A reader in Vancouver has a housing question that pits sensible personal finance against a raging hot housing market.
Should he buy a home now, or try to save a bigger down payment? “If I were to hold off for a year or two, I could save about $40,000 to aid in a down payment,” this 31-year-old wrote. “My only fear is that if I hold off on buying and housing prices rise, I’ll be priced out.”
The latest numbers on Vancouver housing support this reader’s concern about being priced out. The MLS Home Price Index for the city rose 0.6 per cent in July from June levels to $1,031,400. Let’s say that momentum holds up for 12 months – the total price gain adds up to $74,250 or so, almost double what our reader sees himself saving.
The strength of the summer real estate market is definitely a worry if you’re barely able to afford a house. Should you jump in, or wait to build a bigger down payment and hope prices to fall or take a breather? I’m inviting readers to weigh on this question.
This week’s poll
Buy now or later: What advice would you give this 31-year-old Vancouver resident about home buying? Click here to vote in our poll.
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Rob’s personal finance reading list
The end of aimless shopping
The New York Times lists some supposedly fun things we’ll never do the same way again, including ’mindlessly wandering the mall.’
The many ways advisers get paid
An ex-investment adviser guides you through all the ways advisers charge clients and wonders why we don’t look at better options.
Best financial website for visible minorities
Personal finance blogger Enoch Omololu picks his favourite personal finance websites for the BIPOC community – black, indigenous and people of colour. Mr. Omolulu’s Savvy New Canadians website is a great resource for all savvy Canadians.
Home insurance and remote work
If you’re working at home instead of your usual workplace, give this article a read to see if there are any potential issues with your home insurance.
Ask Rob:
Q: We have $300,000 invested at EQ Bank. Only $100,000 of that, as I understand it, is covered by deposit insurance. How do I evaluate the risk for the uninsured portion and what would happen if the bank failed? Is the $200,000 too exposed to risk?
A: First off, it’s important to note that EQ Bank is a member of Canada Deposit Insurance Corp., which covers combined interest and principal in eligible accounts to $100,000. You get that level of coverage for each insured category, including regular accounts in your name and joint accounts. The risk if you have deposits in excess of the deposit insurance coverage amount is that your bank fails and there are not enough assets to fully cover the amount you had on deposit. I see no reason to take on this risk, and that’s not a comment on EQ or any other bank. It’s simple caution. Parcel out your deposits to maximize, but not exceed, the amount of deposit insurance you can get at each bank you use. Note: Some credit unions have provincial deposit insurance plans with higher coverage limits, or no coverage limit at all. But they are not backed by CDIC.
Send us your money questions. Globe and Mail personal finance editor Roma Luciw will tackle questions about money and parenting, and I’ll tackle the rest. Sorry we can’t answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
This asset allocation calculator will be a big help to DIY investors looking for ideas on how to weigh bonds and stocks from Canada and globally in a portfolio.
The money-free zone
Can’t believe I just discovered this prime bit of 60s pop music candy – Cass Elliot singing Make Your Own Kind of Music.
More Rob Carrick and money coverage:
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: How to survive the gig economy • How to get out of debt • Is now the right time to buy a house? • Crisis-proof your finances • Does investing change during a pandemic? • Can you afford to live downtown? • The cost of kids • Should you move back in with your parents?
- ✔️ A 10-point pandemic personal finance checklist: Create a “wartime” family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.
- 📈 Investing: The case for a tight portfolio of big blue chips dividend stocks; robo-advisers beat human advisors (and they’re thriving), why online banks that are better than the branch; is it time to invest your 2020 TFSA; don’t get your mortgage at a bank; why it’s so hard to invest in preferred shares; stock up on stocks to retire early; and are you following the 10-year rule with your investments?
- 💰 Saving: Food waste is wasted money; why you might regret that SUV and find out if CAA is worth it; juice your PC Optimum points; how an ex-Bay Street lawyer got out of debt; blindly easy tweak to your retirement investments to survive economic downturn; should you buy that latte?
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick