Simplifying the Terminology....(Part IV)

Did something different this morning. I drove in about an hour and a half later than I normally do. Funny how your perspective can change when you do something in a different manner than you are accustomed to.

Traffic seemed to flow about the same rate through the George Massey Tunnel into Richmond, but there was one difference. There was less aggressive drivers on the road @ 9 am then there are at 7:30 am. Who knew.

I wonder how much of that has to do with coffee?

Anyways here is part 4 of my 5 part series....

Adjustable Rate Mortgages:  An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate—not the payment per say—fluctuates. In other words, the minimum mortgage payment will not always be the same every month. How often it changes depends on the Lender and their policy. Ask your mortgage broker how often the lender may change the rate and what their policy is.

Why go for one of these?

The main difference between an ARM and a more traditional fixed rate mortgage is that the payments typically start off quite low. This makes the mortgage appealing to homeowners that may want a particular repayment plan. However, the interest rate of the ARM can change at any point, and when it does, it typically raises the payments.

How about this doozy of a term that seems to be the talk these days in Canada....

Debt Consolidation: Debt consolidation is basically taking out one loan to pay off many other loans. In other words, rather than paying several different credit card bills individually, you're taking all of them and combining them into one payment every month. Doing this makes use of the equity in your home to pay off all your credit cards, so that your responsibility is now with the lender, rather than the credit card companies.
Some of the Advantages of Doing so..

Obviously, if you have 5 or more credit cards, it can be difficult remembering to pay them all on month every time. It will help greatly with this, as it rolls all those payments into one monthly payment, rather than 5 or more.
Another advantage of debt consolidation is that it can give you a much lower interest rate. A typical fixed rate mortgage today of 3.59% (5 year fixed as of today) offers a much lower interest rate. A lot lower than the traditional 18-25% interest rate on most credit cards. In this regard, debt consolidation can save you money.
And last up today for those who may be thinking of either buying a rental/revenue producing property, or may have already done so, keep this in mind when you go to sell it....

Capital gains: This is the profit of the sale on assets that were bought at a lower price and sold for more. Commonly, capital gains are earned on property, bonds and stocks. A capital gains tax is the tax that is charged on capital gains. Not every country in the world implements a capital gains tax, however, both Canada and the United States do.
In Canada, the current capital gains tax rate is at 50%. There are exceptions, however. If you’re interested in finding out the tax rate for capital gains you intend to realize, it’s best to contact your accountant or tax attorney.
To get a good idea of how taxes work on capital gains, here is a simple example.

Say the profit you’ve realized is $100.

50% of that, or $50, would be taxed at your marginal tax rate.

If your marginal tax rate was 43%, your capital gains tax would be $21.50.

Therefore, you would be left with $78.50. If you’ve experienced capital losses (the opposite of capital gains) within the past three years, you may use these to offset capital gains tax paid during those years.
As always, it pays to stay informed and to have a few experts working with you on your PLAN.

If you need a referral to an accountant and financial advisor, I have paired myself with a few outstanding individuals who would be more than willing to sit down and help you to determine your best route to where you want to be. Check some of them out at www.kevynoyhenart.ca under the Business directory section.

Enjoy this fabulous Wednesday, unless you choose otherwise.

Kevyn