, the risk of either of those events happening in the near term remains high.
The post Fewer Canadians missing loan payments but high debt still a concern appeared first on Money Solutions Blog.

Pay Off Debt or Save Money: Which is Better?

2012-11-06T20:34:00.001-05:00

Like many Canadians you may have been hit hard by the recent recession. You have seen your personal savings account dwindle as your family income dropped or worse, your debt levels rise in order to make ends meet. Now you are back to work and you are facing a financial dilemma: pay off debt or restore your savings.

Canadian debt levels are at record highs and you hear warnings that Canadians need to take control of their debts. Not worrying about your debt can have serious repercussions, even bankruptcy. You know that it is important to pay off debt but should it be your only priority?

When To Pay Off Debt First

Paying off debt should be your first priority if you are already struggling with your bill payments. If your monthly debt payments are higher than you can afford on your income then you need to get these debts under control. If your sink is overflowing clearly you are not worried about whether you need to restock the pantry right now. You need to deal with the emergency and if you can’t pay your bills each paycheque then that is your emergency. There are ways of dealing with your debts including budgeting and focusing on eliminating credit card debt that will help you pay off debt faster. If you need help, consider contacting a not-for-profit credit counsellor or trustee in bankruptcy for advice. Both can help you with alternatives to avoid bankruptcy.
Even if you are managing to meet all of your bill payments, if your debts bear a high interest cost (credit card debt for example) then paying off this debt first makes sense. It will lower the amount of your income your lose to interest costs and quickly improve your overall cash flow making more money available for savings in the long run. Paying 18% on a credit card balance while you earn 2% or less on your savings does not make good financial sense. Another option may be to refinance your high interest credit card debt with a debt consolidation loan at a much lower rate. This will reduce your overall loan payments creating extra cash flow that you can put into savings.
If you are loosing sleep, or stress over your debts is affecting your personal relationships, then you may want to focus on a plan to pay off debt until you are feeling more comfortable. If you think you may need to apply for a loan in the near future (perhaps a mortgage or car loan) and are trying to improve your credit score and debt ratios than again, you may want to make paying off debt your number one priority for a while.

When To Consider Saving

It’s an alarming finding, but Canadian’s are heavily reliant on credit for unexpected emergencies. A recent study by Hoyes, Michalos & Associates, an advisor at Moneyproblems.ca, showed that 92% of Canadians would need to rely on some form of borrowing to come up with $2,000 for an emergency. If your debts are manageable, you should set aside extra cash flow towards an emergency fund rather than pay off debt faster. This is a temporary priority until such a time as you build up a large enough emergency savings. Typically advisors recommend that you set aside enough funds to cover six months of expenses. This is particularly important if you have experienced income loss in the past due to economic factors and are concerned that this may happen again. You should also set aside enough funds to cover off unexpected events like a car repair or small house repair.
The best approach is a balanced approach. Have a long term plan to pay off your debt, ensure you have an adequate emergency fund and focus on your savings for the future. And once you pay off your debt, keep them paid off.
The post Pay Off Debt or Save Money: Which is Better? appeared first on Money Solutions Blog.

Capital Loss Without Economic Loss Denied Under the GAAR

2012-10-30T17:53:00.001-04:00

In its latest GAAR decision, Triad Gestco Ltd. v. The Queen released on October 15, 2012, the Federal Court of Appeal applied the GAAR to deny the taxpayer’s capital loss on the basis that the taxpayer had not suffered a current economic loss. The court reached this conclusion even though the capital loss deduction rules do not expressly require an actual economic loss.

Click here to read an in-depth analysis of the case written by Richard Bennett and Patrick Lindsay and published in Tax Notes International.

18 octobre 2012 - Mise à jour du marché résidentiel

2012-10-22T03:25:00.001-04:00

Market Commentary

Fall is a cold wind blowing in the housing market in Canada. September figures from the Canadian Real Estate Association show a fall of more than 15% of home sales compared to last year. More than half of the country markets show a decrease of at least 10%. This sharp decrease is attributed to tougher mortgage rules applied by Ottawa. However, September sales exceeded those of 2.5% in August.

Despite this decline in sales prices rose by 1.1%, giving an average price of $ 355,777. Rising prices was in fact constrained by declines in Vancouver. Excluding Vancouver calculating the price increase is 3%.

Although the federal government's efforts to calm the housing market seems successful, efforts to reduce household debt are blank. The ratio of debt to income ratio of Canadian households rose to 163.4% in the second quarter, against 162% in the previous quarter. Although this increase - compared to the previous figure of 150% - the result of a change in calculation methods, the quarterly increase observed indicates that owners ignore warnings about unsustainable levels of debt. In Canada, the ratio of debt to income ratio is now higher than it was in Britain and the United States before the real estate crisis strikes in both countries.

Parlons Vivant: Les cinq mythes de l'assurance invalidité/ Living Benefits talk: The five Disability Myths - dvk.b2b2c@gmail.com - Gmail

2012-10-17T16:29:00.001-04:00

Les cinq mythes de l’assurance invalidité

Pourquoi les canadiens oublient d’assurer leurs chèques de paie? Parce qu’ils croient généralement à l’un des mythes en assurance invalidité.

Mythe 1 : Le gouvernement(CSST, SAAQ, AE, RRQ) va me couvrir si je deviens invalide.

Réalité : Les régimes gouvernementaux ne paient que des prestations pour une invalidité totale, qui est définie de façon très stricte. Ne couvrent pas l’invalidité partielle.

Mythe 2 : J’ai une assurance invalidité par mon employeur

Réalité : Beaucoup de gens ont la chance de travailler pour une entreprise qui se soucie de ses employés- c’ est un énorme avantage. Cependant, la plupart des plans d’assurance collective ne couvrent que 60% du revenu d’un employé avec un avantage imposable. Après impôts, ils reçoivent seulement 42% de leur revenu. S’ ils peuvent maintenir leur mode de vie sur 42% de leurs revenus, ils ne sont pas à plaindre, sinon ils devraient envisager une protection complémentaire.

Mythe 3 : L’assurance invalidité est trop dispendieuse

Réalité : En regardant la valeur reçue par rapport au coût, l’assurance invalidité est en réalité moins chère que l’assurance automobile ou habitation. Pour seulement quelques dollars par jour, une personne peur assurer des millions sans impôt sur le revenu. Que demander de mieux.

Mythe 4 : Je ne suis probablement pas assurable

Réalité : Très peu de gens ne sont pas assurables. Les compagnies d’assurance offrent des plans pour les personnes ayant une condition médicale quelconque, ceux ou celles qui travaillent dans les professions à haut risque et pour ceux ou celles qui ont des passe-temps à haut risque.

Mythe 5 : Mes chances sont minimes de devenir invalide….Je travaille dans un bureau

Réalité : 75% des invalidités est causé par la maladie plutôt que par des blessures, et les statistiques montrent qu’un tiers des individus âgés de 30 à 64 ans sont invalides au moins une fois durant leur vie active au travail. Poser la question : pouvez-vous vous permettre de ne recevoir aucun revenu durant 6 mois ou plus?

Maintenant que savez les faits, vous serez surement d’accord que l’assurance invalidité est un composante essentielle de chaque portefeuille financier, et avec une économie plutôt chancelante, l’intérêt des consommateurs en matière de protection prend de l’ampleur. Il n’y a pas meilleur moment pour offrir cette protection, faites en une priorité.

The Five Disability Insurance Myths

Why do Canadians forget to insure their paychecks? Because they usually believe on of these disability insurance myths.

Myth 1 : Government(CSST, SAAQ, EI, QPP) will cover me if I become disabled

Reality: Government plans only pay to those with total disability, which is defined very strictly. Does not cover partial disability

Myth 2 : I have disability insurance through my employer

Reality: Many people are fortunate to work for a company that cares for its employees- that’s a huge benefit. However, most group disability insurance plans only cover 60% of an employee’s income with taxable benefit. After taxes, they receive 42% of their income. If they can sustain their lifestyle on 42% of their income, they’re in great shape, if not, they should consider a supplemental policy.

Myth 3: Disability insurance is too expensive

Reality: By looking at the value received compared to the cost, disability insurance ia actually less expensive than auto or home insurance. For just a few dollars a day, a person can insure millions in tax-free income. There’s truly no better deal.

Myth 4 : I am probably uninsurable

Reality: Very few people are uninsurable. Carriers offer plans for medically impaired individuals, those who work in high risk occupations and even for those with high risk hobbies.

Myth 5 : I’m not going to be disabled….I work in an office!

Reality: 75% of disability is caused by illness rather than injury, and statistics show one third of individuals between age of 30 and 64 are disabled at least once their lifetime. Ask the question: Can you afford to go without income for six months or more?

Now that you know the facts, you surely agree disability is an essential component of every financial portfolio, and with the unsteady economy, consumer interest in income protection is gaining momentum. There’s never been a better time to offer this protection, make it a priority

Montreal shifts to buyer’s market: Royal LePage

2012-10-10T14:40:00.001-04:00

Hard hit by tougher mortgage rules, Montreal property sales slowed during the third quarter in a market that now favours buyers, Royal LePage Real Estate Services said Wednesday.

