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Dear Rob: 'Am I headed for financial ruin?' Add to ...

Jennie: Hi Rob. Can you please explain the advantages/disadvantages of using a combined mortgage/savings account (i.e. Manulife One, Canadian Tire one-and-only). The principle behind it makes sense to me, but I'm wary that it's too good to be true. Thanks.

Rob Carrick: Hi Jennie. You're referring to a combined bank account/mortgage product that has always fascinated me in a way. Not enough to actually try it myself, of course, but still...The concept here is that you combine your chequing account with your mortgage so that your paycheques and other deposits at least temporarily count against your outstanding debt balance. Net result, the interest charged on your mortgage should be lowered. There are a few things to be aware of with these mortgages. One, they're essentially variable-rate mortgages. What kind of rate will you get? Right now, VR mortgages at prime are available. Next, what kind of a borrower are you? If you're very disciplined and keep lots of savings on hand, then the all-in-one account can work well because you'll quickly chip away at what you owe. If you're liable to keep dipping into your account and thereby driving up your loan balance, then an all-in-one account can be like a debt treadmill. One other thing to look out for is the monthly account fees for these products. Anything more than $8 to $10 is too much.

Debt, debt and more debt

A reader: I'm lost, I'm scared and way over my head. Was collecting ei for part of 2003. Started working and never had tax deducted from paychecks.I haven't filed taxes since then. I make about $40,000 a year, single father of two and caring for my 80 year old dad. I have the worst credit rating and about $60,000 in debt which I've never paid back. I am 40 years old, have no savings and I worry about retirement and kids post secondary schooling. Where do I start? Bankruptcy?

Rob Carrick: OK, exhale. You need some help and I'm going to tell you exactly how to get it. In many communities across the country, there are non-profit credit counselling agencies that exist to help people just like you. To help find the one nearest you, click this link: http://www.creditcounsellingcanada.ca/ Credit counselling agencies do not judge, they don't lecture. They just size up your situation and help you come up with a plan to make it through. Bankruptcy may be required, but there are several steps to consider before that. One is to come up with a debt management plan to address what you owe. Remember, your debtors may settle for being paid less than the total amount outstanding. Also, there's such a thing as a consumer proposal, which is a legally binding plan to repay all or part of what you owe. It's less of a harsh step than bankruptcy. Don't let this situation fester any longer. Help's out there. Go get it.

A reader: Scenario: 40 yrs old, 2 kids (between 8 and 11), mortgage $326,000, the only savings totals $10,000…no rrsp's no resp's…nothing. Annual gross income $125,000 (this can fluctuate as my spouse is self employed). Right now it has gone up every year for the past 5 years but it's never guaranteed. Other debt's owing, $30,000. Pathetic mess we're in! how do we get out? How do I save? There never seems to be anything left. Do we sell our house? take something smaller to lower our mortgage? Stick it out and pay down as much as we can. I don't want to be 60 and still paying for our house. Our mortgage was $165,000 but we sold for less than expected rolled in some other debts and now have ballooned to more than it should have been. It just got worse and worse after the market tanked last fall. We already purchased our new home and of course builders don't like to refund $30,000 deposits! It drives me crazy and I hate it! I don't even like my new home because it's just a reminder of how bad our financial situation is. I feel like I'm too old to have all this debt. I feel hopeless and fell that I won't be able to retire and that when that time comes I really will have nothing. My oldest child will start post secondary school in about 5-6 years. I don't know how we're going to do it. It keeps my up at night! I don't have fun and can't enjoy anything. We hardly go out because I don't think we can afford to!

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