Money123: Real money, artificial intelligence

Putting the ‘AI’ in ‘finance’

Would you let an artificial intelligence tool set your budget? How about shaping your savings goals? Would you let AI pick stocks for you?

A number of Canadians, particularly the younger generation, is using AI to manage their finances, according to a new poll published this week by BMO.

Nearly a third of respondents to a recent survey said they were using AI for tasks like setting budgets, figuring out new investment strategies and, most popularly, learning about financial topics.

Even portfolio managers are using AI to help summarize information about the markets and particular stocks’ performances ahead of meetings with clients, says Ben Felix, head of research at PWL Capital.

But he cautions that there are limits to what AI can do at this stage in the game, and Canadians ought to treat the source of any advice with a grain of salt.

“If you’re trying to decide, ‘Should I contribute to my RRSP or my TFSA?’ I’d be, at this stage, a little bit nervous about that coming from an AI,” Felix says.

30-year mortgages are here

Some Canadian homebuyers can now stretch their mortgage amortizations out to 30 years as new rules from the Liberal government kicked in Aug. 1.

The extended amortizations, which give homeowners a longer time to pay back their loan in exchange for smaller monthly payments and increased borrowing power, are open to first-time buyers purchasing a newly built property with an insured mortgage.

Experts who spoke to Global News this week said that for those who can qualify for the extended mortgages, it could help to break into Canada’s often-unaffordable housing market.

But there are many caveats that limit how many would-be buyers will be able to access the 30-year amortization regime, particularly in Canada’s priciest cities like Toronto and Vancouver, says Victor Tran, mortgage and real estate expert at Ratesdotca.

“There’s actually not that many people across the country that are going to be able to take advantage of this new program,” Tran says.

Here’s what to know about how changes in amortization could affect individual buyers and housing affordability in Canada.

Automatic tax filing rolls out wider

The Canada Revenue Agency is expanding its “SimpleFile” services that allow some lower-income Canadians to file their income tax returns just by answering a few questions.

The CRA said this week that more than 500,000 eligible Canadians were invited in July to file their 2023 tax returns by phone, online or by mail using the agency’s SimpleFile services.

The national pilot program, which was included in the 2024 federal budget, is to help low-income Canadians who have never filed a tax return or who have a gap in their filing history.

Using this service, tax returns can be filed in as little as 10 minutes, the CRA claims.

Including a previous expansion of its SimpleFile by Phone services, the CRA says more than two million Canadians have so far been invited to the pilot program.

Read more to find out how to file your taxes (nearly) automatically.

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– THE QUESTION –

“Our mortgage is up for renewal in 3 months and my husband and I are debating taking a variable rate for the first time. Our mortgage only has 3 years left after our current term and we are considering going variable for the remainder. My question is, should we go with fixed or adjustable payments? If we do adjustable, we would see our monthly payments go down if the interest rate keeps falling, I know. But if we have the same payments and the interest rate drops, does that mean we would pay off the mortgage faster? Could we be done before 3 years are up? The idea of being done our mortgage a little bit sooner is nice but I am not sure if this is how that works. Thank you.”

— A Money123 reader 

“First, congratulations on starting your last mortgage term! It sounds like you understand fixed and adjustable mortgage payments well. With a variable-rate mortgage and a fixed payment, you’d reduce your mortgage principal faster in a falling-rate environment. However, if rates were to increase, you’d see a reduction in the mortgage principal repayment, and you would need to increase your payments, or make lump sum pre-payments to finish your mortgage in the three-year term.

If I may share an opinion, an adjustable payment offers more control over your mortgage and transparency. For borrowers who prefer the security of set payments, I recommend a fixed-rate mortgage. In my experience, some homeowners find themselves in unfavourable situations where rates have increased and their fixed payments are insufficient to cover the interest payable on their mortgages. These borrowers are surprised to discover their mortgage balances are higher than the amount shown on their statements and online banking, as the unpaid interest payable is accruing in the background.

As always, I recommend speaking with an independent mortgage professional to explore your options.”

– Nicole Hayes, BC Mortgage Expert

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