Residential prices, which were up slightly in Q3, year over year, are expected to dip by the end of 2012 - especially in the once hot condo market, where new construction continues to hit record levels. Condo inventory was up 23.4 per cent in the quarter, year over year.

“Price softening should be felt in the coming months, especially in condominiums,” said Dominic St-Pierre, director of Royal LePage for the Quebec region.

Compared to the same quarter in 2011, the average price of a Montreal home in 2012 rose:

-4.5 per cent to $287,500 for a detached bungalow.

-5.5 per cent to $387,786 for a standard two-storey home.

-.3 per cent to $236,989 for a standard condominium

Royal LePage blamed the downturn on new mortgage rules - including a reduction of the maximum amortization period from 30 to 25 years. The change went into effect in July, when sales were already slowing in the country’s larger real estate markets. The new rules, which are applicable to CMHC-backed mortgages, hit first-time buyers who account for a third to half of the market, Royal LePage said.

“We don’t believe these measures were necessary,” St-Pierre said of the government’s tougher mortgage rules.

According to the survey, the average price of a home in Canada rose between 1.8 per cent and 4.8 per cent in the third quarter of 2012 compared with the same period last year.

5 ways to get mortgage-free faster | Sympatico.ca Your Money

2012-10-09T07:17:00.001-04:00

5 ways to get mortgage-free faster

by Kerry K. Taylor ..A mortgage-free home not only saves you money today, but could save you a quarter million dollars over a 25 or 35 year amortization.

Is that mortgaged roof over your head weighing heavy on your shoulders? Then maybe it's time to get serious about your mortgage and try to pay it off sooner.

Don't believe me? The Canada Mortgage and Housing Corporation (CMHC) has a handyMortgage Payment Calculator that crunches the numbers and does the math, and it shows that a $250,000 mortgage on a 30 year amortization (at 5.50 per cent) costs you around $257,500 in interest alone.

If you have no desire to pay for your home twice (and who does?), then reduce your interest payments and trim your mortgage costs with these five tips, and get mortgage-free faster.

1. Know what you can really afford.

Before buying that lavish estate, take a look at your paycheque and figure out how much of a mortgage you can comfortably carry. A good way to see how a mortgage feels is to practice paying it before you buy. Try this tactic:

1. Pay your landlord your monthly rent. Tally the difference between your rent and your anticipated mortgage cost.
2. Put this additional money into a Tax-free Savings Account or a high interest account and use it later for your home down payment.
3. If you can't come up with this additional money every month, then your anticipated mortgage price is too high. Continue saving for a bigger down payment or look at lower priced homes.

The Investor's Education Fund offers a series of home buying articlesfor would-be home buyers looking to scrape together a down payment.

2. Use your prepayment privileges.

If your mortgage has prepayment privileges -- lump sum payments you make outside of your regular mortgage payment schedule, where 100 per cent of the payment goes against the principal -- then you should use them to pay off your mortgage faster.

On a $250,000 mortgage at 6 per cent over 25 years, one prepayment of $1,000 each year could save you around $26,000 in interest and pay off your mortgage two and a half years sooner.

3. Get on an accelerated bi-weekly payment plan.

Want to really end your mortgage faster? Consider paying your mortgage every two weeks, for a total of twenty-six payments per year, using an accelerated bi-weekly payment plan. Your mortgage payments will fall on different calendar days each month, but this minor inconvenience could save you a stunning $50,000 in interest over monthly payments, assuming that same $250,000 mortgage with a 30 year amortization at 5.50 per cent.

4. Round up your payments.

If your regular mortgage payment is an odd number like $14,04.88, then round up to a more memorable $1410 and save some interest over the life of your mortgage. The extra $5.12 should be painless to part with, and even a little top-up can make you a homeowner sooner.

5. Pay a lump sum when possible.

Did you get a bonus, a tax refund, or come into an inheritance? Rather than squander this cash on consumer goods, add this after-tax cash to your mortgage principal and discover the freedom of being mortgage-free faster.

Your Turn: What tricks do you use to pay down your mortgage faster?

Content in this section is provided by Investor Education Fund, a not-for-profit organization established by the Ontario Securities Commission. IEF provides unbiased resources to help people make smarter financial decisions. GetSmarterAboutMoney.ca is IEF’s personal finance website.

Why it’s better to rent than buy | Investing | Financial Post

2012-09-19T12:48:00.001-04:00

Why it’s better to rent than buy

David Kaufman | Sep 14, 2012 12:49 PM ET | Last Updated: Sep 19, 2012 12:10 PM ET
More from David Kaufman

Does it make more sense to buy or rent a home from an investment perspective? It’s a question I get asked more than any other. The answer, in an era of historically low interest rates and perpetually rising real estate values, appears to be obvious: buy.

Just ask any real estate agent and they’ll tell you, “Don’t pay your landlord’s mortgage for him,” or “Build equity for yourself instead of flushing your money down the toilet,” and our favourite, “There has never been a better time to buy.”

It all sounds pretty convincing, but it’s wrong. Unless you need the security blanket of owning your home, it is nearly always a better financial move from an investing standpoint to rent rather than buy. The reason: People rarely consider three major costs of owning a home.

1. The round-trip costs of buying and selling

The largest expense when buying a home is the land transfer tax. In most jurisdictions, this can amount to at least 1.5% of the purchase price. In the Greater Toronto Area, it’s closer to 4%, which comes close to the rent you would pay on a similar residence for an entire year. And, keep in mind, this is paid in after-tax dollars.

When you sell your house, you will also pay about 5% in commissions. Throw in moving costs and legal expenses, and the total cost of buying and selling a home approaches 10% of the purchase price.

If you buy a home for $800,000 and sell it five years later for an impressive $950,000, your net profit (excluding the hefty annual costs discussed below) is about $80,000 — or a compounded annual return of a paltry 1.6%. That’s not a typo. True, this calculation doesn’t figure in the so-called benefit of leverage, but we’ll get to that in a minute.

2. The operating costs of ownership

The largest cost of ownership is invisible. It’s the opportunity cost of not having invested your downpayment somewhere else. As the above point demonstrates, you don’t have to take a lot of risks to outperform the equity appreciation of your home, even in most bull markets.

The other costs of home ownership aren’t invisible at all. Property taxes, mortgage interest, maintenance and a variety of other miscellaneous expenses quickly add up. If you’ve ever had a leaky roof, frozen pipes, a pool to take care of, or a predilection for home improvements, you know this to be true.

Of course, homeowners aren’t on the hook for paying rent, but the operating costs generally far outpace the rent that would apply to the same residence.

3. The impact of a mortgage

It is generally assumed that buying a home means taking out a mortgage, especially with interest rates at historic lows. Mortgages used to be a vehicle that homebuyers used to buy an asset well beyond their means. The goal was to pay it off over 20 or 25 years, just in time for retirement, when the home they lived in would become their physical nest egg.

This has morphed over time to the point where buyers access the maximum amount of leverage available to them at purchase and take the longest possible amortization period available. They enter into mortgages knowing that their monthly payment is close to the maximum they can afford (assuming they stay employed and won’t have any costly unexpected events), confident that if they ever run out of money, they can just extract more equity from the ever-increasing value of their home.

This isn’t preparing for retirement. This is preparing for job interviews in your seventies when you should be enjoying cocktails after a round of golf.

If you would like to run some of the numbers comparing buying vs. renting for yourself,click here for an excellent online Excel template that is geared specifically to Canadian homebuyers. The New York Times has also published a very detailed interactive online calculator that may be useful.

The bottom line is that using leverage to buy a home presumes the value of real estate will always go up. Historically, the value of residential real estate has increased more or less in lockstep with inflation, meaning that the buying power of your equity will be the same 20 years after you buy a home as when you bought it.

The same people who think buying a home with 15% down is a sound investment would never dream of applying 600% leverage on any other investment. Most conservative investors, for whom capital preservation is the primary objective, eschew any leverage at all in their investments because leverage works both ways: It magnifies gains, but magnifies losses as well.

In the case of an 85% mortgage, it is imperative to understand that a 15% decline in the value of the home results in a 100% loss of the equity forming the downpayment. The vast majority of your mortgage payments in the first five years is interest on your debt. If you sell your house after that time following a 15% market correction, you end up with nothing after you pay down your outstanding mortgage principal.

If you try to refinance your mortgage in that scenario, you will have to “re-up” on your equity, assuming you can get a new mortgage at all. This is a tame version of what transpired in the U.S. in 2007-08. It is not fantasy; it can happen here and it will happen here.

It’s just a matter of time.

