Commercial Real Estate Loans in Canada

Commercial Property Loans in Canada

The commercial property market in any country plays a major part in its economy, being the point where retail and investment banking meet. There is a lot of encouragement given by any government in the issue of keeping commercial properties running and finding a way for them to keep up with debt repayments so as to avoid the worrying eventuality of a commercial property closing down – thus depriving the economy of the tax dollars from the property and business itself, and the banks of important money from mortgage repayments. It is a lose-lose-lose situation when one takes into account the owner of the business going bust. Yet there is a very real situation emerging at present which suggests that commercial property loans will need to be looked at very closely in the coming year.

Commercial loans are unlike residential mortgages in that the latter are self amortizing, and as long as the resident has a well-chosen mortgage their payments will shrink in real terms as the life of the mortgage runs down. At a given point with a commercial loan, the payments may well begin to increase, having been agreed on the basis that profits from business will rise year-on-year. Depending on the nature of the loan, the case may well be that the borrower needs to look at refinancing the loan or repaying it in full. There are billions of dollars’ worth of commercial property loan coming due for refinancing or repayment this year – and several companies who are in no position to meet either of these conditions.

At present, the government and the banks are working together to find the best way of ensuring that the mortgage deals hanging in the balance are restructured in a way that leaves no-one too seriously out of pocket. Although the properties which are bought with commercial real estate loans represent an asset which can be repossessed and re-sold, there is still a large level of reluctance to borrow among the general and business public, raising the spectre of commercial properties remaining vacant for the time being. This leaves the banks with assets of limited worth, the government with a reduced level of tax income from these sources, and civic authorities with the problem of empty properties on their high streets – not encouraging for trade, and considered to be injurious to civic pride and all the things which flow from that.

As we were in a recession with a global reach, there are no short cuts where business and commercial real estate financing is concerned. Foreign investment is no more likely than domestic, as Canada is in better shape than most economies worldwide. In order to keep businesses open and trading, some level of agreement needs to be made between government and private finance so that the best outcome for everyone is achievable. Anyone looking for a commercial real estate loan at the present time may well be in an advantageous position, as there will be breaks available while the government seeks to encourage lending. Everyone is holding their breath at the moment waiting to see how this recession has had its play coming out of recession. Some proactive conduct on the businessperson’s part at this moment might well be sensible.

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Economic Growth of China to Slow Down

China’s Slow Economic Growth

China over the past few years has been an amazing success story with a massive amount of growth over the past decade. The country of China is expected to overtake the United States as the most dominant economic power on the planet, but that may not come as soon as many forecasters thought. With the recession hitting the world hard, Citigroup Inc. has lowered the forecast for China’s economic expansion for the rest of 2010. China is currently the third-largest economy in the world, right after the United States and Japan, but fewer purchases by consumers in those countries have caused less goods being exported out of China.

China showed a slowing in its second quarter, which resulted in the forecast by Citigroup being lowered for the third and fourth quarters of 2010. The gross domestic product of China was originally forecasted to be 10.5 percent for 2010, but that has been lowered to 9.5 percent. This resulted in the biggest one-month reduction in the outlook of the country’s economy since 2001. In addition, the growth projections for 2011 were lowered, as was the economic forecast of the major trading partners of the United States and China.

The world’s economic growth is expected to slow due to China trying to curb property prices, Europe’s debt issues and the economic outlook of the United States. In 2011, it is forecast that China will have its economy grow by about 8.8 percent, which is half a percent lower than the previous forecast. One good thing is that the country will see its inflation rate go down next year, falling from 4.6 percent this year to 3.6 percent next year.

In the second quarter of 2010, China only had a growth of 10.3 percent, which was lower than the 11.9 percent increase seen in the first quarter. The inflation rate fell from 3.1 percent in May down to 2.9 percent in June. In addition, property prices around the country fell by .1 percent in about 70 Chinese cities, which ended almost a year and a half in growth for property prices in the country. Citigroup was not the only bank to lower the rate of increase for China. Deutsche Bank AG forecasted that China would have a growth rate of 8.6 percent in 2011, down from the bank’s forecasted growth rate for 2010 of 9.6 percent.

