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Trump’s Huawei threat a risk to Canadian and global tech in 2019: Don Pittis

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Reports that U.S. President Donald Trump is threatening to up the stakes in his battle with Chinese tech giant Huawei in 2019 seem at first glance the kind of Trumpian sniping the world has grown to expect.

But if it is true, as Reuters reported this past week, that Trump may sign an executive order prohibiting U.S. firms from buying Huawei technology, the issue goes far beyond Huawei and 5G wireless networks to one that could transform the global tech industry. And not for the better.

The reason is that Huawei — and Chinese chip maker ZTE, which the U.S. president also threatened to ban — are not unique. Instead, they are merely a couple of examples of Chinese technology that is not just catching up to the best in the world, but beginning to exceed it.

China, tech superstar

For Canadian technology businesses trying to see their way forward, facing a global tech leader that is in conflict with the U.S. is an unfamiliar experience.

Despite the Soviet Union’s space race victory with its 1957 launch of Sputnik 1, humanity’s first artificial satellite, the collapse of the Soviet communist empire nearly 30 years ago revealed a creaking technological relic.

Canadian technology experts say China is something entirely different and people who try to make the comparison with Eastern Europe, where the Trabant was the communist answer to the BMW, have it all wrong.

Some analysts say the poor quality of the Trabant and the time it took to order one were significant factors in the collapse of communism in Eastern Europe. But China’s rise as a tech industry powerhouse is a different story. (Arnd Wiegmann/Reuters)

Pretty well everyone now knows that China is a developing technological competitor. But there are growing indications that, barring some political or economic cataclysm in China, or a sudden technological golden age here in North America, China is on its way to becoming not just a technological powerhouse, but the technological powerhouse. It is becoming the global tech superstar.

And at some point Canada is going to have to make some crucial decisions on how it will cope with that change. And it may find its interests do not coincide with those of the United States.

“On Chinese technological prowess, they are now graduating twice as many graduates as the United States from university, but they’re graduating five times as many STEM graduates,” says Gordon Houlden, director of the University of Alberta’s China Institute. STEM stands for science, technology, engineering and math, the kind of graduates who make a real difference in the race for world-beating know-how.

Leapfrogging the world

In many ways, the explosive developments in Chinese science and technology have no equivalent since pre-war Germany leapfrogged the world in many areas of science and industrial production.

Over the past month, the arrest in Canada of Huawei executive Meng Wanzhou, at the request of U.S. prosecutors, has helped focus attention on that company.

An exhibition marking the 40th anniversary of China’s reform and opening up at the National Museum of China in Beijing shows off the country’s space technology. (Thomas Peter/Reuters)

While the charges against Meng have nothing to do with 5G — she’s accused of misleading financial institutions about her, and Huawei’s, relationship with a company that did business with Iran — the case has spotlighted Huawei’s state-of-the-art contributions to communications technology.

There has been much debate over whether Huawei’s involvement in 5G, or even the sale of its phones in the world market, represent a Trojan horse for the Chinese government, giving the country’s security forces backdoor access to our deepest secrets.

Not just telecom 

But that focus on 5G may be misleading. For one thing, 5G is not a single gizmo. It is more accurately a kind of marketing title for the fifth generation of mobile phone technology. As such, it represents a host of technological subsets, mostly software, some of which are being developed in Canada, says R&D specialist Rick Clayton, a partner with the Ottawa-based consultancy Doyletech.

Clayton says Huawei is just one company operating in an industrial cluster in the Ottawa suburb of Kanata North, where Canadian engineers, some of whom used to be at Nortel Networks before its collapse, work on new software components.

“There’s a fair bit of implicit and explicit sharing between the companies,” he says, which is part of what makes an industrial cluster strong.

And this by no means applies just to the smartphone sector.

One way of sharing is to license intellectual property that someone else has already invented, says Mark Henderson, former owner and editor of the specialist newsletter Research Money.

“They can get it immediately as opposed to working it out of their lab over a period of months or years,” he says.

That international sharing of technology between companies saves money and speeds up progress. The financial damage of cutting off access to intellectual property invented in China, especially as its technology pulls ahead, is hard to calculate.

Chinese open source

Another common way of sharing is called open source software, something that’s been around for years and famously includes the operating system Linux, where employees from many different companies work to build and improve chunks of programming components that are widely used in the systems of those and other companies.

An increasing number of those open source projects are being invented and co-ordinated by Chinese software developers, and that trend is only likely to grow as China increases its number of STEM graduates.

Another potential mistake compounded by the focus on Huawei is thinking that China’s growing technological skills are isolated in just a few areas, such as telecom.

While the experts interviewed for this piece say the U.S. still has an overall technological lead in many sectors, China is not just catching up, it is pulling ahead.

According to the MIT Technology Review, China has become the one to beat in space technology, while its southern city of Shenzhen is racing to outdo California’s Silicon Valley as “a global hub of innovation, entrepreneurship and manufacturing.”

Currently, most global products include the best innovations from around the world. U.S. firms use Chinese-invented technology and vice versa. 

A Huawei executive has said the company will do absolutely anything, including opening its code to detailed inspection, to prove that it is not a threat. Whether a ban is worthwhile can only be determined by the best and most independent security experts. And banning Huawei to eliminate a purported backdoor does not guarantee U.S. systems will be secure from international hackers who have used other methods of entry.

If instead the security concerns are actually part of a political attempt by Trump to weaken China’s technological advantages, the world may be on the verge of a watershed that could hurt everyone. The risk is there could be a new technological cold war that divides the world, forcing countries to choose between two increasingly incompatible technical — and political — systems.

As Gordon ​Houlden of the China Institute says, besides the business cost and difficulty of untangling two sets of competing technology, economic interdependence helps prevent wars. He says as an outward-looking trading nation, Canada should do everything it can to try to prevent such a technological fissure and the resulting political divide that will inevitably hurt both the U.S. and China.

Ultimately, says Houlden, if push comes to shove, Canada must stand shoulder to shoulder with the U.S., its longtime ally and security guarantor. 

But avoiding a technological split into “we” and “they” is not just in the interests of Canada, but those of the global technology industry both inside and outside the American sphere. 

And if that doesn’t matter to you, consider this. If we gang up with the U.S. against China’s increasingly sophisticated knowledge industry, maybe sometime soon we will no longer be able to get our hands on the coolest tech.

Follow Don on Twitter @don_pittis

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Real Estate

5 ways to reduce your mortgage amortization

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Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know

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Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages

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This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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