The new law aims to prevent non-Canadians and corporations controlled by non-Canadians from purchasing some, but not all, residential property in Canada in 2023 & 2024.
The Federal Government hopes the Act will expand real estate supply and make homes more affordable for Canadians.
But considering the law’s geographic restrictions and its plentiful list of exemptions (both outlined below), I predict the impact on Canada’s housing market will be very limited.
Another last-minute addition to the guidelines is problematic and unfair to those folks on work permits. A new restriction requires buyers on a work permit must wait at least three years to purchase a home, and the buyer must show three years Canadian tax returns to qualify. Our government will let folks into the country to work, pay taxes, but must wait at least three years to buy a house. We are trying to determine if this restriction applies outside the restricted geographic area. Hmmm.
Here is when, where and how the law applies.
Where does the ban on foreign homebuyers apply?
The new Act applies to residential properties in a census metropolitan area or a census agglomeration as defined by Statistics Canada 2021. These areas are:
Census Metropolitan Areas (A-Z)
Abbotsford-Mission Kelowna Saguenay
Barrie Kingston Saint John
Brantford Lethbridge Sherbrooke
Calgary London St Catharines - Niagara
Chilliwack Moncton St. John's
Drummondville Montreal Thunder Bay
Edmonton Nanaimo Toronto
Fredericton Oshawa Trois-Rivieres
Greater Sudbury Ottawa-Gatineau Vancouver
Guelph Peterborough Victoria
Halifax Quebec Windsor
Hamilton Red Deer Winnipeg
Kamloops Regina
Census Agglomerations (A-Z)
Granby North Bay Sarnia
Grande Prairie Prince George Sault Ste Marie
Medicine Hat Saint Hyacinthe Wood Buffalo
To which property types does the ban apply?
The prohibition on foreign buyers applies only to residential properties as described below.
The Act defines residential property as buildings with three homes or less, as well as parts of buildings like a semi-detached house or a condominium unit. Examples of such residential properties include:
The law does not prohibit the purchase of properties with 4 or more residential units.
The ban also does not seem to apply to Type A or B vacation properties, such as cottages, vacation homes, or lake houses.
Which non-Canadians might be exempt from the ban?
Certain criteria must be met in all the below scenarios. To see the full list of exemption criteria, visit cmhc-schl.gc.ca.
Which non-Canadians might be exempt from the ban?
Certain criteria must be met in all the below scenarios. To see the full list of exemption criteria, visit cmhc-schl.gc.ca.
What documentation can non-Canadians use to show they are exempt?
Non-Canadians can show the following documents to demonstrate compliance. These proof points may be required in a mortgage application
Other documents that show they live in Canada (for example, rental agreements, utility bills, or records of travel in and out of the country)
]]>We are so grateful for every referral you give us. To show our thanks for your trust and kind words, we want to give the gift of supporting your local food bank this holiday season!
From December 1, 2022 to January 31, 2023 anyone who refers their family and friends to Jencor will be entered to receive a $500 donation to the Calgary Food Bank or the registered Canadian food bank of their choice.
How it Works
When we receive a call or email from a new client, we will ask who sent them our way. The referrer’s name will then be entered into our referral pool for a chance to win.
We will draw one winner at random in early February 2023. The winner will receive a $500 donation to the Canadian food bank of their choice and will be announced on our website, social media channels and in our newsletter.
Thank you for working with us to make a difference in our communities.
Happy holidays from the Jencor team!
]]>While curb appeal should not be forgotten in winter months, the focus should be centered on creating a warm, comfortable, and welcoming space. You can do this through the following:
While there is some extra work with selling your home in the winter due to the weather conditions, it can pay off! Buyers tend to be highly motivated and often there is less competition for sales during this time, giving more focus to your home.
]]>Up for renewal?
If your mortgage is approaching renewal and you are considering a transfer or switch – great news! You won’t be charged a penalty. BUT you are still required to qualify at the current qualifying rate and need to consider potential costs around legal charges, appraisal fees and penalty fees (if applicable). In some cases, the lender will offer you the option to include these fees in your mortgage or even cover the costs for you.
Currently have a collateral charge mortgage?
If you have a collateral charge mortgage (which secures your loan against collateral such as the property), these loans cannot be switched; they can only be registered or discharged. This means you would need to discharge the mortgage from your current lender (and pay any fees associated) before registering it with a new lender (and pay any fees associated).
Still locked into your mortgage?
If you’re considering a transfer or switch in the middle of your mortgage term, you will likely incur a penalty for breaking that mortgage. Typically, transfers and switches are done to take advantage of a lower interest rate (and lower monthly payments), but you want to be confident that the penalty doesn’t outweigh the potential savings before moving ahead.
Things to consider for a transfer or switch:
If your mortgage is currently up for renewal, consider reaching out to your Jencor mortgage advisor. Not only can they advise you of any penalties or fees that may be associated with your desired transfer or switch, but they also have the knowledge and ability to shop the market for you to find the best options to meet your needs. This extensive network of lender options allows brokers to ensure that you are not only getting the sharpest rate, but that the mortgage product and terms are suitable for you now – and in the future.
Originally authored by Dominion Lending Centres Inc.
https://dominionlending.ca/mortgage-tips/the-real-deal-about-transfers-and-switches
]]>Don’t wait until you go to buy something and you are turned down. And don’t worry… checking your own credit does not affect it. So, what should you be looking for?
MISTAKES
Make sure your personal information is correct and up-to-date. Also check that your date of birth and any other identifying information is correct as well.
ERRORS
Even creditors make mistakes sometimes so carefully look over any negative information appearing on your credit that isn’t true. Creditors are required to change any errors that you find on your report.
HINT: Send a letter to the credit bureaus, as well, to let them know there was an error and send a copy to the credit agency who incorrectly reported to motivate them to take care of it in a timely manner.
OUTDATED INFORMATION
Credit agencies are required to remove certain information from your credit after a certain number of years. For example, if you got behind on your payments but then went back to your normal payment schedule, that late history is to be removed after 6-7 years. Don’t assume it will be. Be proactive and follow up to make sure it was done.
FRAUD
We all know someone who has had their identity stolen and nothing wrecks a credit score and report more than someone hijacking it. It doesn’t necessarily have to be a stranger either. Family and friends have been known to “borrow” someone’s credit. Be smart and make sure to protect your credit from the known and the unknown.
WHY DO ERRORS MATTER?
Even minor errors like a misspelled name or a wrong address can keep you from getting a loan or even lower your credit score. Keep your credit as healthy as possible by checking it every year. Choose a day that will be easy to remember like your birthday or the day you file your taxes.
Authored by Dominion Lending Centres Inc.
]]>It is easy to think that this is the most important question, but there is a lot more to your mortgage contract than just the rate. And so, the rate debate continues!
The rate debate is a hot topic in the mortgage world. Not just the numerical value of the rate itself, but the importance of the rate versus other factors in the mortgage, such as terms and penalties. As a borrower, it can be easy to get caught up in just the rate but ignoring other factors could cost you in the long run.
Before we get into these other factors, let’s talk rate. While not the only factor, it does continue to be an important decision criteria with any mortgage product. The interest rate is the percentage of interest you are paying on the principal loan; lower interest rates mean more money is paid towards the mortgage loan – and who doesn’t want that?
VARIABLE VS. FIXED
There are two types of mortgage rates: variable-rate and fixed-rate.
A fixed-rate is just that – a fixed amount of interest that you would pay for the term of the mortgage. A variable-rate, on the other hand, can fluctuate depending on the markets. A variable-rate is based on the current Prime Rate, which is based on the Bank of Canada’s overnight rate target.
Fixed rates are typically tied to the world economy whereas the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying. When the economy is faced with inflation or other challenges, interest rate will rise to dampen market activity.
Fixed-Rate Mortgage: First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space. The pros of this type of mortgage are that your payments don’t change throughout the life of the term. The downside is that should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.
Variable-Rate Mortgage: As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on Prime. When considering a variable-rate mortgage, some individuals will set standard, sometimes called static, payments (based on the same mortgage at a fixed-rate). With this option, when Prime drops and interest rates lower, they are paying more to the principal as opposed to paying interest. If the rates go up, they simply pay more interest than to the principal loan. With this option, your payment amounts do not change. It is the ratio of how your payment is divided between interest and principal that will change. This is done automatically.
Other variable-rate mortgage holders will choose an adjustable variable rate mortgage. This simply allows their payments to drop with Prime Rate decreases, or increase should Prime go up. If considering this option, you will want to take a close look at your income, financial stability, and risk tolerance. Can you afford higher payments if Prime goes up?
BEYOND RATES
When considering your mortgage, other considerations such as penalties can be important factors for deciding on a mortgage product. If you have two competing products, say a 1.65% interest fixed-rate and a 1.95% interest variable-rate, it may seem like a pretty easy decision. But, what about the ability to make extra payments? What penalties could you be faced with?
Given that nearly 70% of fixed mortgages are broken before the term ends, penalties are an important variable. When looking at the fixed versus variable rate mortgage, penalties can be quite different. Where variable rates typically charge three-months interest, a fixed rate mortgage uses an Interest Rate Differential (IRD) calculation.
The aim of an IRD is to calculate the interest lost if your lender were to turn around and lend the funds at today's rates. Lenders use either their posted rate or the Canadian Bond Yield, which results in higher penalties.
Here’s how it works.
The IRD is calculated as the outstanding balance of your mortgage multiplied by the time remaining in your mortgage, multiplied by the difference between your mortgage interest rate and the current rate offered by your lender, including any available discounts, for the term closest to that which remains on your mortgage.
For example: you have a five-year term, and need to leave your mortgage early with three years (36 months) remaining.
IRD calculation
.06 (your interest rate) – .04 (current posted rate) = .02 (the difference between your existing interest rate and the bank’s current rate)
.02 x $300,000 (amount of mortgage remaining) = $6,000
$6,000 ÷ 12 (months) = $500 x 36 (number of months left on mortgage) = $18,000
Estimated IRD penalty payment: $18,000
Let’s compare that to a penalty that would equal three months of interest.
Three months of interest calculation
.06 (your interest rate) x $300,000 (amount left on mortgage) = $18,000
$18,000 ÷ 12 (months) = $1,500
$1,500 x 3 (months) = $4,500
Estimated variable-rate mortgage penalty payment: $4,500
In some cases, penalties for breaking a fixed mortgage can sometimes be two or three times higher than that of a variable-rate. While the interest rate may be lower with a fixed mortgage, the lower penalties associated with variable mortgages can be best if you anticipate breaking your term early for any reason.
CONVENTIONAL VS. HIGH-RATIO MORTGAGE
Another consideration beyond the interest rate is whether you will be obtaining a conventional or a high-ratio mortgage. Whenever possible, it is recommended to put 20 percent down payment on a new home. This results in a conventional mortgage. However, not everyone is able to do this! It is common for buyers to put less than 20% down and end up with a high-ratio mortgage product.
So, what does this mean?
High-ratio mortgages need to be insured by either Sagen, the Canada Mortgage and Housing Corporation (CMHC), or Canada Guaranty. This is due to the Bank Act, which only allow financial institutions to lend up to 80 percent of the purchase price WITHOUT mortgage default insurance. Insurance on the mortgage is important to protect the lender should you default on your payments.
The difference between conventional and high-ratio mortgages is that high-ratio mortgages require insurance, which results in an insurance premium. This is added to and paid along with the mortgage, so it is an important factor when considering your monthly payments. These premiums are based on the loan-to-value (LTV), which is how your loan amount compares to the value of your home.
All high-ratio mortgages are required to have mortgage insurance, but some homeowners with a conventional mortgage may choose to pay for mortgage insurance to get a better rate.
SMART QUESTIONS TO ASK
To ensure you understand your mortgage contract, and how it could affect you now and in the future, we have compiled a few smart questions to ask before you sign.
These are just a few examples of good questions to ask. It is important to do your research and be diligent with any contract you are signing.
There is no single, magic mortgage option that works best for everyone. Every situation is unique and should depend on your circumstances: your income, financial security, plans and dreams for the future, intentions for your property, credit score, risk tolerance, and more.
Contacting a Jencor mortgage broker today can help ensure you understand what you are agreeing to, and that you are getting the best mortgage product for you!
]]>Before you launch into this purchase there are a few things you should know, depending on which type of second property you are looking to purchase.
SECOND PROPERTY WITH INTENTION TO RENT
Buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases. Before you look at purchasing a rental property, consider:
Rental income from the property can be used to debt service the mortgage application but bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you decide to sell in the future.
VACATION PROPERTY
While vacation properties are not always the perfect investment, they are popular options for people who want to get away from it all and build memories!
Cottages and vacation homes are classified as either Type A or Type B properties, which have different criteria.
Type A Cottage / Vacation Home Criteria
Type B Cottages Criteria
Buying a Type A property is essentially like purchasing a second home with a minimum of 5% down. This type of property can be refinanced as long as 20% equity remains in the property.
Type-B properties require a 10% minimum down payment as a second home purchase with CMHC/Sagen mortgage loan insurance and cannot exceed a $350,000 sale price (although some exceptions are available on a case-by-case basis). Type-B properties generally have limited-to-no refinance options.
Interest rates for vacation properties might be 0.10-0.20% higher than a traditional mortgage because property is not ‘owner occupied’ year-round. It will depend on the lender.
If you are considering buying un-serviced land, know that this typically requires a 50% down payment, though closer to 25% is possible for prime locations (like a waterfront lot).
SECONDARY PROPERTY
Most people are trained to stay out of debt and don’t tend to consider using the equity in their home to buy an investment property, but they haven’t realized the art of leveraging. If you’re using equity from your primary residence to buy a secondary property, keep in mind that the interest you’re using is tax deductible. Consider that you’re buying an appreciating asset, and if you put a real estate portfolio and a stock portfolio side-by-side, they don’t compare.
WHO IS A GOOD CANDIDATE?
You might be surprised to learn that you don’t need to make six figures to get in the game. Essentially, you just have to be someone who wants to be a little smarter with their down payment. Before taking on a secondary property, remember that the minimum down payment is 5% of the purchase price – unless you are intending to rent, in which case it is 20% down.
When it comes to purchasing a secondary property, whether for investment or rental or vacation, it can be a great opportunity! Your Jencor mortgage broker can work on your behalf to find the best solution for your unique needs.
AIR BNB ON YOUR MIND?
More and more Canadians are hopping on the short-term rental train as Air BnB’s popularity has sky-rocketed over the last few years. It’s not a bad way to earn extra money, but don’t forget there are a few things to consider:
The more services you provide as a host, the greater the chance that your rental operation will be considered a business. There are different requirements for commercial real estate financing that we can talk about.
Buying a second property can be simple with mortgage expertise on your side. Give us a call and let’s see how we can make your investment or vacation home happen!
Based on “Investment Properties” by Dominion Lending Centres Inc.
]]>Home renovations can increase the value or habitability of your home. But remodelling projects can be pricey depending on the scale, labour, type of home, permits, and cost of materials. For these reasons, many people consider financing options for home improvements.
If you already have an existing mortgage, you may consider cash-out mortgage refinancing. To qualify, you have to refinance the existing mortgage for more than the current one you owe. You can obtain more cash if you have owned the property for a long time. That is because your equity on it will be more. Another thing that may qualify you for more cash is when the present home's value is higher than when you purchased it.
The benefits of considering this option are:
Credit cards are good options if you want to conduct smaller, short-term projects. Be aware that the interest rates are high, and some require repayment within a short time.
The benefits of using credit cards are:
A HELOC is a popular home improvement financing option. You can use the equity on your home to get money for your renovation. At least 20% equity on the property is required by most lenders to qualify.
Your lender will also look at the home's market value. It is more beneficial if the current home's value is higher than the value at purchase.
The benefits of using this option are:
Unsecured personal loans are easier to assess, provided you have steady employment, income, and a good credit score. Approach the lenders and go through the terms and conditions. If favourable, you can get the loan and make payments based on the agreement.
The benefits here are:
Eligibility requirements for home improvement loans
Most lenders are willing to approve your loan if you can prove you will repay it. To get a larger loan with lower rates, you need the following:
How to choose the best home improvement loan
Before you decide on a financing option, determine the total cost of the project and the expected value the renovation will add to your home. It is also essential to know the timeframe in which you will require funds.
Things to check before choosing a financing option are eligibility requirements, term length, loan amount, and interest rates. All these are vital in deciding the ideal loan for your home and a mortgage broker can assist you free of charge.
The bottom line
It is essential to know that home renovation is not tax-deductible in Canada. However, you may obtain tax credits. Canadians have a nationwide tax credit with a value of 20% for amounts above $2,500. You can also add your home renovation costs to the mortgage if you intend to purchase a home that requires improvements.
Authored by Leenan Homes, a team of architects, designers, construction professionals and real estate industry experts based out of Regina Saskatchewan. For more information about remodelling or constructing a home, visit leenanhomes.com.
]]>If you live paycheque to paycheque, the idea of somehow having enough money to invest and eventually have financial freedom seems about the furthest thing possible.
But experts in financial education like to point out, no matter your income and place in life, a few changes to the way you’re living life can make all the difference. It’s never too late to start learning and reverse course. If you’re still not convinced, here are a few simple ideas to get you started.
PRETEND YOU EARN LESS THAN YOU DO
Give yourself a cut in pay. The goal is to put 10% in savings from each paycheque into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every pay day.
CREATE A BUDGET
In order to stop living paycheck to paycheck, you need to know where that money is going. Creating a budget is simple with Google docs or look into other online tools and sites to get started.
BUILD AN EMERGENCY FUND
Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.
CONSIDER DOWNSIZING
It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of that cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.
PAY DOWN DEBT
If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.
DON’T FORGET YOUR FUTURE
Putting at least 3% of your paycheque into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future!
Authored by Dominion Lending Centres Ltd.
]]>Here are some tips to consider when choosing window coverings:
New Safety Regulations for Cords
Importantly, there are a few new Government of Canada safety regulations to be aware of. The new restrictions and safety measures were put in place to reduce the risk of strangulation. Any exposed single pull cord, chain, or looped cord mechanism must not exceed a length of 22cm. The new restrictions are in effect as of April 30, 2022. For more information, visit Corded Window Coverings Regulations (justice.gc.ca).
There are several alternatives to cord systems, and these are growing in popularity! You might consider:
Talking to a window covering expert can help you select the best blinds or curtains for your space. There are options for everyone, and knowing your goals, style, and window specifics will go a long way to finding the perfect fit.
Authored by Sun Blinds YYC, a preferred partner of Jencor. For more window coverings advice and great pricing, visit sunblinds.ca/calgary.
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1. It’s all in the numbers
Regardless of whether you are shopping for a pre-built home or are looking to create your own from the ground up, it is vital to know what you can afford and stay within budget. This is the key to building a home that you will be able to enjoy for the next 20 or 30 years, while still maintaining your financial stability.
When calculating the cost of building your home, there are many components to think about, such as construction materials; contracts; tax benefits; funds for the down payment; and a slush account. In Calgary AB, the typical cost to build a house is between $185 and $400+ per square foot. In some cases, it could cost as much as $500+ or more per square foot.
Overall, the average cost to build a house can range from $300,000 to $350,000 for 1,000 square feet to double or triple that amount. For example, an average 2,500 square foot home could cost between $500,000 and $875,000 to build, depending on materials, design, etc.
2. Choose a reputable builder
This one seems pretty straight forward, but when you start looking it can quickly become overwhelming when you realize how many options there are. When it comes to determining the head contractor for your project, careful research is needed. Another option is to consult friends and family members who have gone through the process or ask your realtor for a referral.
3. Build a home for tomorrow
As tempting as it can be to personalize your home and include every cool little feature you can think of it is important to always keep resale value and practicality in the back of your mind. Life can often throw a few curve balls that, for one reason or another, may result in your having to sell your home in the future. If that time should ever come, you will want to be able to appeal to all buyers easily and not have to hold the house longer than necessary. Ask yourself if the features you are putting into your home will appeal to others, and if the design suits the neighborhood you are building in as well.
4. Go green!
Now more than ever energy efficient upgrades are easy to add to your home. To make your home as efficient as possible, it is important to incorporate these options into your design BEFORE you start building. Options such as energy efficient appliances, windows, HVAC systems, and more can save you money in the long run and may also make you eligible for certain grants and discounts. For instance, the Canadian Mortgage and Housing Corporation (CMHC) green building program rewards those who select energy efficient and environment friendly options.
5. Understand the loan
Aside from the costs of building a new home, what does a mortgage look like for an unbuilt home? In many cases, this is where a “construction mortgage” might come into play. To properly qualify for financing on an unbuilt home, you need to give your Jencor mortgage advisor a budget that includes both hard and soft costs, as well as the reserve of money you plan to have set aside in case you run into unexpected events.
For example, based on the lender loaning up to 75% of the total cost (with 25% down):
It is also important to note that the lender will also consider the appraised value of the finished product. This value is determined before the project begins. In this example, the completed appraised value of the home would have to be at least $600,000 to qualify. The buyer would have to come up with the initial $150,000 to be able to finance the total cost of $600,000.
Depending on the lender, you may have a timeframe within which you need to complete construction (typically between 6 and 12 months).
When it comes to construction loans, there are a few other key points to remember with regards to repayment:
In addition, a lender will always consider the marketability of a property. This includes not only demographic aspects, but also looking at the geography. For instance, a lot in a secluded area with minimal market demand may not be a property that they will be willing to lend on.
There are a lot of things to consider when you build a home, but a few focus areas that can keep you on track and on budget are to have a solid plan in place, work with a builder you trust, build a strong team around you that can be there from start to finish, and to do your research.
Once you have decided to build, call your Jencor mortgage advisor. They can help you get the ball rolling and guide you to the first step of breaking ground on your new home!
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If you buy the home with your spouse, common-law partner, or other individuals, each of you can withdraw up to $35,000. Income tax will not be deducted from the amount withdrawn, and the withdrawal amount will not be included in your income.
Qualifying for the Home Buyer’s Plan
There are some conditions that must be met before applying to withdraw funds and other conditions must be met when a withdrawal is made. One of the conditions that must be met before applying to withdraw funds is that you must enter into a written agreement to buy or build a qualifying home.
For more information, see the Canada Revenue Agency (CRA) information on the Home Buyers' Plan (HBP), including conditions for participating in the HBP.
Repayment of funds borrowed from your RRSP
See Important Dates for RRSP, RDSP, HBP and LLP on the Canada Revenue (CRA) website.
Authored by Dave Lougheed of Lougheed Wealth Management, a preferred partner of Jencor. For more financial advice, visit www.lougheedwealthmanagement.com.
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Real estate tends to see a strong return on investment over the long term. And it makes up part of a well-rounded investment portfolio.
But there’s no doubt about it: buying a home is also one of the biggest financial decisions you will make.
There are advantages to both renting and buying. Ultimately, it will come down to what makes best sense for you and your lifestyle. For this reason, it’s important to consider your options and seek expert advice.
Let’s break some of these advantages down.
Advantages of Renting
Lower costs – When you rent, you don’t have to worry about paying property tax or maintenance costs. Rent tends to be cheaper than mortgage payments (but not always).
Greater flexibility – Unlike a mortgage, renting gives you more freedom to move with fewer or no penalties.
More time – The responsibility of fixing up rental properties falls on landlords and property managers. When you rent, you don’t have to spend time on these projects.
More available cash flow – As long as your rent isn’t eating up a huge chunk of your pay, you will have more available cash flow to put towards alternative investments.
Advantages of Owning
Building equity – With every mortgage payment you make, you will build equity in your home. Your payments will include interest payments, but the amount that goes towards interest will decrease overtime. You can access the equity in your home should you ever need extra cash.
Greater stability – When you own your home, you won’t face eviction. Your living situation is more dependable and can reduce stress caused by the uncertainty of renting.
Retention of any capital gain – If you eventually sell your home, you may realize a capital gain. As long as the property was your principal residence, you won’t have to pay tax on this gain and can pocket the profit tax-free.
Building good credit – If you make all your mortgage payments on time and in full, you will make a big, positive impact on your credit score.
More control – Your house, your rules! You have the freedom to paint, have pets, and make home improvements to your heart’s content.
Investment in a generational asset – Real estate is very straightforward investment. If you pay off your mortgage loan, you will have an asset that can support you in old age and that you can pass on to your family. Like many other assets, the value of real estate can fluctuate considerably in the short term, but over the long term it is shown to be stable and to increase in value.
After reading the above, perhaps you’re thinking, “Home ownership sounds great. But how do I know I can afford it?” If you’re unsure, you can apply the 5% rule.
Apply the 5% Rule
When you rent, your rent payments are your unrecoverable costs (meaning money you won’t recoup).
When you own, things like property tax, maintenance costs, and mortgage interest payments are your unrecoverable costs. As a rule of thumb, the unrecoverable cost of homeownership is about 5% of the home’s value annually.
The 5% rule works as follows:
If you can rent annually for less than 5% of the value of a comparable home, you might be better off renting and investing the difference. If renting is more than 5% annually (or about on par), that’s a good indication that you’re better off buying.
It’s important to remember that neither renting nor owning is a superior option, necessarily. Both have pros and cons.
The decision of whether to rent or buy is highly personal and depends on where you live, your values, and your vision for your life.
For Jencor, there are no cookie cutter approaches. We offer mortgage advice tailored to our clients’ unique circumstances.
Use the information outlined here to start asking yourself the right questions and reach out when you’re ready to talk your decision through.
We are here to help, and our advice is always free!
Contact uwc@mortgageconnection.ca or 1-877-245-3636.
]]>But did you know that interest rates for each type are determined by different factors?
While both fixed and variable mortgage rates are impacted by a consumer’s financial health, they are also affected by two distinct largescale economic factors. These factors include activity by the Bank of Canada and by the Government of Canada. Here’s how it works.
What determines variable mortgage rates?
Variable mortgage rates are short-term interest rates that fluctuate in tandem with a lender’s prime rate. Prime rates are most influenced by the Bank of Canada’s “overnight” rate, also called its “policy interest rate.”
The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves. They settle their accounts at the end of each business day based on this rate. Eight times a year, the Bank of Canada – or BoC – influences short-term interest rates (like variable mortgage rates and lines of credit) by raising or lowering the target for the overnight rate. This is how the BoC carries out its monetary policy in an effort to keep the economy stable.
When the BoC increases the overnight rate, it becomes more expensive for banks to borrow money. As a result, their prime rate goes up to cover the added costs. When the BoC lowers the overnight rate, banks typically follow suit and lower their prime rate, passing the discount down to their customers. While each lender sets its own prime rate, there is usually consistency across the “big six” banks.
Key takeaway: The overnight rate set by the Bank of Canada is the biggest factor that determines whether interest rates on variable mortgages will go up or down. When the overnight rate increases, variable mortgage rates can be expected to increase as well.
What determines fixed mortgage rates?
Fixed mortgage rates largely depend on Government of Canada (GoC) bond yields. The relationship between fixed mortgage rates and GoC bond yields isn’t firm, but it is positive: meaning that when GoC bond yields go up, fixed mortgage rates tend to go up as well. Why? It’s a matter of risk, supply, and demand.
Because they are guaranteed to be repaid, GoC bonds are considered an ultra low-risk long-term investment product. In comparison, mortgages carry a higher risk (after all, there is a chance that the return on investment could be reduced if a borrower defaults or repays the loan early). Pricing fixed mortgage rates slightly higher than GoC bond yields serves to attract investors by compensating for this higher risk.
At its most basic, when the economy is judged to be weak, safer investments like GoC bonds become more popular. This demand drives GoC bond prices up, which creates lower yields and lowers fixed mortgage rates in response. When the economy is considered strong, investors feel comfortable taking on more risk, and bond demand falls, causing yields to increase and fixed mortgage rates to go up to compete. Factors that influence whether the economy is weak or strong include inflation, employment rates, and consumer spending.
Key takeaway: The performance of Government of Canada bond yields gauges whether fixed mortgage rates will go up or down. The relationship between bond yields and fixed rates is largely positive – when yields go up or down, so do rates.
How does personal financial health factor in?
While Government of Canada bond yields and the Bank of Canada overnight rate are broad indicators of how fixed and variable mortgage rates will behave at a macro level, it’s important to remember that there are micro factors at work too.
The interest rate that is finally offered from a lender to a consumer is also determined by factors unique to each transaction, such as the property type and its value, the down payment, credit scores, employment, the bank’s balance sheet, the bank’s mortgage products, and more. The only homebuyer who will receive the prime rate is a “prime” customer – someone deemed creditworthy based on all the factors above. For this reason, it’s essential to talk to a mortgage advisor who can review your financial health, advocate on your behalf, and find the best rate and best terms for your unique situation.
Key takeaway: Whether your mortgage is fixed or variable, your financial health will ultimately determine your interest rate. For the best advice, speak to a mortgage advisor.
What’s next for mortgage rates in Canada?
While different factors determine the interest rates for different mortgage types, broadly speaking all interest rates follow fluctuations in Canada’s economic performance. With the third vaccine rollout underway and our economy performing better than many analysts anticipated, we can expect long-term (fixed mortgage) interest rates to rise incrementally as demand for bonds falls and investors take more risks. Until the Bank of Canada deems the economy stable enough to lift the overnight rate, we can expect short-term (variable mortgage) interest rates to remain low. The overnight rate has remained at 0.25 per cent since March 2020.
The Bank of Canada’s next interest rate announcement is set for January 26, 2022.
]]>Unfortunately, the pressure during these months can cause us to get distracted from some of our most important goals. No matter what your goals may be, many people find it difficult to stay motivated.
Here are six tips I use help me stay motivated during the holidays:
Above all, give yourself some grace during the holidays, remembering that the reason you want to work hard for this life is to experience more of it! Don’t be too rigid making it all about productivity; celebrate the small steps and reward yourself often! You will see the results which will motivate you to do more and make you feel confident as you enter the New Year.
]]>Best of all, these items can all be purchased from local Calgary businesses.
Welcome mats from Steeling Home
Set the tone with a festive welcome mat from Steeling Home. Located on 17th Avenue, this modern general store is home to a wide variety of home wares and treasures.
Visit steelinghome.ca
House plants from Plant
Add some joy with the gift of greenery! Plant, located in Inglewood, is known for offering a unique, well-curated selection of plants and accessories, along with friendly customer service.
Visit plantshop.ca
Candles from Field Kit
Create a warm glow with stunning candles by Field Kit. These candles are made of soy and come in a reusable glass vessel. You can find Field Kit stocked at Purr, Recess, Plant, Luke’s Drug Mart, and many other Calgary businesses.
Visit fieldkit.studio
Images from left to right: a welcome mat from Steeling Home; house plants on display at Plant; a candle by Field Kit |
Spirits from Bridgeland Distillery
Make spirits bright with delights from Bridgeland Distillery. Rooted in the community of Bridgeland-Riverside, this local distillery is connecting generations of tradition with innovation through a focus on Brandy, Whisky, and Eau de Vie.
Visit bridgelanddistillery.com
Spice sets from The Silk Road Spice Merchant
Share your favourite holiday flavours with spices and herbs from The Silk Road Spice Merchant in Inglewood (or find them at the Calgary Farmer’s Market). This family business is inspired by the senses.
Visit silkroadspices.ca
Board games from The Sentry Box
Bring the household together with a great game. For over 40 years, the Sentry Box has been Calgary's gaming destination of choice. Located on 10th Avenue SW, this store has over 13,000 square feet of display and gaming space.
Visit sentrybox.com
Images from left to right: a glass of spirit from Bridgeland Distillery; a box of spices from Silk Road Spice Merchant; a selection of games from The Sentry Box |
Pretty Sweet Co. is a pre-order bakery in Calgary’s SW. They are all about making sweets look as good as they taste (and vice versa). Give a special sweet treat with custom pre-orders from this unique bakeshop!
Visit prettysweetco.com
Coffee and brewing essentials from Rosso Coffee Roasters
Warm up your homeowner’s morning with freshly roasted coffee. Rosso Coffee Roasters first opened its doors in Ramsay in 2007. Since then, it has expanded across several locations in the city. They are passionate about coffee and their producers. Plus, they have incredible baristas, some of whom have even won the Canadian Barista Championship.
Visit rossocoffeeroasters.com
Images from left to right: a dozen holiday-themed sugar cookies from Pretty Sweet Co.; coffee from Rosso Coffee Roasters; a happy holidays tag in a Christmas wreath |
Where do you like to find local gifts? Wishing you and the new homeowners in your life a wonderful holiday season!
-The Jencor Team
Amortization Period: The period required to completely pay off a mortgage if all conditions are met and all payments are made on time. Mortgage debt is reduced or paid off by making regular payments. The size of your payment is determined by the length of the amortization period.
Closing Costs: The legal fees, transfer fees, disbursements and other costs that must be paid when buying a home. These are in addition to the down payment and the GST (plus PST and HST if applicable). Closing costs are due on the day the buyer officially takes ownership of the home, and they usually range from 1.5% to 4% of the purchase price.
Conventional Mortgage: A mortgage loan equal to or less than 80% of the value of a property. (That is, where the down payment is at least 20%.) Conventional mortgages don’t usually require mortgage insurance.
Deposit: Money that a buyer places in trust to show they are serious when they make an offer to purchase a home. The deposit is held by the real estate agent or lawyer (or notary in Quebec) until the sale is complete, and then it’s transferred to the seller.
Equity: The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity.
Fixed Rate Mortgage: A mortgage with a locked-in interest rate, meaning it won’t change during the term of the mortgage.
Guarantor: A person with an established credit rating and sufficient earnings who guarantees to repay the loan for the borrower if the borrower does not. A guarantor is not a co-owner and therefore cannot be listed on title.
High Ratio Mortgage: A mortgage loan from a regulated lender for more than 80% of the value of a property. (That is, where the down payment is less than 20%.) A high-ratio mortgage must be insured against default with mortgage loan insurance provided by CMHC, Sagen, or Canada Guaranty.
Interest Adjustment Date: The date on which the mortgage term will begin. The interest adjustment is the amount of interest accrued between your closing date and the day of your first mortgage payment.
Lender: A bank, trust company, credit union, caisse populaire, pension fund, insurance company, finance company, or other institution that loans people money to buy a home.
Maturity Date: The last day of the term of a mortgage. The mortgage loan must either be paid in full, renegotiated, or renewed by this day.
Premium: The amount homebuyers have to pay to CMHC or another insurer to insure their mortgage against default if their down payment is less than 20% of the purchase price. The CMHC premium is calculated as a percentage of the mortgage loan and is based on factors like the size and source of the down payment. In general, the smaller the down payment is, the higher the insurance premiums will be. Premiums can typically be paid separately or be included in the regular mortgage payments to the lender.
Principal: The amount a person borrows for a loan (not including the interest).
Renewal: When the mortgage term has concluded, your mortgage is up for renewal. It is open at this time for prepayment in part or in full. It can be renewed with the same lender or transferred to another lender at no cost (which your Jencor mortgage advisor can arrange).
Term: The period of time the mortgage agreement covers. Common mortgage terms available are: 6-month, 1, 2 to 4, 5, 7, and 10 year terms.
Title: A registered document showing all legal encumbrances filed. It shows who has legal ownership of the property.
Total Debt Service (TDS) Ratio: The percentage of a person’s or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus all other debt obligations such as car payments, personal loans, or credit card debt. To qualify for a mortgage, the borrower’s TDS ratio must meet the lender/insurer guidelines.
Variable Rate Mortgage: A mortgage where the interest rate fluctuates based on the
current market conditions. The payments will generally remain the same, but the amount of each payment that goes toward the principal or the interest on the loan changes as interest rates fluctuate.
With these terms in your vocabulary, you are on your way to mortgage-industry fluency! Time to give your Jencor mortgage advisor a call and show off your skills.
]]>From now until the end of December 2021, anyone who refers their family and friends will be entered to receive a $500 donation to the Calgary Food Bank or the registered Canadian food bank of their choice.
How it Works
When we receive a call or email from a new client, we will ask who sent them our way. The referrer’s name will then be entered into our referral pool for a chance to win.
We will draw two winners in early January 2022. Each winner will receive a $500 donation to the Canadian food bank of their choice, for a total of $1,000 towards food security. The winners will be announced on our website, social media channels and in our newsletter.
Thank you for working with us to make a difference in our communities.
Happy holidays from the Jencor team!
]]>The reality is that cancelling healthy, active cards or accounts hurts more than having too many. When you cancel a card, all your payment history is lost as well as the type of credit granted. While you may think having a couple credit cards is extreme, the average Canadian has TEN credit sources. What many Canadians don’t realize is that lenders want to see a history of credit; they want to see payments made on time. In addition, lenders also want to see balances maintained at no more than 70% of your credit limit in use. So, if you have a $10,000 credit card, you don’t want to owe more than $7,000 on it at a time.
It is easy to think that different forms of credit matter more than others, but that is simply not the case. In fact, all lenders want to see is a history of credit and payments made on time. This is what will build your credit score and, eventually, give you the ability to qualify for financing. A history of on-time payments and manageable balances shows the lender that you are a promising investment and not likely to default.
Unfortunately, paying utilities does not build credit. In fact, these providers only check your credit score to determine creditworthiness; they don’t report your payment history to the bureau. Unless you are late to pay, that is. The other organizations that only report on default are municipalities and vehicle insurance providers, so make sure you keep these payments up-to-date. Be sure to pay any traffic tickets and bylaw infractions too!
Don’t be discouraged. Lenders understand that you are only human and, in many cases, they are often willing to work with you if there is a late payment. If they are notified within a timely manner, a late payment can be easily reversed. Just be careful not to make a habit of it.
Not exactly. There are two types of credit inquiries: soft and hard. A soft inquiry occurs when you pull your own credit report. Credit card companies also pull this type of inquiry when marketing pre-approval offers. Soft inquiries do not affect your credit score.
A hard inquiry, on the other hand, is triggered by the applicant when submitting a loan or credit card applications. As a result, hard inquiries will affect your credit score slightly as they are included in the calculation done. Recording the number of inquiries a consumer has on the credit report allows potential lenders to see how often a consumer has applied for new credit; this can be a precursor to someone facing credit difficulty. Too many inquiries could mean that a consumer is deeply in debt and is looking for loans or new credit cards to bail themselves out. Another reason for recording inquiries is for preventing identity theft. Hard inquiries that aren’t made by you could possibly be from a fraudster trying to open accounts in your name; therefore only individuals with a specific business purpose can check your score. Creditors, lenders, employers and landlords are some examples of approved business people. The inquiry only appears on the credit report that was checked.
In addition, hard inquiries remain on all credit reports for two years, after which they are removed. Soft inquiries only appear on the report that you request from the credit bureaus and will not be visible to potential creditors.
Credit score plays a vital role when it comes to potential financing for car loans, mortgages, or even personal loans. It is important to recognize good credit habits now and maintain them for a higher credit score today, and better chance of financial approval in the future.
]]>A Tax-Free Savings Account (TFSA) is an investment account that allows you to make gains free of tax. You can open multiple TFSAs but the amount that can be contributed is limited each year. A TFSA can be used for any savings goal and withdrawals are free of tax.
An RRSP is a retirement savings plan that you establish and register with the Canadian government, to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.
Now you know what they are, you might be asking, which one is better? It all depends on your situation. The chart below might help answer that question.
If you are in a low tax bracket, you get less benefit from the tax-saving aspect of an RRSP contribution. TFSAs are a good place to put money away during your time as a student or early years of working.
You can put money aside in eligible investment vehicles (such as a high-interest savings account or guaranteed investment certificate) and watch those savings grow tax-free throughout your lifetime!
Good news for you…the initial amount deposited in a TFSA, and any interest income generated is not taxable, even when you withdraw from it.
If you have an emergency come up and need funds right away, you can use these savings without paying taxes. It can also be used for things like buying a car or renovations.
The amount you can save in a TFSA during a year, no matter how much it is, has no impact on the amount that you can contribute to an RRSP.
Think of an RRSP as a self-funded pension plan because that’s basically what it is intended for. It gives you the chance to save more and build a nice nest egg for your future.
An RRSP contribution gives you the potential of pushing you into a lower tax bracket because any contribution to your RRSP comes directly off your taxable income, with the potential to push you into a lower tax bracket.
It’s extremely painful to withdraw money from an RRSP. You can be charged a withholding tax that can reach as high as 30%.
If you or your spouse is considering going back to school, you can take out up to $20,000 to pay education costs under the Lifelong Learning Plan (LLP). You won’t pay taxes on the withdrawals but you have to pay it back within a certain amount of time.
You can borrow money up to $35,000 from your RRSP to buy your first house under the Home Buyers’ Plan (HBP). The amount is non-taxable, but you have to pay the money back within 15 years or pay tax.
]]>And too often, the learning curve feels steep even for ourselves, let alone to share the key messages with our kids.
The thing is, that teaching our kids to use and value money for the powerful tool that it is, is one of the most empowering gifts we can give them, from even an early age. How do you do it? It’s so much easier than you think; even if you grew up with a distorted view or approach to wealth and personal finance, here are our top five teaching tools for parents and kids to learn to speak the language of money, and develop a healthy attitude towards money straight away.
“It’s not too late to start right now!”
Use it. Allowance is a fantastic hands-on learning tool to teach the actual process of money management. (Don’t give your kids money for chores – chores are a part of family life, and it is an expectation that they participate in them.) Give allowance because it shows your kids how to be responsible for their own saving, spending, and sharing, and give them the wide berth to make bad decisions in spending it; better to learn the lesson that the glow in the dark Beanie Boo was a bust as a seven year old, than to realize that the car they bought at 21 was a lemon.
Get them familiar with the pattern of reserving part of their money to share with others, to cultivate a spirit of generosity, and to reserve part for saving – this is crucial in developing a pattern and attitude of “I don’t spend all my money once I get it.”
Speak it. If you are someone who grew up with a bitter taste in your mouth about money, more than likely there were messages and feelings of shame associated with it; stop that cycle with your kids, and open up the conversation in all of the age appropriate ways. Talk about saving for the mini Golden Doodle you all want as a family pet. Talk about the $25 budget at the toy store for their friend’s birthday present. Talk about the cost difference between a dance class and the competitive dance team. And have each of these conversations in a frank and open way, not of guilt or shame, just in a way that draws attention and awareness to the fact that there is an energetic cost to everything we do.
Are you into stocks? Show them bits of your portfolio, especially the visual charts, and let them in on the secret pattern that over time, it always goes up. Each of these micro-conversations plants an essential seed that you can continue to grow over the course of your child’s lifetime.
Take them. Chances are, unless you’re keeping your cash in a jar under your bed, the bank is the hub of your personal financial transactions. Include your kids in this area of daily life: let them not only “press the buttons” at the ATM, but take them to the teller, get them familiar with the processes behind daily banking, let them count cash when it comes out, and let them fill deposit envelopes with bills and cheques. Teach them to look at the balance on the receipt and say “thank you” for what’s there.
Let them know how grateful you are to have this wonderful tool in your life that enables a whole lot of freedom, and how it got there.
And pay them together. There is something deliciously analog about getting a paper bill in the mail. I kid you not, when my girls see a bill in the mailbox, they actually say “Yessss! Bills are here!” Why? Because we have carved out a ritual in which we sit together one on one and pay our bills together. Show your kids to find the vendor, the amount due, and to circle that amount and write “Paid on [date].” As they gather that info from the bill, you can enter it into your own online payment system.
Not only is this much needed and celebrated time together, but it’s another conversation about personal finance: why do we pay a hydro bill? Why is this utility bill higher in the winter? Can you imagine a world without internet – let’s happily pay that one! These conversations draw kids’ awareness to the daily happenings of life, and connect them to their own resources.
If your attitude towards bills is “man, I’m so grateful to have a house that is heated in the winter and cool in the summer, with a one click connection to anywhere the world,” suddenly the entire experience is a joy for you, too. And where there is gratitude and joy, there is the cultivation of more gratitude and joy.
So wait, and teach patience and a mentality of “earned, not given.” One of the greatest parenting challenges our generation faces is exactly this: how on earth do we teach patience and process while we live in an instant, on-demand world? Well, we simply teach it.
Just because we can access something instantly doesn’t mean we should; you know from your own experience how sweet a victory it is when you buy something with your own money, or hold something in your hands you know is irreplaceable. These feelings are part of healthy brain development, and in their absence we cultivate a near constant dopamine rush of instant gratification that becomes stronger, and harder to fulfill over time. It’s ok to say “no” to things, to hold out, and to appreciate the consumption of less, not more.
Children thrive when they feel like they are a real part of our family life, and respected enough to be included. Having these grown up conversations distilled into a child friendly way shows your kids that you have confidence in their abilities to handle it, and that they are valued members of your tribe. And in the same breath, you are teaching them an incredibly valuable life skill they will continue to hone and use over the course of their lifetime.
]]>Many homeowners believe that if you have been approved for a mortgage, you are good to go. But your lender or mortgage insurance provider will often run a final credit report before completion to ensure that nothing has changed. Changes in your credit usage and score could affect what you qualify for – or whether or not you get your mortgage at all.
To avoid having your mortgage approval status reversed or jeopardizing your financing, be sure to stay away from these 10 mortgage mistakes.
1. BEEFING UP YOUR APPLICATION
This is not a time to try and ‘beef up’ your financials; you must be honest on your mortgage application. This is especially true when seeking the advice of a mortgage professional, as their main goal is to assist you in your home buying journey. Providing accurate information about your income, properties owned, debts, assets and your financial past is critical. If you have been through a foreclosure, bankruptcy or consumer proposal, disclose this right away as well. We are here to help!
2. NOT GETTING PRE-APPROVED
With all the changes and qualifying requirements surrounding mortgages, it is a mistake to assume that you will be approved. Many things can influence whether you qualify for financing such as unknown changes to your credit report, mortgage product updates or rate changes. Getting pre-approved is the first step to ensuring you are on the right track and securing that mortgage! Most banks consider pre-approval to be valid for four months. So, even if you aren’t house hunting tomorrow, getting pre-approved NOW will come in handy if a new home is in your near future.
3. NOT SHOPPING AROUND
One of the biggest mistakes people make when signing for a mortgage is not shopping around. It is easy to simply sign up with your existing bank, but you could be paying thousands more than you need to, without even knowing it! This is where a mortgage broker can help! With access to hundreds of lenders and financial institutions, a mortgage professional can help you find a mortgage with the best rate and terms to suit YOUR needs.
4. NOT SAVING FOR A DOWN PAYMENT
Your down payment is a critical part of homeownership and a useful financial tool that you should utilize when purchasing a home. A down payment reduces the overall amount of financing you need and increases the amount of equity right from the start. Down payments also show the bank you are serious. In Canada, the minimum down payment is 5% (with mortgage insurance), with the recommended amount being 20% if possible.
5. CHANGING EMPLOYERS OR JOBS
As employment is one of the most important factors that determine if you qualify for financing, it is important not to change employers if you are in the middle of the approval process. Banks prefer to see a long tenure with your employer, as it indicates financial stability. It is best to wait for any major career changes until after your mortgage has been approved and you have the keys to your new home!
6. APPLYING OR CO-SIGNING FOR OTHER LOANS
Applying for additional loans or financing while you are in the midst of finalizing a mortgage contract can drastically affect what you qualify for – it can even jeopardize your credit rating! Save any big purchases, such as a new car, until after your mortgage has been finalized.
Also, just as applying for new loans can wreak havoc on a mortgage application, so can co-signing for other loans. Co-signing signifies that you can handle the full responsibility of the debt if the other individual defaults. As a result, this will show up on your credit report and can become a liability on your application, potentially lowering your borrowing power.
7. MAKING CREDIT MISSTEPS
As mortgage financing is contingent on your credit score and your current debt, it is important to keep these things healthy during the course of mortgage approval. Do not go over any limits on your cards or lines of credit, or miss any payment dates during the time your finances are being reviewed. This will affect whether or not the lender sees you as a responsible borrower.
Also, although you might think an application with less debt available to use would be something a bank would favor, credit scores actually increase the longer a card is open and in good standing. Having unused available credit and cards open for a long duration with a good history of repayment is a good thing! In fact, if you lower the level of your available credit (especially during an application) it could lower your credit score.
8. HAVING TOO MUCH DEBT
Credit card debt is on the rise and overuse of lines of credit can put you at risk for debt overload. Large purchases such as new truck or boat can push your total debt servicing ratio over the limit (how much you owe versus how much you make), making it impossible to receive financing. Some homeowners have so much consumer debt that they aren’t even able to refinance their home to consolidate that debt. Before you start considering a new home, make sure your current debt is under control.
9. MAKING LARGE DEPOSITS
Just as now is not the time for new loans, it is also not the time for large deposits or “mattress money” to come into your account. The bank requires a three-month history of all down payments and funds for the mortgage when purchasing property. Any deposits outside of your employment or pension income will need to be verified with a paper trail – such as a bill of sale for a vehicle, or income tax credit receipts. Unexplained deposits can delay your mortgage financing, or put it in jeopardy if they cannot be explained.
10. MARRYING INTO POOR CREDIT
Having the financial talk before getting hitched continues to be critical for your financial future. Your partner’s credit can affect your ability to get approved for a mortgage. If there are unexpected financial issues with your partner’s credit history, make sure to have a discussion with your mortgage broker before you start shopping for a new home.
If you are in the middle of a mortgage application, or are looking to start the process, don’t hesitate to reach out to a Jencor Mortgage professional today to ensure that you do things the RIGHT way to succeed with your home purchase.
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Many home buyers understand that a certain amount of money down will be required on a home. However, most don’t realize the ins-and-outs of down payments, such as where the funds are allowed to come from and ensuring a proper paper trail.
Here are a few things to keep in mind while preparing your down payment and working towards your perfect home!
Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize, is that lenders are required to verify the source of the funds. This allows them to ensure that they are coming from an acceptable source. Sources that further contribute to indebtedness are less-likely to be considered (such as line of credit or credit card). Instead, the best and most traditional options for your down payment are:
The first and most traditional method is your savings account, where you have been pinching your hard-earned pennies to save up for this day!
If you are utilizing your personal savings for a down payment, note that lenders will require three months of full bank statements. This includes name, account number, transactions and balance history. For any large deposits made in that time (sale of a car, work bonus, etc.), explanations and supporting documents will be required.
If you are fortunate enough to receive help from the Bank of Mom and Dad for your down payment, there are certain requirements:
Another option for down payment is the use of Registered Retirement Savings Plan (RRSP), but only if you are a first-time buyer. This is part of the Home Buyers’ Plan (HBP), which allows first-time buyers to borrow up to $35,000 from their RRSP’s (tax-free!) -as long as the money is repaid within 15 years. Please note: The minimum repayment is 15 equal instalments paid once per year.
When it comes to putting money down on your new home, you need to consider the minimum down payment required as well as additional fees.
The minimum amount required in Canada is 5% for the first $500,000, with 10% down on any amount beyond that threshold. For example, on a $600,000 house you would need to put $35,000 down at minimum ($25,000 on the first $500,000 and $10,000 for the additional $100,000 purchase price).
Keep in mind, if your down payment is less than 20% of the price of your home, you will be required to purchase mortgage loan insurance in case of default. These premiums range from 0.6% to 4.50% of the total amount of your mortgage. Using the example above, this would mean $3,600 to $27,000 in mortgage insurance premiums.
If you are able to put 20% down on your new home (which is the recommended amount), you would be looking at an investment of $120,000 down with no mortgage insurance premiums required.
One component of the purchase process that homeowners often forget about, are the closing costs. These are typically 1.5% up to 4% of the purchase price.
Closing costs can include:
- Legal fees
- Property tax adjustments
- Disbursements
- Home inspection fees
- New fire insurance coverage
- Title insurance
- An estoppel certificate (if a condo)
- Possible penalty if breaking another mortgage
- Appraisal costs
- GST (if a new build)
In order to get financing, you are required to show that you have enough to cover these costs.
When you have collected the funds for your down payment and closing costs, you must ensure those funds remain in your bank account once you’ve provided confirmation. They should only leave your account when they are provided to your lawyer to complete the purchase. This is because lenders will often request updated statements closer to the closing of the sale, to ensure nothing has changed. If money has been moved around, or if there are new large deposits or withdrawals, they will all need to be confirmed and could affect approval.
The last thing that anyone wants when purchasing a property is added stress or for something to go wrong late in the process. Consider contacting a Jencor Mortgage Professional today to help guide you through the process! Make sure you are upfront about your down payment amount, and where it is coming from. This will help a mortgage broker determine whether or not it is suitable, and allow them to find the best lender and mortgage product for you!
]]>Having the following information on hand before meeting with your mortgage professional will help them determine what you qualify for and help them determine the best mortgage product for you:
One of the best things any potential homeowner can do when starting the home buying process is to get pre-approved. Mortgage pre-approval requires submission and verification of your financial history and can help you determine your price range, understand the monthly mortgage payment associated with that price range and provide the mortgage rate for your first term.
It is important to note that pre-approval does not mean that a lender has fully reviewed your documentation and you may still need the approval of a mortgage insurer. However, it does have a lot of benefits that can give you a “leg-up” in your search!
Getting pre-approved not only makes the search easier by helping to determine your price range and budget, but pre-approval also guarantees the interest rate for 90-120 days while you search for that perfect home. Plus, the rate will automatically be adjusted down with any market reductions. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.
Quick Tip: Being entirely candid with your home-buying team throughout the process will be vital! Hidden debt or buying a big-ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!
In today’s competitive real estate market, it can be very difficult to acquire property WITHOUT the help of a realtor. One of the reasons realtors are integral to the home buying process is that they can provide access to properties that never even make it to the MLS website. Realtors also gain access to information about homes that may come onto the market before a listing is even signed.
Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.
Once you have found the property that meets your needs, you’ll put in an offer that’ll be accepted or countered. This may go back and forth until you reach an acceptable price with the vendor. To start home shopping today, check out the listings on Rew.ca!
Once your offer is accepted with the condition of financing, you will need to do a few things to finalize the sale:
At this point, your financing is in place and you’re ready to proceed with the purchase of the property.
You’ll be asked to provide any money that’s to be used as your down payment, which is not already on deposit with your realtor. Typically, you’ll go in 1-2 days prior to the completion date.
Before you start on your home buying journey, be sure to take advantage of the expert advice that Jencor Mortgage Professionals can offer. As experts in mortgages, brokers can help walk you through the process and find you the best mortgage product to suit your unique needs! The best part? It won’t cost you a penny! Mortgage professionals are paid out by the lender when they register a new contract. Therefore, all that matters is finding YOU, the client, the best possible mortgage.
By: DLC Marketing Team
]]>When it comes to buying rural property, it is important to check how the property is zoned. This is vital! Zoning will determine how you are able to use the land, as well as the types of buildings that are allowed and where they can be located. Is the property zoned as “residential,” “agricultural” or perhaps “country residential”?
Zoning could affect the lenders available to you and what you qualify for, as well as what you can do with that property. Differences in lending and foreclosure processes, has caused some lenders to be hesitant with financing mortgages in agricultural/country residential zones.
Once you have determined how a property is zoned, it is important to look at the land. Requisitioning a survey early in the process will help mark the exact boundaries of your property to avoid future disputes. This is also a good time to get an appraisal done on the land and its value.
What many borrowers don’t realize is that land has a drastic effect on mortgage qualification and what you can borrow. In fact, most lenders will mortgage: (1) house, (1) outbuilding and up to (10) acres of land. If you have a second building or extra land that is being purchased, you will need to consider additional funding on top of your typical 5% down payment.
When it comes to rural living, many people draw water from private wells and utilize septic tanks for sewage. To ensure everything is safe and in working order, it is a good idea to have an inspection done on the septic tank and water quality as a condition on the purchase offer. Due to the nature of these properties, be advised that inspections may cost more than it would in the city. However, it is important as lenders may request potability and flow tests!
Coverage matters, especially when you are living away from the city. When it comes to rural properties, there are two types of insurance that you should consider:
If you are thinking about purchasing a home in a rural area, be sure to speak to a Jencor Mortgage professional before you do anything. They can often recommend a realtor who specializes in rural properties and knows the area best. A Jencor Mortgage professional can also help ensure you understand any differences in the mortgage process and qualifying that come with rural purchases.
]]>The simplest explanation for this is that it is a type of mortgage loan that is available only to homeowners 55 years old and above. In essence, it lets them convert part of the equity that is in their homes into cash.
Initially, this was a product that was created with the idea of helping retirees with limited income stay in their homes. This is achieved by using the accumulated equity in their homes to cover health care and basic living expenses. When it comes to reverse mortgage proceeds, there is no limitation or restriction on how the proceeds can be used.
It is called a reverse mortgage because instead of making monthly payments to a lender – like a traditional mortgage – the lender makes payments to the borrower.
With this type of mortgage, the borrower isn’t required to pay back the loan until the home is sold, vacated, or everyone on the title passes away. So long as the borrower lives in the home, they are not required to make monthly payments towards the loan balance. However, there is still the matter of remaining current on property taxes, HOA dues where applicable, and homeowners’ insurance.
Knowing the different types of reverse mortgages can be beneficial when it comes to making the selection that fits you best. We will get into each kind in detail. There are a few details, however, that lenders will generally look for. These are:
A good rule of thumb to consider is that the older you are and the more equity you have in your home, the more money that you could get. This is, of course, impacted by current market trends, so keep that in mind. You could even use the money from the reverse mortgage to do this.
If there is a remainder left, you can use it for a wide range of things like:
There is a lot of flexibility when it comes to how you spend your loan, making it one of the more versatile options out there.
If you want to learn the plain facts on reverse mortgages, there are a number of great resources available online, including information from the Financial Consumer Agency of Canada.
There are a couple of ways to get access to the money from your loan. This can be achieved by either taking the money in a one-time lump sum, for starters. It can also be taken in an upfront portion with the rest over time.
Generally, it’s good to ask your lender what the options are. There may also be restrictions and fees, so be aware of those as well. You also must pay off and close any outstanding loans or lines of credit tied to the home.
This is the kind of mortgage that is offered by provincial, local, and nonprofit agencies. Not only that, but it is considered to be the least expensive process. The municipality or agency specifies the reason for this type of mortgage, and that will be its only use.
Homeowners can use the proceeds from this type of mortgage only to pay for a specific lender-approved item. The proceeds can cover property taxes or necessary repairs to the home. Whereas home-equity loan proceeds can be used for any purpose, the lender restricts how single-purpose proceeds can be used.
The difference here is that, with a home equity loan or line of credit, there is a monthly payment. With a single-purpose loan, there is no need for repayment until the home’s ownership changes, the borrower moves to a different residence, or passes away. It can also become due if the homeowners’ insurance on the property lapses or the city condemns the property.
The reason to go with his type of mortgage is that the homeowner can expect to pay far less in interest and fees. This differs greatly from a home equity conversion or proprietary reverse mortgage. While there is no need to make a payment until it is due, fees, interest, and mortgage insurance can reduce the amount that the homeowner can borrow.
After all of that, you may still be wondering whether or not a reverse mortgage is the best idea. Like anything else in life, it comes with its own set of pros and cons involved. This makes it worth considering and looking further into.
Let’s start with the good news first.
This type of mortgage can be a very powerful source of income for older individuals. It can be for those who need to increase their retirement income or take on a big household project. Since the largest asset that most retirees have is their home – and it is likely paid off – this allows for an increase in income without increasing monthly payments. It is a great way for retirees to stay in their homes.
Not only that, but it can be highly beneficial because it requires no payment. That is until ownership of the home changes hand, the home is vacated or condemned, or the borrower passes away. It is the quickest and easiest path to substantially more income for a retired person who may not otherwise have that kind of access to additional funds.
Generally speaking, the interest rates tend to be much higher than most other types of mortgages out there. It is also worth considering that the equity in your home could go down. Combined with interest on your loan adding up, it could create quite the gap.
While you won’t need to repay the loan until you pass or sell the home, paying the loan and interest in full will fall on the shoulders of your estate. Not only that, but it must be repaid within a specific period of time.
The general costs associated with this type of mortgage also tend to be much higher. While there is certainly greater flexibility in how you get and spend your money, it comes at a cost, literally.
Ultimately, it is up to you to determine if the benefits offset the higher cost and burden of repayment that falls on your estate. Getting the money from your loan, as well as what you can spend it on, is perhaps one of the most flexible mortgage options out there. This is especially true for seniors.
It also provides much-needed income for those retirees who may not have adequate funds for retirement. This shortfall can happen for a lot of reasons, and it is common for retirees to exceed their expected retirement life.
Weighing the pros and cons is essential regardless of the loan type. A reverse mortgage has all the potential to be beneficial to seniors in need of funds and provides greater flexibility for acquiring and spending that money.
Published by DLC Marketing Team
]]>Let’s face it, your financial future will not get any brighter if you continue to run deficits forever. Unlike a bank or big company, you won’t get a bailout! Stop procrastinating and take charge of your own finances with the above tips!
If you are looking for expert advice about your mortgage and how to pay it down faster, contact a Dominion Lending Centres professional to discuss YOUR situation and options.
BORROWER BEWARE:
It is always important to take things with a grain of salt. This is especially important when it comes to too-good-to-be-true, ultra-low-rate mortgages. These “no frills” mortgages are often loaded with restrictions such as pre-payment limitations, fully-closed terms, stripped-out features or unusual penalties. If you’re not looking at what you’re giving up, you may regret it in the future. These hidden terms alone could prevent you from taking advantage of tips #1, 2, 3, 4, 5, 7, 8, 9, 10, 14, 16 and 22!
]]>Thankfully, a Purchase Plus Improvements Mortgage allows you to roll renovation costs into your mortgage with as little as 5% down.
One easy-to-manage loan package
Purchase Plus adds the cost of renovations to your home’s purchase price, creating one manageable loan. Essentially, you borrow money for your home improvements and pay it back as you pay down your mortgage.
When mortgage rates are low, Purchase Plus is a particularly great financing option. This is because you benefit from lower interest rates while investing in your home’s resale value.
Eligibility and requirements
Whether you are tackling major upgrades or making minor touch-ups, Purchase Plus can help.
This product is available for existing homes and new builds so long as you are purchasing a maximum of 4 units and will make one unit your principal residence.
To be eligible, your home improvements must be permanent in nature and increase the value of your home. Examples of improvements that fully qualify often include:
Getting the down payment down
How much you can borrow for home improvements depends on your down payment.
Most lenders will approve up to $40,000 or 20% of the purchase price (whichever is greater) for improvements on home purchases with less than 20% down.
Keep in mind that while a purchase of up to $500,000 can be made with as little as 5% down, an additional 10% down will be required on any loan amount (including added renovation costs) above and beyond this threshold.
If you have 20% down, most lenders will approve up to $60,000 for home improvements.
The only caveat is that the property value (including added renovation costs) must be below $1,000,000 no matter what your down payment.
How it works
This mortgage product is perfect for you if you can:
Refinancing Plus Improvements
Do you want to finance upgrades on a home you already own? A Refinance Plus Improvements option lets you borrow up to 80% of the as-improved value of your home to cover renovation costs.
Customize your home your way
If you are interested in making home improvements, talk to your Jencor advisor about the financing options that are available through your mortgage.
With Purchase or Refinance Plus Improvements you can have your dream home and a balanced budget too.
]]>In the time between having your offer accepted and closing on your new home, your mortgage application must be reviewed and approved.
Several roadblocks can appear at this point, slowing down the approval process and, in some cases, bringing it to a complete halt. Thankfully, these roadblocks to mortgage approval can be avoided with careful action and a little bit of patience.
While your mortgage application is being reviewed, these 10 common roadblocks to loan approval should be avoided.
Hitting any of these roadblocks (even if you’re pre-approved) will impact the kind of loan you qualify for by affecting your debt-to-income ratio, credit score, income, or closing timeline.
