# The Real Profit on Selling Your Home

Last week we talked about the option of drawing money out of your RRSP to buy a home. Today, I wanted to talk about the other side, about someone selling their home. This example comes from a short story out of Moneysense magazine, and it’s really insightful.

Here’s a math quiz: If you bought your home for \$250,000 and sold it for \$450,000 ten years later, how much did you make? Almost all of us would say it turned into a \$200,000 profit. Well – no, not even close. The example assumes a 5% mortgage with a 10% down payment on the purchase. Here’s what’s missing from the equation, in rounded numbers:

-you have to subtract the original down payment money of \$25,000
-take off the \$4,000 legal fees for the purchase and sale
-deduct the mortgage interest for 10 years of \$160,000
-take off the \$2,200 land transfer tax at the time of purchase
-less an estimated \$19,000 spent on home maintenance
-there’s about \$22,000 of realtor fees from the sale
-and deduct the \$168,000 still owing on the mortgage

That leaves an actual profit of just under \$18,000. Quite different than thinking you’ve made \$200,000. Keep in mind you did have a place to live for a decade, but the real net profit is quite different than the sale proceeds.

# Here Are Five New Insights That Are Definitely Worth Knowing About:

Shell has just rolled out “Pay By Touch” biometric payments. We talked about it a few months ago and now it’s here. Yes, you just need to give them your fingerprint as payment, which is hooked to your credit card. Right now, don’t look for it here, it’s just in Chicago area Shell stations and stores.

E-bay recently started their very own gift cards, for sale through 10,000 grocery stores. But you can also get them on-line to e mail to anyone you choose for amounts under \$500. But I have a question: With tens of billions of gift cards sold each year, stores get a commission for selling them. What? You thought they sell them to help you out? Nice try. So when we buy the directly from the retailer how come we don’t get a discount?

There is now something called a virtual or disposable credit card. It’s a one-time use card. You get a temporary number that’s linked to your real credit card number and it’s governed by your same cardholder agreement. But it makes nervous people happy as they can use it on-line, and with merchants they don’t really trust. Right now they’re issued by Bank of America and Citigroup. But I never understand why so many people spend all that energy worrying about this kind of stuff. Repeat after me: By law, you are NEVER on the hook for any fraudulent charges on your account. Relax…

An RBC Survey last fall reported that about half of all new mortgages made in Canada are 40-year terms. Great news for lenders – probably the worst news for those who actually do it. It’s financial suicide: On a \$200,000 mortgage the payment might drop \$160 a month, but you’re adding \$173,000 of interest. I can think of at least five or six ways to make a 25-year mortgage work, instead of this, and it’s not a stretch to figure there are hundreds of things I’d rather do with \$173,000 interest than gifting it to one of the mega banks!

Last month, Visa issued a \$19 billion public offering. That was one of the biggest private offerings ever, and on March 18th, the first day of trading, the shares opened at \$44. By the end of that day, they were at \$56. Debt really does pay if you’re a shareholder, but NOT if you’re broke and paying the interest on the other end of the food chain!