Does this mean that the economy for China is going to reverse? Not in the least. China is still a force to be reckoned with around the world as its economy continues to grow at an amazing rate. No other country on Earth is coming close to the growth rate of China these days and even if China has seen a decline, it is still growing during a major recession. As the world moves out of the recession, China again will see a major growth for the country’s economy and that will eventually push it past the economy of the United States midway through the 21^st century.

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Why People Spend More Than They Earn

Remember “the number one personal finance tip of all time” I mentioned in Ten Timeless Personal Finance Tips By Financial Author A. Dawn article? That is, you need to spend less than you earn. To spend less, you need to know why we spend more than we earn. If you can grasp the basics of the “spending more than earn” scenario, it will be a lot easier for you to save money by spending less. Let’s look at the most important factors that cause us to spend more.

Lack of Information – The majority of the population have no idea where their money is going exactly. We often ignore small spending here and there; but at the end of the month all these tiny expenses add up and turn into something big and beyond our control. To handle this, you need to keep track of your spending. I don’t believe that dollar-for-dollar budgeting works. However, you need to keep track of your spending to see the patterns in your spending behaviour and take steps to cut down on unnecessary expenses. Here is an article to help you find personal finance software to track your spending: Personal Finance Software Review by Financial Author A. Dawn

Lifestyle Habit – Keeping up with the Jones, competing with colleagues, a tendency for showing off riches to the world, acting rich and successful but not able to survive without steady paycheques, feeling a sense of power while spending money, being jealous at other people’s stuff and trying to match their possessions, an inability to say NO to others when they ask for something (although you’re not in a position to afford it), not treating credit card spending like real money, not being true to yourself, and much much more – all these are variations of lifestyle habits. Let’s be honest here – If you aren’t able to save money because of one of these reasons or a similar one, it can be a serious problem and has to be dealt with seriously. I doubt that reading articles online will be any good resolving this. If you think you have this problem, I would suggest you read a few books, and based on the severity of your problem you may need to consult a qualified financial professional. Books I recommend:

The Simple Living Guide
Your Money or Your Life by Dominguez and Robin
The Millionaire Next Door by Thomas Stanley & William Danko

Instant Gratification – Here is an excerpt from my book Invest Now which is very suitable: “Every day, we face tempting opportunities to spend money. A sea of indulgences can distract you from investing for your future. “Buy now!” “Pay after one year!” “Don’t pay interest for six months!” Everyone everywhere is urging you to spend, spend, spend. I’ve even seen a “Vacation now, pay later!” advertisement on the subway. But every dollar you spend now is a dollar in lost investment opportunities that could have grown a lot more in the long run”. We are bombarded every second to buy into some “now and pay later” scheme. We want what we don’t need when we want it, and are willing to drag on paying interest to fulfill our instant gratification mentality year after year. What we don’t realise is that a $100 item is costing us $150 at the end of the interest paying term and it is prohibiting us from investing for our future – because we are paying interest on many other similar things and becoming money constrained. How should you handle instant gratification syndrome? Here are a few simple tips: try to pay for everything in cash; learn to delay major money sucking purchases, your urge will likely wither away if you can delay a few days; if you are at a store and can’t stop yourself from purchasing something you don’t need and/or is out of your budget, try counting 1 to 10, or take a few deep breaths, or try walking around the store. Once you try one of these; most likely your strong desire will go away.

Not Having Any Goals in Life – We tend to spend recklessly if there is nothing to look for in the future. Setting up goals for different stages in life is a smart way to save money and accomplish goals. These goals can be broken down into smaller parts. For example, instead of saving for a $20,000 down payment for a condo, it’s a lot easier to save $5000 each year for 4 years. Also, have set plans about your life such as buying a house by 30, paying half of the mortgage by 40, retiring at around 50, and so on. Each time you purchase something, think before paying for that item. Take a moment to think whether this purchase will help you achieve your goals or will take you away from your goals.

Whether your spending habit is causing you debt problems or keeping you from achieving your future goals, take a deep look at the causes and eliminate them to start saving for your life. No one else will care for your future and money like you do, and only you can take the necessary steps to secure your financial future.

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Tips for Saving For Retirement in Your Later Years

Later Years Retirement Saving Tips

In a perfect world, we would all save for retirement early but life has a way of getting into the mix and changing things around us. Sometimes it can be difficult to make sure you put the money away that you need to for your retirement years and it is not uncommon for an individual to save for their retirement but do so in their 40s and 50s.