Contact your Jencor mortgage advisor as soon as possible if you anticipate encountering any of these barriers.
To make for the smoothest road to closing possible, bring your Jencor mortgage advisor on board early.
They will expertly help you navigate the home stretch of home financing with ease.
To help you decide whether now is the time to make your big move, ask yourself the following key questions.
What are my goals for the future?
Buying a home is about more than your budget—it’s about your lifestyle too. Consider your current lifestyle needs (such as room for a home office or proximity to green spaces), but also how these needs will evolve. After all, purchasing real-estate is a long-term investment. You should plan to be in your home for about five years before moving again. Will you need more space within this timeframe for a growing family? Will you need cash available to go back to school? Think about how the home you purchase now will support your goals for the future.
If staying put and financially prioritizing your home for the next five years feels unrealistic, don’t despair: waiting to purchase will allow you to save for a down payment down the road. If you are interested in learning more about the kind of down payment you should save for, reach out to a mortgage advisor.
What can I comfortably afford?
If you are ready to commit to a home for the next five years or so, you next need to determine how much you can afford to spend. First, consider your upfront costs, which include your down payment, closing costs, and any applicable taxes. Next, take into account your ongoing costs, such as mortgage payments, property taxes, insurance, utility bills, routine repairs and maintenance, and condominium fees. With all relevant costs factored in, ensure you also have some funds set aside for any major repairs that might come up, like a new water tank, furnace, or roof.
When you speak with a Jencor Mortgage Advisor, they will help you identify a purchase price and a mortgage product that will feel comfortable for you, leaving you plenty of financial flexibility to cover the often-hidden costs of homeownership without feeling burdened.
What are my mortgage options?
There are many different mortgage products available to home buyers, and they all have extensive options and features. Navigating the possibilities (and the paperwork) can be complex and time consuming. To help make the homebuying process as seamless as possible, surround yourself with professionals who will offer you a tremendous amount of knowledge and support. Your team of professionals should include your realtor, home inspector, lawyer, and mortgage advisor.
Your mortgage advisor will take time to understand your financial needs and will research the market to find the best mortgage for you. They will represent you when negotiating with lenders, manage your paperwork, and advocate for you every step of the way. A key service that mortgage advisors can provide is pre-approval. In a fast-paced real estate market, getting pre-approved for a mortgage can make the difference between your offer being accepted or not. Mortgage advisors can also place rate holds on your behalf to help you lock in current low interest rates for up to 120 days.
If you are a first-time home buyer seeking to fully understand your financial situation and maximize the options available to you, reach out to set up a call. The team at Jencor Mortgage can help you answer these three key questions and more, and our advice is always free.
However, in response to new signs of strong economic recovery across the country, the central bank made two significant changes to its monetary stimulus program and economic forecast. These changes will likely make a fixed rate mortgage more attractive than a variable rate mortgage for most homebuyers.
Interest Rate Increase Forecasted for Next Year
The Bank of Canada has suggested that due to improving economic conditions, we can expect its overnight rate to rise in the second half of next year (as opposed to 2023 as initially forecasted). This indicates that we are now at the bottom of the interest rate cycle, and that variable interest rates could start to go up in the next 18 months.
Bank of Canada Scaling Back Bond-Buying
Given the resiliency of the economy, the Bank of Canada has said it will begin to scale back its bond-buying from $4 billion to $3 billion a week. We can expect that this scaling back will take off some of the downward pressure that has been keeping fixed rates low.
Both these changes by the Bank of Canada suggest that short-term (variable) and long-term (fixed) rates could begin edging higher sooner than previously expected.
How does this impact my mortgage?
Variable rates are attractive when rates are in a downward trend or staying flat. Fixed rates are attractive during an upward trend. Since we are now at the bottom of the interest rate cycle and have begun an upward trend out of historical lows, a longer term fixed rate mortgage will be the safer decision for those who want to ensure no payment increases over the term of their mortgage. Now may also be the right time to lock in a fixed rate if you currently have a variable rate mortgage.
Call your Jencor Mortgage Advisor for a personalized analysis, as everyone’s situation is unique.
More information about the Bank of Canada’s April 21 rate announcement from our Chief Economist, Dr. Sherry Cooper, is available here: dominionlending.ca/economic-insights/bank-of-canada-holds-rates-steady-but-pares-bond-buying-program
]]>Job Loss – often unexpected and with no time to save for emergencies, things get ugly pretty quick. E.I. payments can run out leaving you with the option of buying food for the family or paying your mortgage.
Illness – Cancer treatments can be so hard on a person that even if it’s only a 5 minute radiation treatment, you are left feeling unable to work for the rest of the day. Short term disability plans usually top out a 75 per cent of your average salary. However, when you’re ill, your bills don’t drop by 25 per cent. In fact, they often increase due to extra medication, medical equipment rentals etc.
Death – one of the borrowers dies leaving the other person to pay out the mortgage by themselves on one income.
Divorce – once again one income where there were two and often expensive legal fees and bills that get forgotten in a tangle of emotions and a spouse moving out.
While you can find a job again or get over an illness, often there’s a period of time when you need to catch up on your bills and this is when people fall behind in their mortgage payments.
What should you do if you are in one of these situations?
Call all your Dominion Lending Centres mortgage professional and tell them what has happened. Let them know as soon as possible. They will look up your mortgage and let you know who the lender is and who your mortgage was insured with. They can guide you through the process of contacting the lender and insurer to see how they can help you out.
What can CMHC, Genworth or Canada Guaranty do for you? Depending on your circumstances they will allow you a forbearance which is a temporary mortgage payment deferral. They also may change your mortgage amortization lengthening it to lower your payments. They may also take your missed payments and just tack them on to your mortgage balance without a penalty. All these options are available but you have to contact your mortgage professional in order to get the ball rolling. JIDD happens but you’re not alone.
David Cooke - Jencor Advisor
]]>Another nice feature of First National is that they will provide pre-approvals. Many lenders do not want to spend the time and money to provide these but First Nat have always provided pre-approval that are underwritten. What this means is that an underwriter has reviewed your application and if everything in it is straight forward they foresee no problems with an approval for the specified amount of money.
Additionally, if the home you are purchasing is 5 years old or older, a First National mortgage may be for you. They offer Echelon Home System Warranty Program. This is a warranty on your electrical, heating and cooling systems as well as your plumbing. Most hot water tanks have a 6 year warranty. After that it can cost you $20 a month for a warranty program with your utility company. Echelon is free for the first 12 months and then it costs you only $17 a month. Any calls you make for repair work have a $50 call fee but everything else is covered by the warranty. Imagine your hot water tank breaking down on Sunday afternoon. In addition to paying a service call fee of probably $100 you would be paying time and a half for weekends. The tank alone could be $800+. It’s worth it.
Finally, First National introduced something new in fall 2018, a second mortgage. If you have a need for funds for renovations or something else substantial and you are part way through your First National mortgage term you can now obtain a second mortgage. No need to break your mortgage and incur penalties. When your first mortgage term ends, the second mortgage is rolled over into your first mortgage so you don’t have two different expiration dates for your mortgage. This is unheard of for a non-bank to do.
Remember, you can only get First National through the broker channel. Be sure to ask your DLC Jencor mortgage professional if this would be a good mortgage for you.
David Cooke - Jencor Mortgage
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If they can deal with variability, we now enter the world of genies, tarot cards, and educated guesswork.
Interest Rate Overview, In the last 18 months
The Governor of the Bank of Canada says the “Goldilocks zone” overnight rate (not too accommodative and not too restrictive), would fall in the 3.5 -4% range (this range may be dropping). With a whole bunch of assumptions, please note that range is close to, if not a double, from current rates. The Canadian Government and the Bank of Canada both are comfortable, expect, they are leaning towards/want higher interest rates.
Rates have gone up and are expected to continue going up as long as we have an expanding economy and rising inflation expectations. This is despite Alberta’s current economic state.
Predicting Rates for the Next five years.
Lock in and take five years in the higher 3’s(The 5-year Fixed):
Here is a guess at future rates:
Take a variable and we will guess the Bank of Canada overnight interest rates rising by 0.5 % in the next six months by 1% in the next year after that, by 0.75 % the next year, at this point we would have prime of 5.5% and variable at 4.5% and in the last year and a half of our 5-year term have rates coming down by 0.75 %. To summarise:
We are as well, guessing on continued economic expansion and then a world or North American or Canadian recession of a mild sort. No vicious recessions. No expansion forever either. Expansion ending sometime in the next year to 2 years.
We come back to “what to do?”
A reasonable guess on rates suggests, the decision of fixed versus variable, it’s a tossup for the next half year or so. Then the traditional advantage for variable will likely become more obvious.
Last year when fixed rates were below 2.5%, fixed was a clear winner. That was one of the rare periods. However, as rates rise a bit and the economic cycle appears to become more traditional, our answer again is it really about emotional make-up… If you want interest rate and payment stability, choose fixed. If you want the most likely chance at lower interest charges, choose variable (Especially once the next cycle turns).
Many factors can play into the decision besides emotional make-up, financial cushion, debt service ratios, other major necessary purchases during the term, payout penalties.
It is a choice most people ignore and simply request a 5-year fixed, which is revealing in and of itself. People should at least consider Variable.
Croft Axsen- Broker Owner Jencor Mortgage Corporation
]]>Here are a couple strategies we have used to get home buyers qualified, who have had difficulty elsewhere:
CREATE THEIR DOWNPAYMENT Your clients take out an RRSP loan with a lender who has the right guidelines. The client utilizes a payment on the RRSP loan that fits into their long-term debt service ratios to qualify for a house. After 90 days the clients use the Home Buyers plan to withdraw the down payment. The useful part of our scenario is that our lender does not require the loan to be paid off to use the RRSP money for the down payment. Most RRSP lenders will demand that the withdrawn funds are used to pay the balance of the RRSP loan off in full. If they qualify, (in RRSP room and GDS / TDS ratios,) up to $25,000 in down payment could be available. |
RE-WRITE A CAR LOAN TO REDUCE THE MONTHLY PAYMENT
We have a bank lender who rewrites car loans with a longer term creating a lower monthly payment. Lower car payments can lead to a higher mortgage. Recently, we had clients with a newer vehicle with a large payment. With the new lower payment that we organized, the clients then were able to obtain a $70,000 higher mortgage. They were very happy that they were now able to purchase the house they really wanted NOT the house that the bank said they should be purchasing.
If you think you can benefit from these strategies or would like to know about other solutions, please contact us. Let one of our experienced and licensed mortgage advisors get to know your situation. Get on the path to owning the home of your dreams.
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For realtors, mortgage brokers and their clients we are facing many months of the lenders sorting out their guidelines. If a borrower or seller voluntarily discloses they have been growing four legal marijuana plants, which should produce more than 30 grams, as a point of interest, how will the lenders, mortgage insurers and home insurers react?
Lenders:
As of today, many lenders do not have a policy. Some say yes four plants will be OK, some say case by case, and some say four plants will be a hard no. For the common existing house stigmatized as a “grow-op”, there are still very few lender options. We do have a couple of lenders for fully remediated grow-ops, and CMHC does consider those applications.
Mortgage Insurers:
CMHC says they will carry on the same as they have been. Genworth and Canada Guaranty are saying either, case by case or the policy will be determined shortly.
Home Insurers:
As or right now we have not been able to get any consistent information on this subject. However, home buyers and homeowners are encouraged to check with their provider for their policy information.
For those folks growing up to four plants and looking for financing, expect your clients to get mixed results from banks and many lenders. Some lenders are considering air quality tests, home inspections, statutory declarations and other means to determine if the home has been impacted or damaged by four plants. For now, we have identified willing lenders. CMHC will consider the applications.
Please contact your Jencor agent or me if your clients have any questions on how the new legalization laws affect their options or to avoid complications with four plant files.
Croft Axsen - Jencor Mortgage Corporation
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Approximately 15-20% of Canadians are considered self-employed. Though this number is not the majority, it is still a significant portion of the buyers market, and it is something we pay particular attention to in our office. So where do you start as a self-employed home buyer?
The Groundwork:
Lenders need to feel confident that your organization and management of your business finances and your personal finances are in order.
Speak to your accountant, or find a copy of:
You also want to make sure you have the personal financial documents for you and your co-applicant in order as well. A Notice of Assessment (NOA) for the last two year showing you have your income taxes paid in full will be necessary. Most lenders will require proof that your personal taxes have been paid and there is no outstanding money owed to the Canada Revenue Agency.
Getting Started:
The next step is where working with a Licensed Mortgage Advisor is important. Every Self-employed home financing file is unique, and working with a professional team with expertise and lending multiple options will always give you the best outcome.
First, we get to know your goal and your needs, then we get to know your financial status and run the numbers. All lenders have their particular list of criteria, programs, and conditions for how they view a self-employed application. It's important that the person you are working with understands your Financial Statements clearly and can identify the lending and insurable options available. As a short example; some business owners declare less personal income for themselves for tax purposes, preferring to keep the money in the corporation. Though this is a substantial annual tax savings, this could make it difficult to qualify a borrower based on their income alone. Professional Mortgage Advisors can use the complete business financial picture and present a much more favourable and accurate account of your income to the lender. We can do this in a number of ways such as showing year after year growth, providing proof of contracts showing revenue, and in some cases using a Stated Income Solution.
We won’t go to into depth on the Stated Income as there are some revisions to the program that promises to make it more accessible to future applicants. However, the program is designed for Self-employed borrowers who are unable to provide traditional income verification but have a proven history of managing their credit and finances responsibly. If you have more questions or would like to learn more about this program, please give us a call and we can discuss if its right for you.
Getting to the Finish Line:
After we get you paired with the best lender to finance your mortgage, the completion process becomes basically the same as any standard signing process. You sign your documents with us, then you work with your Lawyer and Realtor to complete the property closing.
The key to this process is, remove doubt and let us know what you can do. True some lenders do not have an appetite for all Self-employed borrowers, but not at Jencor. We know our lender's programs, and we know not to make them work for our clients. Licensed Mortgage Advisors are trained and educated to make this process as smooth and seamless as possible for borrowers in all situations. Our Advice is free, and we are available when you are.
Written By:
Morgan Dempsey – Mortgage Advisor, Jencor Mortgage Corporation
]]>Canada is made up of hundreds of thousands of people and some did not start in Canada but have made it their home. Buying a home, especially when you are new to Canada can be mind boggling, BUT, we have a mortgage for you!
The New to Canada Program is designed to help new Canadians purchase their first home sooner and become established faster.
What are the qualifications for this program?
Firstly, you must have immigrated or relocated to Canada within the last 3 to 5 years to qualify for the New to Canada Program. You must have proof that you have been working full time in Canada for at least 3 months and that you are not on probation with your employer. The lender will require a letter of employment from your employer with your salary and employment status. Copies of your valid work permit or landed immigrant status card (front and back) will also be a requirement.
Down payment is a minimum of 5% and at least 5% of the funds must come from your own savings and be verifiable with 3 months worth of bank statements from a Canadian Bank. Some lenders will allow the 5% to be a gift from an immediate family member and gift letter from the lender will be required. Please speak to your broker in advance when a gift is being used. That way we can provide you with information for monies coming from other countries and ensuring you are following all the banking rules and regulations. With a minimum of 5% down payment you will need default insurance and that can be provided by Canada Guaranty, Genworth or CMHC (Canada Mortgage and Housing). Each of these insurers offer programs that will work with the lender.
The lender will need to see your credit bureau and as you are new to Canada you may be just starting that, so we will require an international credit report from your country of origin. Just starting up your credit, we can assist you with that by providing valuable information to get you ready for the road to homeownership. You can obtain an International or US Bureau by contacting Equifax and they will point you in the right direction. Your international credit report is taken into consideration by the lender as it will show that you are a responsible borrower and have kept your accounts in good standing. We would advise that a letter of recommendation from your current bank be done as that is also very helpful in the process. If you cannot provide an international credit bureau the lender will ask you for to confirm your good standing by providing 12 months history of bills that must be paid on time (rent, utilities, cable or insurance premiums).