David Kaufman is the president of Westcourt Capital Corp., a portfolio manager specializing in the construction and management of investment portfolios using traditional and alternative asset classes and investment strategies. drk@westcourtcapital.com

Back To School - Finance 101 - Money Saving Tips and Q&A - RedFlagDeals.com

2012-09-19T12:42:00.001-04:00

Back To School - Finance 101 - Money Saving Tips and Q&A - RedFlagDeals.com:

Q&A - User Submitted & Answered By @TD_Canada

Q1: RESP contributions — is there an age restriction for making contributions in a child's name? Are there limitations to government grants?
Q2: At what age should a child have his/her own bank account?
Q3: What are some good tips to sticking to your budget?
Q4: Should I let my child apply for a credit card as soon as they turn 19? I heard it was good to establish credit.
Q5: What are some of the loans or line of credit that can benefit post graduate students and what's the usual requirements.
Q6: Should I get a student line of credit to pay my school expenses with? What's the interest and how does the payments work?
Q7: Is it wise to borrow at low interest rates to invest in RRSPs or TFSAs?
Q8: My Bank just told me I could up the limit on my card but I use nowhere close to the limit, should I do it?
Q9: How do I save for my child’s higher education living on bare minimum wage?
Q10: Is it better to pay for purchases with cash or credit cards?

Q1: RESP contributions — is there an age restriction for making contributions in a child's name? Are there limitations to government grants? (Submitted by @matschkean)

There is no age restriction when making a RESP contribution, however you do need your child’s SIN to open the account. Here are a couple of factors that you should be mindful of:

A Registered Education Savings Plan allows each beneficiary (child) to receive a lifetime contribution of $50,000.
A RESP can be opened for 35 years; but contributions can only be made until after year 31.
The year the child turns 17 is the last time they can receive government CESG grant/bonds; however unassisted contributions (no grant) can continue to be made until the lifetime maximum is achieved.
The federal government will match contributions up to 20% or $500 per year for every child in the plan. This is called the Canada Education Savings Grant (CESG). Some families may also qualify for the Canada Learning Bond (CLB) which is an additional top up of 10-20% on the first $500 of contributions in a year for every child. By the time your child goes to school, they could receive up to $7,200 of ‘free’ government money, in addition to your contributions and the income earned within the account.
Investments held within a RESP for your child grows tax-free which means your returns are increased.

To learn more about RESPs you can visit the CRA Website.

Here are some other sites you may find helpful: the first is an RESP calculator which can project how much you need to save today, in order to have enough money available once your child is ready for school. Theother site will give you a breakdown of how much grant money you will receive based on your annual contributions into the RESP plan.

Back To Questions

Q2: At what age should a child have his/her own bank account? (Submitted by @greenurlifenow)

It’s never too early for a child to have their own bank account. In fact, a parent or guardian can even open an account while the child is still an infant. There are some key advantages to opening an early account for your child. Parents can deposit and save their child’s birthday or monetary gifts for when they're older. As the child continues to grow, the parent can then demonstrate the concept of saving money by either incorporating an allowance or simply showing them how to put coins into a piggy bank. When they are older, your financial institution can give the child their own debit card and access to view their accounts online.

By promoting financial literacy and educating your child about the proper techniques of saving and money management, you will help them form good financial habits that they’ll be able to use in the future. Most financial institutions offer a youth account (available for minors) that has minimal or no monthly fees and offers unlimited deposit/withdraw transactions. Once the child becomes age of majority (based on their province), then they can convert this youth account into a student account that would transition them into their years of post secondary education.

Back To Questions

Q3: What are some good tips to sticking to your budget? (Submitted by @tkwan23)

As a rule, most students have limited funds so it’s important to make the most of what you do have. Even if you have received a bursary or have a part-time job, the monthly costs do add up.

Here are some tips I find helpful:

Stay organized: You have to be able to keep track of all the money coming in (part-time jobs, bursaries, student loans, income assistance, etc.) and all the money going out (tuition, books, rent, food, etc.). The idea is not to spend more than you bring in.
Create a budget and stick to it. I recommend that you start with a look at your last three months of bank statements and bills for a realistic view of your spending habits and expenses. Now it’s time to work on a budget. A great tool can be found on TD's cash flow calculator, you can even print out a report and analyze your spending. If your main concern is sticking to your budget, allow yourself to spend a certain amount on things like entertainment and clothes per month. Once you meet that budgeted amount, you’re going to have to cut yourself off from spending more.
Don’t forget to create an emergency fund. Make sure your budget lets you put away some money to take care of unexpected costs. You may have to fix your car or pay for some extra tutoring. Unfortunately these instances pop up more often than most people think and it’s always better to be prepared for them.

Back To Questions

Q4: Should I let my child apply for a credit card as soon as they turn 19? I heard it was good to establish credit (Submitted by @donnaelle)

Anyone can apply at age of majority but the advice of a parent really counts. Credit cards are convenient and can be a real help especially for students living away from home who need to make an important purchase. It’s also a good way to help younger adults build up a credit history to help them borrow in the future.

To get a card, your 19 year old will have to apply and meet certain conditions to be approved including showing the ability to pay. If he or she is approved then you should talk about how to use credit responsibly -- try to pay in full each month, always pay on time and keep the spending under control. Getting behind on card payments or getting into too much debt can impact their credit rating which they'll need in order to borrow in future, or even rent an apartment and in some cases, get a job.

If you don't think your teenager is ready for this then you may want to consider getting them a supplementary card on your account so they have the benefits of a card and you can see how they handle it.

Back To Questions

Q5: What are some of the loans or line of credit that can benefit post graduate students and what's the usual requirements (Submitted by @djemzine)

A number of lenders offer Student Lines of Credits specifically aimed at post graduate students (obtaining your Masters of Ph.D.) and professional students (programs of Chiropractic, Dental, MBA, Medical or Optometry, Pharmacy or Veterinary). The requirements can vary from bank to bank. However, some usual requirements are:

Providing proof of enrollment/registration of an approved accredited school however, some exceptions may apply.
Being able to service the debt you will be taking on. This may mean applying with a co-signer; however, some exceptions may apply.
Some lenders, depending on your program, may have you complete a Student Budget Worksheet in the applications process.

For more information regarding post graduate Student Lines of Credits at TD, click here.

Back To Questions

Q6: Should I get a student line of credit to pay my school expenses with? What's the interest and how does the payments work? (Submitted by @chi_amy)

A Student Line of Credit (SLOC) can help pay for your tuition, books, laptop computer and supplies if you don’t have the funds to pay for it yourself. Student Lines of Credit tend to feature a competitive interest rate, which can vary depending if you are an undergraduate or a post graduate student. In terms of how the payments work, while you are in school and for up to 12 months after graduation, you will be paying interest only on the balance you use. To see more Frequently Asked Questions related to TD’s Student Line of Credit, click here.

Other options you may want to consider to pay for your school expenses can be:

Back To Questions

Q7: Is it wise to borrow at low interest rates to invest in RRSPs or TFSAs? (Submitted by @mrdisco3)

Given today’s low interest environment, it can be very tempting to borrow money, but what you use that money to purchase will determine whether it’s ‘good’ or ‘bad’ debt. Fortunately, RRSP loans fall into the good debt column – debt that allows you to invest in your future and helps you get ahead in the long run (vs bad debt which tends to result from consumer spending that doesn’t pay off in the future).

A RSP loan can be a great way to invest into your future because:

The money that you put in will grow tax-deferred, which means your investments will grow quicker than if it was held outside of your RSP.
The contribution you make into a RSP is tax-deductible. This means that when you’re filing your annual tax return, you can include the contribution as a deductible amount that will reduce your taxable income. This will result in you having to pay lower taxes or you may even receive a tax credit (which can be put towards further savings or debt repayment)
When you’re ready to purchase your own home one day, or, if you’d like to continue your education, you may be eligible to borrow money from your RSP. To learn more about the Home Buyers Plan, check out this link or the Lifelong Learning Plan.

Back To Questions

Q8: My Bank just told me I could up the limit on my card but I use nowhere close to the limit, should I do it? (Submitted by @jennthanasse)

The credit card limit increase was probably offered to you based on your positive credit rating and determined that you would be a good candidate for more credit. Now, this is a very important time for you to consider how credit can help or hurt you. Some students get in over their head with too much credit at a young age when they don’t know how to handle it. The offer of an increased limit can really help you out but may hurt you if you borrow more than you can afford to pay back.

While a credit card with a higher limit does have its advantages, like the ability to make larger purchases, and the availability of funds in case you need them, it can also have disadvantages. You may be tempted to spend more or carry a balance which means you will pay more in interest. Or you might be late with or miss a payment, which could affect your ability to get credit in the future or even to do things like rent an apartment.