If you are in your 40s and 50s and you do not have much in the way of retirement savings, you can follow these tips to start saving in your later years:

• Look at how much you spend and live on right now and then determine how much you will need per year in your retirement. If you spend $60,000 per year on all your bills, mortgages, debts, etc, then when you retire you will probably spend around $30,000 since many of your debts will be paid off. That means on average from the age of 65 to 85, you will need at least $600,000 saved up. Now that you know how much you need, you can start saving.
• Look at your retirement savings plan like the Canada Pension Plan and 401(k) and determine how much you can contribute per year to help you reach your goal.
• Talk with your employer and see if they can contribute to your retirement plans as well, and find out what the pension from your employer is like.
• Start looking at ways that you can save money with your life at this point. Maybe downsize the home you live in, sell one of your cars, start cutting back in any way that you can. The more money you save now, the more you will have to put away for retirement. If you are able to save $10,000 per year from the age of 40 to 65, you will have saved $250,000, which is an excellent sum and almost half what we calculated you would need at $30,000 per year post retirement.
• Probably the most important thing you can do to save for your retirement in your later years is to get yourself out of debt. When you are in debt, you are paying money every month and it can amount to a lot of money. Therefore, work to pay off your debt in the next five years and you will find that the amount you can save will triple or even quadruple. Do you want to save $10,000 per year or $40,000 per year?

Retirement is something we all look forward to but not all of us save for it. When we are in our 20s, retirement is the last thing we are thinking about but as we get closer to our 50s, the looming retirement begins to come into our sights and we need to start thinking about saving for it. You can save enough money for your retirement in your 40s and 50s; it just takes a bit of work to do it.

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The recession has been good and bad for India. With the recession, spending has gone down and the amazing growth in auto sales has slowed. In years past the industry grew by 30 percent per year, but this past year it grew by only 15 percent as more and more people in India began to hold back on spending. However, overall the economy of India has continued to grow even during the recession. The International Monetary Fund recently announced that in 2010, the forecast growth for the country is 9.5 percent. The reason for this is the high corporate profits, as well as the financial conditions that were very favourable.

Originally, India was expected to only have a growth of 8.8 percent, but that was raised as the country continued to do well as the world moved out of a recession. The growth of 9.5 percent is roughly two percent above the growth for last year in India, which stood at only 7.4 percent. This is better than the global economy growth which only stood at five percent in the first quarter of 2010. This shows that India is doing very well and continuing to grow while the recession has hurt other countries. Asia as a whole is doing very well, and that is helping India as its major trading partners are in Asia, as well as the United States, which outsources a great deal of work to the subcontinent.

However, if you are looking for a country to invest in, India does have its benefits but its growth is still lower than that of China, which has a growth of 10.5 percent right now. Japan in contrast is the second largest economy on Earth, but it only had a growth of 1.9 percent, which was well below that of India. This shows that India’s economy is stronger at the moment than some of the largest economies on the planet.  Throughout the recession, many investors worried about investing in India because the country had never gone through a huge recession such as the one in the last 2000s. However, after some initial hiccups, the economy of India began to grow once again, move past the rest of the world in terms of the speed of growth, only beaten by China.

This allowed investors to determine India is a country that is growing quickly and rapidly, and is still seeing huge growth while other countries are struggling. The recession has begun to fade and with it India is again moving forward.

This continues the process that began in the late-1990s when India began to implement major reforms for its economy. This allowed India to grow in economic power, which has helped its citizens have a better standard of living. More people buying in India helps the economy grow, and the better the economy grows, the more India can export cheaply to other countries like Canada, America and China.

If you are looking for a country to invest in, invest one of the few that actually did well during the recession

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Canadian Popular ETFs

 Some Popular ETFs in Canada

Investing in exchange-traded funds is considered to be one of the better ways to invest in the stock market. Where usually you are trying to beat the stock market, with exchange-traded funds you are only mirroring the index itself. This means that there is a better chance for long-term rewards. Of course, conversely you will end up having lower reward because there is lower risk. However, with lower risk comes the long-term ability to slowly build your investment without worry that you will lose it all. In Canada, ETFs are a very popular because they are somewhat safer investment vehicle than others and here are the most popular ETFs within Canada.

