When you’re buying a home, whether it’s your first home or your third, you want it to be perfect. Your home affects every aspect of your life, from your financial stability to things you do in your free time to the people you spend time with. It’s also probably the most expensive purchase you’ll ever make. Yet it seems like you always have to sacrifice something when buying a home. Here are the tradeoffs that homebuyers most commonly face. 

1. Location
   Location is the one thing you can’t change about most homes. Where you choose to buy affects the job opportunities available to you, your commute, your safety, the resale value of your home, where your kids will go to school, how much peace and quiet you will have and dozens of other things.

   Since location is so important, you might be thinking that your ideal location is something you should never compromise on. However, people compromise on their ideal location all the time – they move further out into the suburbs even though they work in the city because they want a larger/newer/nicer house for a lower price, for example. Sometimes it’s worth making a tradeoff on location to get something else you want. 

2. Privacy
   The type of dwelling you choose – house, condo or townhouse – will have a major impact on how much privacy you have. Will someone always notice when you’re coming and going and whether you’re home or away? Will you be able to play your music at the volume you want, turn up the TV and have parties without disturbing your neighbors? Will your neighbors be able to see what you’re doing even while you’re indoors or in your backyard?

   Keep in mind that privacy goes both ways – do you want to be subject to the intimate details of your neighbors’ lives?

   If you buy a home in a multi-unit building, your level of privacy will vary with the overall size and layout of the building, the quality of construction materials used, your unit’s location in the building and the behavior of the community (do people keep to themselves, or does everyone know each other?). In a single-family house, factors such as lot size, number of stories, fence height, vegetation, the location of the home’s windows and doors and whether the home is on a cul-de-sac or in a gated community can all impact its level of privacy.

   A house will usually offer more privacy than a condo or townhouse, but not always. Homeowners who want to live near the heart of the city often trade off privacy for location since urban areas tend to be more densely populated than suburban areas. 

3. Dwelling Type
   Whether you choose a house, condo or townhouse will also affect your lifestyle, your home’s resale value and your monthly finances.

   If you choose a condo, it will be difficult-to-impossible to have a backyard barbecue or a nice patch of grass for the dogs – in fact, it may not be possible to have dogs at all.

   Condo life means your exterior maintenance responsibilities are limited – there’s no repainting the house, replacing the roof or mowing the lawn – but you’ll still have to pay for all of these things in the form of monthly homeowners’ association fees. You’ll also have to pony up extra cash if a major repair comes up and the homeowners’ association is short on funds. So while many people think that living in a condo alleviates the burden of having to suddenly pay for major home repairs, whether that ends up being true actually depends on how well your homeowners’ association is managed. 
   Also, condos and townhouses can be more difficult to command top dollar for when you go to sell because there may be other units for sale that are identical to or very similar to yours. The larger your building, the more true this becomes. The same can also be true in neighborhoods of tract houses, but even tract houses with the same floor plan will often have more distinguishing features than condo units within the same building.

   Since condos and townhouses are often cheaper than houses, first-time homebuyers commonly make the tradeoff of choosing the former over the latter.

4. Price
   The cost of the home ranks at the top of most people’s lists in importance. A better location and nicer amenities will increase a home’s price. If you’re not wealthy, you’ll have to sacrifice some of the things you want to stay within your budget. Be realistic about what you can get for your dollar and remember to rely on your own calculations of what you can afford, not your lender’s estimate. 

The Bottom Line
It’s rarely possible to find a completely perfect home for your needs, tastes and budget, and it’s OK to make tradeoffs. Think about your priorities before you start your home search, but be flexible and willing to change your mind once you see what your true options are – viewing actual properties can shift your priorities. And remember that if you can only find places that require too many compromises, it’s OK to wait – new homes come on the market every day http://financialedge.investopedia.com/financial-edge/0810/Homebuyer-Tradeoffs-What-Will-You-Have-To-Sacrifice.aspx

OTTAWA – The Canadian economy likely suffered the worst quarter since the recession over the summer months, but Bank of Canada governor Mark Carney warns against taking too gloomy a view.

“I wouldn’t obsess about the third quarter,” Carney told reporters Wednesday after Canada’s central bank released its latest global economic outlook.

The bank conceded the economy likely continued to brake in the July-September months to 1.6 per cent growth — down from two per cent in the second quarter and the distant memory of the first quarter’s 5.8 per cent advance.

But Carney said Canadians should take a longer view and also take comfort that no matter how modest, at least activity is still positive.

