Unimor Capital Corporation

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  • 7 Most Common Financial Mistakes

    7 Most Common Financial Mistakes

    It is indeed a material world. When it comes to spending, North America is a culture of consumption. The result: rising levels of consumer debt and declining household savings rates. Don’t make these 7 most common financial mistakes. In 2008, this culture was hit hard by economic reality. According to the Federal Reserve, U.S. household debt grew steadily from the time they started tracking it in 1952. It declined for the first time in the third quarter of 2008. As a result of the credit crisis and ensuing economic recession, savings rates also rebounded.

    For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice. Here we’ll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

    Mistake No. 1: Excessive/Frivolous Spending
    Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-double, stop for a pack of cigarettes, have dinner out or order that PPV movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you’re enduring financial hardship, avoiding this mistake really matters – after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

    Mistake No. 2: Never-Ending Payments
    Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio, video games, and cell phones can force you to pay unceasingly, but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning you from financial hardship.

    Mistake No. 3: Living on Borrowed Money
    Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don’t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you’ll spend more than you earn.

    Mistake No. 4: Buying a New Car
    Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Sometimes a person has no choice but to take out a loan to buy a car, but how badly does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain.

    Mistake No. 5: Buying Too Much House
    When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000 square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

    Mistake No. 6: Treating Your Home Equity Like a Piggy Bank
    Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you’ll end up paying way more for your home than it’s worth, which virtually ensures that you won’t come out on top when you decide to sell.

    Mistake No. 7: Living Paycheck to Paycheck
    The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. Everyone has a choice in how they live, so it’s just a matter of making savings a priority.

    Making a Payment vs. Affording a Purchase
    To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

  • What to Know Before You Retire

    What to Know Before You Retire

    Retirement planning is about managing your money so you can make the most of your retirement years. Your retirement plan should balance your needs, wants and the reality of your finances. Below are a few tips about what to know before you retire.

    How Much You Need to Save Depends on 3 Things

    Age: When you start saving makes a big difference in how much you need to put away. The younger you are when you start, the less money you have to put aside, thanks to the power of compounding.

    Lifestyle: Do you plan to stay home or travel the world? The amount you’ll need to save will depend on the life you plan to lead when you retire. Not sure what your retirement lifestyle will cost?

    Federal Government Benefits: You could be entitled to government retirement benefits like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). If you’re eligible for income from these government programs, you might not have to save as much.

    7 Tips for Last Minute Savers

    Take advantage of any unused RRSP contribution room – The government allows you to carry forward unused contributions each year. If you have unused contribution room, try to use it as soon as you can.

    Invest in a TFSA – As of January 2013, you can invest $5,500 each year. Your money grows tax-free and you don’t pay tax on the money you withdraw.

    Look for small ways to save – Consider cutting back on your spending for items like lottery tickets, magazines or fancy coffees. It may be better to live on a little less now, so you’ll have more when you really need it. Here are more ways to save.

    Take advantage of workplace pension or savings plans – Especially if your employer offers matching contributions.

    Save your bonuses & raises – Next time you get a bonus or raise, don’t spend it all. Try to put some of it toward your retirement savings.

    Consider saving less for your children’s education – If you have to choose between saving for retirement and your children’s education, put money in your RRSP first. Let your children get jobs or borrow to help pay for their education.

    Revisit your investment strategy – Look for ways to get a little more growth without more risk. If you choose only the most conservative investments, your savings may not grow fast enough to give you the income you need after you retire.

  • How to Talk to Your Kids About Money

    How to Talk to Your Kids About Money

    In some families, how to talk to your kids about money can be more uncomfortable than talking about sex. Many parents don’t know how to approach the topic of money, and some avoid it altogether. By starting the discussion early, you can make it easier to talk about this tough topic later, when your child is making larger purchases, thinking about getting a job, or beginning financial planning for college.

    Practice Smart Spending
    Talk with your children about how you make spending choices based on more than just affordability. Use language like “We’re not going to spend our money that way because…” or “It’s not a good value because…,” rather than just saying, “It’s too expensive,” which may give the impression that you would buy it if you could afford it.

    Create Learning Opportunities
    If you’re refinancing your mortgage, you have an opportunity to discuss the concept of interest and the importance of paying off loan balances quickly. When you’re taking out a car loan, talk about how loans allow you to pay for things that you don’t have the money for, but you end up paying more in the long run. Bring your kids with you to the bank. If you’re making a deposit in a savings account, talk about the importance of ‘saving for a rainy day’.

