- How much can we afford to spend on our new house?
- How much will our down payment be?
- When do we put our house up for sale?
Of course, when it comes down to how much we can afford to spend on a house, the bank has a different opinion than I do. I take what the bank calculates with a grain of salt, as I don’t feel that anyone should extend themselves to the very limits of what they’ve been approved for. That being said, the old adage about only spending 2-3 times gross salary on your house doesn’t seem to make much sense in today’s environment either.
The house we are looking to build will probably end up costing us more than I would have liked to spend, however I am happy to say that the final amount shouldn’t come close to what the bank has approved us for. I say “shouldn’t”, because any time you are building a house with some estimated costs involved in your allowances and upgrades, I believe it’s prudent to factor in a contingency fund of at least 10 percent.
Our challenge lies with the down payment. I would like to use all of the equity in our existing house to pay for the down payment on the new house. However we need to declare our down payment to the builder and the bank in advance to starting construction. If we want to continue to live in our current house while we build the new house, we will need to open a home equity line of credit (HELOC). The bank will only lend us 80 percent of the market value of the house, minus the existing mortgage on the house. So, for example if our house was assessed at $250,000 and our mortgage was sitting at $150,000 the bank will only lend us $50,000 in a HELOC.
The house we are building will cost upwards of $400,000 which means we will require $80,000 to satisfy the 20 percent down payment and avoid CMHC fees. Even if we have an additional $30,000 to put onto our mortgage after the sale of our house, we would still have to pay the CMHC fees if our initial down payment is only $50,000 (or 12.5 percent). So what should we do?
There are still many factors to consider, for example when do we absolutely need to be in the new house? My wife and I have talked about this and we would love to be in the new house by this time next year (November 2011). Since it takes five months to build the house we would need to start building by the end of May next year. That also seems like a good time to put our current house up for sale, and gives me about six months to save up a bit more cash.
With so much to think about, doesn’t it seem like the easiest decision would be to just stay put? While that may be true, we feel that this is a great opportunity to build the house of our dreams and are very excited to get started.
Although they’re called “bonds”, CSBs are actually savings certificates that are more like term deposits or GICs. They are issued by the federal government in the fall and pay a fixed rate of interest that is periodically reset based on market conditions. Canada Savings Bonds currently have a 10-year maturity and are also RSP eligible.
Canada Savings Bonds: Still A Good Investment?
The main change since I sold Canada Savings Bonds as a banker is in the interest rate. Past CSBs had a fixed rate of interest for the entire term, usually seven years. I owned one series that paid 19.5% compounded annually. (Of course, inflation was probably about 22% so I actually lost buying power, but that’s another story.)
Since they were easy to buy, fully guaranteed by the government and cashable at any time, they made an attractive alternative to bank issued term deposits and GICs and were regularly rolled over into new issues on maturity. My father purchased a house entirely from CSB proceeds. I sold many $100 bonds to grandparents who gave them to their grandchildren each Christmas instead of toys.
The regular CSB on sale right now pays an interest rate of .65% for one year. Compare this to an ING high interest savings account currently paying 1.5%. The first year interest rate on the Premium CSB is 1.1%. These bonds are only cashable on the anniversary of the issue date (plus the 30 days after) so they are more like a GIC. One year GIC rates range from .75% to 1.5% so they are better than some, less than others, depending on where you do your banking.
The benefits I see for purchasing Canada Savings Bonds are:
- After the first 3 months the regular bonds are redeemable at any time with full, accrued interest to the previous month end.
- Interest rates can increase during the term but rarely will they be reduced (based on changes to the Bank of Canada rate).
- They can be purchased through payroll deductions through your employer as a forced savings.
However, with all the other options currently available to the investor, I haven’t considered Canada Savings Bonds to be a desirable investment for myself for quite some time.
Are they, or will they become part of your investment portfolio? And what are your reasons?
- Tell me about yourself.
- Why do you want to work here?
- Why should I hire you?
- What did you like/dislike from your last job?
- Where do you see yourself in 5 years?
- What accomplishments are you most proud of?
- How do you deal with pressure/stress?
- How do you take direction?
- What is the most difficult situation you have faced?
- Do you prefer working alone or with others?
So how do you separate the potential stars from the duds?
Hiring Employees for Personality
The answer is, to hell with experience, if you want to hire great employees you need to hire for personality! And don’t just interview, take the time to learn your candidates’ personality.
When there is an employee vacancy and you need to hire someone, most companies dust off the job description that was created ten years ago and use that to create a recruiting ad. You need something more dynamic than that to uncover a future winner in the interview process. Here’s what your job profiles need to tell you:
- What talents do the ‘stars’ have that others don’t?
- What must they ‘do’, vs. what must they ‘have’?
- What talents are needed to be successful, not just what the job entails?
What I recommend is to create a set of adjectives that describe the type of person you are looking for and match the skill-set of the job you’re looking to fill. Then during the interview process, ask probing questions that will help you discover if your candidate matches those personality traits. For example, you could list a set of eight adjectives that describe your potential hire:
- Team Player
- Sense of Humour
- Fast Paced
- Knowledgeable of Current Events
Now during your job interview you can ask questions to uncover these traits. If a candidate doesn’t match at least five of these eight adjectives, you should move on to the next interview.
Using these job recruiting techniques when hiring employees can help you stand out at your company as someone who is not going to follow the conventional route, someone who thinks outside the box to hire great people. After all, selecting winners to work at your company can be a defining moment in your own career.
Do you conduct interviews at your job? What tips do you have to hire great employees?