“Two years ago, I (would have said) the economic picture we’ve just seen would have made the bank happy, would have made Canadians happy, given the alternative,” he said.

“We’ve recovered the jobs, we’ve recovered the lost output, we are doing better than virtually anybody else in the advanced world.”

Canada’s current rate of growth is about half the pace the bank had expected a few months ago, and even slower than the U.S., but Carney notes that there’s no comparison between the Canadian and U.S. economies.

While all and more of the about 400,000 jobs Canada lost during the recession have been recovered, the U.S. has only recouped about 15 per cent of their losses. And Canadian domestic demand is outpacing the U.S. by 20 per cent.

Dangers lurk, however, as the bank’s latest quarterly review makes clear.

Both the Canadian and global recoveries, as well as future growth projections, are more modest now than they were three months ago.

To accommodate those diminished expectations and increased risks, the bank on Tuesday suspended the monetary tightening cycle it began in June. Analysts think the bank’s key interest rate will stay at one per cent for many months.

The bank says in the balance it still believes the recovery will continue, but it highlights “important” risks, both internal and external, with the potential to upset the apple cart.

Canadian households are steeped in debt and could become a drag to the economy should housing prices collapse. Latest data shows debt-to-disposable income among households has reached a record 147 per cent.

“If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households,” the bank states.

Carney acknowledged keeping rates low for an extended period only increases the debtload risk, but said he believes consumer spending, including on housing, is tracking lower.

Coincidentally, the TD Bank also warned about household debt in a report Wednesday, saying one-in-10 households could find themselves in financial distress when interest rates rise. Fortunately, that many not be for some time.

Externally, the bank heightened its concerns over the growing friction in the world over currency manipulation, with advanced economies threatening to retaliate against China’s undervalued yuan.

The issue will be central to discussions at this week’s G20 finance ministers in Korea, but Carney suggested a solution will be slow and laborious.

Advanced economies, particularly the U.S., have long complained that China and other fast-growing Asian economies are artificially keeping their currencies below their true value in order to boost exports and discourage imports.

Although China has made some moves to increase the value of the yuan and hike domestic consumption, advanced economies believe those actions have not gone far enough.

Carney said as big a concern is that frustration will grow in advanced economies to such an extent that it will touch off a currency war, although he said China was the key.

“It’s not just China’s position … but as part of rebalancing the global economy, increased flexibility of the (yuan) is absolutely essential,” the bank governor said.

Despite the challenges, the bank sees the Canadian economy advancing from the slow third quarter to a 2.6 per cent gain in the fourth, and an average 2.3 per cent in 2011, followed by 2.6 in 2012.

One encouraging signal is that businesses have begun to invest in new machinery and equipment, which should boost productivity going forward.

Another, said Carney, is that exports will turn from being a net drag on growth to a tiny positive sometime next year as global demand picks up.

Still, it’s going to be a slow, hard slog back to normalcy.

The economy is not nearly as strong as the bank thought it was in July. It calculates output gap — the slack in the economy — remains at 1.75 per cent, not 1.5 per cent as estimated in the previous review.

The bank’s best guess now is that the economy will eventually right itself, but won’t be firing on all cylinders for another two years.

The Canadian Press http://news.therecord.com/Business/article/797065

How would you sell your house today if it was on the market? Would you use a real estate agent or go it alone?

It’s no small issue given the typical commission paid by the seller in this country is about $15,000 based on the latest average sale price of an existing home. When you consider most home sales are for principal residences — and profits are not subject to capital gains taxes–that $15,000 looms larger because it is after-tax money.

The truth is not much has changed since the Canadian Real Estate Association updated its rules in March to make its Multiple Listing Service more flexible, thus allowing agents to simply list a home with the consumer handling all other aspects of a transaction. Those changes are about to be made permanent because of a consent agreement with the Competition Bureau reached last month.

So, what’s the difference today? On a practical level, it’s hard to argue against listing your home on the MLS, which controls about 90% of transactions in Canada. And while you may pay as little as $109 for that listing, you can almost be sure to pay a commission of 2% to 2.5% to any agent bringing his or her customer to your door.

The option to use one of the dozen or so for-sale-by-owner, or FSBO sites, exists, but you can expect to pay a fee for the service. Plus, you can also assume any customer who buys a house through a FSBO site wants a discount on the market price because they know you are saving commission.

I tried it myself for two weeks before listing my own home on the MLS six years ago. My agent encouraged me. What happened is people who did show interest immediately started to talk about a discount. I was back to an agent and the MLS system.

