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Money Matters

Buying a home: “Open” and “closed” mortgages

When you take out a mortgage you will need to negotiate “terms.” The term sets the interest rate and payments you have to make for that period of time (e.g. 6 months, 1 year, 3 years, 5 years, etc.).An “open” mortgage means that, during the term, you can pay off any part of your loan at any time.A “closed” mortgage means you must pay back the amount you agreed to, for the time you agreed to, when you selected the “term.” When the term ends, you can pay off as much as you like and decide on a new term.

Investing: Rate of return

When you invest money, you hope to make money.The amount of money you make will depend on the rate of return. In general, the greater the possible gain, the greater the possible loss.That means that investments with higher possible returns are usually more risky. If you choose to make a risky investment, make sure you can handle the risk of losing that money. Learn more

Car: Lease or buy?

When you lease a car, you pay a monthly lease cost.There will be a limit on the number of kilometres you can drive, on average, per year.When you return the car, the mileage will be checked.You will be charged a fee for each kilometre over your limit.You must return the car in reasonable condition. If the car is damaged or has not been properly maintained, you may have to pay an additional cost when you return it. Most leases are for 36 or 48 months..

Potential benefits

Many companies offer benefits to employees in addition to a wage or salary in return for work. Benefits can include additional health insurance coverage, life insurance, pension plans, dental plans, and so on. Check with employers, and potential employers, to find out about the kinds of benefit packages that are offered, or provided, to employees.ca

Buying a home: Amortization

The time period it will take you to pay off your entire mortgage is the amortization period.The longer the amortization period, the greater the total cost you will pay for your home since you will pay more interest. Example: a $100,000 mortgage at 7% for 10 years has a total cost of $138,713.The same loan over 25 years would cost $210,123. Keep your amortization period as short as possible to pay less for your house. Learn more

Investing: Bonds

Bonds are issued by governments and corporations as a way of borrowing money.When you invest in bonds, you receive a guaranteed rate of interest over a period of time (for example, 4% a year for 10 years). Bonds are bought and sold through the bond market, which is similar to the stock market.The government of Canada sells Canada Savings Bonds.These are considered as safe investments. Consider the rate of return on any bond before you decide to invest.

Retirement

Many Canadians plan to retire in their late 60s. Over the course of one’s life, it is important to plan for retirement to make sure that there will be enough money to live on. Everyone needs to plan ahead, to estimate how much money he or she needs to save for retirement. Keep in mind that people are living longer these days.An advisor can help you with retirement planning.That advisor may charge you a fee for these services. Learn more

Life and Disability Insurance

You may be the most valuable asset your family has. If you should die or become disabled, this could be difficult for your family financially. Life and disability insurance can help protect you and your family. For a list of insurance companies who can provide help, go to DayPlanner web site – Link #200.

Buying a home: Mortgage term

You pay the same rate of interest for a mortgage over a set period of time called the “term.” For example:You pay 6% on your mortgage for a five-year term.After five years, you must renew the mortgage with your lender.The lender will set a new rate of interest. Compare the rates of different lenders when your terms ends. If you think interest rates are likely to fall, you may want to consider a shorter term. If you think rates may rise, you may want to choose a longer term. That way, your interest rate can be set for the full term. Learn more

Investing: Stocks

Stocks are bought and sold through stockbrokers and the stock exchange.To invest in stocks, you must set up an investment account at a financial institution.You must pay a commission to the financial institution to buy and sell stocks.You may also hire a broker for professional advice. Using the services of a broker will cost an additional fee but he or she will provide you with advice for your investments in stocks – also called equities. Learn more. See page 237 for contact information on key financial associations in Canada.

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