Working with your Jencor Mortgage Advisor will provide you with options and answers to your questions. Our advice is always free, we are here to help you make home ownership a reality.
Remember, when looking for your home, use a professional to assist with not just financing but the search as well. Realtors are great negotiators and can also help you determine your requirements in a home, “needs vs wants”. Do you need to be close to schools, public transportation, etc.
This process can take some time but again, that is why you have a Jencor Mortgage Advisor at your fingertips!
By the way, Welcome to Canada!!
By
]]>What is bruised credit and how does it impact your ability to obtain a mortgage?
Mortgage lenders use your credit reports to evaluate risk by looking at your repayment history to see how responsible you are with credit. Although a 790-beacon score and zero late payments in the last three years is ideal for all lenders, bruised credit means something slightly different to some lenders. So, what is bruised credit? It can be a result of many circumstances including, late payments on loans, collections & judgements, bankruptcy, consumer proposal or credit counselling, late payments on your mortgage, foreclosure & even identity theft. Traditional mortgage lenders and insurers will not commonly approve applications with credit histories that show challenges with borrowing in the recent past. The good news is that there are still options with alternative mortgage lenders with a minimum down payment of 20% to 30%. With these mortgages, you will be paying higher interest rates, usually for two years, while you rebuild your credit. We can then transition you into a regular mortgage.
Rebuilding credit takes time.
There are some things you can do which will bring your score up substantially in one swoop, but normally it takes time to rebuild. Here are some of the basics to improve your credit:
Don’t be defeated; get advice, get back on track!
Ultimately, how each item impacts your score, depends on how it interacts with everything else on your report. One late payment, for some with long-held credit and very little past delinquencies, will have less of an impact than for someone with bruised credit or someone with new credit.
If you have bruised credit, don’t write off your dream of home ownership. Contact your Jencor Mortgage Advisor who can advise you on the necessary steps to obtain the mortgage you need.
Ayashah Kothawala - Mortgage Advisor Jencor Mortgage
]]>Currently, the most one can refinance is 80% of the value of the home. This leaves 20% of the equity unavailable for the buyout and is forcing the sale of the home. Because of this, both insurers (CMHC and Genworth) will consider a Marital Home Buyout up to 95% of the value of the home. The deal is packaged as a ‘purchase’ and the spouse remaining in the home becomes the buyer on the purchase.
Marital Home Buyout:
Option 1:
Option 2:
Requirements:
At the time of mortgage approval, in addition to income verification and other standard conditions, lenders will require the following:
If you are facing a marital breakdown, make sure that you reach out to your trusted Jencor Mortgage Advisor to make sure you have all of the information you need to make the right decisions regarding your mortgage and your home.
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HOW MANY ACRES ARE YOU PURCHASING?
For conventional mortgages, lenders will finance a certain number of acres, a house & a garage. The number of acres that they will consider can vary based on the property location and the norm for that area. The minimum down payment can also vary based on the size and location of the land. For example, a property that is close to a major urban area and under 10 acres would most likely be approved with 20% down payment. If it is a larger acreage 30+ acres and not within an hour of a major urban area, the minimum down payment will likely increase.
For high-ratio / CMHC insured mortgages with a minimum of 5% down, they will approve and insure the value of the house, garage and the `residential component` of the land. If the norm / average acreage size for the area is 20 acres, this is what they will approve in land value. If it is 160k – then this is what they will approve. However, if you purchases a 160 acre acreage and all of the acreages surrounding it are only 20 acres – CMHC will likely only give value to the first 20 acres of land and the buyers will have to pay out of pocket for the value of the remaining land as determined by an appraisal.
It is typically easier to secure financing on CMHC insured Mortgages and it is not uncommon for lenders to require the mortgage is insured even if the buyers have a 20% down payment based on the purchase price. If it is a large acreage, has outbuildings of major value or is a mobile or modular home – these are all things that could result in either a larger down payment requirement and / or mortgage default insurance.
If there is no home on the property a mortgage is not available and one would require a land loan. Land loans typically start at a minimum of 25% down payment and go up from there based on the location, size and value of the property, they also often come at slightly higher interest rates.
WHAT ABOUT POTABILITY? No mortgage unless there is good water! Potability reports are needed for all well water and flow rate, this will be requested either upfront with the lender approval or at the lawyers before closing. Some insurers will also request a copy of the Septic Inspection report.
WHAT ABOUT ZONING? Country residential is the easiest to finance. However, if the land is zoned Agricultural, but used as residential (no farming or commercial component) the lenders and insurers will consider this as well. Agricultural & Farm land that derives income is more difficult to finance. Lenders are wary as it is difficult to foreclose on agricultural land and if the Agricultural land has a farming component or income lender options become much more limited and down payment requirements increase.
WHAT IF THE PROPERTY HAS OUT BUILDINGS? Mortgages are for a house, garage and land – and that’s all. If the property has an outbuilding of value the effective value of the property will often be reduced by the lender or insurer, and this will affect the down payment requirements.
For example, if a client is purchasing a small acreage for 800k , and there are a brand new large heated shop, horse corrals and an arena on the property that the appraiser values in total at $ 160k, this would be deducted from the purchase price in the lenders eyes bringing the effective value down to 640k (800k-160k). The buyer would then need to have a minimum 6.1% down payment based on the 640k effective value ($39k) PLUS 160k to make up the difference (value of outbuildings) for a total of $ 199,000. Even though the buyer is technically putting more than 20% down based on the contract purchase price, the lender and insurer would consider this to be financed at 94% of the value of the home, garage and land and a CMHC premium would apply.
OTHER FINANCING FACTORS TO CONSIDER: You may need to allow extra time for conditions to be removed on acreage purchases as CMHC appraisals and well water testing can cause delays.
As always with mortgage financing the buyer plays an important role. For strong clients the lender may make an exception to their policies.
]]>When calculating a mortgage payout penalty, banks and broker lenders use the greater of:
This is where the similarities end. Banks calculate their I.R.D. based on the discount off the posted rate for the nearest term at the time of payout, while the broker lender uses a re-investment rate. The bank discount is the discount you received at the time of approval.
The example that I am using is a mortgage with a balance of $400,000.00 at 2.79% with 26 months left on the original 5 year term. The 2.79% rate from your bank was a 2% discount off the original 5-year posted rate of 4.79%. The broker lender does not deal in posted rates as such.
Interestingly enough, the bank posted rate for the nearest term of 2 years was 3.24%, and the reinvestment rate for the broker lender was also 3.24%.
For the broker lender, the reinvestment rate was higher than the rate on the mortgage paid out, so the 3-month interest penalty is charged. The penalty worked out to $2,790.00.
The bank penalty was calculated using the original 2% discount subtracted from the 3.24% posted rate for a 2 year term. This resulted in the penalty being charged as the difference of 2.79% minus the 1.24% or 1.55% differential for the remaining 26 months of the term. The result was a penalty in the amount of $13,433.33 or a difference of $10,643.33. The banks not only get to charge the higher penalty but also get to reinvest the money at the higher rate. Win, win for the banks but lose, lose for the borrowers.
In the past three years, many Albertans had to sell their homes due to unforeseen circumstances. Do you not think that the $10,000.00 plus in penalty differences would have been better in the hands of these Albertans or your hands versus going to the Ivory Towers on Toronto’s Bay Street?
For all your mortgage financing requirements, please contact Jencor Mortgage Corporation.
Written by: Dave Melnyk, Mortgage Advisor – Jencor Mortgage Corporations
]]>You may be coming up for renewal soon. You may be concerned rates are rising, even with a renewal a few years away. The consensus is rates are increasing in North America over the next year and may continue to do so in the foreseeable future.
The new government has significantly changed the mortgage market with their implementation of new rules and underwriting guidelines. Due to these changes lenders are now restricted on what they can do and what they cannot offer to their clients. Some specific niche situations are now larger factors in whether or not you are approved.
Here are some questions to think about when you’re up for renewal:
Depending on how you answer these and other questions, we may very well be able to get you a lower interest rate with better terms then what your current lender offers.
Your existing Lender will typically offer you a renewal rate around 30 days before renewal. In an increasing rate environment, why wait until the 30-day mark? Most lenders can lock in a rate hold for 120days. If rates go up 0.5% during the 120-day period, and you are locked in and do not have to worry about the increase.
What Can a 0.5% increase mean for you?
If you have a $350,000 mortgage, you could save $8000-$9000 over the next five-year contract. As well potentially lower your remaining balance by $3000-$4000 at the end of your term. Do you want to save $10,000 or more?
Contact one of our Licensed Mortgage Advisors and let them get you the best financing available to you
Croft Axsen,
Broker/Owner, Jencor Mortgage Corporation
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The preferred method of using the payment savings would be to increase the payment on the variable rate mortgage to that of the fixed rate mortgage. The increased payment portion will assist in faster reduction of the principal on your mortgage. This will help to reduce the impact of prime rate increases over the term of the mortgage. If the prime rate does increase according to what the economists are predicting, we can anticipate increases in prime of approximately 0.25% six months for at least the next 18 months. This would now bring the variable rate mortgage to the same rate as what your fixed rate mortgage would have been. With having use the increased payment you would still be ahead as initially you had the rate savings plus the increased reduction in your principal. If the prime continued to increase by the same 0.25% every six months, it would take over 3 years for the variable rate mortgage not to outperform the fixed rate mortgage. If the prime rate increases don’t occur as predicted, then the pendulum swings greater in the favor of the variable rate mortgage. The variable rate mortgage also offers the same prepayment options as other mortgages plus you have the benefit of lower payout penalties should the need to sell arise.
The variable rate mortgage does have the inherent risk of the prime rate increases, so if you the borrower feel the need for security opt for the fixed rate mortgage. Jencor Mortgage Corporation will be able to assist in getting you the borrower, the best rate for your individual circumstance.
Dave Melnyk, Mortgage Advisor
Jencor Mortgage Corporation.
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U.S. labour conditions remain strong, and the economy continues to grow at a moderate pace. Inflation is still below the Fed’s target despite the rapid decline in unemployment to 4.1 percent. The growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter pace.
In the Fed’s quarterly forecast of economic and financial conditions, policymakers were divided over the outlook for the benchmark interest rate in 2018. Seven officials projected at least four quarter-point hikes would be appropriate this year, while eight expected three or fewer increases to be warranted. This is in direct contrast to market expectations of only two rate hikes this year by the Bank of Canada and is one important reason why the Canadian dollar has fallen sharply vis-a-vis the U.S. dollar in recent weeks, although the loonie did edge upward following the release of the Fed’s decision as the U.S. dollar fell sharply.
In the forecasts, U.S. central bankers projected a median federal funds rate of 2.9 percent by the end of 2019, implying three rate increases next year, compared with two 2019 moves seen in the last round of forecasts in December. They saw the fed funds rate at 3.4 percent in 2020, up from 3.1 percent in December, according to the median estimate.
The median estimate for economic growth this year rose to 2.7 percent from 2.5 percent in December, signaling confidence in US consumers despite recent weakness in retail sales. The 2019 estimate rose to 2.4 percent from 2.1 percent. The 2020 GDP growth continues to be a forecasted 2.0%. Fed officials expect a lift this year and next owing to the tax cuts passed by Republicans in December.
These projections are above the Fed’s estimate for the long-run sustainable growth rate of the US economy of 1.8 percent, a figure that is about in line with the Bank of Canada’s analysis for our country. The tax cut stimulus was introduced to an economy that was already experiencing labour shortages. The Fed estimates the long-run noninflationary level of unemployment to be about 4.5 percent–well above today’s nearly 20-year low of 4.1 percent, suggesting that inflation is likely to rise in coming months.
- Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
As the seventh round of NAFTA negotiations commenced in Mexico City, President Trump dropped a bombshell late last week, threatening to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum for national security reasons. The news reverberated around the world, causing U.S. trading partners in Europe to announce potential retaliatory actions quickly. The European Union raised the stakes for Trump by aiming levies on the GOP heartland, saying it would slap tariffs on products like Harley-Davidsons, Kentucky bourbon and Levi, bluejeans if President Trump goes ahead with his plan. Paul Ryan, Speaker of the House, is the Republican Representative from Wisconsin, headquarters of Harley-Davidsons. He immediately urged the President to stand down or ‘to be more surgical’ on tariffs. Hardliners such as Secretary of Commerce Wilbur Ross argued that any retribution would be trivial.
Well-known Republican economic advisors to the president warned that the tariff plan would do more harm than good, having adverse effects on consumers and many companies that use imported metals in the production of their products. The number of jobs lost in the auto sector and construction, for example, could be far more significant than the positive impact on the comparatively few jobs in the steel industry mainly in Pennsylvania. Prices of many products would rise including infrastructure costs, energy and food products.
Canada is ground zero in this maelstrom as the number-one exporter of steel and aluminum to the U.S., supplying $7.2 billion of aluminum and $4.3 billion of steel to the United States last year. Trump has often accused China of forcing U.S. steel and aluminum companies to fold by inundating the market with cheaper materials, but Trump thus far has refused to exclude Canada from the tariff proposal, holding Canada hostage to a favourable NAFTA deal.
Canada and the rest of the world are hoping that reasonable voices are going to prevail, but the resignation of Gary Cohen, White House Economic Adviser and formerly President of Goldman Sachs, is a victory for the protectionists (and immigration hawks). A registered Democrat, Cohn was regarded as one the few political moderates close to the president. His absence will amplify voices like Commerce Secretary Wilbur Ross and trade adviser Peter Navarro who back the president’s impulses to buck convention and pick trade fights on a global stage.
Housing Another Factor Postponing Rate Hikes
Even before the escalating trade tensions, the Bank of Canada was concerned about the impact of rising mortgage rates and new mortgage guidelines on housing, a significant contributor to the 3% growth in the economy last year. “Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand,” according to the Bank of Canada press release. The central bank is monitoring the economy’s sensitivity to higher interest rates, pointing out that “household credit growth has decelerated for three consecutive months.”
Inflation has edged upward to close to the 2% target. Wage growth has firmed, but even with the hike in minimum wages, the rise in compensation remains smaller than usual at full-employment.
The Bank of Canada commented once again that the economic outlook is expected to warrant higher interest rates over time, but some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential with inflation on target. The next scheduled Bank of Canada policy announcement is April 18 when the full economic outlook will be updated in the quarterly Monetary Policy Report.
To be sure, if the Trump administration goes ahead with the tariffs, the Bank will keep rates steady in April as well. Investors have pared bets on rate hikes after weaker-than-expected fourth-quarter growth, turmoil in global equity markets and the sharp decline in the Canadian dollar. Traders are not pricing in another rate hike until July according to Bloomberg News calculation on overnight index swaps. A month ago, expectations pointed to at least one increase by May. By the Bank of Canada’s measure, interest rates are still about two percentage points below what it would consider “neutral” for the economy.
- Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
As the seventh round of NAFTA negotiations commenced in Mexico City, President Trump dropped a bombshell late last week, threatening to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum for national security reasons. The news reverberated around the world, causing U.S. trading partners in Europe to announce potential retaliatory actions quickly. The European Union raised the stakes for Trump by aiming levies on the GOP heartland, saying it would slap tariffs on products like Harley-Davidsons, Kentucky bourbon and Levi, bluejeans if President Trump goes ahead with his plan. Paul Ryan, Speaker of the House, is the Republican Representative from Wisconsin, headquarters of Harley-Davidsons. He immediately urged the President to stand down or ‘to be more surgical’ on tariffs. Hardliners such as Secretary of Commerce Wilbur Ross argued that any retribution would be trivial.
Well-known Republican economic advisors to the president warned that the tariff plan would do more harm than good, having adverse effects on consumers and many companies that use imported metals in the production of their products. The number of jobs lost in the auto sector and construction, for example, could be far more significant than the positive impact on the comparatively few jobs in the steel industry mainly in Pennsylvania. Prices of many products would rise including infrastructure costs, energy and food products.
Canada is ground zero in this maelstrom as the number-one exporter of steel and aluminum to the U.S., supplying $7.2 billion of aluminum and $4.3 billion of steel to the United States last year. Trump has often accused China of forcing U.S. steel and aluminum companies to fold by inundating the market with cheaper materials, but Trump thus far has refused to exclude Canada from the tariff proposal, holding Canada hostage to a favourable NAFTA deal.
Canada and the rest of the world are hoping that reasonable voices are going to prevail, but the resignation of Gary Cohen, White House Economic Adviser and formerly President of Goldman Sachs, is a victory for the protectionists (and immigration hawks). A registered Democrat, Cohn was regarded as one the few political moderates close to the president. His absence will amplify voices like Commerce Secretary Wilbur Ross and trade adviser Peter Navarro who back the president’s impulses to buck convention and pick trade fights on a global stage.
Housing Another Factor Postponing Rate Hikes
Even before the escalating trade tensions, the Bank of Canada was concerned about the impact of rising mortgage rates and new mortgage guidelines on housing, a significant contributor to the 3% growth in the economy last year. “Strong housing data in late 2017, and softer data at the beginning of this year, indicate some pulling forward of demand,” according to the Bank of Canada press release. The central bank is monitoring the economy’s sensitivity to higher interest rates, pointing out that “household credit growth has decelerated for three consecutive months.”
Inflation has edged upward to close to the 2% target. Wage growth has firmed, but even with the hike in minimum wages, the rise in compensation remains smaller than usual at full-employment.
The Bank of Canada commented once again that the economic outlook is expected to warrant higher interest rates over time, but some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential with inflation on target. The next scheduled Bank of Canada policy announcement is April 18 when the full economic outlook will be updated in the quarterly Monetary Policy Report.
To be sure, if the Trump administration goes ahead with the tariffs, the Bank will keep rates steady in April as well. Investors have pared bets on rate hikes after weaker-than-expected fourth-quarter growth, turmoil in global equity markets and the sharp decline in the Canadian dollar. Traders are not pricing in another rate hike until July according to Bloomberg News calculation on overnight index swaps. A month ago, expectations pointed to at least one increase by May. By the Bank of Canada’s measure, interest rates are still about two percentage points below what it would consider “neutral” for the economy.
]]>Give us a call today and find out how you can maximize your borrowing potential!
1.877.245.3636
]]>As many of you may remember, this past October the Office of the Superintendent of Financial Institutions (OSFI) issued a revision to Guideline B-20 . The changes will go into effect on January 1, 2018 but lenders are expecting to roll this rules out to their consumers between December 7th – 15th, and will require conventional mortgage applicants to qualify at the Bank of Canada’s five-year benchmark rate or the customer’s mortgage interest rate +2%, whichever is greater.
OSFI is implementing these changes for all federally regulated financial institutions. What this means is that certain clients looking to purchase a home or refinance their current mortgage could have their borrowing power reduced.
What to expect
It is expected that the average Canadian’s home purchasing power for any given income bracket will see their borrowing power and/or buying power reduced 15-25%. Here is an example of the impact the new rules will have on buying a home and refinancing a home.
Purchasing a new home
When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:
Up To December 31 2017 | After January 1 2018 | |
Target Rate | 3.34% | 3.34% |
Qualifying Rate | 3.34% | 5.34% |
Maximum Mortgage Amout | $560,000 | $455,000 |
Available Down Payment | $100,000 | $100,000 |
Home Purchase Price | $660,000 | $555,000 |
Refinancing a mortgage
A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV. The maximum amount available is: $560,000 minus the existing mortgage gives you $145,000 available in the equity of the home, provided you qualify to borrow it.
Up to December 31, 2017 | After January 1 2018 | |
Target Rate | 3.34% | 3.34% |
Qualifying Rate | 3.34% | 5.34% |
Maximum Amount Available to Borrow | $560,000 | $560,000 |
Remaining Mortgage Balance | $415,000 | $415,000 |
Equity Able to Qualify For | $145,000 | $40,000 |
In transit purchase/refinance
If you have a current purchase or refinance in motion with a federally regulated institution you can expect something similar to the below. A note, these new guidelines are not being recognized by provincially regulated lenders (i.e credit unions) but are expected to follow these new guidelines in due time.
Timeline: | Purchase Transactions or Refinances: | |
Before January 1, 2018 | Approved applications closing before or beyond January 1st will remain valid; no re-adjudication is required as a result of the qualifying rate update.
|
|
On and after January 1, 2018 | Material changes to the request post January 1st may require re-adjudication using updated qualifying rate rules.
|
Source (TD Canada Trust)
These changes are significant and they will have different implications for different people. Whether you are refinancing or purchasing, these changes could potentially impact you. We advise that if you do have any questions, concerns or want to know more that you contact your Dominion Lending Centres mortgage specialist. They can advise on the best course of action for your unique situation and can help guide you through this next round of mortgage changes.
Dominion Lending Centres - Accredited Mortgage Professional
Many times, if it’s a good fit, we recommend a Monoline, as your first option.
It’s important to recognize the differences between the two, Monoline and Bank, because they are very different businesses and how they approach mortgages can have a very significant impact on you.
Monoline mortgage companies are in the business of providing nothing but competitive mortgages to you, your family and friends. It’s important to stress that they offer competitive mortgage products. As a group, they provide great rates and more importantly, flexible mortgage repayment terms, all in an effort to be competitive.
They want your mortgage business because it’s their sole business line and they want to do well, both for you and for their investors.
The big banks are not in the mortgage business. They are in the financial services business. It’s very important to understand that their focus is not about being competitive in the mortgage business.
“Huh?” I know, it doesn’t seem to make a lot of sense, but let me explain…
When you work at a bank, you hear all the time that the bank doesn’t make any money on its mortgage portfolio. You come to see how true this is when you see the incredible focus that a bank has on minimizing costs, how it’s almost impossible for you to step out of the normal process to help clients with special circumstances.
Because maximizing profit is the true goal of minimizing costs, every bank follows the “Golden Mean”.
In art, the Golden Mean is a strict proportional guideline for creating great art.
For a bank, the Golden Mean of profit is the strict proportion of average products and services per client. Their golden number is that each client has an average of more than of 2.75 products and services. For example, if you have a chequing account, a mortgage and a Visa, you’re profitable for the bank. Move any one of those and you’re not profitable anymore.
The intense focus on profit and managing costs means you pay more for mortgage financing. Not on something as obvious as interest rate, but on the options. Say for example you’re in a fixed rate mortgage and you need to pay out your $350,000 mortgage out before the five year term expires. Its not that uncommon, probably two in five of you reading this will do it.
If you were to pay out two years into a five year term, depending on who you’re dealing with, the penalty can be a little as $1,500 or as much as $13,000 depending on the lender you choose. Banks typically charge higher penalties because they’re not in the mortgage business – they don’t need to be competitive and also as a way to closely manage costs.
This post and some of the recent articles you’ve seen floating around may lead you to think that your average Canadian Bank is a manifestation of Mr. Robot’s Evil Corp. They’re not; managing costs is what drives profit for them – saving 10 cents means 3 dollars more profit – so even phone to phone contact for them is considered an extra cost.
The most important thing for you to remember is that they’re not really in the mortgage business, that’s why you need to connect with a Dominion Lending Centres mortgage specialist – to understand all your options.
If you want more information on this or mortgage financing in general, please give a DLC mortgage specialist a call today.
Dominion Lending Centres - Mortgage Professional
Jonathan is part of DLC A Better Way based in Surrey, BC.
To view the origional article click here
]]>And remember to stay safe! Don't leave your vehicle unlocked, or valuables out there.
Calgary vehicle break-ins surge to nearly 1,000 per month: See how often thieves hit your community
]]>Also, the government wants regulated lenders to have more scrutiny around loan to value ratios. Wonder what that means??
Mr. Rudin, the OSFI regulator championing these changes will someday be remembered as either,
1) That really smart regulator who skillfully guided and managed the Canadian Housing market, avoiding a market melt-down, easing prices is Toronto and Vancouver, while protecting our banks.
Or
2) That strong-willed regulator who personally precipitated the greatest destruction of wealth in Canadian History. Destroying the equity in millions of homes, across the entire country, not only Toronto and Vancouver, for no reason except a blind adherence to regulation. “I am a regulator, I must regulate”
Isn’t it fun to watch bureaucrats toy with our lives. And our equity. Mr. Rudin has already hurt the mortgagors in the rest of Canada, outside of Toronto and Vancouver, with his previous rule changes. We can only hope he does not actually cause a national catastrophe. Housing and its related economic influences makes up about 25-30 % of Canada’s GDP. Some would argue Mr. Rudin has done enough damage to one of the most important contributors to our economy.
Croft Axsen
Mortgages that qualify for mortgage insurance are basically new purchases for borrows that have less than 20% down and can debt-service at the Bank of Canada Benchmark rate (currently 4.89%). Those who don’t are basically everyone else – people with more than 20% down payment but need to qualify at the lower contract rate, and people who have built up more than 20% equity in their homes and are hoping to refinance to tap into that equity.
The biggest difference we are seeing is two levels of rate offerings. Those that qualify for a mortgage insurance by one of the three insurers in Canada (CMHC, Genworth and Canada Guaranty) are being offered the best rates on the market. Those who don’t qualify cost the banks more to offer mortgages due to the new capital requirements and so are offered a higher rate to off-set that cost.
Dominion Lending Centres’ President, Gary Mauris, wrote a letter to the Prime Minister and the Minister of Finance at the beginning of October 2017 outlining the negative impact of those changes on Canadians on year later. That letter was also published in the Globe and Mail. CLICK HERE to see that letter.
But even more alarming are the rumblings being heard about another round of qualification changes that will see those who have been disciplined in saving or building equity having to qualify at a rate 2.00% higher than what they will actually get from their lender.
Where the first round of changes in 2016 saw affordability cut by about 20% for insured mortgages, this new round of changes will have much the same impact on the rest of mortgage borrowers – regardless of how responsible we’ve proven to be.
The mortgage default rate in Canada is less than 1/3 of a percent. We Canadians simply make our mortgage payments. So where’s the risk?
The new qualification rules are intended to protect us from higher rates when our current terms come to an end. But when most Canadians are already being prudent, borrowing at well below their maximum debt-to-income levels the question now is why do we need to be protected from ourselves?
The latest round of rule changes are rumoured to be coming into effect by the end of October 2017 so my word of advice to at least those who have been contemplating a refinance to meet current goals? Contact your Mortgage Professional at Dominion Lending Centres to find out your options before your window of opportunity is closed.
-Dominion Lending Centres
]]>A mortgage in its simplest form is a contract. It has terms, conditions, rights and obligations for you and the lender. When you sign on the dotted line, you are agreeing to those terms for the length of time laid out in the contract. However, sometimes life throws us an unexpected event that brings around the need to make key decisions and changes. One of these changes, for whichever reason, might be needing/wanting to break your mortgage contract before the end of the term. Can you do that? What are the penalties? Let’s take a look!
To answer the initial question of can it be done, the answer is yes. Most mortgage lenders will allow this provided they receive compensation. Compensation is known as an Interest Rate Differential or IRD. When you started your fixed rate mortgage you had a rate of xx.x%, but the best they can lend to someone else right now is 1% less, so they want the difference. Seems fair, right? However, like most contracts, the fine print tells the true tale. The method in which the IRD is calculated is what borrowers should be aware of.
Let’s examine a few different calculations that can be used for IRD.
Method “A” -Posted Rate Method – Generally used by major banks and some credit unions
This method uses the Bank Of Canada 5 year posted rate to arrive at the formula to calculate the penalty. It also considers any discounts you received. These are the ones you will commonly see on their websites or when you first walk into the Bank or Credit Union. Now, rarely does anyone settle on that rate-there is a discount normally that is given. This gives you the actual lending or contract rate. When this method is used, you will be required to pay the greater of 3 months interest or the IRD. What that looks like is:
Bank of Canada Posted Rate for a five-year term: 4.89%
You were given a discount of: 2%
Giving you a rate of 2.89% on a five-year fixed term mortgage.
Now you want to exit your contract at the 2-year point, leaving 3 years left. The posted rate for a 3-year term sits at 3.44%. The bank will subtract your discount from the posted 3-year term rate, giving you 1.45%. From there your IRD is calculated like so:
2.89%-1.45% =1.44% IRD difference x3 years=4.32% of your mortgage balance.
On a mortgage of $300,000 that gives you a penalty of $12,960.
For most, that is a significant amount that you will be paying! It can equate to thousands and thousands of dollars, depending on the mortgage balance remaining. So what other methods are used? Let’s take a look at the second one.
Method “B”-Published Rate Method – Generally used by monoline (broker) lenders and most credit unions
This method is more favourable as it uses the lender published rates. Generally, these rates are much more in tune with what you will see on lender websites and appear to be much more reasonable. Again, let’s look at an example.
Your rate: 2.90%
Published rate: 2.60%
Time left on contract: 3 years
Equation for this: 2.90%-2.60%=0.30% x3 years=0.90% of your mortgage balance. A much more favourable outcome. On a $300,000 mortgage that would equate to only $2,700.
The above two scenarios operate under the idea that the borrower has good credit, documented income, and a normal residential type property. It is also a fixed rate mortgage, not a variable one. For variable rates, if the contract needs to be broken, generally the penalty will be a charge of 3 months interest, no IRD applies.
So, if you do find yourself in a position where you need to end your contract early get in touch with a Dominion Lending Centres mortgage broker to review your options. To avoid any surprises all together though, it is advised to consult with a mortgage professional right from the start. We are committed to ensuring that you make an educated decision when selecting a lender. Yes, we want to get you the best rate, but we also want to make sure you are taken care of.
-Dominion Lending Centres
]]>You’ll get no lectures from me on buying new cars instead of used ones or for financing the purchase instead of paying cash. I have owned cars since I was 16 and have bought them every which way – new, used, with cash and via loans and leases.
One rule I have is that a car loan should never be financed for longer than five years. My strategy for new cars is this: Finance over five years, but pay off the loan in two or three years. The latest data on car payments from J.D. Power suggests I’m out of sync with what the majority of car buyers are doing. Last month, 56 per cent of people financing a vehicle chose a term of 84 months or longer.
I asked members of my Facebook personal finance community what they thought about this trend and the consensus is that it’s problematic. Here are some of the points people raised about long-term car loans:
- You’ll still be paying for your car long after the warranty period is over
- You could end up owing more than the car is actually worth; one person said the value fell below his vehicle’s remaining loan balance in year four of the loan
- Allows dealers to sell you a more expensive car than you could afford over a shorter term
One benefit of financing over five years, max, is that you’ll end your loan payments quicker and be able to redirect your monthly payments to savings. Seven years is a long time to send monthly payments of hundreds of dollars to your car company’s financing division.
-Carrick on Money - The Globe and Mail
Add another group to the growing list of organizations trying to convince the federal banking regulator to back down from its plan to tighten the reins on consumers borrowing with low ratio loans.
The Fraser Institute said Wednesday the changes to consumers with 20 per cent down could make it harder for them to access mortgages, especially in higher-priced markets. Those buyers could turn to less regulated finance companies or perhaps turn to shorter, more volatile variable loans to meet qualification criteria.
“The proposed stress test for financially sound homebuyers is unnecessary and will do more harm than good,” said Neil Mohindra, a public policy consultant and author of the Fraser report, Uninsured Mortgage Regulation: From Corporate Governance to Prescription.
The Office of the Superintendent of Financial Institutions’ (OSFI) will release final changes to its mortgage lending guidelines, also known as B-20, by the end of the month and they will go into force two or three months later.
Key among the changes is a stress test for consumers borrowing with 20 per cent or more down – a level previously not heavily regulated — requiring them to qualify at a rate 200 basis points or two percentage points above their contract. In 2016, the government forced borrowers with less than 20 per cent down, and whose loans are backed by Ottawa, to qualify based on the five-year Bank of Canada posted rate which is now 4.89 per cent.
Some economists have questioned whether the changes from OSFI are needed at a time when the country’s hottest market, the Greater Toronto Area, has already cooled off and seen average sale prices on a non-seasonally adjusted basis drop about 31 per cent from the April peak.
Real estate groups have also heavily opposed the changes but those in favour of a crackdown point to a massive increase in debt, including mortgage debt. Statistics Canada said in September that household debt as a percentage of disposable income had a reached a record 167.8 per cent in the first quarter.