But maybe there is a compromise solution, where I list on the MLS using an agent who helps me with part of a transaction. After all, there are people who paint their own homes but are reluctant to dabble in electrical wiring.

“Commissions are flexible,” says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “There is [a middle ground] and people have to look for it. Many agents will offer a menu of services and that is out there already. Most people will choose to list with an agent who manages an entire transaction.”

But now that that choice is part of the game within the confines of the MLS, expect consumers to take advantage of it to save some cash.

“I’d still use an agent. My life is too busy,” says Craig Alexander, chief economist with TD Bank Financial Group. “But there are going to be people who only want an agent for some things.”

Mr. Alexander thinks changes are coming, but couldn’t put a timetable on it. He says it is basic economic theory that once you introduce elements of competition to a system, it will start to become more efficient.

Robert McLister, editor of Canadian Mortgage Trends, says many realtors will start offering a la carte services such as document preparation, showings, valuation and offer negotiations. He believes high-end real estate will be less affected by the changes and the industry might gear its efforts more to that end of the market.

And, he adds, FSBO sites that charge listing fees could be devastated by a bargain-basement MLS.

“Removal of listing barriers will allow efficient markets to take over. That will put obvious pressure on realtor fees. The era of 5% commissions in Ontario [other jurisdictions vary] could become a distant memory in three to four years,” says Mr. McLister.
Read more: http://www.financialpost.com/personal-finance/Your+options+brave+real+estate+world/3680721/story.html#ixzz135MK523U

The federal finance committee got an earful Tuesday from one group not too thrilled with the housing boom — Canadian landlords.

John Dickie, president of the Canadian Federation of Apartment Associations, said at least part of the housing boom over the past decade can be attributed to the government favouring housing over rental accommodation by providing a much larger subsidy.

“There are a number of rules in the current tax system that amount to massive favoritism towards homeowners as opposed to renters,” said Mr. Dickie Tuesday, adding it’s true for all three levels of government.

In Ontario, the group estimates, municipal, provincial and federal governments provide a subsidy of $2,629 per owner-occupied house, compared to $395 per renter.

“There is a perception among politicians that homeowners vote more frequently than tenants,” said Mr. Dickie. “There is perception in society that homeownership is good and should be encouraged.”

Homeownership rates in Canada have climbed steadily over the past decade and are now closing in on about 70% of households, something Mr. Dickie said “pushes it further than it should.”

Federal subsidies include such things as a rebate on the goods and services tax on new homes and the home-renovation tax credit. Capital gains on the sale of a principal residence are also exempt from federal and provincial taxes.

Though it varies by city, homeowners generally pay less property taxes than landlords. In Ottawa, Mr. Dickie said, landlords pay property tax of 1.7% of the value of the home, compared to 1% of the value for homeowners. Condominium owners, who rent out their space, get the residential rate in most municipalities.

He said renters should be concerned about the disparity. “They don’t know they are getting ripped because it’s the owners that cut the cheques.”

Craig Alexander, chief economist with TD Bank Financial Group, said homeownership has long been a goal of Western society.

“There is no question the policy environment provides incentives and support to homeowners,” he said.

But there is a risk subsidizing the sector, he said. “In the case of the United States, one could make the argument that part of what fuelled the housing bubble was oversubsidization of the housing market or maybe just excessive public-policy support for homeownership
Read more: http://www.financialpost.com/news/Housing+boom+blamed+subsidies/3696298/story.html#ixzz12tnVPRxd

Consumers on the long end of the borrowing spectrum appear to be getting a better deal with the five-year term fixed-rate mortgage reaching an all-time low over the past month.

Rock-bottom long-term mortgage rates appear to have handed the housing sector the lifeline it desperately needs, helping to push up sales for a second consecutive month and keep prices from falling.

The Canadian Real Estate Association said Friday sales last month rose 3% from August on a seasonally adjusted annualized basis — highest since May 2010 — and the second straight month sales rose.

Meanwhile, prices have also begun to stabilize as fears of a dramatic meltdown appear to be abating. The average price of a home sold in Canada last month was $331,089, down slightly from the $331,683 average a year ago. But prices were up from a month earlier, when the average was $324,928.

“Supply and demand are rebalancing and that’s keeping prices steady in many markets,” said Georges Pahud, president of CREA.

The other factor keeping the market afloat are interest rates.

