Leaving debt as a legacy

There’s an article in the Globe and Mail about the rising number of ‘Grandpa debtors‘ – people past the age of 55 who have debt problems.  There are a few reasons sited for this shift: easy credit, lack of emergency savings and relying on real estate as a retirement plan:

Real estate can also be a factor in some of these dire debt situations, Mr. Elyea said. Some older debtors head into retirement with $50,000 still left on their mortgages, and then start using their credit cards to pay them because their income has dropped and the CPP and OAS aren’t enough to cover the payments.

There’s also the trap of considering your home to be your retirement nest egg, said Mr. Elyea, which can backfire because of the unpredictability of the housing market.

“In our Tri-Cities practice [covering Coquitlam, Port Coquitlam and Port Moody], that’s where a lot of people bought houses at the height of the market when anybody could get financing, and now they’re all [valued] below what they paid for them,” he said.

If you do find yourself in a situation where your debt has gotten out of control, see a professional, said Mr. Eylea, whether it’s a bankruptcy trustee or a money coach who can let you know about your options.

Here’s the full article.

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Anonymous
Anonymous
8 years ago

@patriotz: ….I’d rather pay $200/hour a couple of times a year than take a continuing drain of 2% on my assets without any guarantee of performance….. Excellent advice! I’ve got into arguments with a so called ‘professional’ who has pitched me on various investments (he doesn’t know anything and can’t analyze anything – its kind of entertainment for me to witness how inept he is) – I ask him why I should pay him anything if the advice he provides results in a loss i.e. if I take all the risk, why would I pay for bad advice? The entire financial industry is nothing but a scam designed to part gullible ‘investors’ from their hard earned cash. If you examine the ‘tenants’ of the industry you’ll see they’re primarily designed to provide regular cash flow to the industry regardless of… Read more »

Hibernating Renter
Hibernating Renter
8 years ago

@Anonymous: How much money do I need before a portfolio manager will want to talk to me? I only have $100k.

patriotz
8 years ago

@Anonymous: “Fee for services fees are tax deductible for non-registered account. Brokerage and mutual fund commissions/fees are not.” This is at best misleading and at worst wrong. It’s a classic sales pitch for fee for service. First of all brokerage fees are deductible from capital gains. That happens at sell time, it’s not a current expense. That applies to both stocks and buy/sell commissions for mutual funds. Second management fees for mutual funds are deducted from the income that they earn before the income is reported to you on the T3. That’s why you don’t deduct them on your tax return as you would for a fee for service. But the deduction against income is there either way. Now I’ll say that I think the fees for mutual funds are a rip off. But do you think the guy charging… Read more »

Iggy
Iggy
8 years ago

A “soft landing” still means that the thing that went way up comes back to earth. The only difference is the velocity at which it hits the ground… but it still comes down. All the people that have been buying real estate the past few years were convinced that it would never go down. So a soft landing will be of little consolation to the folks that thought there would be no “landing” of any kind.

Here's to hoping
Here's to hoping
8 years ago

@klipsh:

What you need:

1) lawyer (personal)
2) accountant
3) insurance planner- corporate specialist.

Put them together in a room and can come up with the most tax effective &creative way to move $$$ from corp to personal funds. Can also look at shareholders loan.

rp1
rp1
8 years ago

#107 @N: “That’s it. The CBC just had a panel say that we are in a bubble,”

Harper’s going to fire them all. They have nothing left to lose.

jesse
8 years ago

@UnagiDon: “The source of the risk is the borrower, not the lender.

So true. Price-income made a fleeting appearance by the financial advisor fellow but he didn’t quite get there. They’ll figure it out, eventually 😉

Anonymous
Anonymous
8 years ago

@crashcow: I was not expecting 4 economists to agree that we’re in a bubble on cbc. I guess the media has lowered my expectations over the past 5 years here.

Nice to hear some experts agree with what my wife and I have been doing for so long and socking our money while paying very low rent.

Even with these ridiculous prices 20% down is a cake walk for us.

N
N
8 years ago

@Anonymous:

That’s true. I didn’t comment on the fact that they held up Australia as a good example of a soft landing even though today’s Herald Sun says house prices in Melbourne are plummeting and that the slide is gathering pace (http://www.heraldsun.com.au/news/more-news/melbourne-house-prices-plummeting/story-fn7x8me2-1226344154364). Hopefully people will be helped find that out by themselves.

