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Quick Questions Before Starting an Account
February 9, 2019
2:41 pm
PurplishSocks
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I'm looking into opening an accounts for HISA and GIC at Hubert and I had a few questions before doing so. First, for some background information, I'm from the Toronto area and i'm looking into a home purchase in about a 5 years. I'm looking into putting $15k into a a 1 year GIC every year and $2k every month into a HISA and when the GIC expires redoing the 1 year GIC but with the HISA money added. I was looking at doing this at Hubert because both their HISA and GIC rates seem very good and stable over the years. I had the following questions:

1) Does this sound like a good plan overall or are there alternative options that I should look into?
2) Currently, all of my money is in a CIBC chequing/savings account. Will it be free and easy for me to transfer money between the two financial institutions?
3) Does anyone know what will happen if for some reason I need to withdraw the money from the GIC (will I be able to with the penalty of loss of interest or will it be not even possible?) This is highly unlikely as I am already planning on always keeping about 3-6 months pay outside the GIC and in the HISA but I would like to know just in case a big disaster happens.

Thanks in advance for reading and the replies. If there is anything else that I'm missing that you think would be useful for me please let me know as well.

February 10, 2019
12:03 am
Denise Milani
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1) Does this sound like a good plan overall or are there alternative options that I should look into?
Since you have a 5yr plan, why not do a 5 year GIC first, then 4 3 2 1 and add HISA funds at each GIC purchase. You will get higher rates.

2) Currently, all of my money is in a CIBC chequing/savings account. Will it be free and easy for me to transfer money between the two financial institutions?
Yes easy, set it up with Hubert and pull funds into Hubert.

3) Does anyone know what will happen if for some reason I need to withdraw the money from the GIC (will I be able to with the penalty of loss of interest or will it be not even possible?) This is highly unlikely as I am already planning on always keeping about 3-6 months pay outside the GIC and in the HISA but I would like to know just in case a big disaster happens.
Hubert does not have an early redemption with penalty option but the one year GIC does....look it up on Hubert site.

Outlook financial has early redemption and had a very poor return if you do.

February 10, 2019
3:21 am
threeoakwest
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Hubert is really great and have very knowledgeable staff available and are available by phone from 9:00 - 8:00 ET.

Have a good look at the one year GIC's which can be reinvested if you wish every three months, or, redeemed and you will receive that three months of interest. No penalty! This can be done for regular or TFSA savings.

February 10, 2019
6:18 am
Loonie
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I too don't understand why the maximum time that you want to put it in for is one year at a time. Hubert's one-year GICs are cashable at any time. The only penalty is whatever interest may have been due since the end of the most recent quarter , so it's a maximum of less than 3 months. If you cash them at one of the 3-month marks, when quarterly interest is paid, then there is no penalty. You can also, at that time, reinvest at a higher rate if higher rate is available or for a longer better term. However, you will not be able to redeem 2 to 5 year GICs early at Hubert.

If it were me, I wouldn't wait around for a whole year to pile up 24K before putting it into at least the one-year GICs. Why would you need to do that when they are cashable at any time with a maximum penalty of less than 3 months' interest and you don't anticipate cashing them at all? I'd rather get 3.1% than 2.5% on my money, and I imagine you would too.

You can stagger your deposits into the one-year GICs, and you can have as many of them as you want. So, why not put the monthly 2K straight into the GIC? If you get paid twice a month, put in $1000 every two weeks. It will take a little time on the other end to redeem them all, but I would think your main issue right now is getting the most interest. No matter how many of them there are, you will be able to redeem them all without penalty within 3 months.You may have heard about how much money people save by making more frequent mortgage payments. This is osrt of the reverse of that. The result is less spectacular on this end over five years, but every dollar you add to your down payment could cost you $2 or $3 over the life of the mortgage, depending on rates and amortization.

As suggested, I would put some of it into longer GICs for better return. I hear that you're nervous about tying up all your money, but, right now, you don't have that money except for the 15K, and you are managing just fine. If you are convinced rates will continue to rise, you may not feel that makes sense, but that's a big "if".

You might want to look at DUCA's 3 year GIC. It pays 3.25% but is redeemable annually on the anniversary with no penalty. That gives you the flexibility of a one-year GIC but with a higher rate. I anticipate this offer will be withdrawn soon as it's been around for a while.

You might consider setting up an unsecured line of credit for emergencies at CIBC, since you don't plan to use it. It shouldn't cost you anything to have it although it counts on your credit record and of course if you do use it you would have to pay interest, but it would give you the back-up that may be important to you. Without question, the very best time to set up a line of credit (LOC) is when you don't need it, i.e. now.

