hi guys, its been an amazing couple of months with the forum. People here are amazing with their help and patience with my unlimited questions..

Now I feel myself obliged to return your favors in some way. i thought "what can i do? " Since i have been working for a major bank (biggest, i dont want to give the name, bit im sure you know it ) if you have any questions regarding your banking including, accounts, credit cards, line of credit, mortgages, investments (rrsp, rif ,) mutual funds, fees, or some ways to save some money in this recessive times , please type it here, i will answer them each and hopefully give u couple of tips.

 

No questions right now, but nice gesture, thanks man.

 

Hi, I'm interested in both short and long term savings, as well as a line of credit.
Basically it's like this, I've currently financed my car through a very crappy financing company, and am due to pay it off in 5+ years. I'm not really cool with that, and would like to pay it off sooner, because I feel I can afford to do so. Due to the nature of the loan, I am not able to just put more money a month, my only option is just buying it outright. I figured my best option was a line of credit, that way I can just dump the max I can every month, and pay it off in a hurry.
The other thing is, I need to put away some money to buy a motorcycle first, so this would probably be early spring, after I buy the bike. Right now, my method of saving just involves moving funds from my chequing, into my savings account, and I gather there may be some more efficient way to go about this.
In the meanwhile, I'm also contributing a small amount to my RRSP, it's either 2 or 3% with full match from my employer, so between 4-6% and it's pre-tax, so I kinda like that aspect of it. Either way, I'd like to buy a house or condo eventually, so I'd like to start dumping a bit more into that, and I'm interested in what the best way is to do that.
So yea, that's what I'd like to know, as well as how to prioritize between paying off the car and saving for a house. Should I kinda mix it up and do both at the same time, or pay off the car as fast as I can so then I'm able to put away larger sums?

Thanks!

 

For your biggest bank, just curious how the mortgage department works? Do you guys go by broker or specific mortgage sales area? Is there a mortgage retention department?

 

hi !
1-for the line of credit, you can move the whole balance of your car loan (simply paid it off from your line of credit) to line of credit and do interest only payments. im probably sure the line of credit rate will beat the loan's rate.
i dont know if you have a line of credit as of now, but if you apply depending on your credit rating and risk assessment they will give you prime rate + ? points. right now most of the major banks decreased their lending rate to 4.00% so it works for people now, since rates are decrasing, on the other hand, to qualify for a line of credit is getting harder. its the whole liquidity issue with the banks. its actually pretty simple, if you lend the client at 4% and u r borrowing close to that rate, how is the bank going to make money out of it with the line of credit, dont forget couple of things

-line of credits are not forever, it is subject to review every once in a while, and depending on your risk assessment they might increase or decrease your rate, or if u stay to the maxed out level for a long time they might even convert the line of credit to a loan.so even you get a nice rate at the beginning you might get a higher rate in the future.
-if you do not have line of credit and want to apply to one, use your current bank, do not shop around for better rates, your bank who u have been dealing for a while, will probably give you the best rate.since u have built a relationship and u probably have multiple products with them. plus its such a hassle and hard process to be a brand new client and get approval for credit.

2-savings:
in these days high interest e-savings accounts are the best, it beats GICs or many other short term investments.but dont forget the rates u r getting is subject to change. i heard ING or PC has 4% seems like a good deal. with the market conditions putting in a investment in the short-term would be too risky and would not bring u a lot of return.since u r going to need the money in spring. traditional savings account are not really helping offers u really low rate, but the high interest ones (almost all banks have one , starting from 2.5% to 4%) seems fair enough.

but do not forget one thing, canada has inflation close to 3 percent so putting your money in a savings account will not really help your money if the rates is lower than 3%. so actually u r losing your money(as the purchasing power of money depreciates) but what the hey, looking at current market movements, at least its safe.

