Should you buy the mortgage 'life' insurance?

After getting my mortgage approved, I needed go in to the bank (I bank with RBC) to get some paperwork signed to say that 'yes I am accepting this liability'... doesn't sound as soon as it did when I first said to myself, 'I just got approved for a mortgage!" :p anyways!

Part way through signing the document I noticed that my monthly payment was higher than what he told me initially.

'Why is this I ask?'

He told me that they added on the $15 life and disability insurance option, and because I was going with the accelerated bi-weekly payments, that meant that I'd be paying $30 + mortgage monthly. I did some quick math in my head and said 'no I don't want this.' I was surprised that he didn't try to push the product further on me, or maybe he knew it wasn't a good deal and just surrendered to it. Hmm... for those who don't know, I used to be very passionate about this kind of thing. I used to be a crusader for Term Life Insurance back 2 years ago when I was working with Primerica Financial Services. I truly believed in their philosophy of Buy Term, Save the Difference! That topic can be for another post but it somewhat relates to why this 'life' insurance is not the best bang for your buck and here is why:

Let's say you go to the Mortgage Calculator on the RBC website and you input $250,000 as your mortgage amount, variable, 2.5%, 5 year term, 25 year amortization (let's say it is a perfect world and you get the 2.5% for entire duration of your mortgage)... then you get a report like this:

Looking good so far... A couple of things off the bat... I would recommend going with the accelerated bi-weekly plan if you can. It will shave a good 3-4 years off your amortization (life of the mortgage), allowing you to be debt-free (out of your mortgage) sooner... if you can contribute more, DO IT, it will expedite the process even more! :) Don't be paying JUST interest each month, make sure you bring down your amount by paying off the principal, and the only way of doing that is paying a bit more each month... good luck!

So back to this mortgage insurance thing... Here is where the trick is...

Underlying message: the mortgage insurance only covers you for the term of the mortgage. The coverage actually decreases over time while you are maintaining the same payment amount each month.

OUCH!

The above is assuming $30 a month for both Mortgage and Term insurance for the same 25 year period. 1$ per coverage amount goes down as your mortgage decreases, while term stays the same throughout the term.

Yeah... if you stick to your schedule, you should be able to pay off your mortgage in 19 years (goodie)... that's when you can stop paying for this stupid mortgage insurance thing. Then what happens after that? Nothing, you're screwed... you are not covered anymore :o! You're probably thinking... wow... this is such a scam! IT IS! Don't get it!

My suggestion: get in touch with a Primerica Rep (I can refer you to mine if you need one, he's really good) to run a quote for you, and he/she should be able to match or beat the price of the bank's mortgage insurance rate, with more coverage for a longer period of time so your family is protected longer. I should stress that Term Life Insurance is the only type of insurance anyone should get. Insurance agents will try to sell you what they call, Whole Life Insurance, where they bundle Term + Investment into one product... it's a demon product! I'll expand on this more in another post.

I hope this was helpful! Ask me any questions you might have :)

Until next time...

Line of credit versus credit cards

Today I went to the bank to sign some papers to finalize all the mortgage stuff. I ended deferring the life and disability insurance that they originally put on top of the mortgage amount. It was only $15 a month... so not much... but I've been very cautious about thinking with that mindset because every dollar will begin to count after I move out and start paying those big figure bills (YIKES!). I'm also contemplating on whether to switch out of my current auto insurance with Belair and go with RBC's auto+home insurance package. They say it's cheaper but until I call in and get a quote, I won't make the assumptions that it is. Have any of you switched to your banks plan for auto+home and received substantial savings? I'd like to hear it if you have!

The mortgage specialist was extremely helpful and professional explaining me all the details of the mortgage and even broke down and printed off my scheduled payment. I went with their accelerated bi-weekly plan as it will shave off close to 4 years on my overall mortgage term, saving me just over $9000 in interest costs over the life of the mortgage. Yay!

Later I was introduced to the rep that would be my long-term relationship rep. I thought the specialist would be it, but it appears as though he's was only responsible for getting me qualified and the papers done. This guy was also friendly and professional. I felt like speaking with him that he was a bit tense. Nonetheless he sounded like he knew his thing and he had told me that he's been working at RBC for 8 long years.

We spoke a lot to the other products that RBC offered for people who just qualified for a mortgage. Interesting enough, I learned a lot about what I don't know. You know... You don't know what you don't know... So you gotta learn to know ;)... I wasn't trying to confuse you there.. I swear ;).

So what kinda trouble did I get myself into? A bunch of things and there's a ton I could write here but I will be dividing this blog up into multiple parts, hoping that it stays with me until I blog again :) So to start... here is what I signed up for...