I think DUCA also has a different GIC with possibility of early redemption. However, any FI which offers this is going to take a big cut off your interest. With some, the cut is retroactive, and with others it's only from the date you take the money out. Need to ask.

Make sure you top up your TFSA first.

Very easy to transfer to/from CIBC online. You initiate this from the Hubert end. It's free unless you have withdrawal restrictions at CIBC.

I imagine you're going to say you want to keep it all at one financial institution, and Hubert is a good choice for the reasons you have stated. But, if you want to save aggressively, you may want to add another one at some point. Probably not worth it yet though.

I hope that helps.

February 10, 2019
7:15 am
2of3aintbad
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If this will be your first home, you should consider putting 25K (max HBP) in an RRSP. In any case, currently Hubert's 4 year rate is 3.55%, higher than their 5 year rate of 3.50%. My guess is that this will not continue. As others have pointed out, their quarterly cashable 1 year GIC is a good choice, especially when you are less than 5 years from your target date.

February 10, 2019
10:16 am
Denise Milani
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Denise Milani said
1) Does this sound like a good plan overall or are there alternative options that I should look into?
Since you have a 5yr plan, why not do a 5 year GIC first, then 4 3 2 1 and add HISA funds at each GIC purchase. You will get higher rates.

2) Currently, all of my money is in a CIBC chequing/savings account. Will it be free and easy for me to transfer money between the two financial institutions?
Yes easy, set it up with Hubert and pull funds into Hubert.

3) Does anyone know what will happen if for some reason I need to withdraw the money from the GIC (will I be able to with the penalty of loss of interest or will it be not even possible?) This is highly unlikely as I am already planning on always keeping about 3-6 months pay outside the GIC and in the HISA but I would like to know just in case a big disaster happens.
Hubert does not have an early redemption with penalty option but the one year GIC does....look it up on Hubert site.

Outlook financial has early redemption and had a very poor return if you do.  

Or you could put your 2k per month in a one year GIC and keep renewing it every year. That way that money could be all accessible in a 3 month period.

Here is what their website says:

Short-Term Commitment, Long-Term Interest.

We’re happy to offer a one-year term featuring one of the best rates around! This term deposit (which is RRSP and TFSA eligible) will keep you smiling for a full 365 days.

The good news? You’re not locked in for the entire year — you can redeem your term after three, six, or nine months (and keep the interest that’s already been paid to you). The even better news? If you sign up and keep your funds in place for the entire year, you’ll earn an average rate of 3.10% for the year (with compounded interest). Not too shabby, is it? Here’s what you will earn:

The first three months: 2.95%.
Months four to six: 3.05%.
Months seven to nine: 3.15%.
The last three months: 3.25%.
Again, you can choose to redeem your 1 year term at any time. If you do, all interest that has been paid to you is yours to keep, but if you redeem between a quarter you will not receive any interest from that quarter. For example, if you redeem after seven months, you’ll only receive interest up to month six!

February 11, 2019
7:28 am
PurplishSocks
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Sorry I was busy yesterday so I wasn't able to reply but I wanted to thank everyone for their advice.

I think I'm going to open the account with Hubert and start tying down my money to a 4 year forecast in case I need the money earlier and the fact that the interest rate for 4 years is higher than 5. I'll also be taking the advice of continuously ramping down in years (ie. put my money into a 3 year GIC next year) while also putting my savings from paycheques into 1 year GICs every 2 weeks. I definitely see the advantage of this and since I can withdraw the money in 3 months time with the worst case scenario I think it will be okay.

Thanks again for all the advice.

February 11, 2019
9:56 am
Denise Milani
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You have lots of options.

You could also consider a 4,3,2 year GIC for every second or third pay cheque too.

And if you have not used your TFSA allotment consider using that too.

And also the RRSP comment as per above...but I don’t know how that works. If that allows some tax savings and a no pay back withdrawal, why not? See plan here.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

Do you have a plan to use some of the interest for income tax for the earned interest.

And also keep in mind other FI’s may occasionally have specials on 2, 3, and 4 year rates that are better than Hubert. Like Oaken or? Use them too.

I have a tracking sheet on excel to summarize my GICs at matured value.