Back To Questions

Q9: How do I save for my child’s higher education living on bare minimum wage? (Submitted by @lizzyoday)

Although your finances may be tight, it’s great that you are thinking about saving toward your child’s education down the road. Did you know that even with little or no savings you could qualify for $500 from the Government of Canada to get you started? All you have to do is open a Registered Education Savings Plan (RESP). The RESP is a special savings plan to help you save for your child’s post-secondary education. With the rising costs associated with sending a child to college or university, an RESP can really help because the government provides grants while the savings grow tax-deferred until withdrawn. You can contribute to a RESP directly from your chequing account and you may be eligible for receiving two grants that are exclusive to this plan:

The Canada Learning Bond (CLB) – You can earn $500 now to help you start saving, an extra $100 each year up to age 15, and an extra $25 to help cover the cost of opening the RSP. The CLB is available to children born after December 31, 2003 and families who receive the National Child Benefit Supplement (NCBS) also known as the “family allowance” or “baby bonus.”
The Canada Education Savings Grant (CESG) – The CESG is made up of the basic CESG and the additional CESG. The Basic CESG is a payment of 20% on contributions made to an eligible beneficiary up until the child turns 17 (total grant not to exceed $7200 per lifetime or $500 per year).

You can find out if you qualify for the CLB, get more information on the basic CESG and see if you qualify for the additional CESG by visiting the CRA site.

Try to start saving right away because the sooner you start the more you will save. Even a small amount every month or every paycheck slowly increased over time will make a big difference. Visit TD’s simpleeducation savings tool calculator here.

Back To Questions

Q10: Is it better to pay for purchases with cash or credit cards? (Submitted by @greenurlifenow)

The principle of money management teaches you that you should only purchase what you can afford to pay. With good reasoning too, because you’ll live within your means, not incur any debt and possibly save along the way. This is a great way to live, however the problem with only paying cash is that you won’t be establishing a credit history that’ll one day be important for larger purchases like buying a home or even paying for rent. Your credit history will follow you through school and into the working world so you want to ensure your credit rating is positive because it will be one indicator for lenders to decide on your ability to carry and pay back debt.

If you’re financially responsible and ready to establish credit, then starting with a secured credit card may be one option to consider because the card is secured against the savings balance in your account. Here are some tips that can develop positive spending habits and a positive credit history:

Always pay the minimum monthly payment on your credit card statement.
To avoid paying interest, treat your credit card like cash, by only charging purchases you’ll be able to pay for in full.
Make your payment on time — write in or program your monthly due date in your calendar for an instant reminder.

Check out TD's site to learn more tips about student life and paying for school.

CAAMP Stats September 2012

2012-09-05T12:46:00.001-04:00

September 2012

Welcome to the September issue of CAAMP Stats. For more information on CAAMP please visit www.caamp.org

JUMP TO A SECTION:

Bank of Canada Interest Rate	Government of Canada Bonds
Bank Prime Lending Rate	Total New Housing Starts
Conventional Mortgage - 5 Year Rate	Average MLS® Resale Price for Local Markets
US Federal Reserve Board Discount Rate

Bank of Canada Interest Rate

July 17, 2012	1.00 %
September 5, 2012	1.00 %
October 23, 2012	Next meeting date

Source: Bank of Canada
Top of Page

Bank Prime Lending Rate

July 18, 2012	3.00 %
September 6, 2012	3.00 %
October 24, 2012	Next meeting date

Source: Bank of CanadaTop of Page

Conventional Mortgage - 5 Year Rate*

June 6, 2012	5.24 %
July 25, 2012	5.24 %
August 15, 2012	5.24 %

Source: Bank of Canada
*Determinant for high ratio mortgage variable qualifying rateTop of Page

US Federal Reserve Board Discount Rate*

June 20, 2012	0.00 % - 0.25 %
July 31, 2012	0.00 % - 0.25 %
September 12, 2012	Next meeting date

Source: US Federal Reserve
*US Federal Reserve has indicated it will keep this rate until Q4 2014Top of Page

Exchange Rate $CDN($US)

July 31, 2012	0.9971
August 15, 2012	1.011
August 31, 2012	1.010

Source: Bank of CanadaTop of Page

Government of Canada Bonds

Bond Type	July 25, 2012	August 15, 2012	August 29, 2012
1 year Treasury Bill	0.97%	1.17%	1.14%
3 year Benchmark Bond Yield	1.00%	1.29%	1.23%
5 year Benchmark Bond Yield	1.16%	1.51%	1.38%
10 year Benchmark Bond Yield	1.60%	1.95%	1.80%

Source: Bank of CanadaTop of Page

Total New Housing Starts (Seasonally adjusted and annualized)

Province	May 2012	May 2011	June 2012	June 2011	July 2012	July 2011
Newfoundland/Labrador	3,700	3,700	3,800	5,800	4,300	4,100
PEI	700	900	1,300	800	1,200	1,200
Nova Scotia	4,200	4,400	4,100	4,000	2,800	5,700
New Brunswick	4,200	3,400	4,600	4,500	3,700	6,000
Quebec	42,900	50,500	49,100	48,200	50,600	45,600
Ontario	79,300	53,000	72,900	75,800	74,500	75,200
Manitoba	12,400	6,300	5,100	5,400	6,400	7,400
Saskatchewan	7,000	5,200	10,900	8,700	7,500	5,600
Alberta	33,600	24,300	33,900	24,100	31,500	24,300
British Columbia	28,200	31,900	36,400	23,500	26,000	30,000
CANADA	216,200	183,600	222,100	200,800	208,500	205,100

Source: CMHC Housing Now - August 2011 and August 2012. This seasonally adjusted data goes through stages of revision at different times of the year.

Top of Page

Average MLS® Resale Price for Local Markets

City	July 2011	July 2012
Halifax	$ 262,723	$ 268,872
Saint John	$ 158,448	$ 177,955
Quebec	$ 240,422	$ 266,552
Montreal	$ 316,936	$ 331,577
Ottawa	$ 342,925	$ 340,352
Toronto	$ 459,122	$ 476,947
Hamilton/Burlington	$ 349,235	$ 345,807
Winnipeg	$ 238,258	$ 249,175
Saskatoon	$ 299,097	$ 323,165
Regina	$ 272,548	$ 297,708
Calgary	$ 397,613	$ 409,670
Edmonton	$ 334,444	$ 337,304
Vancouver	$ 761,673	$ 667,462
Victoria	$ 467,052	$ 475,768

Source: Canadian Real Estate Association

Top of Page

Personal Information Request Form

2012-09-04T17:33:00.001-04:00

Personal Information Request Form

This form is being offered to you as an on-line service and is available to you in Rich Text (RTF) and Portable Document (PDF) formats. More detailed instructions will also be offered on the form.

If you choose the RTF format, you will have two options for completing the form:

Fill in the form on-screen and then print it for submission by mail;
or print the form and fill in the fields by hand for submission by mail.

If you choose the PDF format, you must print the form and fill in the fields by hand for submission by mail.

If you require a reader to view the form, please go to the Adobe Acrobat Reader download page.

Instructions for completing the form:

Determine which federal government institution is most likely to have the information you are seeking.
To apply for information under the Privacy Act, complete the Personal Information Request Form. Describe the information being sought and provide any relevant details necessary to help the institution find it. If you require assistance, refer toSources of Federal Government and Employee Information for a description of personal information banks (PIB) held by the institution or contact its Privacy Coordinator.
Forward the access request to the Coordinator of the institution holding the information.

Personal Information Request Form (TBS/SCT 350-58):

US Citizens Abroad: New Filing Procedure and OVDP FAQs

2012-08-28T06:47:00.001-04:00

US Citizens Abroad: New Filing Procedure and OVDP FAQs

On June 26, 2012, the IRS announced a new compliance procedure for certain US taxpayers living abroad who have failed to timely file US federal income tax returns or reports of foreign bank and financial accounts (FBARs), form TD F 90-22.1. Effective September 1, 2012, the new procedure applies to current non-US residents, including those who are dual citizens. The IRS also released FAQs for its open-ended 2012 offshore voluntary disclosure program (OVDP).

New compliance procedures. To come forward under the new guidance, a taxpayer must file delinquent tax returns with appropriate related information returns for the past three years and delinquent FBARs for the past six years. Notably, the guidance allows a taxpayer to claim retroactive relief for failure to timely elect income tax deferral on certain retirement and savings plans, such as RRSPs and RRIFs, for which deferral is permitted by a tax treaty; the deferral elections for a taxpayer's non-US retirement plans must be made with the submission. Any tax and related interest must also be paid with the submission. Further guidance on the application procedure is expected before September 1, 2012.

The IRS is expected to review all submissions, but the level of the review will vary according to the taxpayer's compliance risk. For taxpayers who present a low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. For those who present a higher compliance risk, the IRS will conduct a more thorough review and possibly a full examination of the returns--in some cases, for more than three years--and on that basis will impose tax, interest, and any appropriate penalties in accordance with US federal income tax laws. The IRS refers taxpayers to its fact sheet FS-2011-13 (issued in December 2011) for more information on penalties that may be imposed.

The level of compliance risk is based on certain information provided in the returns filed and on certain other information required in the submission. A low-risk taxpayer has simple returns with little or no US tax due. Absent any other high-risk factors, a taxpayer is generally considered to be low-risk if he or she has less than $1,500 in tax due in each of the three years. The risk level rises (1) as the taxpayer's income and assets increase, (2) if there are indications of sophisticated tax planning or avoidance, or (3) if the taxpayer has material economic activity in the United States. Additional risk factors include any additional history of non-compliance with US tax laws and the amount and type of US-source income. Before September 2012, the IRS is expected to release more information and guidance on how the level of compliance risk is determined.

