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Safe Options for BC Investor - ~2 Year Term
July 31, 2018
4:21 pm
PocketLint
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I just purchased a pre-sale condo.

Builder estimates construction to finish no sooner than November 2020.

I have most funds needed for purchase. I want to set this money aside in a safe investment until needed - something with better interest than the absolute pittance I'm getting now from my bank's regular savings account.

So I am thinking a GIC up to 2 years - redeemable or not.

I have 750K now and anotther 750K available in September as another investment matures.

I am in BC.

Questions... would it seem better to invest 750K now and invest the second 750K in 2 months? Or hold off and invest the 1.5 million in September/October?

All funds should be fully deposit insured. So Credit Union?

Am I best to find an institution in BC to handle this?

Just looking for non-legal opinions and better understanding of options.... a lot of posts seem for Ontario financial institutions which I am not sure apply to me.

July 31, 2018
6:17 pm
mmlt
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Manitoba credit unions are popular with members here. They offer better rates than what BC banks and credit unions will. Deposits are protected by the province.

July 31, 2018
6:59 pm
NorthernRaven
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Just mechanically, those are some large figures, that have to move from wherever the chunks are now, to wherever you invest, and then to wherever the funds need to be for closing on the condo in 2020. Make sure you check with each institution as to how you'll do the transfers - online systems, for instance, may have daily limits that are only a fraction of this, and you'll want to make sure you can have their service desk to the transfers without trouble.

In the US, there are systems (CDARS, for instance) that let you deal with one bank, but have anything in excess of FDIC deposit guarantee limits split out to multiple other banks. You might check if Canadian GIC brokers have anything similar where they take a lump and parcel it out to various CDIC institutions and consolidate the paperwork, but I don't think they can quite work like that.

Is the money just in your name, or shared with a spouse? If the latter, you can get 3x$100,000 coverage by putting $100K in each of your names plus a joint GIC. Oaken issues under two independent CDIC subsidiaries, so you could potentially get $600K in CDIC coverage in one stop, and they are currently at the top of the GIC rates (3.10% for two years), if you are comfortable with them.

It looks like the Manitoba credit unions are at about 2.65-2.75% for two-year GICs, if you are looking at putting full $750K lumps in one place with unlimited provincial credit-union deposit guarantees. I'd assume it is unlikely that you could get anything near this from a BC credit union, but if you are with one that you'd prefer to deposit with, you could always check.

Make sure there's no chance of needing the funds earlier than the GIC maturity date before locking into a non-redeemable GIC. Could the builder accelerate the construction schedule and call for closing in July 2020, for instance? You might look at Hubert's 1-year term - it can be redeemed at the end of every 3-month period, and is fairly close to their 2-year rate.
Also, don't have maturity be too tight to the earliest date you require the funds - assume it might take a couple of weeks or more to get the money transferred to your closing bank (glitches, etc).

I doubt you'd get a significantly higher rate on $1.5M over $750K, but it could be worth checking.

July 31, 2018
8:12 pm
Loonie
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One of the MB CUs on the chart has standard redeemable GICs. The penalty is stiff, but, still, worth considering. I think it's Outlook but can't remember for sure.

NorthernRaven has an excellent point about making sure you will be able to get ALL the money out in time. Increasingly, the smaller financial institutions are putting daily, weekly and monthly withdrawal limits in place. In two years, they may all have this. With some, you can override the limits by a phone call, but wouldn't want to count on it as rules can change.
It might be easier to get the money out if you choose a financial institution which offers chequing. You can write yourself a cheque and it would be difficult tor them to refuse to cash it. Then you get the necessary bank draft from your regular bank after it has cleared. However, you could encounter a longer-than-expected hold on such a large amount, so a direct transfer is better in that respect if they allow it in large sums. Best to check with the bank on which you intend to get the draft.

Make sure you fill up your TFSA if you haven't already. It's not a lot but every bit helps. Consider the impact of these investments on your tax burden, as it will be annual.

As to your basic question, I would lean towards putting the first half of the money away now. Rates are unpredictable anyway. If you put it in now, this gives you more time to get it out later - at least that half. Much will depend on the answers you get to NorthernRaven's question.
Oaken is good about allowing you to specify at the beginning if you want the money to be reinvested at maturity or sent back to originating bank. You don't want to end up needing a bridge loan, which could wipe out a lot of your profits.

If it looks like you might have trouble getting all your money out at once, you could consider an 18 month GIC, available at some financial institutions.

MB credit unions do have unlimited insurance, but they are NOT insured by the province. They are insured by the Manitoba credit union insurance system.

There are some pretty good rates on one year GICs right now, so you might consider a one-year then see how your builder is coming along by then. Interest rates may have gone up further by then, maybe. Then you can decide about the second year.