February 11, 2019
12:26 pm
Loonie
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Yes, the 4 year rate at Hubert is the best on the market at the moment except for Ganaraska Credit Union, which is 4%.
I considered recommending Ganaraska to you, but felt it wasn't worth the inconvenience for the relatively small amount of money that you have currently available to deposit, and also I thought you were likely to go after a five year rate. Ganaraska is a small credit union. The rate will not last much longer. You would have to go to either Cobourg, Port Hope or Peterborough to open an account in person during M-F office hours. I didn't feel it was worth it for the extra amount of interest you would get. But, in the interests of laying everything out, it is a possibility if it interests you or if you happen to live out that way.

However, I think Hubert is your best bet. It offers flexibility, great staff, and, in my experience, they always pick up the phone! They never seem to get "unexpectedly high call volume", unlike most banks, because they have enough staff to service their members. And you never have to press 1, 2, 3, 4 or 5!
(I belong to Hubert.)

Just one caution. Their monthly statements can be hard to follow. I suggest that, in regards to the GICs, you keep your own records. This is particularly important if the one-year rates change, which they do from time to time. It's impossible to find out from your statement what your quarterly rate arrangement was when you bought your GIC if the rates have changed since then. So just make sure you know what it was for each GIC. This can be important if the rate improves and you want to know if it would be worth your while to cash in and reinvest at the new rate. Bear in mind that the new rate will start with the first quarter's rate, so you would need to make sure that was at least as high as the rate for the quarter you would be entering on your old GIC. The one-year rate increased 5 times last year - which is certainly unusual!

February 11, 2019
1:21 pm
Denise Milani
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It doesn’t hurt to have 3 or 4 favorite FIs that offer high rates such as Oaken, Hubert, Accelerate and Outlook or. That way even if only some funds stray away from Hubert for a better rate, your blended return on your investment will be better. A little effort, as this “making money from your money” is a DIY program why not chase the rates when ever possible, within reason. And definitely record your GICs that can be sorted by maturity date. I suggest excel.

February 11, 2019
1:49 pm
Denise Milani
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I also make and a file paper copy of every GIC and sticker them with summary information to make my papers show dates etc in a consistant manner. Hubert and Oaken are odd balls but you can make screen prints as you do your online GIC request. And yes Oaken has an online certicate and they also mail one.

February 11, 2019
3:55 pm
PurplishSocks
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Great ideas. Yeah I was planning on keeping about 4 months worth of pay in the HISA and 8 months in the 1 year GICs while the rest in longer term GICs.

I will also be maxing out my TFSA first as mentioned as I have a lot of room and will probably invest in my RRSP at the very least up to the $25k that I can take out for the first home benefit (as I have 20% matching from my employer) but I haven't looked into anything more than $25k. I will definitely contribute more after my first home but at the moment I think having the easily reachable income will be more useful for the near future (for a home, having a child, wedding, etc.).

I will probably first start with Hubert for now and move on to additional FI when I feel more comfortable with financial planning.

The advice on keeping track of GICs on an Excel sheet is very helpful. I would have been very regretful if I hadn't so thank you for that.

I'm currently setting up an account with Hubert, sadly my online application did not go through and I need to also order some cheques so the earliest I can send my application will be next week.

You've all been a great help 🙂

February 11, 2019
9:45 pm
Loonie
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I question whether those online applications with Hubert ever go through!

Here's another piece of advice with Hubert. Keep a copy of your original application or , at very least, the password you used. You won't be using this password on a regular basis, but if you phone in on an issue which requires access to your account, you will likely be asked for it then.

If you haven't already done that RSP, you might consider putting in less than 25K. By the time that GIC matures, it will be worth more than that, but you can only use 25 for the house.

It's true that you can sometimes get better deals elsewhere, as I illustrated with Ganaraska, but it's a trade-off between the extra amount of work involved and the value of the additional return. With the kinds of amounts that you are looking at, you may not feel it's worthwhile for some time.
I would consider making an exception though for one FI based in Ontario, where you live. So far, Oaken is a good choice. It also diversifies your insurance as it's CDIC insured.
It's a personal choice, but, although I like Hubert very much, I would not personally put all my money in that basket. I prefer to keep most of it in FIs based in Ontario, where I live. Remember that credit unions are governed by provincial legislation, so the rules in Manitoba are going to be a bit different than in Ontario. There may not be a lot of difference, but I am not likely to be as aware of rules in MB.

It's going to take a couple of weeks to get your account set up. You might ask them if they will hold that 3.55% rate for you. i don't know if they will, but rates can change at any time, and Hubert gives, at most, one day's notice.

Please write your comments in the forum.