• I opened up a TFSA.
• I applied for a line of credit.

After have been a client of RBC's for many years (since I was a toddler)... I've only owned a student's chequings account and a VISA with a $1000 transaction limit (woo hoo!). So yes... I don't like debt so I try to keep things simple :). If you didn't know already... for a student account, you don't pay any fees but there is a limit on how many transactions you make a month. I've gone over countless times and got dinged each time for exceed that limit, argh! But the good news is; if you own three products or more with the bank, you qualify for what they call... a "MultiProduct Rebate". This means they will give you an instant rebate on the fee that would have needed to pay if you didn't have three products with them. So to sum up... no monthly fee and unlimited transactions!

So the 3 products I have with the bank now...

1. Bank account
2. Mortgage
3. TFSA

(your credit card doesn't count as a product they say)

I save on $10.95 a month... Or $131.40 a year :D. That's good enough for a nice piece of furniture each year... hmmm... lol or maybe I will save that for some photography gear / travel.

The last thing I'm going to share here may shock you but I didn't know about this until I asked... actually, that's a lie, he brought it up and then I began questioning him.

You can get a credit line for FREE! Make sure you ask about it because they may just try to charge you. He didn't though. He told me straight up it was free.

So the line of credit option is actually a good product to have because the minimum payment is only the interest rate against the borrowed amount over 12 months. That's very little... Check this out...

• Your credit limit = $5000
• You borrow = $2000
• Interest rate = 7%
• Minimum payment = $2000 * 7% / 12 months = $11.67 a month.

Your minimum amount is only $11.67 a month! The amount is charged to you based on two factors here, the withstanding balance that you borrowed and the interested rate. Keep in mind that you probably wouldn't want to keep paying the minimum, or else you're going to be stuck there foreverrr. But then again... it's better than having that debt on your credit card... why?

Most shocking thing... credit cards is a scam! The interest you pay on your credit card balance is always against the highest amount you had previously not paid in full for. For example,

• Your purchase was $5000
• You pay back to the bank $1000
• You owe the bank $4000 plus interest
• So that must be $4000 x 19.99% (whatever the rate is, but look how high it is)
• The truth is, this is NOT how it works!

The interest rate is actually against the $5000 until you've paid it all off in full!

I wish I could share a real example but I've never actually gone down that path :p If you've endured this can you confirm with me that that is how they scam you? It's frustrating because they never disclosed that to me. I guess the think about credit cards is that almost anyone can apply for one and it's very easy to get approved. But what they don't tell you can hurt you over the short/long term if you are not careful. Take that as a cautionary note, I really hope you do!

I'll leave the life and disability insurance thing for another post because I think it deserves a lot of writing about that topic with some fancy graphs and stuff :)

Until next time, subscribe to my blog!

I purchased my first home!

Some say that...

• Buying a home is the biggest purchase you'll ever make in your lifetime.
• A home is an asset, and some say it is a liability.
• Home is where you hang your hat.
• Home is where your heart is.

No matter what, "home" to me is a place of familiarity and comfort. Some people say, and I say it too, "There is no place like home".

Over the past couple of months, there's been a lot happening at work and it involved me moving in and out of the city/country. I tell my friends with a lot of excitement that I get to travel for work. I tell them, "I'm heading over to Vancouver for a week", or "I'm going to visit Boston next week" (which I all did). While I appreciate the travel, there's been countless times that I said to myself... "I miss home" or "I miss sleeping on my bed". The comfort is just not there... although my company pays some serious bills and gets us into the Hiltons :p But if you've felt the same way with business travels, like I have, now you know you're not alone. And if you are brave enough to admit it, leave a comment and say I agree with you Jackson. Thanks.

So enough said... over the past couple of months, I've been scouting around for a potential property to buy for myself. I've come to realize that I shouldn't need to rely on my parents to take care of me anymore, and that it's time to take a step into the independent life. Most of my life I've been fortunate enough to have had the love and care of my family and friends. It's really been a memorable 24 years of my life :). I'm hoping that by moving out, I will become a more mature and responsible human being. I look forward to the challenges ahead, and it has been one of the reason for my decision to look for a place at such a "young" age.

I finally found a place of my liking and it's taken over 100 e-mails from my real estate agent (Donna Sun of Royal LePage) and some in person open house to get the juice running in me and tell me what I'm about to get myself into. I've visited a few locations around the Billings Bridge area and saw that there's some great things around there that I want to be part of. So I eventually went for one of them, and the next thing you knew, I won the bid and purchased the property! :)

What are some home shopping tips I would give from this experience?