3-rrsp and home

i dunno if u know, but u can witdraw your rrsp towards first home buyer's (HBP) plan up to $20,000, they will not charge taxes if u r withdrawing the money within the HBP.
one thing to consider, u can take up to 20k of this money which stayed in the account min 90 days.
ex: u r buying the house on january and you put a lump sum contribution to your rsp on november, u can not touch that portion to withdraw it.i have seen people who tried to do it, unfortunately they did not know the rule.

if you have enough equity (down payment ) to put down as purchase , let ssay more than 20% , you can have a home equity line of credit.

example: house bught 200K
down payment: 50K
mortgage balance : 150K
appraised value as of now: 250K

so what they do is they take 80% of your homes appraised value , deduct the mortgage balance, the difference will be a line of credit secured with your home avaliable at prime rate(which is the lowest rate in canada)

so if the house worth 250k , X 80%= 200K
minus mortgage balance (150k) = 50K avaliable line of credit.

if the house u just bought was 200k , u still have availiable line of credit of 10K.
which is 200X 80= 160(- 150)= 10K

and the limit of this line of credit increases while you are paying down your mortgage.so every payment portion you do which goes to principal of the house will also increase you line of credit limit.
1500 payment per month (1000K interest ,500K principal)
next month your avaliable line of credit will increase by $500.

what people usually do is they consolidate all their debt into home equity line of credit plan (credit card debt, car loan) and save a lot of dollars, because of paying less interest cost every month.

you can even have these debts you consolidate into this as a mortgage too. so
150K mortgage
10k (line of credit or another mortgage segment which u consolidate all your debt)

but everything starts with the amount of money you are putting down as downpayment. if its less than 20% downpayment the property has to be insured with cmhc or gen worth which will cost you 5-6K extra fees.

the reason i explained this was if u buy the house in the near future and have enough monehy u can bring your car loan, credit card debt to this plan and pay less interest.bt i know its not easy to come up with min 20% downpayment.

if the above explained option is not possible for you, you might apply for a line of credit and move that car loan balance.and try the pay this off as soon as possible so u can focus on your home buying plan. but if u come up with the necessary down payment, and move that car loan to the home equity line of credit, you wil lprobably pay the least interest rate in canada(because it is secured)

i hope i answer all your questions.
musti

 

for mortgages besides personal and commercial mortgage bankers, we also have mortgage specialists(mobile) in each area. when it comes to flexibility they are really handy and they have a lot of expert in this area.they do mortgage application, pre-approval and qualifying mortgages.

when it comes to retention, let's say your mortgage is coming up for renewal, and you are looking for a better rate, you have to discuss it with you personal banker, they'll try to give you better rate, if they get approval, personal bankers alone does not have any rate discretion.banks will battle for rate as long as it is profitable to retain this mortgage and client.

what i usually get as a personal banker is , i get mails and notices from national office, when the client is with our branch and their mortgage is coming for renewal, i immediately contact the client , if we have special rates try to do early renewal. because the rate you are getting is not guaranteed until you sign it. banks usually have 120 days early renewal promotions to lock-in rates. if the rate decreases then the guaranteed rate u sign, u still get the lowest.

i hope this answers your question.

 

You're wise to be looking for alternatives that give you more flexibility on your loan repayment.

I would recommend you forget the motorcycle since you're already in a long term debt situation with your car and are thinking of a house. Get rid of your debt first while building a small emergency fund equal to about 6 months worth of living expenses. Pay the car off as quickly as possible, then save for a house, then consider other toys like a motorcycle when you're truly able to afford them. There are lots of options out there for true long term savings versus a bank account. This is something you should discuss with your personal banker to consider your goals, income, risk tolerance etc.

Keep contributing to your employer group pension and benefiting from their matching and the tax reduction, assuming you are in a bracket where this is worthwhile. Have a close look at how this is invested to make sure you're properly allocated for the long haul.

 

there is a really goofdtax free savings account coming up on january 23rd. I ll give u guys details soon.

 

^thanks. it's pretty straightforward from what I've read. Each individual can contribute up to $5K per year into an investment or savings account annually. The money can grow within the account tax free and no taxes on capital gains or interest are paid upon withdrawal.

You needn't have income to contribute and the unused contributions can be carried forward. However there are no tax deductions triggered like an RRSP.

 

Thanks for the advice! To be honest, I know getting the bike is not the smartest idea, but at the same time, I've only ever regretted doing something smart. I don't know if that makes a lot of sense, but I've just played it safe for too long, and I'm pretty passionate about the whole bike thing, so I'm gonna make it happen. Right after though, I intend to tighten my belt and avoid any frivolous purchases