In order to claim reasonable cause for failure to file a tax return, an information return, or an FBAR, the taxpayer must submit a dated statement, signed under penalties of perjury, explaining the reasonable-cause justification for the failure to file. (Taxpayers are referred to fact sheet FS-2011-13 for examples of reasonable cause.) In addition, a taxpayer who seeks to file a late election to defer income from certain retirement or savings plans pursuant to a relevant treaty must submit (1) a statement that requests an extension of time to make an election to defer income tax and identifies the treaty position, (2) for relevant Canadian plans, a form 8891 ("US Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans") for each tax year and a description of the type of plan covered by the submission, and (3) a statement describing the event that led to the failure to elect; the events that led to the discovery of the failure; and, if the taxpayer relied on a professional adviser, the nature of the adviser's engagement and responsibilities.

The IRS reminds taxpayers that this new procedure does not provide protection from criminal prosecution if the IRS and the Department of Justice determine that it is warranted in the taxpayer's particular circumstances. Furthermore, once a taxpayer makes a submission under this new procedure, the IRS's 2012 OVDP is no longer available. A taxpayer who is ineligible to participate in that OVDP is also ineligible to participate in this procedure.

OVDP FAQs. The IRS released long-awaited FAQ guidance for its open-ended 2012 OVDP. The lookback period is the most recent eight tax years for which the US income tax return filing date (with valid extensions) has passed either with no income tax returns filed or with returns filed from which income was omitted. Thus, for a Canadian who did not file a 2011 US income tax return--or a request for an extension to file by October 15--by the June 15, 2012 deadline, the lookback period is 2004 through 2011.

The OVDP requires payment of any US tax owing, interest, and mandatory penalties for late filing of US income tax returns and late payment of any US income tax due. The values of foreign accounts and other foreign income-producing assets are aggregated for each year, and the penalty is calculated at 27.5 percent of the highest year's aggregate value during the period covered by the voluntary disclosure. The rate of penalty is reduced to 5 percent for a taxpayer who did not reside in the United States during the lookback period, made a good-faith showing of timely compliance with all tax reporting and payment requirements in his or her country of residence, and has $10,000 or less in US-source income each year.

The new FAQ guidance reaffirms that no penalties are imposed on a taxpayer who for the last eight years timely filed US income tax returns reporting all non-US income, and failed only to file FBARs and forms 3520 or forms 5471. In that case, a taxpayer may file the delinquent information returns with the appropriate processing centre (forms 5471 must be filed with amended income tax returns) and include a statement that explains why the information returns are being filed late. The IRS will not impose penalties for failure to file if the taxpayer was not previously contacted by the IRS regarding an income tax examination or a request for delinquent information returns.

The new compliance procedure is welcome guidance for many US citizens living in Canada, particularly its inclusion of deferral elections for RRSPs and RRIFs. Some questions remain unanswered, but the available penalty relief should encourage US citizens who may have just learned of their US tax-filing requirements to come forward. Canadians should consult a US tax adviser to determine the appropriate approach to come into compliance with their US income tax and information reporting obligations.

Marla Waiss and James M. Bandoblu Jr.
Hodgson Russ LLP, Buffalo

Canadian Tax HighlightsVolume 20, Number 8, August 2012
©2012, Canadian Tax Foundation

GST/HST Place of Supply for Services

2012-08-28T06:41:00.001-04:00

GST/HST Place of Supply for Services

Coincident with the 2010 implementation of the HST in Ontario and British Columbia, the place-of-supply (POS) rules, which govern whether GST or HST applies on the supply of property or services, were revamped. In particular, the POS rules that govern the supply of intangible personal property and services were modified to focus more on the place of consumption and not the vendor's location, thus bringing the rules in line with one of the founding principles of a value-added tax. The June 2010 Technical Information Bulletin (TIB) B-103 contained various helpful examples that illustrated the changes, but many interpretive issues remained. The redraft of the bulletin, "Harmonized Sales Tax--Place of Supply Rules for Determining Whether a Supply Is Made in a Province"--was released in June 2012 for public comment and incorporates many new examples that answer some questions that were left hanging. The TIB redraft does not introduce new rules or significant new concepts, but its examples may be useful to taxpayers and practitioners who are struggling to understand the POS rules in the context of specific transactions.

A number of POS rules target specific services such as transportation, customs brokerage, telecommunications, and repair and maintenance. Other rules that encompass services in relation to real or tangible property apply if a sufficiently direct connection exists between the service and the underlying property. For example, the TIB redraft delineates a sales agent whose services do not "relate to a particular good that is known . . . to be situated at a particular location, but rather [consist] of the selling" of a generic good. Because the connection to specific identifiable goods is not sufficiently direct, the CRA is of the view that the POS rule for services in relation to tangible property is not relevant: instead, the general services rule (discussed below) applies.

If no specific rule fits the circumstances, the default rule is the general services rule, which focuses primarily on the address of the recipient--the person liable to pay for the service--as a proxy for the place of consumption. The general services rule establishes the POS and rate of tax by reliance in the first instance on the Canadian home or business address of the recipient that is obtained by the vendor in the ordinary course of business. The TIB redraft reiterates that such an address is relevant only if it is obtained in connection with the supply, but it does not have to be the address that is determined for every supply made to the recipient: thus, the relevant rule can vary from supply to supply. Notably, the CRA states that it must be reasonable for the supplier to be able to conclude, on the basis of information available to it or provided to it by the recipient, that a valid business address has been obtained. However, the redraft reaffirms that the supplier is not required to verify the validity or appropriateness of the address.

If more than one address is obtained, the POS is based on the one address that is most closely connected with the supply, as represented--in decreasing order of preference--by the contracting address, the address that the supplier has the most contact with, and the billing address. This hierarchy of addresses has led to a number of unresolved interpretive issues, including the question of which contracting address should be used when both a master services agreement and a statement of work or a purchase order (PO) exist, as is often the case. The TIB redraft sheds light on this question by citing the example of a recipient, headquartered in Ontario, that contracts with a consultant under a global framework agreement (GFA). The GFA incorporates definitions, the extent of the parties' liabilities, confidentiality obligations, performance standards, dispute resolution, and payment terms between the contracting parties. The GFA does not constitute an agreement for the supply of any specific services and does not impose an obligation on either party for future supplies: each regional office issues a PO for specific services under the GFA umbrella. The redraft concludes that the most closely connected business address is the one associated with the PO and not with the GFA, presumably because the PO-connected address is the locus of the actual supply, whereas the GFA-connected address is merely the locus of an agreement that establishes the relationship's ground rules in the event that a supply is made.

If there is no Canadian home or business address, the default POS is the place where the service is performed. The CRA interprets this POS to potentially include the location from which a person physically performs the work or the location of the supplier's equipment that is used to supply the service; the location where a report is prepared; and the location of a customer's property if the vendor can remotely access it to provide electronic services. Under the CRA's expanded interpretation, each supply must be analyzed to pinpoint the various locations where elements of the supply are performed before the predominant location can be determined.

Audrey Diamant
PricewaterhouseCoopers LLP, Toronto

Canadian Tax HighlightsVolume 20, Number 8, August 2012
©2012, Canadian Tax Foundation

CAAMP Stats August 2012

2012-08-09T01:23:00.001-04:00

August 2012

Bank of Canada Interest Rate

June 5, 2012	1.00 %
July 17, 2012	1.00 %
September 5, 2012	Next meeting date

Source: Bank of Canada
Top of Page

Bank Prime Lending Rate

June 6, 2012	3.00 %
July 18, 2012	3.00 %
September 6, 2012	Next meeting date

Source: Bank of CanadaTop of Page

Conventional Mortgage - 5 Year Rate*

May 30, 2012	5.34 %
June 6, 2012	5.24 %
July 25, 2012	5.24 %

Source: Bank of Canada
*Determinant for high ratio mortgage variable qualifying rateTop of Page

US Federal Reserve Board Discount Rate*

June 20, 2012	0.00 % - 0.25 %
July 31, 2012	0.00 % - 0.25 %
September 12, 2012	Next meeting date

Source: US Federal Reserve
*US Federal Reserve has indicated it will keep this rate until Q4 2014Top of Page

Exchange Rate $CDN($US)

July 3, 2012	0.9877
July 18, 2012	0.9894
July 31, 2012	0.9971

Source: Bank of CanadaTop of Page

Government of Canada Bonds

Bond Type	June 27, 2012	July 11, 2012	July 25, 2012
1 year Treasury Bill	0.96%	0.99%	0.97%
3 year Benchmark Bond Yield	1.04%	1.04%	1.00%
5 year Benchmark Bond Yield	1.21%	1.20%	1.16%
10 year Benchmark Bond Yield	1.72%	1.67%	1.60%

Source: Bank of CanadaTop of Page

Total New Housing Starts (Seasonally adjusted and annualized)

Province	April 2012	April 2011	May 2012	May 2011	June 2012	June 2011
Newfoundland/Labrador	4,600	2,300	4,500	3,700	4,700	5,800
PEI	1,200	700	700	900	1,300	800
Nova Scotia	3,200	3,900	4,400	4,400	4,100	4,000
New Brunswick	2,500	2,500	4,700	3,400	5,400	4,500
Quebec	62,600	45,100	42,000	50,500	48,100	48,200
Ontario	98,400	67,600	80,300	53,000	73,300	75,800
Manitoba	5,100	4,800	12,200	6,300	5,000	5,400
Saskatchewan	11,100	5,900	6,900	5,200	10,800	8,700
Alberta	39,400	21,400	33,400	24,300	33,500	24,100
British Columbia	23,900	24,500	28,300	31,900	36,500	23,500
CANADA	252,000	178,700	217,400	183,600	222,700	200,800

Source: CMHC Housing Now - July 2011 and July 2012. This seasonally adjusted data goes through stages of revision at different times of the year.