• Do your research ahead of time. Purchasing a condo is very different than purchasing a single,townhouse, etc.
• Ask your parents, family and friends about their experience when they bought their first home. Everyone will give a different perspective, but you don't need to go with everything they say. Take what you can get and make informed decision that you want. Afterall, this is your purchase, not theirs!
• Get qualified to know how much you can afford. There is nothing worst than wasting your precious time looking at properties that you cannot afford. Although I did that at the start, there is no shame admitting it, it's fun shopping but just be cautious about it.
• Start using Microsoft Excel to brainstorm and jot down month expenses and do all your calculations ahead of time so you know what to expect once you move out. This is the part that I think is probably the most important because people can tell you all sorts of things about "we pay this much for this" and it could be better or worst in your situation. Plan for the worst case scenario to ensure that you safety net for any unexpected events.
• Another reason why you want to do your calculations upfront is so you can take those calculations to the bank/lawyer/friends/family and asked them if you are on par with how much each expense are. This shows that you know your stuff and you thoughts things through with out "jumping the gun" (I never got to use that phrase, glad I could use it here :).
• Show no weaknesses when you are talking to your mortgage broker, real estate agent or lawyer. When you've done your research, you will have questions and if you ran them by your friends and family, then go to the specialist and ask them, but it's always good to ask them even if you've asked your friends and family just to confirm as housing markets have probably changed since they went through the process.
• Be confident and read through all documentations before signing any papers. Ultimately, a signed contract is a proof of some transaction. If you solely rely on your broker or agent to tell you want to do, then you could be pushed around if you don't know what it is you are being sold on.
• Don't believe in anything private sellers tell you. Ask lots of questions and take what you've learned from the first encounter to the next. Often the seller will try to use some persuasive words or talk all about benefits but not disclose some things about the unit unless you ask. That is when the lawyer comes in and takes a close look at the terms, but you should probably read it too.

Those are the only tips I can think of right now. I hope they will help you when you're shopping for your place :). But by now, you probably want to know what I bought :p My building is...

• Built in 1975
• Has 2 bedrooms
• Has 1 bathroom
• Has 1 living room, dining room and kitchen
• Has 1 underground parking spot
• Has 1 balcony looking out into the Ottawa River and Landsdown Park (clear view)
• Unit is on the 26th floor (29 floors altogether)
• Literally 10 steps from the lobby to the OC Transpo transit
• Has an exercise room
• Has an indoor swimming pool and sauna
• Has 1 storage locker
• Share laundry with only the same floor people (no more than 8 units per floor)
• Comes with dishwasher, refrigerator and stove
• Comes with window blinds
• Freshly painted
• Newly installed spot lights around the unit
• New cabinets in the kitchen
• Well kept, very clean minus the cat smell (I'm allergic to cats)
• Condo fees include caretaker, heat, hydro, building insurance, management, recreation facilities, and water

Here are some photos of the place (taken by the real estate company)

*I will get post some more pictures once I move in and furnish the place up!

Overall, I think this was an awesome purchase with a sweet deal! At the time, I was looking at another unit in the same building but the guy was asking for 25,000 more... and yes, I got it 25k less for this one I bought :p I'm glad I waited as long as I did. There were 10 others involved in the whole bidding process (this place was apparently in real high demand... :p). In the end, we won but had to dish out an extra $1,000. No loss in my sense, as I was extremely happy to have secured the property with knowledge of everything about the building being sound and "not much to worry about".

I think that is it for now... I will absolutely be available for any questions if you have any for me. If possible, ask it here as I think there will be some good knowledge sharing between everyone who comes here to read this :). But if needed, you can email me jackson.lo87@gmail.com your questions and I'll try my best to answer with what I know. I will be adding more tips as I move through the process.

But current state... The condo is BOUGHT! Now it's all paperwork...

Wish me luck :p ... oh and the closing date (when I get my keys) is on September 1, 2011! Until next time thanks for stopping by! :)

Getting back on track

I need to really stop buying domains and creating new blogs that I will not update. Jumping from old school Asian Avenue to XANGA to Blogspot to WordPress (I think that is all the blogging platforms that I've actually spent considerable amounts of time pushing content out on), I realized that all of them are great, and that it only comes down to your preference on what tool you find comfortable working with. Wordpress is my favorite, but sometimes I feel Blogger is much simpler to handle, thus I'll be blogging here...

Moving forward, I will be updating this regularly and sharing 'things' with my closest friends in hopes that some of those things I blog about will help them in their lives. At the same time, I see this as an opportunity to record the landmarks of my life that I deem interesting and worth writing a few words down on paper about... maybe not physical paper but you get it :)

So... let the journey begin! :)