Posted on: 26-09-08 12:07:58
Quote:
Originally posted by Shah Ji
I have just Landed in CANADA 2 months back and have sold my house in INDIA. I am planning to buy a house, my question is:
1)If you can pay cash with all your savings, what I mean by all saving is 0 balance in your account with a permanent job and regular income, is it worth buying it on cash or MORTGAGE is better.
2) If you opt for mortgage but at one point you want to pay the whole balance ; is there any kind of fine.
Will really appreciate any replies.
Shah ji,
First of all welcome to Canada.
You are indeed one of those lucky ones who have come to Canada armed with Cash, permanent job and a regular income. You would love here.
Can I request you to please update your location in Canada as some times some questions can be best answered if we know about the place of residence or at least the province of residence as some laws could be different in different provinces.
As suggested by earlier posters, I would say that even if you can buy the house with full Cash, please get your selves approved for a secured HELOC (Home Equity Line of Credit) so that you have access to funds for any emergency or for investments purposes to increase your income and net worth.
Good Luck.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Here is my take on it
1) Always keep cash readily available to you. There is nothing more liquid than cash unless you are in an economic depression.
2) Never put all your eggs in the same basket.
3) What if the house you put all your money in loses value. You are losing your money technically.
4) All debt is not bad. Debt for house/education is considered good and should be carried whenever deemed necessary.
5) Interest on good debt is tax deductible. That's how you can tell the difference between good debt and bad debt.
6) What if you lose your job after paying all cash for your house. You will be a true owner of a BIG house but not liquid enough to carry the burden of daily life in it. Thats a sure shot way to a financial doom.
I am sure you can get your answer embedded in my comments...
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We will find a way or we will make one
Dear Smiley,
I always value your comments and replies to questions asked by fellow desi's on CD. Once again, good advice. However, it seems that your replies have a shadow of whatever happening in USA presently, may be because you know much more about the same as you live there.
I agree with your observations but would like to add certain points as below to clarify it more for a new CD member.
Quote:
Originally posted by Smiley
Here is my take on it
1) Always keep cash readily available to you. There is nothing more liquid than cash unless you are in an economic depression.
The HELOC will serve the same purpose. Moreover, till such time you do not use it, you are not paying any interest costs on it.
Quote:
Originally posted by Smiley
2) Never put all your eggs in the same basket.
HELOC would help him diversify much more by helping him invest borrowed funds either in a business, investment property or mutual funds etc. and write off the interest as well. With personal cash, you do not enjoy these benefits.
Quote:
Originally posted by Smiley
3) What if the house you put all your money in loses value. You are losing your money technically.
That means that NO ONE should buy a house ever. Whether you buy house with total cash or have a mortgage in it, so long you are not selling, the price of house whether it goes up or down does not affect you. And if you sell, then you lose money in any case, whether the house was bought cash down or has a mortgage on it.
Quote:
Originally posted by Smiley
4) All debt is not bad. Debt for house/education is considered good and should be carried whenever deemed necessary.
Exactly. And HELOC gives you that benefit of having a good debt or converting bad debt in to good debt.
Quote:
Originally posted by Smiley
5) Interest on good debt is tax deductible. That's how you can tell the difference between good debt and bad debt.
Once again. HELOC gives you the benefit of writing off interest by using the same to have good debts by investing in income producing ventures mentioned above.
Quote:
Originally posted by Smiley
6) What if you lose your job after paying all cash for your house. You will be a true owner of a BIG house but not liquid enough to carry the burden of daily life in it. That's a sure shot way to a financial doom.
I am sure you can get your answer embedded in my comments...
That's why I suggested that one should have access to liquidity available through HELOC even if some one buys house with total cash.
Cheers!!
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Hi Pramod
Appreciate your remarks as always. I understand HELOC is similar to having own cash in the bank but there is a difference. in where the control is. HELOC rules can change anytime and interest rates can increase or limits can be decreased which is not the case with your own money..
Again, you are totally correct. It is just an individual preference of what he/she is financially comfortable with and can sleep well in the night with 
Thanks
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We will find a way or we will make one
Many Thanks to Promod Ji, Amit Kalia, Smiley and others for there input, that really helps understanding the banking system in CANADA.