The Bank of Canada has signalled it will take a pause on raising its key lending rate which should keep the prime rate at most banks at 3%, affecting any variable rate borrowers.

But it’s consumers on the long end of the borrowing spectrum who appear to be getting a better deal with the five-year term fixed-rate mortgage reaching an all-time low over the past month.

Gary Siegle, the Calgary-based regional manager for mortgage broker Invis Inc., said the standard rate for locking in for five years is now 3.69% but adds some lenders have dropped to as low as 3.39%.

“I’ve been working for 38 years and I don’t recall rates this low ever in my career,” said Mr. Siegle, adding the discount on variable-rate mortgages has dropped to the point that consumers can float with a rate as low as 2.35%.

“The question I wonder about is at these rates is why are people not all over the real estate market?”

CREA said two-thirds of local markets last month posted sales increases with Winnipeg, Calgary and Montreal standing out. However, compared with last year, sales still lag across the country, down 19.8% in September from a year ago.

“Record level sales activity late last year and earlier this year is expected to further stretch year-over-year comparisons in the months ahead,” the group warned.

TD Bank Financial Group economist Shahrzad Mobasher Fard expects falling mortgage rates to be a significant boost for the market for the near future. “They are a factor that cannot be dismissed,” said Ms. Mobasher Fard. “[Current rates] won’t lead to an overheating but it will support further growth in home sales and prices. The last two months of data indicate there has been a bottoming out of home-selling activity and prices.”

Demand is still tepid but there has been a slowdown in new listings, which are 15% off the peak reached in April. The number of months of inventory, which represents the number of months it would take to sell inventories at the current rate of sales activity, was down to 6.6 months in September.

It was the second straight month inventory levels dropped, having stood at 6.9 months in August and 7.2 months in July.

“Mortgage lending rates eased in the third quarter, which helped support sales activity over the past couple of months,” said Gregory Klump, chief economist with CREA.

“Interest rates are going nowhere fast, so home ownership will remain within reach for many home buyers.”

The chief executive for Royal LePage Real Estate Services Ltd. said he was almost a bit relieved to see the latest figures.

“I was pleasantly surprised to see the year-over-year average price flat given the strength of last year’s September results,” said Phil Soper. “I expected a small decline in average price. It has been driven almost entirely by the low cost of money.”

Financial Post

The Canadian economy appears to be on the mend again after a major stumble earlier this summer that rekindled fears of a possible double-dip recession.

Fresh evidence that July may have been an aberration, rather than the beginning of a downward spiral, built Friday as Canadian manufacturing, housing, and U.S. retail sales all came in surprisingly strong.

The most dramatic boost came in the unlikeliest place — a strong two per cent jump in the troubled manufacturing sector in August, powered by motor vehicle, petroleum and coal product manufacturers.

As well, new orders were up 5.3 per cent in a signal of future activity.

On the heels of better-than-expected export numbers Thursday, fuelled by auto shipments, the data is the first strong news the factory sector has received in months.

Equally important, say analysts, is that the long-idle U.S. consumer is showing signs of reviving, with the third consecutive month of healthy growth coming in September, a 0.6 per cent pickup following gains of 0.7 and 0.5 per cent the previous two months.

After a swoon, the Canadian housing sector is also showing signs of stabilizing. The Canadian Real Estate Association reports home sale activity rose three per cent in September, reaching the highest level since April.

“It’s a great way to end a Friday,” Scotiabank economist Derek Holt said. “We’ve got a whole Goldilocks round of data with pretty strong growth indicators but no inflation. This is a synchronous upturn in a broad cross-section of indicators that unwinds the synchronous downturn of the prior month.”

With positive data appearing for both August and last month, July appears to have been the low point of the rapid slowdown suffered by the Canadian recovery since it’s quick rebound of last fall and winter months.

Not only did July result in the first real contraction of activity at minus 0.1 per cent, it also ended the string of strong job creation numbers, actually producing the first loss — 9,000 overall and 139,000 full-time — since last year.

Economists caution that while a double dip appears to have been averted, for at least the rest of the year, there is also now signs that the economy is ready to take off.

The Bank of Montreal says the latest data is consistent with growth of about 1.5 per cent during the just completed third quarter — very modest for this early in a recovery cycle from recession. http://news.therecord.com/Business/article/794558

For some first-time buyers, arranging financing is more daunting than the actual purchase of a home. There’s a glossary of terminology associated with taking out a loan, including variable- and fixed-rate mortgages, debt-service ratio, amortization period, maturity date, and mortgage insurance.