July 31, 2018
9:33 pm
Norman1
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NorthernRaven said

Is the money just in your name, or shared with a spouse? If the latter, you can get 3x$100,000 coverage by putting $100K in each of your names plus a joint GIC. Oaken issues under two independent CDIC subsidiaries, so you could potentially get $600K in CDIC coverage in one stop, and they are currently at the top of the GIC rates (3.10% for two years), if you are comfortable with them.

It looks like the Manitoba credit unions are at about 2.65-2.75% for two-year GICs, if you are looking at putting full $750K lumps in one place with unlimited provincial credit-union deposit guarantees. I'd assume it is unlikely that you could get anything near this from a BC credit union, but if you are with one that you'd prefer to deposit with, you could always check.

After maxing out on Oaken's CDIC deposit insurance coverage, one can check with deposit brokers to see if there are other financial institutions with good rates on insured two-year GIC's.

As an indication, Ontario deposit broker Fiscal Agents is listing some attractive two-year GIC rates for higher amounts:

Institution Date Amount 2 year
IC Savings (Agent) 31 JUL $25,000 3.110%
Buduchnist Credit Union 31 JUL 5,000 3.100
Meridian C.U. (Agent) 31 JUL 10,000 3.100
July 31, 2018
11:10 pm
miro
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It seems that OmniaDirect
has the best 2 year GIC. Not sure how safe is it thou.

August 1, 2018
1:29 am
Loonie
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Unfortunately, OmniaDirect is only available to residents of Ontario.

August 1, 2018
4:33 am
JenE
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When I bought a condo 18 years ago I was required to pay set amounts to the builder at various stages during construction. Check your contractsf-surprised

Oaken currently has an 18 month GIC AT 3%.

August 1, 2018
6:35 am
Nehpets
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JenE said
Oaken currently has an 18 month GIC AT 3%.  

Lint, if you were not already aware, dealing with Oaken and therefore Home Trust along with Home Bank, the two independently operated divisions of Home Capital, each independently CDIC insured, one can maximize CDIC coverage with accounts held by each spouse as well as a joint account in both subsidiaries, providing up to $600,000 CDIC coverage on deposits. Joint accounts need not be joint by spouses necessarily, though there may be additional contractual requirements between the parties for their individual protection.

Monitoring deposit rates using this Forum along with your own links to the various comparison sites can provide you with the National picture on rates.

Additionally you may want to locate a local or even remote deposit broker (as not all deposit broker networks are created equal and not all brokers receive all GIC offers) so that you can have access to deposits not always available to residents outside the home Province of the financial institution (eg Bridgewater Bank ).

Stephen

August 1, 2018
6:51 am
Nehpets
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Loonie said
Unfortunately, OmniaDirect is only available to residents of Ontario.  

Given Omnia's current promo rates and DICO coverage to $250,000, Omnia can provide an attractive addition / alternative to Oaken.

In speaking with Jody at Omnia Direct today, I was informed that residents outside of Ontario are, in fact, eligible to purchase GIC's from Omnia Direct.

To paraphrase Jody, "a certain percentage of their deposits can be held by members outside Ontario."

Stephen

August 1, 2018
7:50 am
Norman1
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One may wish to spread the funds across multiple financial institutions anyways.

Deposit insurance can cover original principal and the earned interest. But, it won't guarantee the funds will be available on maturity date. In the unlikely event the financial institution runs into problems, there could be a delay in the payouts.

It is very important with real estates transactions that funds be available on the closing date and not a few days or a week later!

August 1, 2018
12:04 pm
Loonie
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I would not want to rely on Jody's opinion about Omnia Direct without written confirmation from a manager. See my comments here: https://www.highinterestsavings.ca/forum/site-suggestions/correction-for-july-2018-savers-roundup/#p32682
Even if allowed, with a large deposit you may not qualify as part of that mysterious "certain percentage".

September 6, 2018
4:01 pm
PocketLint
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Sorry for the late acknowledgement. Work and life, one seems to get in the way of the other...

To clarify, my wife and I are buying the condo together. I also want to ensure funds are fully available at Sales Completion in about 2 years time.

I decided to place 600K with Oaken Financial in 18-month GICs at 3% APR, split between six GICs; 3 from Home Trust and 3 from Home Bank, and using my name, my wife's, and both our names jointly for GICs.

I would have invested more (with Oaken) but didn't want to deposit more than would be deposit-insured.

I am earning about an extra $6K interest over my local credit union thanks to the great info here. Thank you!

September 6, 2018
4:34 pm
semi-retired
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PocketLint said
Sorry for the late acknowledgement. Work and life, one seems to get in the way of the other...

To clarify, my wife and I are buying the condo together. I also want to ensure funds are fully available at Sales Completion in about 2 years time.

I decided to place 600K with Oaken Financial in 18-month GICs at 3% APR, split between six GICs; 3 from Home Trust and 3 from Home Bank, and using my name, my wife's, and both our names jointly for GICs.

I would have invested more (with Oaken) but didn't want to deposit more than would be deposit-insured.

