September 2010

This article is provided by Brian Marling of Neighbourhood DLC – Canada’s #1 Mortgage Team  905.372.7222

One of the ongoing discussions I have with many of my clients centres around the idea of reverting back to a cash based budget, or what I like to call a cash based Spending Plan (don’t like the ‘B’ word).  I suppose the idea of reverting back depends on the age of the person I’m speaking with, since many of my clients have never been on a cash based plan.  The alternative to cash of course is credit, and lately, we are told, the trend is starting to change.

In fact, according to recent surveys, more people paid cash this past holiday season to keep spending on track and reduce or eliminate post-holiday debt.  Bryan Eshelman, managing director at Alix Partners comments that, “Consumers are looking for discipline in their spending levels that they can achieve from using cash.”.

Often those struggling with high consumer debt are told to ‘cut up the cards & pay cash’, but that is now becoming a more wide spread philosophy. The cash vs credit card debate has also become popular in the media & with well known financial experts like Dave Ramsey and Gail Vaz-Oxlade who recommend  a more regimented approach to budgeting using envelopes or jars so people can literally see what they are spending – personally I prefer envelopes since they take less space.

Even well known Suze Orman has recently launched her  ‘Back to Cash Movement’ as she urges her television audience to only pay cash for a week or month or more and get “connected” to their finances again.

I have been ‘preaching’ this for years (maybe I can get a TV show) and it is refreshing to see it coming from the main stream now. Perhaps we are finally beginning to admit what the psychologists have known all along and what the bankers hoped we would never realize, namely that when we use credit or debit we are far more likely to over-spend.

Cash has it’s advantages. The thinking behind the strategy is simple: living beyond our means is a recipe for financial disaster, and credit & debit cards make it too easy to spend. Keep in mind also, that you are usually spending money that you haven’t even earned yet! Research has shown that parting with cold hard cash in our hands  is harder to do and the visual/physical reminder makes us think more carefully about our purchases.

One of the illustrations I like to share with my clients in an effort to help them change their thinking about credit use goes like this:  if you have only a $500 balance on a card that is charging 18% interest and you are making minimum payments it will take you almost 7 Years to pay it off.  Usually I will ask them to guess before I tell them how long it will take and normally they are shocked at the answer.  However, what about a more realistic scenario where the debt is more likely to be 10, 15 or 20 thousand dollars.  A little more scary for sure.

Neither experts nor consumers are going to unanimously agree that either cash or credit cards are better. Perhaps a combination of both works for some. So then, what to do? If your current strategies are working for you, there’s no need to change simply because it’s the thing to do. However, if a change is warranted then you may want to try something new. Give the cash only strategy a try and see how it goes.

Regardless of whether you use cash or credit or both, the bottom line remains the same: if you don’t have the money in the bank, you can’t afford it.

Here at Neighbourhood not only do we provide Award Winning Service and the best selection of mortgage products in the country, but we also offer our Free Financial Fitness Seminars and have added Personal Financial Coaching for those who truly desire a change but would like some assistance along the way. If you don’t change something then don’t expect different results.  As always you can call us anytime to discuss how we may be able to help you.

At Neighbourhood, & the home of the Brian Marling Mortgage Team, we are concerned for the total well-being of our clients. That’s why we are taking the years of experience from our award winning office and offering a series of  FREE Seminars to our clients and their friends & families and to the public at large. The seminars, entitled ‘Financial Fitness’, will be offered free of charge and will cover all the secrets of successful personal financial freedom. Our next scheduled seminar will be Tuesday, September 28^th at 7:00 P.M.  If interested please call our office at 905.372.7222 to reserve your spot as seating will be limited.

Thanks to Elizabeth Rogers at 50Plus for some of the references in this article.

February 2011

This article is provided by Brian Marling of Neighbourhood DLC – Canada’s #1 Mortgage Team  905.372.7222

On January 17th, Finance Minister Jim Flaherty announced adjustments to the rules for government-backed insured mortgages that will come into force March 18th, 2011.

The new measures will

• Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value (LTV) ratios greater than 80%
• Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes

Additionally, on April 18th, 2011, the government will withdraw its insurance backing on lines of credit secured by homes, such as home equity lines of credit (HELOCs).