Many first-time buyers look to a mortgage broker to help them stickhandle around these issues. But it’s not that easy because not everyone who calls himself or herself a “mortgage broker” is licensed to provide this service by the Financial Institutions Commission, which is the provincial regulator.

The president of the Mortgage Brokers Association of B.C., Joanne Vickery, told the Georgia Straight in a recent phone interview that members of her association work with many different lenders to negotiate mortgage financing on behalf of their clients. Potential lenders include chartered banks, credit unions, and other organizations that provide money directly to borrowers. “We’re able to source business for a client, and put them into something that’s going to best suit their needs,” Vickery said.

An independent mortgage broker is paid by the lender, so there is no charge to the consumer.

Financial institutions, including banks and credit unions, also employ people who offer advice on mortgages, but Vickery emphasized that these people are not “mortgage brokers” in the true sense of the words. She prefers calling them “road reps”.

“Road reps are technically employees of the bank,” Vickery said. “They are not mortgage brokers.”

She emphasized that road reps who work for national companies, such as the chartered banks, are licensed by the federal Office of the Superintendent of Financial Institutions. She maintained that their first obligation is to sell products offered by their employers, which sets them apart from mortgage brokers.

“Many mortgage brokers have clients who say ‘my broker from the Royal Bank or my broker from the Bank of Montreal’,” Vickery said. “We say they’re not really brokers.”

She said that MBABC is collaborating with the Financial Institutions Commission to educate the public on the difference between licensed mortgage brokers and those who sell products on behalf of financial institutions.

“I’m not saying that the lenders from corporate [institutions] are telling their people to say, ‘You’re a broker,’” Vickery stated. “That’s not really what’s happening, I believe. I believe that these individuals who are employees of the bank are calling themselves that because it’s easier. It’s easier for the consumer to understand.”

The Canadian Bankers Association declined the Straight’s request for an interview on this topic.

The Mortgage Brokers Act does not apply to employees of insurance companies, savings institutions, members of the Law Society of B.C., or any person acting for the government or any of its agencies. Samantha Gale, manager of mortgage broker regulation with the Financial Institutions Commission, told the Straight by phone that her organization has taken action in response to concerns over unlicensed advisors calling themselves mortgage brokers.

For example, Gale said, people who are not employees of a financial institution—such as independent contractors who place mortgages with third-party lenders—are not exempt from penalties under the Mortgage Brokers Act. If they call themselves “mortgage brokers”, they could be penalized if they’re not licensed as mortgage-development brokers. For a first offence under the Mortgage Brokers Act, the maximum fine is $100,000 and individuals are liable to imprisonment of up to two years.

“We only have a handful of people registered as mortgage-development brokers,” Gale said. “So my suspicion is that there is a lot more people out there working in this capacity for savings institutions that aren’t registered as mortgage-development brokers.”

In November 2009, the Financial Institutions Commission issued a bulletin stating that it now has the power to issue a cease-and-desist order. However, Gale said that her office has not received complaints about specific individuals, which is why there haven’t been any enforcement actions. “We have responded to the problem and we have a process,” Gale said. “The problem is not getting the complaint information.”

October is Mortgage Education Month, and to coincide with this, the MBABC is holding a series of seminars across the province. For more information, see www.findabettermortgage.ca

Many Canadians are having difficulty meeting their savings goals with 38 per cent indicating they are unable to save, either because they have nothing left over after paying bills (30 per cent) or because they are impulse spenders (eight per cent), according to the RBC Savings poll.

More than half of Canadians find it difficult to achieve their savings goals (57 per cent), be disciplined in their savings habits (55 per cent) or find it daunting to set up a program to ‘pay yourself first’ (51 per cent).

With more than a quarter reducing the amount they are saving (27 per cent) and a further one-in-five (19 per cent) indicating they have stopped saving altogether over the past two years, only a small minority (12 per cent) of Canadians have managed to increase their savings.

“Our clients tell us that one of the main challenges to saving is paying yourself first – being able to put aside money before it gets spent,” said Maria Contreras, product manager, Savings Accounts at RBC. “We advise our clients to start slowly by setting aside small amounts. Starting by setting up a separate, dedicated savings account and an automatic saving program with a small amount each week from your paycheque can go a long way in helping you reach your savings goals.”

When it comes to savings habits, approximately one-third (33 per cent) of Canadians diligently save by making regular contributions to a savings account, while a slightly smaller proportion (29 per cent) only save from time to time.