Top of Page

Average MLS® Resale Price for Local Markets

City	June 2011	June 2012
Halifax	$ 269,605	$ 272,495
Saint John	$ 168,830	$ 163,468
Quebec	$ 245,158	$ 263,740
Montreal	$ 323,926	$ 336,054
Ottawa	$ 354,524	$ 354,690
Toronto	$ 476,386	$ 508,622
Hamilton/Burlington	$ 339,828	$ 363,162
Winnipeg	$ 243,977	$ 257,095
Saskatoon	$ 299,572	$ 287,355
Regina	$ 285,613	$ 312,241
Calgary	$ 412,016	$ 422,139
Edmonton	$ 328,695	$ 340,391
Vancouver	$ 808,867	$ 701,141
Victoria	$ 507,385	$ 486,611

Source: Canadian Real Estate Association

Top of Page

Quarterly Housing Price Index

Standard Two-Storey

Market
Q2 2012 Average
Last Quarter Avg
Q2 2011 Average
2 Storey % Change

Halifax
317,167
306,667
301,667
5.1%

Charlottetown
203,000
200,000
197,000
3.0%

Moncton
138,000
134,800
137,500
0.4%

Fredericton
215,000
208,000
208,000
3.4%

Saint John
279,770
293,250
299,750
-6.7%

St. John's
368,025
350,500
336,667
9.3%

Montreal
384,804
387,429
379,529
1.4%

Ottawa
392,000
387,833
371,500
5.5%

Toronto
668,829
645,467
623,202
7.3%

Winnipeg
321,875
309,250
307,375
4.7%

Regina
347,500
299,000
325,000
6.9%

Saskatoon
379,500
372,250
353,750
7.3%

Calgary
425,456
418,233
415,200
2.5%

Edmonton
353,764
354,714
349,286
1.3%

Vancouver
1,178,750
1,182,250
1,114,500
5.8%

Victoria
461,000
459,000
477,000
-3.4%

National
408,423
398,282
390,163
4.7%

Detached Bungalows

Market
Q2 2012 Average
Last Quarter Avg
Q2 2011 Average
Bungalow % Change

Halifax
285,833
273,333
266,333
7.3%

Charlottetown
172,000
170,000
165,000
4.2%

Moncton
144,000
145,700
157,500
-8.6%

Fredericton
205,000
205,000
201,000
2.0%

Saint John
175,037
191,000
179,950
-2.7%

St. John's
275,625
262,500
245,333
12.3%

Montreal
281,161
286,000
279,714
0.5%

Ottawa
388,917
385,667
370,750
4.9%

Toronto
560,187
544,450
517,100
8.3%

Winnipeg
304,250
283,375
281,125
8.2%

Regina
320,500
316,500
313,000
2.4%

Saskatoon
351,125
338,750
331,250
6.0%

Calgary
432,322
422,989
411,711
5.0%

Edmonton
327,857
324,143
312,000
5.1%

Vancouver
1,087,125
1,068,500
1,025,250
6.0%

Victoria
460,000
470,000
475,000
-3.2%

National
379,311
356,306
356,625
5.5%

Source: Royal LePage, July 2012

Canada's banks resist mortgage rate war

2012-07-31T09:43:00.001-04:00

Canada’s banks resist mortgage rate war

Loan rate drops to as low as 2.84 per cent

BY ALLISON LAMPERT, THE GAZETTE JULY 28, 2012

Mortgage rates in Canada have dropped to as low as 2.84 per cent.

Photograph by: Brent Foster , National Post files

MONTREAL – Five-year closed mortgage rates are descending to record lows, stirring up a rate war that Canada’s major banks appear to be avoiding.

Less than a month after the introduction of tigher rules governing insured mortgages, lenders are beginning to offer five-year fixed rates below the once unheard-of 2.99 per cent. On Thursday, True North Mortgage, which has offices across the country, including Montreal, dropped its best five-year rate to 2.89 per cent, with Xceed Mortgage Corp. advertising a 2.84 per cent rate to customers with top credit, under certain conditions.

The rates are dropping so quickly that the online financial products comparison site Ratesupermarket.ca had to update a Thursday press release advertising an “historic low” 2.94 per cent.

“We expect 2.89 to become the norm by the end of next week,” said Dan Eisner, CEO of Calgary-based True North.

The rate wars are linked to plummeting bond yields. Usually, a drop in bond yields lowers banks’ costs, which in turn leads to a reduction in mortgage rates.

Yet for now, Canada’s major banks don’t seem to be wading in for Round 2 of the very public rate war they initiated in March.

“Interestingly, we still haven’t seen major banks publicly announce aggressive pricing,” wrote Rob McLister, editor of Canadian Mortgage Trends, in an email on Thursday. “You still have the majors advertising five-year rates like 3.94 per cent or 3.99 per cent.”

Some industry observers suggest that the banks are staying out – at least publicly – to please the federal Department of Finance, which has been faced with growing concerns over rising consumer debt and the spectre of condo overbuilding in major cities like Vancouver, Toronto and Montreal. This week, ratings agency Standard & Poor’s cut its outlook on seven Canadian banks, including Toronto-Dominion Bank, the National Bank of Canada and the Royal Bank of Canada, over unsustainable home prices that have roughly doubled in the last decade and consumer debt.

alampert@montrealgazette.com

Using Life Insurance To Extract Corporate Funds Tax-Free

2012-07-30T09:53:00.001-04:00

Using Life Insurance To Extract Corporate Funds Tax-Free

For a shareholder of a private corporation, the transfer of a personally owned life insurance policy to the corporation can offer a way to extract value from the corporation without triggering immediate taxation. The strategy works best if the policy has, relative to its face value, a high fair market value (FMV) and a low cash surrender value (CSV)--the amount that the life insurance company will pay if the policy is cancelled.

A high FMV is important because it determines the maximum amount that the corporation can pay for the policy without creating a taxable benefit. This might occur, for example, if the person whose life is insured has a reduced life expectancy (perhaps due to high blood pressure or a heart condition) relative to what is normal for his or her age. In the extreme, the FMV could approach the policy's face value (its death benefit) if the insured person has a terminal illness or has been critically injured and is not expected to recover (Interpretation Bulletin IT-416R3, "Valuation of Shares of a Corporation Receiving Life Insurance Proceeds on Death of a Shareholder," July 10, 1987). A lower but still substantial FMV could exist if the insured person is elderly and has had the policy for many years. In either case, an actuary would have to determine the policy's FMV.

A low CSV is important because on a non-arm's-length transfer (as in this case) the policyholder will be taxed on the amount, if any, by which the CSV exceeds the adjusted cost base (ACB) of the policy (see subsections 148(7) and 148(9)). Thus, term policies (including term-to-100 policies) are particularly suitable for this planning technique, since they have no CSV.

Consider, for example, an individual (Mr. A) who is the sole owner of a private corporation (A Co). Mr. A is 65 years old and has recently been diagnosed with some health probleMs. Mr. A had purchased a $1 million life insurance policy at age 40, when he was in good health. At the time the policy was purchased, its FMV would have been nominal; because of the change in Mr. A's health, it is worth $500,000 now. In this situation, Mr. A can have A Co purchase the life insurance policy for $500,000, thus extracting that amount from the corporation on a tax-free basis (provided that the policy's CSV does not exceed its ACB).

An additional benefit of corporate ownership is that the policy premiums, although they are generally not tax-deductible, can be paid out of corporate funds, which are taxed at a lower rate than income earned by Mr. A.

The CRA is aware of this type of planning and has indicated that such transactions may not be consistent with the intention of the legislation (see, for example, CRA document nos. 2002-0127455, 2003-0040145, and 2008-0303971E5). However, there have been no further indications that this planning is considered abusive or otherwise problematic.

The immediate tax benefits should be weighed against a number of other factors:

the loss of creditor protection that would generally otherwise exist with personal ownership;
the difficulty of removing the policy or its proceeds from the corporation in the future (one reason being that the policy will have a low ACB--the amount of the CSV); and
the potential loss of the capital gains exemption in cases where owning the policy could cause the corporation to fail the 50 percent or 90 percent active business asset test.