By paring back the maximum amortization from 35 years to 30, qualification will become harder for some borrowers – particularly first-time homeowners – as mortgage payments will increase. It’s hard to imagine that, not so long ago, Canadians could amortize their mortgages up to 40 years with zero down payment mortgages.

This is the second time in less than a year that the refinancing maximum was reduced – meaning Canadians can access less of their home equity. The first reduction from 95% of the value of your home to 90% came into force in April 2010. Now, as of March 18th, 2011, the second reduction will bring maximum refinance levels down to 85%. By reducing the refinancing LTV to 85%, borrowers are losing options. One of the most effective ways that mortgage professionals can eliminate high-interest, unsecured consumer debt and over extension is to retire this debt by refinancing at today’s low interest rates.

This change will mean that fewer borrowers can consolidate high-interest debt such as credit cards and other unsecured loans into their mortgage at today’s low rates. This may force homeowners who are experiencing job loss, illness, separation, divorce or urgent unforeseen family crisis into having to sell their homes to gain access to their very own equity.  With these two reductions in the maximum refinance amount (totalling 10%) in less than a year, on a $300,000 home, that’s a difference of $30,000 homeowners can no longer access.

Government needs to take a hard look at unsecured debt, specifically credit card issuers. Canadians’ biggest financial struggles, their over extension and record debt levels, are not due to their mortgages (again, we have the lowest mortgage default in the world). They are due to easy access to high-interest credit cards and other unsecured debt.  3-4% mortgages are not the problem – perhaps 25-29% credit card debt is the problem!!

With interest rates sitting at all-time lows – with nowhere to go but up – and looming mortgage rule changes, now is the perfect time to act to refinance your mortgage to pay off bills or free up more cash flow, or purchase a new home.

Now more than ever it’s important for Canadians to practice financial responsibility, as options for reducing high-interest debt payments are increasingly being limited.

It’s a new year so why not give your finances a fresh start. If you would like an unbiased and independent assessment of your mortgage and debt situation then please give me a call.  And I promise you won’t be disappointed.

Here at Neighbourhood not only do we provide Award Winning Service and the best selection of mortgage products in the country, but we also offer our Free Financial Fitness Seminars and have added Personal Financial Coaching for those who truly desire a change but would like some assistance along the way. If you don’t change something then don’t expect different results.  As always you can call us anytime to discuss how we may be able to help you.

At Neighbourhood, & the home of the Brian Marling Mortgage Team, we are concerned for the total well-being of our clients. That’s why we are taking the years of experience from our award winning office and offering a series of FREE Seminars to our clients and their friends & families and to the public at large. The seminars, entitled ‘Financial Fitness’, will be offered free of charge and will cover all the secrets of successful personal financial freedom.  If interested please call our office at 905.372.7222 to reserve your spot as seating will be limited. Our next one will be in March.

This article is provided by Brian Marling of Neighbourhood DLC – Canada’s #1 Mortgage Team  905.372.7222

In today’s economic climate of tighter credit requirements and increased unemployment rates taking their toll on some Canadians, there’s no doubt that many people may not fit into the traditional banks’ financing boxes as easily as they may have just a year ago.

Your best solution is to consult your mortgage professional to determine whether your situation can be quickly repaired or if you face a longer road to credit recovery. Either way, there are solutions to every problem.

Mortgage professionals, like Brian Marling,  who are experts in the credit repair niche can help credit challenged clients improve their situations via a number of routes. And if the situation is beyond the expertise of a mortgage professional, they can help you get in touch with other professionals, including credit counsellors and bankruptcy trustees.

 If you have some equity built up in your home and still have a manageable credit score, for instance, you can often refinance your mortgage and use that money to pay off high-interest credit card debt. By clearing up this debt, you are freeing up more cash flow each month.

In the current lending environment, with interest rates at an all-time low, now is an ideal time for you to refinance your mortgage and possibly save thousands of dollars per year, enabling you to pay more money per month towards the principal on your mortgage as opposed to the interest – which, in turn, can help build equity quicker.

Following are five steps you can use to help attain a speedy credit score boost:

1) Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so you’re only using 40% of your limits. Revolving credit like credit cards seem to have a more significant impact on credit scores than car loans, lines of credit, and so on.

 2) Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month.

3) Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders may view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you.

Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards.

The best bet is to pay your balances down or off before your statement periods close.

 4) Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. You should use these cards periodically and then pay them off.

 5) Don’t let mistakes build up. You should always dispute any mistakes or situations that may harm your score. If, for instance, a cell phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

 If, however, you have repeatedly missed payments on your credit cards, you may not be in a situation where refinancing or quickly boosting your credit score will be possible. Depending on the severity of your situation – and the reasons behind the delinquencies, including job loss, divorce, illness, and so on – your Neighbourhood Dominion Lending Centres mortgage professional can help you address the concerns through a variety of means and even refer you to other professionals to help get your credit situation in check.  

This article is provided by Brian Marling of Neighbourhood DLC – Canada’s #1 Mortgage Team  905.372.7222

Yes, really!  Now I know that on the surface it may not seem like that is true, especially according to a recent statistic  that says on a National  level every Canadian citizen (from infant to senior citizen) owes approximately $42,000.  That number is a per capita share of our collective Canadian consumer debt which has skyrocketed to north of $1.3 Trillion dollars – yes TRILLION!!

So then, how can I say that most people do not have a money problem? Because it is my firm belief that what most people have is in fact a Spending Problem.  The list of contributing factors is long: we live in a society that breeds entitlement; availability of credit is far too easy; many people are financially illiterate (i.e. do not understand basic financial concepts or financial management); etc.  But the number 1 reason for our spending problem, in my opinion, is that we simply will not exercise any form of self-discipline or self-restraint.

We are really good at “spending money” we haven’t yet earned. The reason I put quotes there is because most are not actually spending cash but rather using some form of plastic and hoping or assuming that some how the money will be there. The reality for many is that the money runs out before the month does.  And guess what, it doesn’t seem to matter how much money you make – I see the same scenarios with people who make $50,000 a year as I do with people who make $150,000 a year.  That fact alone tells me it is a spending problem and not a money problem.

Now it probably doesn’t help that most lenders will give you just enough to hang yourself.  After all is it really any secret that banks are in the business of making profits and satisfying share holders. Therefore, the deeper they can put us in debt and the longer they can keep us there the happier they are.  They seem to know that we have an innate inability to say ‘No’. However, at the end of the day that is still no excuse – when will we stand up and take personal responsibility?

So if it really isn’t a money problem and we can’t blame anyone but ourselves, what are we to do? Start with educating yourself. Libraries and book stores are full of excellent resources on personal financial management and debt reduction strategies – by the way did you know that most millionaires are avid readers.

Track all of your spending for a full 30 days. Most people have no idea where the money went. “It just seemed to vanish” is an oft quoted phrase. If that seems like too tedious a task then carry on the way you are going. However, you can’t plug the leaks until you know where the holes are.  

Try going to a cash only budget. That alone will save you hundreds if not thousands of dollars. Why? Because it is a proven fact that you will spend less when using actual cash as opposed to credit or debit. In fact, recent university studies have shown that the pain centre in the brain is activated when you pay cash for things and NOT activated when you use plastic. Wow. Even our sub-conscious mind can help control spending.

Those are just a few suggestions. For those of you who are serious about getting a handle on your debt you may be interested in one of our seminars that we offer thru our business (see details below).  Among other things we demonstrate how you can become completely debt free including your mortgage in 10 years or less for most people. There’s the challenge – hope you pick it up.  Don’t forget…it’s really not a money problem.

Here at Neighbourhood not only do we provide Award Winning Service and the best selection of mortgage products in the country, but we also offer our Free Financial Fitness Seminars and have added Personal Financial Coaching for those who truly desire a change but would like some assistance along the way. If you don’t change something then don’t expect different results.  As always you can call us anytime to discuss how we may be able to help you.

At Neighbourhood, & the home of the Brian Marling Mortgage Team, we are concerned for the total well-being of our clients. That’s why we are taking the years of experience from our award winning office and offering a series of FREE Seminars to our clients and their friends & families and to the public at large. The seminars, entitled ‘Financial Fitness’, will be offered free of charge and will cover all the secrets of successful personal financial freedom.  If interested please call our office at 905.372.7222 to reserve your spot as seating will be limited. Date of the next seminar is Wednesday January 12, 2011.