How To Build A Ladder

How first-time buyers can get on the property ladder

The advantage of such schemes is that parents don’t have to stump up cash sums upfront and it can enable you to borrow more. But if you run into financial problems, this can affect your parents’ ability to get credit and potentially put their home at risk. Your parents would need to have sufficient income and/or equity in their home to be an effective guarantor, so not all first-time buyers would be able to obtain one of these mortgages.

But banks deploy more complex credit scoring so the exact amounts will depend both partners’ financial history. Those with significant credit card debts, for example, you won’t be able to borrow as much. While young professionals, with good career prospects (doctors, accountants etc) may be able to borrow more.

Make sure you have a robust legal agreement in place to cover what happens if you go your separate ways. This can be difficult to negotiate when you end on less than friendly terms.

If your parents can’t help and you don’t have a deposit, look at “shared ownership” purchase.

Here housing associations allow you to buy 25 per cent of a property, and pay rent to them on the rest. When you can afford it you make a further staged purchase.

As you are only buying a slice of the property the deposit needed will be significantly smaller – closer to 5pc of the full purchase price.

A number of banks offer mortgages to help pay for these staged payments. Talk to your local housing association for more details.

Some banks offer preferential savings deals to those trying to build a deposit. These can pay higher rates than most instant access accounts. Usually to qualify for one of these savings scheme you have to agree to a meeting with that bank’s mortgage adviser. However, you are not legally obliged to take a mortgage from the bank when you are in a position to buy a home (steer clear of any such account that say you are required to take their mortgage deal).

Make the most of these savings deals. Even if it takes you a period of time to save enough, you may be in a better position, with house prices sliding and lending rule relaxing.

However, ensure you shop around for the best mortgage deal at the time – savings made here will easily outweigh any preferential savings rate given.

How to build a GIC Ladder - Money Advice | Personal Finance ...

Why build a GIC ladder?

1. Never get stuck with the wrong maturity. Get the most bang for your buck by staggering the maturities of a series of GIC investments, usually over five years. You don't have to guess where interest rates are going.

2. Benefit when rates increase. Because a rung of your GIC ladder matures every year, you can take advantage of rising interest rates when you reinvest. If rates fall, only a portion of your investment is hit.

3. Yes, you can access your money. If you need the cash when a GIC matures, go ahead and use it. With your money invested over a span of years, only a portion is locked away until later.

Steps to building a better GIC Ladder:

Step One: Find the best rates. Check with CANNEX , an independent company that compares interest rates, or consult a deposit broker to find the higher-yielding GICs available today. The big banks generally don't offer the top rates.

See 10 Safe places to stash your savings for some competitive options.

Step Two: Divvy up your dough. Divide your money into five equal parts and invest them in GICs maturing in one through five years.

Step Three: Reinvest. Based on this ladder, a GIC matures every year. Mark this day on your calendar to buy a new five-year GIC with the proceeds. After four years you'll have all your money in five-year GICs -- these generally offer a higher rate of return than 1 or 2 year certificates.

Have a lot of cash to stash? Don't forget the limits on deposit insurance. Members of the Canada Deposit Insurance Corporation (CDIC) are insured for up to $100,000 by the federal government. Provincial credit unions often offer more coverage.

Looking for a little more diversity in your portfolio? Before investing in a basket of mutual funds, check out 5 Investing fees that devour your savings to see where the costs are hiding.

Your Turn: Do you ladder your GICs? Or are fixed investments a poor use of cash in a portfolio?

Kerry K. Taylor writes at Squawkfox.com , a blog where frugal living is fun. Kerry is the author of 397 Ways To Save Money: Spend Smarter & Live Well on Less

Google GIC rates of return and you'll find that depending on the term, the average GIC rate floats between 1%-3% (with 0.55% the lowest 1 year and 3.5% the highest 5 year return). You have now locked in your money at rates that will not even keep up with inflation / the CPI. So if you have millions, you're good to go as you possibly don't really need to have that money grow. However if you're the average Canadian, and are dealing with a reasonable or limited income you are in hot water if you're stuck earning 1%-3%. You better hope inflation stays well below 1%, because taxes and simply paying for daily living will eat away at your savings. The phrase "you'll run out of money before you run out of life" seems to fit.