I am earning about an extra $6K interest over my local credit union thanks to the great info here. Thank you!  

Just remember,your principal is covered,but any interest accrued will not be.Each account you opened is covered to a 100,000.00 max.Your interest puts it over that limit on each account.

September 6, 2018
5:30 pm
Loonie
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semi-retired is correct. That was the first thing that occurred to me too when I read what you'd decided. Hopefully, you took that into consideration when you decided exactly how much to deposit.
However, odds are that Oaken/HT/HB will not fold.

Have you decided what to do with the rest of your money?
I would suggest you consider Hubert Financial, a MB credit union which serves BC residents. They have a one-year GIC with a special feature. It is structured as a one-year Escalator GIC, with graduated compound interest paid every 3 months, currently totalling 2.87% if you leave it in for a year. It is cashable either (a) at any time, with interest payable to end of the most recent quarter only; or (b) at the end of each quarter with full interest to date.
This is an ideal arrangement in a rising-interest environment because you can re-set the rate by cashing and reinvesting at a higher rate. at the next quarterly payment. Rates on this GIC have gone up 3 times within the last year. The GICs I bought in Dec 2017 at 2.25% annual are now in the first quarter of a 2.55% rate (@2.4%); later this month, when this quarter comes due, I will switch to the first quarter of a 2.85% rate (@2.70%). So, in the final quarter of my one-year GIC, I will be getting 2.7 instead of the 2.4 which I originally signed up for.

Here's how it works out:
FOR ANNUAL RATE OF 2.05%: The first three months: 1.90%. Months four to six: 2.00%. Months seven to nine: 2.10%. The last three months: 2.20%. (effective Nov 2016).
FOR ANNUAL RATE OF 2.25%: The first three months: 2.10%. Months four to six: 2.20%. Months seven to nine: 2.30%. The last three months: 2.40%.(effective Nov 2017).
FOR ANNUAL RATE OF 2.45%: The first three months: 2.30%. Months four to six: 2.40%. Months seven to nine: 2.50%. The last three months: 2.60% (effective Jan 2018).
FFOR ANNUAL RATE OF 2.55%: The first three months: 2.40%. Months four to six: 2.50%. Months seven to nine: 2.60%. The last three months: 2.70%. (effective June 2018).
FOR ANNUAL RATE OF 2.85%, The first three months: 2.70%. Months four to six: 2.80%. Months seven to nine: 2.90%. The last three months: 3.00%. (effective 02 Aug 2018).

Transfer-out limits:
$50,000 daily (every 24 hours),
$250,000 weekly (every seven days),
$500,000 monthly.
I think these can be overridden with a phone call, but you should check. They are very personable on the phone and I wouldn't anticipate a problem, especially if you let them know your plans in advance.

Insured with unlimited coverage by Manitoba credit union insurance.

September 8, 2018
11:19 am
canadian.100
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Loonie said
Insured with unlimited coverage by Manitoba credit union insurance.  

Just to be fully clear to readers, bear in mind that "unlimited coverage by Manitoba credit union insurance", does not involve any coverage or guarantee by the Manitoba Govt.

September 9, 2018
2:10 pm
bb123
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Implicity has a 2 Year GIC special at 3% for new money. They are a Manitoba Credit Union which has an unlimited deposit Guarentee. I’ve been with them pretty much from the start and very happy with them. I think they have a 1 year special @ 2.85% as well. Both top of market rates for fully insured deposit institutions. Might be good to put half in 1 Year and half in a 2 year.

September 9, 2018
2:13 pm
Loonie
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canadian.100 said

Just to be fully clear to readers, bear in mind that "unlimited coverage by Manitoba credit union insurance", does not involve any coverage or guarantee by the Manitoba Govt.  

This is true, but it's the MB govt that sets the rules for the insurance system. They can't afford for the system to fail as CUs are extremely popular in MB.

September 10, 2018
6:01 am
canadian.100
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Loonie said
This is true, but it's the MB govt that sets the rules for the insurance system. They can't afford for the system to fail as CUs are extremely popular in MB.  

Similarly, the Travel Industry Council of Ontario (TICO) is mandated by the Ontario Govt to administer the Ontario Travel Industry Act 2002 and Ontario Regulation 26/02 which governs all the approx 2400 travel wholesalers registered in Ont. TICO also administers an industry financed Travel Compensation Fund. Travellers who lose their deposits because either the wholesaler/travel agent closes, goes bankrupt or did not supply the trip are supposed to be compensated from the TICO travel fund. However, travellers can lose in the event the travel fund is insufficient to pay all the claims.
I suggest that one should never assume there would not be any losses under this type of arrangement.
I am not sure the statement "they can't afford for the system to fail" means much to me unless one has some knowledge of the financial situation of the Province of Manitoba. I do not know that information.

September 10, 2018
6:12 am
canadian.100
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This might be of interest re Manitoba Govt Finances
https://news.gov.mb.ca/news/index.html?item=44439

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