The most common reasons cited for saving money are to create an emergency fund (47 per cent), followed by vacation/travel (35 per cent), but priorities vary by age group. The RBC poll found that young adults aged 18 to 24 favour travel (47 per cent) as a reason to save, followed by saving for home purchase/renovation (36 per cent) or a car (26 per cent). Saving for a home purchase/renovation is equally high among those aged 25 to 34 (36 per cent).

“You can’t make wise saving decisions without taking a good, hard look at your budget – specifically, how much you earn versus how much you spend,” added Contreras. “Once you’ve tracked your monthly budget, it is important to thoroughly examine your spending habits in order to make informed decisions and to reach your savings goals.”

To support Canadians in achieving their savings goals, RBC offers a variety of budgeting tools including:

• the Spend-o-meter tool – determines where exactly your money is being spent.
• the Emergency fund calculator tool – establishes how much money you should consider for an emergency fund.
• the Easy budget tool – examines your income and how much money you have left after necessary expenditures.
• the myFinance Tracker tool – creates a set budget and tracks your spending habits.

For more resources to help Canadians start saving and achieve their savings goals, visit www.rbc.com/savingsspot.

The savings survey was administered as part of Express Online, TNS national online omnibus survey. Fieldwork was conducted between August 12 and 16, 2010. In total, 1,121 completions were achieved.

While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone’s head as people have watched their neighbours and friends lose jobs and sometimes their home. Many people say that money worries keep them awake at night, but that doesn’t necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?

Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:

1. Late Fees

If you missed a payment or let your bill go past due because you didn’t have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.

2. You Can’t Pay All of Your Bills

Every month, you must decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.

3. Making Minimum Payments on Credit Cards

In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.

4. No Emergency Savings

While amassing six to twelve months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month’s worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.

5. You Can’t Afford Maintenance

Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don’t have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.

6. Reduced Income

Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.

7. Using Credit or Cash Advances to Pay Bills

You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.

8. Using Your Retirement Fund

You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.

9. You’re Maxed Out

One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.

While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.

The Bottom Line

Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.

Interest rate hikes appear to be on the back burner for the foreseeable future after Bank of Canada governor Mark Carney said Thursday that overstretched households and weak U.S. demand would crimp economic growth in the coming months.

At a speech in Windsor, Ont., Carney said Canadians should brace for months of “modest” economic growth, acknowledging this will be reflected in the bank’s revised forecast to be released Oct. 20, in which third- and fourth-quarter estimates would be lowered. Any additional increases to interest rates in this environment would warrant “caution,” he added.

The remarks reinforced a growing belief among Bay Street traders that the odds of another rate hike this year were dwindling to nearly zero. Plus, data released Thursday indicated the economy contracted in July by 0.1% from June levels, the first monthly decline in almost a year.

Economists said Thursday’s speech and the GDP report point to a central bank that’s done with rate hikes for now.

“Mr. Carney is saying he’s willing to keep interest rates low for a while,” said Avery Shenfeld, chief economist at CIBC World Markets, adding the central bank is likely to stay on the sidelines until mid-2011. “Rates at these levels are stimulative, but perhaps we need that.”

In remarks to a Windsor business luncheon, Carney painted a portrait of a recovery that has lost momentum, and suggested the slowdown could be attributed to domestic factors — namely, consumers dragged down by their bloated balance sheets.

“Investment in housing has outstripped their total savings for over nine straight years. . . . This cannot continue,” Carney said.

The recovery’s early spurt, highlighted by annualized quarterly growth in the 5%-plus range, leaned heavily on people capitalizing on low interest rates to buy homes and consumer goods. “The limitations of this reliance are becoming evident,” Carney said, warning it appeared “unlikely” private consumption would be bolstered by further gains in housing prices.

Statistics indicate the ratio of household debt to disposable income hit a record high of 146% in the first quarter of 2010. But recent soft data on retail sales and housing activity suggest consumers have run out of steam.

Michael Gregory, senior economist at BMO Capital Markets, said the implications from household debt on growth represent the newest wrinkle in the bank’s outlook.

When it last raised rates on

Sept. 8, the central bank cited “exceptionally stimulative” financial conditions. But Gregory said the bank believes those conditions may be offset by an “inability or the lack of desire of consumers” to take on more debt.

Carney also called on federal policy-makers to “remain vigilant” about keeping household debt in check. Earlier this year, the federal government tightened rules to make it tougher for new homebuyers to get a mortgage following a series of warnings about the possibility of a housing bubble.