Jul 042018

Five years ago I acquired a variable rate mortgage from CIBC. It was the cheapest rate I could find at the time. I was quite pleased with the rate but that mortgage term expired a couple of months ago. So I shopped around to see if I can find another good deal.

I expected my mortgage to become more expensive. Surely rates would have climbed over the last 5 years right?

But no. To my surprise I found a lender that offered me an interest rate that’s lower than my previous mortgage by 43 basis points. 😀 CIBC was not able to match this offer so I switched. The new financial institution I am with is not one of the big 5 banks in Canada. It is a lesser known company called National Bank.

I was paying 3.05% with CIBC. This was a variable rate 5 year mortgage at prime minus 0.40%. This was the best CIBC could do.
But my new mortgage with National Bank is only 2.62%. This is also a variable rate 5 year mortgage term. Except the rate is Prime minus 0.83%

A 0.43% difference in interest rates doesn’t sound like a lot. But my mortgage balance is around $193,000. So I will be saving roughly $4,000 over the next 5 years because I switched to a cheaper mortgage provider.

However there are costs associated with changing lenders. Appraisal costs $600, and legal documents from a notary public was $800 in my case. Luckily National Bank has a $750 rebate program for transferring over an existing mortgage. 🙂

In the end the cost of changing banks was worth the extra savings in my case.

Even though most Canadians are choosing fixed rate mortgage I still believe that variable rate is the way to go if you want to save money. The increase in fixed rate mortgages locked in by most home buyers this year is “seen as a response to rate hikes, and fear of higher rates in the future.” But critics have been calling for higher rates for over a decade. Yet rates haven’t actually gone up much. In fact, mortgage rates have dropped over the past 5 years as shown in my post today. That’s why we have to be informed of economic conditions so we can make our own financial decisions, instead of following others. 🙂

I have been a homeowner for almost 10 years. During this time my mortgage interest rates fluctuated from 2.3% to 3.2%. It doesn’t look like rates will climb significantly any time soon. Until we see increasing mortgage rates, I would expect Canadian housing prices to climb even higher.


Random Useless Fact:

30 years ago only 5% of the population admitted to being chronic procrastinators compared to 25% today. Some believe technological advances is the main cause of this change.

Aug 012016

Stock Markets Reach Record Highs… Again 

Both the Dow Jones and the S&P 500 indexes have climbed to all time highs in late July. 🙂 But corporate earnings have been stagnant and economic growth remains weak. Restaurant sales have slowed. The U.S. economy only grew a disappointing 1.2% in the second quarter, well below expectations. 😕

So what’s producing so much excitement in the stock market? In short, I believe it’s largely caused by Negative Interest Rate Policies (NIRP). For example, in Europe the benchmark lending rate is negative 0.4%. Usually the bond issuer pays interest to the investor. But with negative rates, the investor pays the issuer. Currently about 1/3rd of the world’s government bonds are producing negative yields. Investors can’t get rich by holding these securities anymore. So in this kind of environment bonds really hold people down.?

As a result of NIRP, more investment capital has moved from the bond market to relatively stable stocks. These tend to be companies that operate gas pipelines, railways, utilities, telecommunication services, and other infrastructure that are recession resistant. Last year I wrote about how to easily make $75 of annual income without using any of my own savings by using leverage to buy shares of TransCanada Corp (TRP.)


I purchased TRP stocks for $42 per share. I mentioned at the time that analysts had an average price target of $57.50 per share. This doesn’t always happen, but sure enough TRP is trading at roughly $60 per share today. 😀 So not only am I making $75 a year in dividends, but I’ve also made $1,800 in unclaimed capital gains so far. 😉

In normal circumstances this kind of price movement in a large cap, blue-chip company wouldn’t happen. But due to a lack of viable investment alternatives, an influx of additional buyers has pushed up TRP and many other relatively safe stocks.

Increasing Valuations and Risk

Unfortunately, NIRP produces asset bubbles and may cause the markets to behave precariously. The chief executive of DoubleLine Capital, who oversees more than $100 billion in assets, recently said that many asset classes look frothy and his firm continues to hold gold, which has also climbed due to NIRP.  At the end of July gold reached $1,350 per ounce, the highest monthly close in years! Stock investors have entered a “world of uber complacency,” said Jeffrey to the media. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong. Continue reading »

Jul 112016

Real Estate Incentives

Financial advisors sometimes get a bad reputation for not having their client’s best interest in mind. Many continue to earn commissions even if their client’s portfolio is losing money. But what about real estate agents? Their compensation structure is also heavily based on commissions. They often earn a percentage from the final sale of a home. For a homeowner looking to sell, the ideal situation is to sell his house for the highest price possible. So at first glance it would appear that both a homeowner and a real estate agent would have the same financial incentive; to get the best possible deal for the seller. 🙂


But further investigation reveals that maybe that’s not really true. Let’s say a homeowner sells his house for $500,000 with the help of a real estate agent on a fixed 2% commission. This means the realtor earns $10,000 and the homeowner keeps the remaining $490,000. To keep it simple we’ll ignore taxes and other costs.