Nathan Wright
Cadesky and Associates LLP
nwright@cadesky.com

Americans in Canada: An Amnesty with Broad Appeal

2012-07-30T09:32:00.001-04:00

Americans in Canada: An Amnesty with Broad Appeal

On June 26, 2012, the IRS announced new filing compliance (NFC) procedures for non-resident US taxpayers (IR-2012-65). Starting on September 1, 2012, there will be a new program for US persons who are non-compliant with US law but do not owe substantial US tax. This will greatly benefit the many US persons (US citizens, green-card holders, and resident aliens) living in Canada who are not up to date in the filing of their US tax returns and foreign bank and financial account report (FBAR) information forms (see "Americans in Canada: The End of the Amnesty," Canadian Tax Focus, November 2011). The rules seem to be close to what tax practitioners have been seeking for some time.

To qualify under the NFC procedures, the taxpayer must present a low compliance risk. Generally, this means that the taxpayer's returns are simple, with less than $1,500 of US tax due for each of the three most recent years. Indicia that may move taxpayers out of the low-compliance-risk category are higher levels of income and assets, use of sophisticated tax planning, material activity in the United States, a history of US tax non-compliance (other than what is being reported in the present application), and the amount and character of US-source income. Higher-risk submissions made under the NFC procedures may be subject to greater scrutiny and additional filing requirements. Specific details and further clarifications are expected to be released prior to the procedures' September 1 effective date. In some situations, taxpayers may be required to submit a statement signed on penalty of perjury explaining why there was reasonable cause for previous failures to file in order to eliminate or reduce penalties.

Individuals intending to use the NFC procedures will be required to file tax and related information returns for the past three years, FBARs for the past six years, and information regarding compliance-risk factors. The IRS has released a statement ("New Filing Compliance Procedures for Non-Resident US Taxpayers") indicating that for "taxpayers presenting [a] low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions."

Individuals who choose not to use the NFC procedures have several additional options, including "quiet disclosures," "noisy disclosures," and participation in the 2012 offshore voluntary disclosure program (OVDP). Choosing none of these (that is, doing nothing at all) is increasingly risky as US enforcement efforts increase and technology improves (see the Canadian Tax Focus article cited above). A quiet disclosure--addressing current-year filing obligations and liabilities without addressing past non-compliance--is not much better: "Those taxpayers making 'quiet disclosures' should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years" (question 15, 2012 OVDP FAQs). Noisy disclosures--which generally consist of the submission of six years of returns and a request for abatement of penalties on the basis of reasonable cause--will likely be used only by taxpayers who are not far outside the simple, low-risk threshold of the NFC procedures.

An option for those in riskier situations is the 2012 OVDP. This program, which was announced on January 9, has no predetermined duration, and may be cancelled or modified at any time. It offers more program structure, waiver of criminal prosecution, and predetermined penalties. To participate in the 2012 OVDP program, taxpayers (which can include business entities) must

file eight years of US income tax returns, FBAR forms, and other information returns;
pay any tax due, a 20 percent understatement penalty, penalties for failure to file and failure to pay, and interest; and
pay an offshore penalty of 27.5 percent imposed on the highest FMV of the taxpayer's foreign assets and the highest balances in all foreign financial accounts. However, US citizens residing in Canada (or other foreign countries) for each of the years covered by the 2012 OVDP may qualify for a reduced offshore penalty of 5 percent, which will be imposed only on the taxpayer's foreign financial accounts.

Both the NFC procedures and the 2012 OVDP allow taxpayers with RRSP and RRIF accounts to file forms 8891 on a late basis so as to make an election under article VIII(7)of the Canada-US tax treaty. The election will not only defer US income taxation of the investment income earned by the RRSP and RRIF accounts, but it will also exclude the balances in those accounts from the base on which the offshore penalty is computed. Thus, the advantages of the election are that it makes it more likely that a taxpayer who uses the NFC procedures will have less than $1,500 of US tax due, and it reduces the amount of the offshore penalty for a taxpayer participating in the 2012 OVDP. In order to make the election, a taxpayer must submit a statement requesting an extension of time to make the election, along with forms 8891 for each of the tax years and type of plan covered and a statement dated and signed by the taxpayer, on penalty of perjury, which describes

the events that resulted in the failure to make the election;
the events that resulted in the discovery of that failure; and
whether the taxpayer relied on a professional adviser and, if so, the nature of the professional adviser's engagement and responsibilities.

The relief provided for RRSP and RRIF accounts may also be available for other pension and retirement plan accounts.

Joseph Devaney
Video Tax News, Edmonton
joe@videotax.com

Robert E. Ward
Robert E. Ward & Associates PC
Vancouver and Bethesda, MD
rward@robertewardassociates.com

What the new IRS rules mean for US Citizens living in Canada from National Post by Jamie Golombek

2012-07-26T12:11:00.001-04:00

What the new IRS rules mean for US Citizens living in Canada from National Post by Jamie Golombek

An estimated one million U.S. citizens living in Canada now have an extra reason to celebrate this Canada Day long weekend. The Internal Revenue Service announced new rules and procedures this week to help dual citizens with their U.S. filing obligations.

“We told the U.S. government that the vast majority of Canadians targeted were honest, hard-working and law-abiding individuals and they listened,” said Finance Minister Jim Flaherty. “The only transgression of these dual citizens has been failing to file IRS paperwork that they were unaware they were required to file.”

The softer IRS approach relaxes the filing requirements for taxpayers outside of the U.S. and provides additional relief for those who have contributed to Registered Retirement Savings Plans or Registered Retirement Income Funds in Canada.
“These are positive developments,” Mr. Flaherty said in a news release.

Under U.S. law, its citizens are required to file a federal income tax return as well as Reports of Foreign Bank and Financial Accounts (FBARs) every year no matter where they reside. Most countries, including Canada, have a residency-based taxation system rather than a citizenship-based system.

In the majority of cases, U.S. citizens don’t actually end up owing U.S. federal tax due to offsetting foreign tax credits.

For many, however, the fear of being assessed harsh penalties on late-filed FBARs (Form TD F 90-22.1), which could range from a “willful” failure to file penalty starting at $100,000 to non-willful failure to file penalty of $10,000 per violation, was enough to keep many dual citizens or U.S. citizens residing in other countries from coming forward.

But under new IRS rules, taxpayers will only be required to file delinquent tax and information returns for the past three years, instead of six, and to file delinquent FBARs for the past six years. And the IRS indicated that taxpayers presenting “low compliance risk” won’t be hit with penalties. The IRS has defined “low risk” as those who generally file returns with less than $1,500 in tax owing.

In general, the “risk” level rises as the income and assets of the taxpayer rise, if there are indications of sophisticated tax planning or avoidance, or if there is material economic activity in the United States. Additional risk factors include a history of noncompliance with United States tax law and the amount and type of United States income.

“For taxpayers in the grey zone — the small business owner, the high income earner, the wealthy grandmother with assets in a holding company — the news release may be less comforting,” said Christine Perry, a cross border tax specialist with Keel Cottrelle LLP.

“Until we get some indication of who is a compliance risk and who isn’t I think there will be a continued reluctance to come forward.”

"The Week Ahead" - July 23-27

2012-07-23T09:16:00.001-04:00

"The Week Ahead" - July 23-27

Key Highlights

The Fed may well do further QE, but progress on a fiscal deal that avoids excessive tightening in both the USand Europe will be far more critical in shaping 2013 growth. While we may get a side deal on US dividend tax treatment, a broader step to put off the “fiscal cliff” isn’t likely in the cards until after the election, andEurope doesn’t seem to be rushing to provide support for the beleaguered Spanish bond market. While we are bulls in waiting, investors in “risk on” assets don’t need to rush in just yet.

Key Numbers to watch this week:

· Canada – Retail Trade – May (Tuesday – 8:30 AM ) – While underlying prospects for consumers should remain weak due to slow growth and weaker credit accumulation, May retail sales may have actually sprung back to life.

· US – GDP – Q2 (Friday – 8:30 AM ) – The US economy was already stuck in low gear, but a further down-shift could well have been seen in Q2. Consumer spending is tracking around a 1.5% rate—a notable deceleration from 2.5% in Q1—and weakness towards the end of the quarter suggests little momentum heading into Q3

Equity Insights:

· Declines of 21% and 12% on the year in the energy and materials sectors and a pullback in tech profits could see index earnings retreat by about 10% on the year. Bright spots may include utilities, health care and industrials.

· Renewed “risk on” sentiment and sector specific developments have seen active lumber futures rebound handily from June’s yearly lows. The recent slew of positive data and support from low-mortgage rates suggest the worst is now over for the long-ailing US housing sector.

· Fiscal “train wreck” fears are fuelling renewed talk in political circles stateside about a “grand bargain” on deficit reduction. A recent proposal by Democratic senators aimed at drawing bipartisan support would cap the tax rate on dividends and capital gains for upper income households at 20%.