    Honesty as the Best Policy
    If you are facing financial difficulty, be honest with your children. You don’t need to worry them with all the details, but it is helpful for them to learn that money isn’t magical—it doesn’t just appear when you need it.

    Stress Wants vs. Needs
    Many kids—especially young ones—have difficulty differentiating between wants and needs. When your child says she ‘needs’ something, ask if she really needs it, or if she just wants it. Make sure your child understands the difference, and start paying attention to what you’re saying and the example you’re setting—for example, do you really need an expensive cup of coffee to get you through the morning?

    Keep an Open Dialogue
    When you’re out shopping, talk with your kids about why you make the purchases you do. Are you influenced by advertising? Pricing? The quality of the product? How do you choose one product over another? Help your child start thinking carefully about making purchases.

    Be an Example
    Discuss with your children the choices you make with your money. For example, how does your caring for others impact how you save, spend, and give money away? Why do you sometimes wait to make certain purchases? What does it mean to you to be responsible with your money?

    Highlight the Positive
    Many financially savvy practices, such as buying secondhand, donating old clothes to a thrift store, and reusing and recycling goods, are also good for the environment. Point out that not only are you saving money by doing these things, but you’re also taking action to help preserve the environment.

  • Before You Renew Your Mortgage…

    Before You Renew Your Mortgage…

    The biggest monthly expense for most Canadians is their mortgage payment. Yet according to an Angus Reid survey, almost 27% of households automatically renew their mortgage when the term is up instead of trying to find a better deal. So, before you renew your mortgage, be sure to read these helpful tips…

    Get Going Early
    Start shopping around for a better rate four to six months before your mortgage is up for renewal. That’s the longest lenders will guarantee a discounted rate, says Vancouver’s Robert McLister, editor of Canadian MortgageTrends.com. “If your current lender’s rates rise, you’ve got your guaranteed rate to fall back on. If they drop, you simply renegotiate a lower rate.”

    Do Your Homework
    Before negotiating a lower rate from your bank, find out what other lenders are offering. Plenty of websites post current rates from all the banks, which can vary widely. A good one to look at is canadamortgage.com.

    Never Accept the Banks Posted Rate
    “If you don’t come right out and ask for a better rate, you won’t get one,” says Alan Silverstein, a real estate lawyer in Toronto and author of The Perfect Mortgage: Cutting the Cost of Home Ownership. He also notes that banks may be more willing to lower your rate if you transfer over other accounts or investments.

    Negotiate on Other Available Options
    Don’t just fixate on the interest rate. The amortization period, the rate type (fixed or variable) and the flexibility of the payment schedule can be crucial to lowering your costs.

    Change Lenders
    “A lot of people renew with their lender and don’t even think about switching to another one, despite the fact that they could do better,” says Silverstein. Note that there’s no penalty if you switch at renewal time.

    Broker a Deal
    If you don’t like negotiating and don’t have the time to research rates, a mortgage broker will do the legwork for you. This can save you valuable time and money! According to the Bank of Canada, people who use a broker usually pay less than those who don’t. Using a broker can typically save $1,670 of interest on a $200,000 mortgage over five years. “The results of using a good broker are twofold,” says McLister. “Better rates and a less restrictive mortgage.”

    Did you know?!?
    Saving even half a percentage point on your mortgage rate can save you up to $10,000 over 25 years (based on a $150,000 mortgage).

  • How to Protect Yourself Against Identity Theft

    How to Protect Yourself Against Identity Theft

    Research indicates that identity theft is on the rise despite continued efforts to keep data secure and crack down on offenders. Big business and government can’t stop the problem alone. It requires the diligence and effort of every citizen to remain vigilant. Learn how to protect yourself against identity theft with these simple steps:

    Double-Check
    If you receive an unsolicited phone call, email or other correspondence, do not provide personal information. Instead, ask for a phone number and name so you can call them back, then verify that the information is the same as that provided on your billing statement or contact information. Sophisticated scammers are able to mimic email, websites and even toll-free call-back numbers so that they can entice unsuspecting consumers to provide information.