But maybe with some additional advertising, negotiations, and patience, the house could actually be sold for $510,000. But this is when the incentive structures begin to diverge. As the homeowner selling the house, an extra $10,000 from the sale price means adding $9,800 more to the bank. 😀 Most sellers would like to see that money, even if it means waiting an extra couple of weeks to find the right buyer. But a realtor would only make $200 off the extra $10,000. For most real estate agents, putting in the extra time and effort (and sometimes even money for ads) isn’t worth the extra commission. So if the homeowner stands to gain $9,800 while the agent would only receive $200, then clearly their incentives do not align very well anymore.

Continue reading »

Jun 272016

Real Estate Ad Terms

Some folks might think using words like “charming,” or “spacious” in a properly listing is smart and would result in a higher sale price. But in reality the opposite is true. Here are 10 common real estate ad terms. Half of them have strong positive correlations with a higher sale price, and the other half is negatively correlated.


According to the book Freakonomics by Steven Levitt and Stephen Dubner, the 5 terms correlated to a higher sale price are:

  1. Granite
  2. Maple
  3. Corian
  4. State of the art
  5. Gourmet

And the 5 terms correlated to a lower sale price are:

  1. Fantastic
  2. Charming
  3. Spacious
  4. Great neighborhood
  5. !

Words such as Granite, Maple, and Corian (a countertop brand,) are all definitive physical descriptions of a home. It tells any potential buyer exactly what the property is like. The terms Gourmet and State of the art, also connotes a place that’s ready to move in.

But on the other hand words like Fantastic can be a misleading description, as are other ambiguous terms such as Charming or Spacious. These words aren’t tangible enough to tell the buyer anything specific about the property. Mentioning a “Great neighborhood” might signal that this particular house isn’t that great and may not have any specific attributes worth mentioning, but at least other homes nearby are pretty nice. The last word on the list isn’t really a word; it’s an exclamation point. It feels like a feeble attempt to cover real shortcomings of the home with a false sense of enthusiasm!

The book also broke down the language used in a listing for a real estate agent’s own home. She indeed emphasize adjectives like new, granite, maple, and move-in condition. She avoided empty and interpretive portrayals like wonderful, immaculate, or the overused exclamation point. She used every advantage she had to increase her final sale price, including telling potential buyers that a nearby house recently sold for $50,000 above the asking price. But that doesn’t make her a bad person. Realtors are people too. They’re simply looking for closure.

Continue reading »

Apr 192016

If you tend to be very trusting of what other people tell you, it might end up harming you in the long run. You can actually tell a lot about some people based on your first impressions of them. Though your initial thoughts about somebody could be wrong, oftentimes, your gut instinct tends to be correct because it is based on your past experiences with similar people.

Consider this scenario: if the lessor turns out to be a pain to talk to during the initial discussion about the house rental, then you will be stuck with that particular lessor for the whole duration of your contract. This is something that can easily be avoided if you take the time to make acute observations during the discussion of the lease. Here are some things for you to observe when you have the initial meeting with your possible landlord, and why each of these factors might be a clue as to your future relationship with that person.

Does Your Lessor Have a Pleasant Personality?

One of the most important factors to consider when renting a house is if your lessor is easy to work with. After all, you will have to deal with this person for the entire time that you stay at your new place. For instance, assuming that you have been able to pay all of your dues each month without a problem, would your landlord consider giving you a short extension if you happened to be late on a particular payment due to some circumstances beyond your control?

According to an article by Brittany Foster on Law Depot, most landlords who are accommodating do not mind giving you a little leeway. After all, it is in their best interests to keep a tenant that is responsible and courteous most of the time rather than kick them out and replace them with a troublesome tenant who is rude and misses every single payment. This is a headache that most decent lessors would want to avoid at all costs, as good tenants can be hard to come by, and it is not worth letting go of them all because of a one-time tiny mistake that they could not avoid no matter how much they tried.

Do You Feel Respected by the Lessor?

During your initial meeting with the landlord, it is important to check for signs of whether or not they look down on you as a possible tenant. After all, they are trying to get people to rent our their property, so they must treat you with respect no matter how many questions you have or how many times you ask to clarify something in the contract. In fact, taking the time to observe a lessor’s tone of voice, body language, and facial expressions are a way to gauge just how much they actually respect you and any other potential lessees they may have.

If you sense any discomfort, condescending tones of voice, or even the tiniest signs of disrespect, consider these red flags about the lessors’ attitudes and move on to the next one.

Does Your Lessor Blame You for Everything?

According to Brene Brown, blaming others for all kinds of problems is one way in which people try to release any pain or discomfort that they are feeling. After all, when you point the finger at somebody else, you would be washing your hands of the problem and would not have to deal with it anymore.

If you can, ask current tenants if the lessor tends to blame them rather than diagnose what the problem is. Make sure to check if the contract states that any damages that happen to the house will be paid for by the lessor. If the contract states that all repairs will be covered by the lessor but you are still forced into paying for the damages, then take it as a sign that the will blame you in the future, and look for another house to rent.

Whether you are looking for a new house for rent on useful sites such as PropertyGuru Singapore or hitting the streets to look for vacancies, do not only focus on the physical properties of the house itself. There is an element of human interaction whenever you decide to rent a new property to live in, and that happens to be in the form of your future landlord. Take your time feeling out the person’s personality, as a few minutes or hours talking to them will give you a clue about what your long-term relationship with them will be like.

Find a landlord that respects you so that you will not just have a home that is beautiful and up to physical standards, but an intangible renting experience that is nothing but positive for everybody involved.