Currency Currents:

· The BoC in its latest MPR, ruled out any near-term rate hikes, slashing its growth outlook for here and abroad. But C$ bears shouldn’t read too much into the downgrade, as it’s still the case that rate cuts would be off base.

· A deteriorating US growth pace is tilting the odds higher for another round of QE by the Fed. Although dollar depreciation would be one channel to help America’s economy, it’s not likely to work this time. The reason: everybody else looks even worse.

· After mainly exceeding expectations throughout the post-recession period, UK inflation is, for the first time, surprising to the downside more often than not. While recent declines in unemployment are encouraging, forward looking indicators suggest hiring is still very weak and joblessness could well rise again. Therefore, we still expect further sterling weakness against theUS$.

http://research.cibcwm.com/res/Eco/ArEcoWAF.html

2012-07-04T18:39:00.000-04:00

Summary

“Hire a Spouse to Work in a Family Business” is an example of articles found in TheTaxBook Planning Strategies Edition.

TheTaxBook Planning Strategies Edition contains over 120 in-depth planning articles. By taking a few extra minutes at the end of a tax interview to speak with your client about pros and cons of a tax planning strategy, your client will appreciate the added value of your service, and you will see an increase in customer loyalty.

Most articles include the following features:

1. Issue. A description of a problem or issue that could be solved with the correct planning strategy. The description is designed to help the tax professional fit a planning strategy to a particular client’s situation.

2. Applicable Tax Law. A list of applicable rules, including authoritative citations to assist the tax professional in further research. The applicable tax law helps identify circumstances in which a planning strategy can be applied to a specific client’s situation.

3. Tax Planning Strategy. A possible course of action to achieve a desired tax result.

4. Examples. One or more examples are given to illustrate how the strategy works. The examples are written in plain English to help the client understand the value of implementing a particular plan of action.

5. Possible Risks. A list of circumstances that could reduce or eliminate the intended goal of the planning strategy, or result in unintended negative consequences. The tax professional may find this information useful to show a misinformed client why his or her desired strategy will not work.

6. Court Cases. Issues related to applicable tax law are examined in court case summaries involving taxpayers in situations that relate to the intended strategy. Court case summaries assist in making a more informed decision about whether to implement the suggested strategy.

Enjoy the article!

Print Version: Hire a Spouse to Work in a Family Business

2012-07-04T18:37:00.001-04:00

Summary

Cross References
• IR-2012-65, June 26, 2012

The Internal Revenue Service has announced a plan to help U.S. citizens residing overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues. “Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.

Shulman announced the IRS will provide a new option to help some U.S. citizens and others residing abroad who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes. The new procedure will go into effect on September 1, 2012.

The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law.

To help these taxpayers, the new procedures will allow taxpayers who are low-compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years.

The new procedures will also allow resolution of certain issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans). In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis. The streamlined procedures will be made available to resolve low-compliance risk situations even though this election was not made on a timely basis.

Description of proposed new procedure. Taxpayers utilizing the new procedure are required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent FBARs for the past six years. All submissions will be reviewed, but the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low-compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the procedure and will be subject to a more thorough review, and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.

Tax, interest and penalties, if appropriate, will be imposed in accordance with U.S. federal tax laws based on a review of the submission.

In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans, where deferral is permitted by relevant treaty, will be available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.

See printable version for the remainder of the article.

Print Version: Click here for a printable version of this news article.

Commercial immovable or enterprise: mandatory statements in any brokerage contract or transaction proposal | OACIQ

2012-06-21T03:03:00.001-04:00

Commercial immovable or enterprise: mandatory statements in any brokerage contract or transaction proposal | OACIQ

Commercial immovable or enterprise: mandatory statements in any brokerage contract or transaction proposal

Article Number: 121346

June 20, 2012 - 12:16

The OACIQ did not publish any mandatory forms for brokerage contracts and transaction proposals concerning an immovable containing five dwellings or more, a commercial or industrial immovable, an enterprise or a vacant land. However, brokers should include in the contract or transaction proposal the mandatory statements set out in the regulation. If they wish, brokers may also use the OACIQ recommended forms which are designed to address certain situations and which include the mandatory statements listed below. In all cases, broker’s obligation to provide the parties concerned with a completed and signed copy of any contract or transaction proposal applies.

The mandatory statements for any brokerage contract regarding the sale or lease of an immovable containing five dwellings or more, a commercial or industrial immovable, an enterprise or a vacant land are the followings:

1) The identification and contact information of the parties;

2) The subject and term of contract;

3) The identification of the immovable or features of the immovable sought;

4) The price and terms of sale, purchase, exchange of the immovable or enterprise or lease of the immovable;

5) The broker or agency remuneration method and payment conditions of this remuneration;

6) The possibility for parties to resort, in case of a dispute, to the services of conciliation, mediation, and arbitration of accounts offered by the OACIQ in accordance with the Real Estate Brokerage Act;

7) Any other right or obligation of parties;

8) Any other statement complying with the provisions of the Real Estate Brokerage Act.

The statements which must also be contained in such a contract, where appropriate, are the exclusivity of the contract, the fact that in some cases the contract cannot be terminated and the description of the enterprise to be sold, if applicable.

In the same way, the new regulation imposes a mandatory minimum content for anytransaction proposal regarding the purchase or lease of an immovable containing five dwellings or more, a commercial or industrial immovable, an enterprise or a vacant land. Here are the statements that should be contained therein:

1) The identification and contact information of parties;

2) The subject of transaction proposal;

3) The identification of the immovable and description of the enterprise, if applicable;

4) The price and terms of purchase, sale, exchange of the immovable or enterprise or, as the case may be, lease of the immovable and the amount of the down payment deposited in the broker’s or agency’s trust account in accordance with the terms provided for the trust, if applicable;

5) The payment method of purchase, sale or exchange price, including, as the case may be, the payment terms of additional funds, new mortgage loan, assumption of obligations related to existing mortgage loans and selling price balance;

6) The terms and conditions regarding the signing of the deed of sale, lease or exchange contract by the parties;

7) The fact that any declaration by the seller or lessor on the immovable or enterprise made prior to the transaction proposal constitute an integral part thereof;

8) The acceptance conditions of transaction proposal, particularly the date and time of its expiry;

9) Any other right or obligation of parties;

10) Any other statement complying with the provisions of the Real Estate Brokerage Act.

Finally, it should be noted that although the Declarations by the seller of the immovable form of the OACIQ does not constitute a mandatory annex in cases of brokerage contracts regarding the sale of an immovable containing five dwellings or more, a commercial or industrial immovable, an enterprise or a vacant land, the broker’s obligation to recommend to the owner of the immovable to provide his declarations about the immovable remains.

Sources: FirstLine to wind down - Mortgage Broker News

2012-06-20T19:12:00.001-04:00

Sources: FirstLine to wind down - Mortgage Broker News

Sources: FirstLine to wind down_{By Vernon Clement Jones | 20/06/2012 3:00:00 AM | 0 comments}

Two of FirstLine’s top broker partners are now confirming Firstline will, in fact, wind down operations at the end of the month, with news about how exactly CIBC will handle rate buydown and other point programs to come with a final announcement.
The news comes courtesy of the broker lender’s BDMs, in on a conference call with CIBC execs Wednesday. The big bank has reportedly failed to come to a sale agreement with one of the broker channel’s biggest companies that would have seen FirstLine kept a going concern, say sources.
“It’s regrettable,” said broker veteran Ron Butler, reacting to the news. “The loss of a Big Five bank is a loss.”
A formal announcement from CIBC is expected as early as the end of the week, with FirstLine’s broker partners anxiously awaiting confirmation on how exactly the bank will deal with their outstanding points.
Collectively, brokers had millions points accumulated in Firstline’s rate buydown program that have yet to be used up, according to sources within the CIBC family.
They’ve watched as the once leading lender has quietly pulled back on its offerings and rate competitiveness over the last year.
It’s been a “death by a thousand cuts,” said one Ontario broker Wednesday. “They should have cut their losses and sold up a year ago when there was still value in the brand.”
Earlier this month, Pacific Mortgage Group founder Alex Haditaghi denied rumours that the company would purchase the broker lender.
“No truth to that rumour,” said he said, following the Mortgage Summit. “Pacific Mortgage Group is not buying FirstLine and MCC.”
Since speculation of an eventual sale surfaced early this year, FirstLine has suffered a precipitous drop in broker market share, but it nonetheless remained in the top four lenders by funded volume in the last quarter. That was despite news CIBC was preparing to sell and was actively fighting to convert clients.
Just how well FirstLine did in the four months ending April 30 has surprised some mortgage professionals given the lender attracted 7.8 per cent of overall broker market share by volume, according to a D+H quarterly report.
A sizable chunk of that business came after news in February CIBC was scouting for a buyer.
The performance, while nearly 10 percentage points off of FirstLine’s 2011 showing, was still enough to place it fourth in the rankings and just below Street Capital.