    Manage Passwords
    Always use encryption when doing online banking or shopping where you are providing private information. Also, take time to change account passwords frequently. Remember, never share your user names or passwords with others and create unique ones for each individual online account.

    Alerts!
    Use email alerts to notify you of unexpected withdrawals or large account transactions on banking or credit cards. This will help you to stay alert to potential fraudulent activity on your account.

    Wireless Warnings
    Although wireless hot spots in cafes and restaurants are convenient, they are a security nightmare. Avoid banking or conducting sensitive business via a wireless network. Instead, wait until you are in a more secure location or use additional encryption if necessary.

  • Pay Off Your Debt Faster & Save Money

    Pay Off Your Debt Faster & Save Money

    Below is one of the most effective methods for paying off your debt faster and saving yourself thousands of dollars. This technique will save you the most money when used on mortgages; however, it can also be used to pay down other debts quickly – like car loans or even credit cards.

    Pay Bi-Weekly Rather Than Monthly

    Making bi-weekly mortgage payments rather than monthly payments will usually reduce the time it takes to pay off your mortgage by several years.  Here is how this trick works.  Let’s say Mike and Cindy obtain a mortgage that has monthly payments of $1,000.  Instead of paying $1,000 per month, Mike and Cindy could ask their bank to chop their mortgage payment in half and pay $500 every two weeks instead.  Even though this doesn’t feel any different to them, it will shave 3.5 years off of their mortgage and save them more than $21,000 over the life of their mortgage (assuming that their interest rate stays the same).

    Here is how Mike and Cindy will save.  If they made monthly payments, their bank would take $1,000 from their account twelve times a year (12 months x $1,000 monthly payments = $12,000 in annual mortgage payments).  Now when they cut their monthly payment in half and their bank to withdraws $500 every two weeks, they end up making what amounts to one extra monthly payment each year (26 bi-weekly payments x $500 every two weeks = $13,000 in annual mortgage payments).  This happens because two months in every calendar year have a fifth week.  If you’re paid bi-weekly, these are the two months each year where you get three pay cheques instead of two.

    Assuming a mortgage of $172,000 at 5% interest over 25 years
    Type of Mortgage Payment Monthly Payment Accelerated Bi-Weekly Payment Accelerated Weekly Payment
    How it works… This is what your lender determines that you must pay each month. Divide your monthly payment in half and
    pay that amount every
    two weeks.    		 Divide your monthly payment into quarters and pay that amount every week.
    Payments $1,000 $500 $250
    Years to pay
    off mortgage    		 25 years 21.4 years 21.4 years
    Savings over
    the life of the mortgage    		 $0 $21,536 $21,774
  • How You Can Benefit from Other Home Buyers’ Mistakes

    How You Can Benefit from Other Home Buyers’ Mistakes

    Most homeowners admit to making at least one mistake when they purchased their home, according to the 20th Annual RBC Home Ownership Poll. Listed below are the top mistakes made by first-time home buyers:

    The Property Needed Work
    Even those buyers with home inspections encountered issues after they moved in.

    Not Having a Bigger Down Payment
    A small down payment meant that many buyers found themselves overwhelmed by the costs of keeping a home.

    Not Getting a Home Inspection
    By skipping this step, some buyers found themselves faced with astronomical repair costs. Particularly those who had purchased older homes with ancient plumbing and wiring.

    Not Knowing the Closing Costs
    Some ill-informed buyers didn’t account for additional costs such as the land transfer fees, the title fee, lawyer’s charges etc…

    Not Getting Pre-approved for a Mortgage
    By not obtaining a pre-approval, many home buyers fell for homes that were out of their price range.

    Falling in Love with the Wrong House
    Buyers found they ignored obvious structural or electrical problems because the home had 10’ ceilings or a great stone fireplace. Beware of buyer’s remorse.

    Not Checking the Market Value of the Neighbourhood
    Some purchasers paid too much for homes that were renovated above and beyond neighbouring properties. This may price them out of the market when it comes time to sell.

    Focusing on Interest Rates
    New buyers felt compelled to buy because mortgage rates were low. Experts recommend buyers focus on the mortgage product that works for them instead of just trying to score a super-low rate.

  • What Do Mortgage Lenders Look For?

    What Do Mortgage Lenders Look For?

    When lenders like banks and credit unions are assessing your ability to qualify for a mortgage, they will look at two factors.  First, they want to make sure you have the ability to make the mortgage payments.  Second, they want to measure your willingness to make the mortgage payments.  These two factors are categorized and are simply known as the Five C’s of Credit.