• iShares CDN Jantzi Social Index: if you want to be socially-responsible with your investments, then this is the ETF for you. All the stocks on this index are picked through an extensive process that must meet criteria in terms of environmental records, social records and governance. This index has consistently outperformed the TSX 60 Index, which it mirrors.
• iShares CDN LargeCap 60 Index: The most popular ETF in Canada, it consistently does well, leading the list of the most active TSX stocks. More than any other ETF in Canada, this is the choice for most investors who want to invest securely and safely.
• Claymore S&P/TSX Cdn Dividend: This ETF tracks the TSX Canadian Dividend Aristocrats Index, which has stocks and income trusts on it that have, for at least five straight years, continually raised their dividends on an annual basis. One of the biggest benefits here is that there is a high yield dividend, twice that of other ETFs, plus the fact that there is very little competition on the ETF when compared with other ETFs like iShares.
• Horizons AlphaPro Managed TSX 60: One of the more unusual of ETFs, this one is actively traded, which is unusual for ETFs as most use simple index tracking, rather than having a broker populate a list of stocks. What the broker will do is take the index and play around with the stocks on it to find the best option. The one drawback is that the ETF has only been around for a year and a half, so there is very little history to go on.
• Claymore Canadian Fundamental Index: This ETF uses a basic index approach in that it will look at various factors based on things like revenues and cash flow, which gives a better and higher rating to stocks that are undervalued. Each year in March, the stock is rebalanced to reflect any changes in the world of the stock market. This index routinely does better than others, making it very popular for ETF investors.

If you are investing in ETFs, then you are probably doing it because it provides you with long term rewards and lower risk. If you are in Canada, then these are some of the ETFs you can keep an eye on to meet your investment goals to give you consistent rewards well into the future.

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What is Opportunity Cost?

Opportunity Cost

There are a lot of complicated concepts in economics, and while some are easier than others, all of them are important to understand. Economics is a diverse field with many things at play, and if you want to invest, or just save money, you should at least have a basic understanding. This brings us to opportunity cost, something that you may not have heard of, but which you deal with on a regular basis.

Opportunity cost is the cost that is associated with the next-best choice available to you based on two, or more mutually exclusive choices. It is a very important factor in economics and it helps blend the relationship between scarcity and choice together. Thanks to opportunity cost, resources that are scarce and difficult to obtain, are therefore used more efficiently. This also means that opportunity cost goes well beyond economies and financial costs, and into other areas including pleasure, lost time, utility and more.

First created by John Stuart Mill in the 19^th century, opportunity cost has become a cornerstone of economics around the world, helping to shape the world we currently live in. Now, opportunity cost may seem rather foreign, and slightly difficult to comprehend, but to help you here are some examples that illustrate opportunity cost.

• Someone takes $50,000 and puts it into a stock, while the person makes money if the stock goes up; they have lost the money that would have come from leaving the $50,000 within the bank, where they would have collected interest on it. Therefore, the opportunity cost to that person, who chose to invest in stocks than leave it in the bank, is the interest they would have received on their savings.
• An individual walks into a store and must decide between spending $20 on a video game or on a new pair of jeans. If the person buys the jeans, the opportunity cost is the video game, while conversely if they buy the video game the opportunity cost is the jeans.

Opportunity cost is not just about material or monetary items; it is about what has more value to a person. For example if a person can afford to go see one movie, and must choose between an action and comedy, they must assess which will give them more enjoyment. If they choose the action movie, then the opportunity cost is the comedy, while if they choose the comedy, the opportunity cost is the action movie.

As you can see, opportunity cost is something you use on a regular basis throughout your life. When you are choosing between what TV shows to watch, what book to buy, which turn to make on the street and more, you are using opportunity cost. Understanding opportunity cost, especially in finances, will then allow you to get the most out of your decisions and help you earn more money, or save it based on the decision you make. Opportunity cost is something you may not have heard of, but it is something you use every day of your life.

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Some Facts About China’s Economy

China Economy Facts

China is one of the most fascinating countries on Earth. It has existed in one form or another for 5,000 years, has influenced the world immensely and even today it is a dominate country on Earth. While in the 20^thcentury China was a developing nation, these days it is not only developed, but it may be the superpower of the 21^st century.