1)HELOC ; is it loan against the property & how much is the interest rate for that & can I borrow only for investment purpose or can I get it for personal use also.
2)However, tax savvy individuals understand the difference between good debt and bad debt (By Amit Kalia);
Is mortgage payment considered a good debt and can help me in reducing my Income tax or only borrowed money using HELOC is considered a good debt.
3) Place of residence: Brandon MB, The house I am looking for is appraised at 200,000$.
OTHER QUESTION OUT OF THE SUBJECT AREA:
1)I have a daughter 2 years old and my wife is taking care of her at home, will I get some rebate on Income tax for that?
2)I heard that Govt pay some monthly amount to the families with kids, what is that and how can i apply for that?
Thanks.
Quote:
Originally posted by Shah Ji
Many Thanks to Promod Ji, Amit Kalia, Smiley and others for there input, that really helps understanding the banking system in CANADA.
1)HELOC ; is it loan against the property & how much is the interest rate for that & can I borrow only for investment purpose or can I get it for personal use also.
2)However, tax savvy individuals understand the difference between good debt and bad debt (By Amit Kalia);
Is mortgage payment considered a good debt and can help me in reducing my Income tax or only borrowed money using HELOC is considered a good debt.
3) Place of residence: Brandon MB, The house I am looking for is appraised at 200,000$.
OTHER QUESTION OUT OF THE SUBJECT AREA:
1)I have a daughter 2 years old and my wife is taking care of her at home, will I get some rebate on Income tax for that?
2)I heard that Govt pay some monthly amount to the families with kids, what is that and how can i apply for that?
Thanks.
Another non-financial person jumping into poke his nose..
1. Contrary to loans you get in india, this is like working capital, you can use it for any purpose - including grocery shopping, if thats what you wish to use it for, along as you have the equity and pay the interest on the borrowed amount. This loan is secured against your home or any other security you can provide. The interest rates depends on individual circumstances, but 5%~6% are good assumptions to start with.
2. Interest on your mortgage can be deducted from taxable income if you are using the property for business purposes. Interest on HELOC can be deducted from taxable income if the purpose is for business.
3. I am not sure how you can finalize the house in MB, while sitting in India. We are not able to even think of buying the property on the opposite side of the street until we have seen it and evaluated it thoroughly. There are many advices on checklist for home buyers on the internet and you can see for yourself which of those you can perform from a remote location.
I wouldnt do it even if I have a family member in the same place - but then, its my opinion only - may not apply to you.
Your get some basic allowances for dependents in the family on your taxable income, based on your gross Salary/income. There are few child care benefits, but looking at your estimate income of $120,000 p.a., I dont think you qualify for the same. But you will get application forms on the airport when you immigrate.
I hope i have been of some help to you.
Ofcourse, the experts will correct me or add thier own advice.
Good luck.
Hiren
If I had all of the cash to buy a house....
I will be living in my house for FREE !! (Just pay city taxes and utilities)
How?
Here it is.
Smiley:
5) Interest on good debt is tax deductible. That's how you can tell the difference between good debt and bad debt.
Pramod:
Once again. HELOC gives you the benefit of writing off interest by using the same to have good debts by investing in income producing ventures mentioned above.
What does it mean? The whole salary minus the taxes that you pay will go straight to the bank. Your savings will multiply faster.
That is how the second generation of Canadians are able to provide their kids the luxuries and the comforts that one would like to enjoy in life. A care free living.
Here is a link: http://www.unisourcemortgage.ca/mortgage-news/archive/2006/2006-01-01_Unisource-is-it-possible-to-make-mortgage-interest-tax-deductible.php
There are a few really good financial planners and a few on this websites too can help you accomplish all of this, even before you buy the house.
Good to know a few people who can help you get settled and move on in life at a higher level.
God Luck.
Freddie.
The CRA website will provide you with the CCTB.
http://www.cra-arc.gc.ca/bnfts/cctb/menu-eng.html
(I was making sure with the materials I am posting and while doing so, I came upon your second question from you, to which I am addressing the same at the bottom.-above)
