Monthly Archives: June 2012

Odette Morin

How much do babies really cost?

Plan to spend about $10k the first year. The total cost of raising a child is about $235K or the equivalent of the cost of a Ferrari!  Oh My!  Se the link below.  Don’t let this stop you from having a precious child!!  It is not all about money but be prepared.  They do cost a lot and you will likely have to sacrifice on lifestyle. 

View the video here

Middle Income family spends $235k to raise a child to age 17.  And this does not even include the cost of education. 

Odette Morin

Money Tips for Travellers

These are good tips except the bring traveller cheques. This is no longer the case for most trip I would argue. They are very hard to exchange, many places will charge a fee on top and it is so much easier to u…se bank machines which are everywhere. Enjoy your trip this summer!

Article here

Odette Morin
Anthony Sabti

Weekly Update – June 22, 2012

Euro Leaders Agree on Growth Plan

On Friday, the leaders of Germany, France, Italy and Spain vowed measures worth up to 130 billion euros to try to revive economic growth in Europe but differed over whether and how to launch joint bonds to combat the euro zone’s debt crisis.

The measures include a capital injection for the European Investment Bank, the redirection of some unspent EU regional funds and “project bonds” to finance infrastructure works.

German Chancellor Angela Merkel, head of Europe’s most powerful economy and the main contributor to its rescue funds, endorsed the growth package but did not address the issue of mutualising past euro zone debt or new borrowing.

France has been pressing Germany to accept the idea of Eurobonds — mutualising the bloc’s sovereign debt — but Berlin has fiercely resisted.

Spanish Finance Minister Luis De Guindos said on Friday the country would make a formal request for Eurozone aid for its banks next week.  Madrid said they need up to 62 billion eurosto survive a financial crisis.


Ottawa Tightens Mortgage Rules

On Thursday, Finance Minister Jim Flaherty announced further adjustments to the rules for government-backed insured mortgages.  These are mortgages with loan-to-value ratios of more than 80 per cent; in other words a down payment below 20%.  The four new measures are:

  1. Reduce the maximum amortization period to 25 years from 30 years. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
  2. Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes
  3. Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent.  The GDS/TDS were previously both fixed at 44 percent and the GDS was unlimited for those with high credit scores.
  4. Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million

The first and fourth changes are the most impactful.  A $300,000 mortgage with a 30 year amortization at 4 per cent would cost $1,426 a month to pay back. That same mortgage amortized over only 25 years increases the monthly payment by $152 or 10 per cent to $1,578 a month.

According to the Canadian Association of Accredited Mortgage Professionals, about 40 per cent of all new mortgages were amortized over 30 years last year.

The new cap on government backed insurance means that home buyers will have to come up with a 20% down payment on any home value exceeding $1 million dollars.

Minister Flaherty said the new rules will take effect on July 9, 2012.


Oil Hits 8-month Low

By early afternoon in Europe, the August contract for crude was up 33 cents to US$78.53 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract had reached US$78.20, the lowest since October.

Crude fell from $84 earlier this week and has plummeted 26% in less than two months as signs mount of a slowdown in the global economy, led by Europe that would reduce demand for crude.


Market Recap (as of June 22nd)

  • The TSX closed at 11,435 down 0.78% for the week. YTD the TSX is down 11.9%
  • The DOW closed at 12,640 down 0.99% for the week. YTD the DOW is up 3.5%
  • The S&P 500 closed at 1,335 down 0.58% for the week.  YTD the S&P 500 is up 6.2%
  • Oil finished at 80.15 down 5.81% for the week. YTD oil is down 18.90%
  • Gold finished at 1,573, down 3.49% for the week. YTD Gold is up 0.38%
  • The CAD/USD finished at $97.60

Sources: Marketwatch, Bloomberg,

Odette Morin

Changes to mortgage rules announced this morning

After much speculation, the new mortgage rules were introduced today. The maximum amortization has been reduced from 30 years back to 25 years and maximum loan reduced from 85% to 80%.
Regarding the amortization period, it is interesting to see that we went from 25 years a few years ago to 40 years, back down to 35, to 30 and now back to a 25 year max again.. This will make payments larger and affordability tighter.  The total debt service ratio will now be set at 44%.
These changes will make it even more difficult for people to buy a home or upgrade. But really, in a financial planning perspective, this will help people stay honest about what they really can afford.  You can expect these new rules to also contribute to the cooling off of our overheating Real Estate market.
Odette Morin