At this moment, China’s economy is the third largest in the world, just behind the United States and Japan. With a GDP of $4.91 trillion, it is fast becoming the biggest economy on the planet and it has the second highest net-worth behind the United States with $8.77 trillion. In addition, China has the fastest growing major economy on the planet, with a 10 percent growth rate over the past 30 years on average per year. China may be a huge economy, but its per capita income is only $3,677, which puts it 97^th in the world. That will change as time goes on though because China is the second-largest trading nation in the world, and the largest exporter, while also being the second largest importer.

The growth of China’s economy has also helped its citizens come out of poverty. The level of poverty in China fell from 53 percent in 1981, to 2.5 percent in 2005. That being said, 10 percent of the population, or over 100 million people, still live in extreme poverty. The infant mortality rate has also fallen as China has grown in economic power, falling roughly 39 percent between 1990 and 2005. Maternal mortality also fell by 41 percent in that same period, while the access to telephones increased by 94-fold to 57.1 percent of the population having telephones.

China has a lot of trade going through its borders, and its currency is highly traded on the world’s markets. Currently, the foreign exchange reserves have risen dramatically. In 1999, foreign exchange reserves in China stood at $155 billion, and by 2000 that had gone up $10 billion. In 2005 it had risen to $800 billion. By the end of 2006, that had gone up to $1 trillion, and by 2008 it was nearly $2 trillion. In 2008 as well, China replaced Japan as the largest foreign holder of U.S. treasury securities with $585 billion. This was the first time that had ever happened.

The two biggest sectors of the Chinese economy are agriculture and industry, both of which employ roughly a total of 70 percent of the labour force and account for roughly 60 percent of the GDP production in the country.

For many, the sudden emergence of China took them by surprise. The country has risen fast and very strongly in the past few years, becoming a country that is going to be very powerful in the 21^st century. As time goes on, more and more people will be looking at China, rather than the United States, as the main driver of the entire world’s economy.

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What is Globalization?

A Brief History of Globalization

A concept that is becoming more and more important in the 21^st century is globalization. Globalization is something that has been going on for thousands of years, but it is only now we are truly seeing the effects of a global society, rather than one based on separate countries competing for resources. Globalization is the process where economies, societies and various cultures are connected through various networks that include trade, communication and transportation across the planet. Economic globalization follows along these same lines, in which economies become connected through investment, migration, trade and flows of capital.

Globalization History

Globalization as we know it goes back to around the Hellenistic Age, when urban centers were the center of Greek culture and held sway from Spain to India with its culture. As time went on, various other empires helped push globalization closer and closer to a reality. The Roman Empire, Han Dynasty and Parthian Empire are all given as examples of empires that were globalized based on the world that that time. A good example of this is the fact that 300 Greek ships a year sailed between Rome and India, sending 300,000 tons of goods.

When Islam came into being, globalization took another step forward as Jewish and Muslim traders created sustained economies that spread across Europe, Africa and the Middle East. Ideas, technology and food all began to be traded and spread over vast distances. The Mongol Empire continued this when they had an empire that stretched from Korea to Europe, helping to spread technologies across Europe and Asia. Thanks to the Mongol Empire, trade along the Silk Road greatly increased, leading to Marco Polo to make his famous journey to China.

Once the Age of Discovery began, globalization moved into the New World as European powers like Portugal, Spain, France and England began to take advantage of the glut of resources North and South America provided. When the Industrial Revolution began in the 18^th and 19^th centuries, globalization took another step forward, leading to the world as we know it. Vast trade in resources helped connect countries and cultures across the planet.

Following the Second World War, politicians began to break down borders that hampered trade so that interdependence and prosperity could increase and therefore prevent a future global war. Organizations like The World Bank and the International Monetary Fund, along with free trade, helped to spread wealth and capital across the world. Some of the ways that economists have achieved this global trade concept through globalization include:

• The creation of free trade areas and the elimination of tariffs.
• The reduction of transportation costs.
• The elimination of capital controls.
• Creating subsidies for global corporations.

