Registered Education Savings Plans

Below is a link to a fantastic site for helping people to understand RESPs, the CLB, and the CESG.  When you click on the link, it will take you to my profile page - from there you can explore the rest of the site.

         Registered Education Savings Plans - Kuldip Sharma

Enjoy!

How to Pay Down Your Mortgage - Part 2

Welcome back for part two of CIBC's tips to paying down your mortgage faster:


3. You use your pre-payment privilege to make a lump sum payment. A lump-sum payment is applied directly to your outstanding principal if there is no outstanding interest owing. This saves you money over the course of your mortgage. 

For example, if you made a $1,000 lump-sum payment, you could save almost $28,350 in interest over the entire amortization period of your mortgage. This would allow you to own your home about four years sooner. 

4. You can pay as much as possible at renewal.  

For example, if you chose 5-year, fixed-rate terms, and made a $10,000 lump-sum payment every time your mortgage came up for renewal, you would save about $37,481 in interest over the entire amortization period of your mortgage, allowing you to own your home about 6 years sooner.

Source: CIBC Website

How to Pay Down Your Mortgage Faster - Part One

Here are some great tips from CIBC for getting your mortgage paid down and freeing up a large part of your paycheque for other, perhaps more interesting, things:
A mortgage is a big commitment. Most mortgages are paid over 25 years but we have some tips to help you pay yours off faster. Reducing the number of years you make mortgage payments can add up to big savings. 

There are several ways to “pay down” your mortgage and get out of debt faster.

1. You can increase your payment amount when you arrange your mortgage, or at any time during the term. This allows you to pay down your principal faster. 

For example, if you increased your mortgage payment amount by $170 from $830 to $1,000 you could save almost $48,000 in interest over the entire amortization period of your mortgage. You could also own your home about 8 years earlier. 

2. You can make payments more frequently which saves you money in interest charges over the long run as it allows you to pay down your principal faster.

For example if you made accelerated bi-weekly payments of $415 instead of monthly payments of $830, you could save almost $27,000 in interest over the entire amortization period of your mortgage. This would allow you to own your home about 4.5 years sooner. 



Source: CIBC - Mortgage

What is a Basis Point?

Mortgage people tend to speak in their own lingo to a client, and sometimes that client isn't really understanding what is being said.  One of the most common 'lingo' terms that a mortgage broker will use is Basis Points or BPS (called beeps).  Below is a short, but comprehensive, explanation of what a Basis Point is and how it applies to mortgages and various investment vehicles.


A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.

For example, if the Federal Reserve Board raises interest rates by 25 basis points, it means that rates have risen by 0.25% percentage points. If rates were at 2.50%, and the Fed raised them by 0.25%, or 25 basis points, the new interest rate would be 2.75%.

In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. For example, if a bond yield moves from 7.45% to 7.65%, it is said to have risen 20 basis points.

The usage of the basis point measure is primarily used in respect to yields and interest rates, but it may also be used to refer to the percentage change in the value of an asset such as a stock. It may be heard that a stock index moved up 134 basis points in the day's trading. This represents a 1.34% increase in the value of the index.

Examine the chart:

The easiest way to convert basis points into a percent form is by simply taking the amount of basis points and multiply by 0.0001 which will give the percent in decimal form. So if you have to convert 384 basis points into a percent, simply multiply 384 by 0.0001. This will give you 0.0384 which is 3.84% (0.0384 x 100).

This can also be done in reverse to find out the number of basis points that a percent represents by dividing the percent (in decimal form) by 0.0001. For example, say the rate on a bond has risen 2.42%, simply take 0.0242 (2.42% / 100) and divide by 0.0001 to get 242 basis points.

Source: investopedia.com

Mortgage: How Much Can I Qualify For?

Below is a link to some fantastic tools to provide you with an estimate of how much you will likely qualify for when applying for a mortgage.  Please keep in mind that these calculators do NOT take into effect such considerations as your credit rating and type of employment.

Mortgage Calculators

Thank you to CENTUM for providing such excellent tools.

Who Can Subscribe to an RESP?

Except for family plans, generally, there are no restrictions on who can be the original subscriber under an RESP. You and your spouse or common-law partner can be joint subscribers under an RESP.

A public primary caregiver of a beneficiary under an RESP may also be an original subscriber.

If you are not the original subscriber, you can become a subscriber only in the following situations:

• you are a spouse or common-law partner, or ex-spouse or former common-lawpartner, of a subscriber and you get the subscriber's rights under the RESP as a result of a court order or written agreement for dividing property after a breakdown of the relationship;
• you are another individual or another public primary caregiver who has, under a written agreement, acquired a public primary caregiver's rights as a subscriber under the RESP;
• you acquired the subscriber's rights under the RESP, or you continue to make contributions into the RESP for the beneficiary, after the death of the subscriber under the RESP; or
• you are the deceased subscriber's estate that acquired the subscriber's rights under the RESP, or that continues to make contributions into the RESP for the beneficiary, after the death of a subscriber under the RESP.

All subscribers under an RESP have to provide their social insurance number (SIN) to the promoter before we can register the RESP.

Source: Canada Revenue Agency

RESP: are you receiving ALL your CLB and Grant Money?

Not every financial institution applies for the CLB and Additional Grants on your behalf.  For example, here is an excerpt from the TD Canada Trust website:

Source: tdcanadatrust.com

Notice how the bank will apply for the Additional CESG and CLB on your behalf if you enrol your child into the GIC RESP, but not if you are enrolled in their Mutual Fund RESP?  Having an RESP professional working on your behalf will ensure that you are receiving all your government entitlements.


You can see my Leading Financial Experts profile by clicking here.