specuskeptic
8 years ago

@N: Done and done. I’ve also posted it to Uboob with my own cap in case CBC is threatened (cue mobster voice) with an “unfortunate accident” by a certain cartel…

http://youtu.be/MBuFcXOygfM

UnagiDon
UnagiDon
8 years ago

@crashcow: Jim Stanford, Economist, United Auto Workers: “I’ll use the B-word. I think “bubble” is absolutely the apt description of what’s happening in some of those regional markets: Toronto and Vancouver, where we’re particularly concerned. People are clearly buying real estate not for it’s real value, not to live in, but as a speculative investment, assuming the price is going to get higher and higher, and that always ends in tears.” So far sounding pretty intelligent. “A new factor that I think has added some extra risk into the equation. The federal government, trying to kind of rein in this whole party, has capped the role of CMHC, our public mortgage insurance system, which has played a very stabilizing role, it helped us through the whole crisis. Now they’ve capped it, which I’m not sure is the right thing to… Read more »

bon jovi
bon jovi
8 years ago

“You omitted some of the other things they said…”

like that homeowners don’t have regular sex life 🙂

Anonymous
Anonymous
8 years ago

@N:

You omitted some of the other things they said…

UnagiDon
UnagiDon
8 years ago

@Anonymous: “Ian Thow has lots of time on his hands; mabe he could help”

Haha, good point! One would hope that the Big Bank investment division folk are more trustworthy.

N
N
8 years ago

@crashcow:

That’s it. The CBC just had a panel say that we are in a bubble, that prices are going down, and that people should not buy unless they know that they can handle a doubling of the mortgage rate they are quoted. Prices, the CBC says, are crazy. Renting, the CBC says, is a better option. They may have tried to back it off in the last few seconds, but they cannot unsay what they said.

Do the world a favor and post the link to that broadcast to your Facebook page.

Anonymous
Anonymous
8 years ago

@klipsh yes… avoid the banks for anything more than a savings account and a mortgage… and hold off on that too

Anonymous
Anonymous
8 years ago

@ unagidon Yeah you always want discretionary management or an online discount brokerage. Financial advisors that are some variation of “financial planners”, including bank branch financial planners, are next to useless. They just sell funds and insurance products, and to be honest, can have little or no education. Brokers are advisory, which means, they recommend an investment and you have to give them authorization on each transaction… if you are an vacation and they want trade something that is time sensitive.. you are out of luck. What you want is a “portfolio manager” not a broker or financial planner. If they say they are MFDA registered ( mutual fund dealers association) then move on. Make sure they are registered with the BCSC (BC securities commission). Only go with “fee for service”, otherwise it is commission based compensation. Fee for services… Read more »

Bally
Bally
8 years ago

@Chem guy:

A tenant has the right to “quiet enjoyment” of the property including freedom from “unreasonable disturbance”. I had a friend who had an issue similar to yours. He asked for a rent reduction but the property management company refused. He took the complaint through dispute resolution and won a substantial award (several thousand dollars because the inconvenience was substantial and it went on for a number of months).

fixie guy
fixie guy
8 years ago

96 klipsh Says: ““High house prices are not a serious problem in much of Canada due to low carrying costs but in Toronto and Vancouver where values have soared in the last few years it’s “a different issue,” said former Bank of Canada governor David Dodge.”

That’s not an easy statement to parse. Does the aptly-named Dodge mean it’s not a problem because another guaranteed 25 years of low interest rates will keep carrying costs manageable, or does he only mean it’s not a problem ‘right now as I say it’, ignoring the possibility of a collapse by year’s end?
Is anyone here fluent in political double-speak?

Renter
Renter
8 years ago

Thank you everyone. I will go after the two month rent.

frank
frank
8 years ago

@McLovin:

I remember the bally-hoo in the media when Vancouver broke the $1 mark, wonder if they will trumpet it as much when it goes the other way?

Chem guy
Chem guy
8 years ago

I have a question for the group:

There was a leak in our building today and it looks like there was some damage in our ceiling and they are going to have to rip everything down, my question is whether we have a right to ask for a rent deduction due to the pain in the ass from the remediation work? The leak was from the unit above when a sprinkler failed.

crashcow
8 years ago

CBC’s The National: The Bottom Line panel on what you should do amid talk of a real estate bubble.

http://www.cbc.ca/video/#/News/TV_Shows/The_National/1233408557/ID=2229772604

Eddie
Eddie
8 years ago

@ReadyToPop: Re: The Carney article – I thought I was reading The Onion!

Unbelievable. He must be somewhat uncomfortable with that “Honor”. In the back of his mind he has to know how precarious things are, in no small part do to his ZIRP policies.

McLovin
McLovin
8 years ago

Just looked at Larry numbers again and it brings a smile to my face.

http://www.yattermatters.com/2012/05/its-cold-outside-for-vancouver-real-estate/#more-30473

I truly wonder how many people know that avg. SFH are down $100K in 1 yr?

At this rate, I think we will see the SFH drop through $1 mil by Aug or Sept. Which will be close to 20%.

When that happens the masses will all know about it but it will be way too late to get in the life boats.

PS – I find it hilarious that the talking heads say that Vancouver will have a soft landing of 7-12% declines. Heck, we are down that much since had that since February!