    Following is a brief explanation of each of the Five C’s:

    Capacity
    Are you able to repay the loan? This is the most critical of the Five C’s. Lenders assess your capacity by reviewing your debt and payment history, something usually found on your credit report.

    Capital
    This is the amount of money that you have to invest in the property yourself. A lender likes to share some of the financial risk with the borrower. Under some circumstances, a lender will grant a loan with little or no capital if there is exceptional strength in the other four C’s.

    Character
    This is a grey area. It’s an impression of how trustworthy you are to repay the mortgage. Lenders look at your length of employment to establish how secure you are, and they will look at your ability to save and to manage your credit as keys to your character.

    Collateral
    This is a guarantee in the form of security for the loan. In the case of a mortgage, it’s the property itself.  Collateral can also come from a third party who will guarantee the loan.

    Credit
    This is your credit history. This is essentially the only way a lender can predict your willingness to make future payments.

  • How to Calculate Mortgage Payout Penalties

    How to Calculate Mortgage Payout Penalties

    Understanding how to calculate a mortgage payout penalty can help you decide whether or not it’s wise to go that route.

    There are two types of mortgage payout penalties. The first is Interest Rate Differential, or IRD. The second is three months’ interest. If mortgage rates are lower than when you got your mortgage, the lender will usually charge IRD. If rates are higher than when you got your mortgage, the lender will usually charge a three-month interest penalty.

    When calculating a penalty, you need to know your current mortgage rate, the lender’s posted rate on the term closest to the remaining time on your mortgage term and your mortgage balance.

    As an example, let’s use the following conditions: mortgage balance today of $200,000; interest rate at the time the mortgage closed 5%; three years left in the term; three-year posted rate is 3%.

    Calculating the IRD:

    Mortgage balance x (difference between mortgage rates) x remaining years in term = payout penalty
    $200,000 x (0.05 – 0.03) x 3 = $12,000

    Calculating Three Months’ Interest Penalty:

    Mortgage balance x 3 months’ interest = penalty
    $200,000 x (0.05 x 3/12) = $2,500

    These calculations are to be used as a guide only. Your mortgage lender may use slightly different values. Please speak with your mortgage professional to confirm actual penalties.

  • What First-Time Home Buyers Need to Know

    What First-Time Home Buyers Need to Know

    With record-low interest rates that may go away in the distant future, many would-be first-time home buyers are considering their options with regard to buying a home. In preparing to purchase a home, it will help to know what lenders are looking for when buyers apply for a mortgage with them. There are four components: down payment, credit, income and assets, and appraised value of the property.

    Down Payment – Putting down at least 25% is ideal, in that buyers can avoid having to purchase mortgage default insurance on their loan. The higher the loan to value ratio, the more risk the lender is being asked to take on. This will result in higher interest rates for the buyer.

    Credit – There are several components to this, including total debt, recent payment history, and ability to manage credit over time. These items give the lender a picture of the buyer’s ability to manage obligations over time. Of the above items, recent payment history is probably the most important. Prior to taking on a mortgage, buyers who are having issues making monthly payments such as those on a car will face questions as to how they will be able to manage after they move into a home.

    Income & Assets – Lenders are looking for two to three years of stable employment history from borrowers. They use two ratios to determine if buyers qualify from an income perspective. The first is the GDSR, or Gross Debt Servicing Ratio. This is the ratio of total shelter expenses (mortgage, taxes, insurance) to gross income. Lenders are looking for this number to be in the 30% to 32% range. The second ratio is the TDSR, or Total Debt Service Ratio, which is the ratio of all financial obligations to gross income. Lenders here are looking for 40% to 42% maximum.

    Ideally buyers will obtain a mortgage in which the principal and interest components of the payment amount will remain constant for as long as possible.

    Should property values decrease, even if the income of the buyer remains the same, being able to refinance the mortgage at the end of the term could prove to be out of the question, at any rate. As far as assets go, the lender will want to know where the down payment is coming from, which could be from the buyer’s savings or perhaps via a gift from a close relative.

    Property Value – The lender needs to know if the property is worth what the buyer and seller think it is worth. If there is a difference between the appraised value of a property and the contract price, the lender will take the lower of the two.