Globalization Effects

Globalization has had many different effects across the planet. These are both good and bad. A good example of the bad effects includes sweatshops and the loss of jobs as companies go to cheap countries where labour laws are relaxed. However, in terms of good effects, we have the following:

• Foreign products have spread across the planet with the movement of goods through international trade. Since 1955, international trade of goods has increased 100 times from $95 billion to $12 trillion. A good example of this is the fact that China’s trade with Africa rose by seven-fold between 2000 and 2007.
• Roughly $1.5 trillion is traded in national currencies on a daily basis thanks to globalization and the emergence of worldwide financial markets.
• Thanks to globalization, the United States has enjoyed great power since the 20^th century because of its massive amount of trade. China is now catching up on the United States and will soon become the leading world power.
• Information is traded through globalization thanks the Internet, television and other mediums like telephone and radio.
• Globalization has helped to harmonize languages. The most widely spoken language on Earth is Mandarin with 845 million speakers, while Spanish and English come in second and third with 329 million and 328 million speakers. Roughly 35 percent of all mail is in English, while 50 percent of the internet traffic is in English and 40 percent of radio programs are in English.
• Globalization has led to greater travel and tourism, with as many as 500000 people on planes at any one time and 922 million international tourists moving about each year. Immigration has also increased and multiculturalism has become extremely common throughout the world.

Globalization is happening all around us and many do not even realize that they are experiencing it every day. A good example of this follows:

A man wakes up in the morning and dresses in clothes that were made in Southeast Asia and China. He gets coffee from his kitchen, with the coffee coming from Africa and the coffee cup coming from Europe. He has a breakfast made up of fruit from South America and milk from Canada. He gets in his car, which was made in Japan, and fills it up with gas that was originally oil extracted from the Middle East. As he gets to his office and uses furniture made in Sweden and electronics made in Asia, he surfs the net, hitting websites located in 15 different countries.

This is just a brief example of how one person, in the first few hours of a day, can be using items that come from all over the world. While globalization has received a lot of bad press, the good it has done is unmistakable. It has spread prosperity across the planet and helped get people out of poverty. Less than 12 percent of the world lives in extreme poverty now, down from over 40 percent 30 years ago. In addition, more people have food, more people are making money and more people can live the lives that they want. There are downsides, including the effect on the environment due to global trade, but overall globalization is leading to a better world and we should be happy we live in a world where the world is interconnected.

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What is a Mortgage Default?

Defaulting on a Mortgage

There are few phrases or words more chilling for the holder of a mortgage than “default notice”. While the appearance of those words at the top of a letter are never what anyone wants to see, they hold a special dread and fear for the mortgage holder because of the genuine fear that the bank’s next step will be to take possession of their house. This fear comes about – with good reason – because the money lent in a mortgage is considered a “secured loan” – that is to say that it is given strictly on the basis that collateral is provided. “Collateral”, for the purposes of a loan, essentially means security. If you don’t pay the loan, then the bank have something of equal value that they can reclaim from you.

It is never desirable to default on a mortgage. The payments can be difficult to keep up, that much is undeniable. A mortgage is, in a lot of ways, the most challenging kind of borrowing that an account holder can take out. Although the longer term of the borrowing and the frequently lower interest rates (available because the loan is secured) lowers monthly payments, the fact that they are stretched out over a long term can mean that there is some doubt in the mind of the borrower over whether the conditions will always exist that make it possible to meet monthly payments. Therefore, especially in the early to middle period of the term of the loan, there will be some recurrent dread of one day defaulting on the mortgage. It is for this reason also that many people who are in a position to do so pay off their mortgage early.

If you default on your mortgage it does not mean that the house you have secured it on will be repossessed. In actual fact, banks tend to prefer not to go that far. It is up to you as a borrower to keep in contact with the bank and stay true to your intention of paying monthly payments at a sustainable rate. If you have already made a substantial dent in the principal of your mortgage, the bank may well be willing to restructure a loan for the remainder, over a longer term so as to allow smaller, affordable monthly payments. How long the term will be depends on factors such as your continuing earning potential and how much is left to pay off. Although you may not be able to stick to the original term, a difference of a few years may be all it takes to make that monthly payment manageable.

Aside from this method, you may have the opportunity to remortgage with a different lender – paying off your old mortgage with a loan that covers the remaining principal and interest, although the earlier you decide on this the better – missed payments and particularly expired default notices will put black marks on your credit file, making it harder to get a decent remortgaging deal, if you can get one at all.

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