“We clearly see the potential risks caused by high household indebtedness across Canada, and by high real estate prices in some markets,” Jeremy Rudin, the head of OFSI, said this month. “We are not waiting to see those risks crystallize in rising arrears and defaults before we act.”
Still, the Fraser Institute doesn’t believe the changes are necessary and says another key result could be a less competitive mortgage industry and suggests some niche players in the residential market, like those who focus on the self-employed, may have their business models upended.
More importantly, the group says the rate of arrears, made up of borrowers more than 90 days behind in their payments, is basically the same as it was in 2002. The rate hasn’t exceeded 0.45 per cent and that includes 2009 financial crisis when the rate rose to five per cent south of the border.
“OSFI’s emphasis on corporate governance worked well during the financial crisis. Shifting towards more prescriptive rules is an ominous sign,” Mohindra said.
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You’ve been squirreling away your bonus cheques, savings and reducing the amount of times you visit Starbucks so you can finally get into your own home to build solid equity for your future. Now that you know what you want and what you can afford, it’s time to visit your local Dominion Lending Centres mortgage specialist to get yourself pre-approved for a mortgage.
Note, we did not say go to your bank to get pre-approved!
A mortgage broker works with banks (including yours), credit unions and other lending institutions to help find you the best rate on your mortgage. Since they work with so many different lending institutions across the country, they are in the best position to approach banks and ask for the best rates – sometimes better than what the same bank would have been able to offer you had you gone in on your own. Best of all, you do not pay a dime for their services – the lending institution does!
To work with a broker for your pre-approved mortgage, you will need the same documentation you would have to provide your bank so be sure to have your documents in order. You will need the following documents:
For a Salaried Employee
o an employment letter/verification of employment
o current/most recent pay stub
For an Hourly Employee
o current/most recent pay stub
o an employment letter/verification of employment
o Two (2) years of your T4 tax slips
For Someone Who is Self Employed
o last two (2) income tax returns
o proof of self-employment
Once you have submitted these details, you are on your way to getting pre-approved for your mortgage and providing yourself with a clear budget on the home you would like to buy!
-Dominion Lending Centres
]]>We know – more changes?! How can that be! With this ever-changing landscape, mortgages continue to get more complicated. This next round of changes is predicted to take affect this coming October 2017 (date not yet available). These new rules contain three possible changes, the most prominent being the implementation of a stress test for all uninsured mortgages (those with a down payment of more than 20%). Under current banking rules, only insured mortgages, variable rates and fixed mortgages less than five years must be qualified at a higher rate. That rate, of course, is the Bank of Canada’s posted rate (currently 4.84%, higher than typical contract rates). Going forward, it will be replaced by a 200-basis-point buffer above the borrower’s contract rate. (source)
The other proposed changes include:
• Requiring that loan-to-value measurements remain dynamic and adjust for local conditions when used to qualify borrowers; and
• Prohibiting bundled mortgages that are meant to circumvent regulatory requirements. The practice of bundling a second mortgage with a regulated lender’s first mortgage is often used to get around the 80%+ loan-to-value limit on uninsured mortgages.
These two proposed changes are minor, and would only affect less than 1% of all mortgages in Canada. The main one, the stress testing, will have a far greater impact.
Why is this happening?
You may recall that the stress test requirements were announced by OSFI in October of 2016. This rule followed a long string of new rules that occurred in 2016. At the time, they primarily affected First Time Home Buyers and those who had less than 20% down to put towards a home. Now, those who are coming up to their renewal date or wishing to refinance may find that this will have an impact on them. They may not qualify to borrow as much as they once would have due to the stress testing implication. For example:
A dual-income family with a combined annual income of $85,000.00. The current value of their home is $610,000.00.
Take off the existing mortgage amount owing and you are left with $145,000.00 that is available in the equity of the home provided you qualify to borrow it.
Current Lending Requirements
Qualifying at a rate of 2.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $490,000.00. Reduce your existing mortgage amount of 343K and this means that you could qualify to access the full 145K available in the equity in your home.
Proposed Lending Requirements
Qualify at a rate of 4.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $400,000.00. Reduce your existing mortgage amount of 343K and this means that of the 145K available in the equity in your home you would only qualify to access 57K of it. This is a reduced borrowing amount of 88K.
They have a mortgage balance of $343,000.00. Lenders will refinance to a maximum of 80% LTV (loan to value). The maximum amount available here is $488,000.00
As you can see, the amount this couple would qualify for is significantly impacted by these new changes. Their borrowing power was reduced by $88,000-a large sum of money!
With the dates of these changes coming into effect not yet known, we are advising that clients who are considering a renewal this fall do so sooner rather than later. Qualifying under the current requirements can potentially increase the amount you qualify for—and who wouldn’t want that?
Dominion Lending Centres
]]>Imagine that, a few years from now, the time has come to renew your mortgage.
Several years back, you got a $350,000 at the then great rate of 2.24%. Your mortgage payments are $1522 per month.
Because we are now in what the financial brainboxes call “ an escalating rate environment “ – normal people just say rates are going up – when you open your renewal notice you might encounter the same feeling you get when you look at the price of a car you like.
When you actually do look at the renewal notice, you see that the remaining balance on your mortgage is now $294,662, the new ( very competitive rate ) is 3.25% and that the new payment is $1668, actually $150 dollars a month MORE than you were paying previously. You think “WHAT THE….???”
This type of sticker shock is a new sensation to an entire generation of Canadians. Brokers are fond of talking about the fact that rates had not moved in 7 years but we rarely talk about the fact that rates have been trending down for more than twenty years and chances are, if you’ve had a mortgage for any time during that period, the payment at renewal has always been lower than when you started out.
‘Well, what’s to be done’, you ask? ‘How do I avoid “sticker shock”?
The key to avoiding that sinking feeling is to increase your payment slightly every year. You can find out how much to increase it during your Annual Mortgage Review. By increasing your monthly payment by even 2% a month, you can potentially avoid that sinking feeling – and pay off your mortgage even faster!
But wait; “Annual Mortgage Review? Qu’est-ce que c’est”, you ask.
Dominion Lending Centres
There are 9 million Millennials in Canada, representing more than 25 percent of the population. Born between 1980 and 1999, the eldest are in the early stages of their careers, forming households and buying their first homes. Buying a home is a daunting process for anyone, but especially so for the first-time home buyer. This is the largest and most important financial decision you will ever make and it should be done with the appropriate investment in time and energy. Making the effort to be financially literate will save you thousands of dollars and assure you make the right decisions for your longer-term financial security.
1. Don’t rush into the housing market–do your homework: learn the basics of savings, credit and budgeting.
Lifelong savings is a crucial ingredient to financial prosperity. You must spend less than you earn, ideally saving at least 10 percent of your gross income. Put your savings on automatic pilot, having at least 10 percent of every paycheck automatically deducted. Money you don’t see you won’t spend. Contributing to an RRSP, at least enough to gain any matching funds your employer will provide, is essential. The Tax Free Savings Account (TFSA) is an ideal vehicle for saving for a down payment and now you can contribute as much as $10,000 a year.
You also need to establish a good credit record. Lenders want to see a record of your ability to pay your bills. As early as possible, get a credit card and put your name on cable, phone or other utility bills. Pay your bills and your rent in full and on time. Do not run up credit card lines of credit. The interest rates are exorbitant and the only one who benefits is your bank. Keep your credit card balances well below their credit limit.
Do a free credit check with Equifax every six months to learn your credit score and to see if there are any problems. Equifax tracks all of your credit history, which includes school loans, car loans, credit cards and computer loans. Equifax grades you based on your responsible usage and payments.
Budgeting is also essential and it is easier than ever with online apps. You need to know how you spend your money to discover where there is waste and opportunity for savings. The CMHC Household Budget Calculator helps you take a realistic look at your current monthly expenses.
2. Make a realistic projectory of your future household income and lifestyle and understand its implications for choosing the right property for you.
Millennials are likely relatively new to the working world. Lenders want to see stability in employment and you generally need to show at least two years of steady income before you can be considered for a mortgage. This also applies if you have been working for a few years in one career and then decide to change careers to something completely different. Lenders want to see continuous employment in the same field. If you are self-employed, it is more challenging, and you need professional advice on taking the proper steps to qualify for a mortgage.
Assess the stability of your job and the likely trajectory of your income. Millennials will not follow in the footsteps of their parents, working for one employer for forty years. In today’s world, no one has guaranteed job security. Take a realistic view of your future. Will your household income be rising? Will there be one income or two? Are there children in your future? Will you remain in the same city? The answers to these questions help to determine how much space you need, the appropriate type of residence, its location and the best mortgage for you.
Financial planning is key and it is dependent on your goals and expectations.
3. This is not a Do-It-Yourself project: build a team of trusted professionals to guide you along.
You need expert advice. The first person you should talk to is an accredited mortgage professional. There is no out-of-pocket cost for their services. Indeed, they will save you money.
These people are trained financial planners and understand the ever-changing mortgage market. Take some time with them to understand the process before you jump in and find your head spinning with all the decisions you will ultimately have to make. They will give you a realistic idea of your borrowing potential. Before you fall in love with a house or condo, make sure you understand where you stand on the mortgage front. Mortgages are complex and one size does not fit all. You need an expert who will shop for the right mortgage for you. There are more than 200 mortgage lenders in Canada and they will compete for your business.
It is a very good idea to get a pre-approved mortgage amount before you start shopping. This is a more detailed process than just a rate hold (where a particular mortgage rate is guaranteed for a specified period of time). For a pre-approval, the lender will review all of your documentation except for the actual property.
There is far more to the correct mortgage decision than the interest rate you will pay. While getting the lowest rate is usually the first thing on every buyer’s mind, it shouldn’t be the most important. Six out of ten buyers break a five-year term mortgage by the third year, paying enormous penalties. These penalties vary between lenders. The fine print of your mortgage is key and that’s where an expert can save you money. How the penalty for breaking a mortgage is calculated is key and many monoline lenders have significantly more consumer-friendly calculations than the major banks.[2] A mortgage broker will help you find a mortgage with good prepayment privileges.
The next step is to engage a real estate agent. The seller pays the fee and a qualified realtor with good references will understand the housing market in your location. Make sure the property has lasting value. Once you find the right home, you will need a real estate lawyer, a home inspector, an insurance agent and possibly an appraiser. Make any offer contingent on a home inspection and remediation of significant deficiencies.
4. Down payments, closing costs, moving expenses and basic upgrades need to be understood to avoid nasty surprises.
The size of your down payment is key and, obviously, the bigger the better. You need a minimum of 5 percent of the purchase price and anything less than 20 percent will require you to pay a hefty CMHC mortgage loan insurance premium, which is frequently added to the mortgage principal and amortized over the life of the mortgage as part of the regular monthly payment.
Your lender will want to know the source of your down payment. Many Millennials will depend on the largesse of their parents to top up their down payment.
The down payment, however, is only part of the upfront cost. You can expect to pay from 1.5-to-4 percent of the purchase price of your home in closing costs. These costs include legal fees, appraisals, property transfer tax, HST (where applicable) on new properties, home and title insurance, mortgage life insurance and prepaid property tax and utility adjustments. These amount to thousands of dollars.
Don’t forget moving costs and essential upgrades to the property such as draperies or blinds in the bedroom.
5. Test drive your monthly housing payments to learn how much you can truly afford.
Affordability is not about how much credit you can qualify for, but how much you can reasonably tolerate given your current and future income, stability, lifestyle and budget. Most Millennials underestimate what it costs to run a home, be it a condo or single-family residence.
The formal qualification guidelines used by lenders are two-fold: 1) your housing costs must be no more than 32 percent of your gross (pre-tax) household income; and, 2) your housing costs plus all other debt servicing must be no more than 40 percent of your gross income.
Lenders define housing costs as mortgage payments, property taxes, condo fees (if any) and heating costs.[3] But homes cost more than that. In your planning, you should also other utilities (such as cable, water and air conditioning), ongoing maintenance, home insurance and unexpected repairs. Taking all of these costs into consideration, the 32 percent and 40 percent guidelines might well put an unacceptable crimp in your lifestyle, keeping in mind that future children also add meaningfully to household expenses and two incomes can unexpectedly turn into one.
The best way to know what you can afford is to try it out. Say, for example, you qualify for a mortgage payment of $1400 a month and adding property taxes and condo fees might take your monthly housing expense to $1650. A far cry from the $500 you pay now to split a place with 3 roommates. Start making the full payment before you buy to your savings account and see how it feels. Do you have enough money left over to maintain a tolerable lifestyle without going further into debt?
Keep in mind that this is not a normal interest rate environment. Don’t over-extend because there is a good chance interest rates will be higher when your term is up. Do the math (or better yet have your broker do it for you) on what a doubling of interest rates five years from now would do to your monthly payment. A doubling of rates may be unlikely, but it makes sense to know the implication.
Do Your Calculations Look Discouraging?
If so, here are some things you can do to improve your situation:
o Pay off some loans before you buy real estate.
o Save for a larger down payment.
o Take another look at your current household budget to see where you can spend less. The money you save can go towards a larger down payment.
o Lower your home price — remember that your first home is not necessarily your dream home.
Footnotes:
[1] I would like to acknowledge and thank the many mortgage professionals of Dominion Lending Centres who made contributions to this report.
[2] People break mortgages because of job change, decision to upsize, change neighbourhoods, change in family status or refinancing. The last thing you want to discover is that discharging a $400,000 mortgage 3.5 years into a 5-year term is going to cost you $15,000.
[3] Lenders now also assess your qualification compliance if interest rates were to rise meaningfully, a likely scenario in this low interest rate environment.
By:
Chief Economist, Dominion Lending Centres
]]>There are three types of mortgages in Canada, so we will take a look at each in detail so you can decide which the best is for you and your situation.
1. Fixed Rate – You can choose anywhere from a six month through a 10-year term. The term is generally a piece of the larger amortization of your mortgage. The longer period is called the amortization and in most cases is a max of 25 years. Choosing the fixed rate gives you the peace of mind that you know exactly what your mortgage payments will be for that time. Most of people choose the 5 year, which is interesting as the average mortgage in Canada is broken at 38 months. The penalty for breaking a fixed rate mortgage is either 3 months interest or the Interest Rate Differential, whichever is greater.
Each bank and mortgage provider is required to inform you at the time you accept the mortgage of how they calculate their penalties. In my experience, there is a significant difference between them. It is your responsibility to acquaint yourself with your chosen mortgage provider as to what their policy is. I have long maintained that banks are a business with the mandate of making money and that is a good thing overall. The good thing is that you are often able to port this mortgage with you to a new property without penalty.
2. Variable or Adjustable Rate – The variable rate is where your interest rate is based on the prime lending rate with either an ongoing premium or discount. As of today the prime lending rate is 2.95% and the ongoing rate discount is averaging at -.40% which makes your interest rate 2.55%. The prime lending rate can and does fluctuate. It is set by the Bank of Canada who meet 4 times a year. Your mortgage payments can increase or decrease according to the decisions made. A common misconception with the variable rate is that it is open or without penalty if it is broken and that is not the case. Most of the time the penalty is 3 months interest. Another consideration for the variable is that it is generally not portable to take with you to another property. Many people prefer the stability of the fixed rate, though if you were to do a look back, you would see that variable rates have historically proven to be the best way to save money in the long term. You are fully able to change your variable rate into a fixed rate without penalty.
3. Home equity lines of credit – An interesting misconception I have run into is that a home equity line of credit is not in fact a mortgage. If a loan has been secured against your property, you my friend have a mortgage. The advantages of the HELOC is that you do not pay any interest unless you carry a balance, you can make interest only payments and that you can pay it out in full at any time without penalty. The downside is that if you are not careful and manage your finances well, you will owe the exact same amount in 25 years that you did at the beginning. The interest rate on the HELOC will depend on your overall credit and generally set at a prime plus a percentage. The government made some change a ways back and the maximum HELOC you can have is 65% of the appraised value of your home. You cannot port a HELOC from one property to another and this type of a mortgage allows you to change it to a fixed or variable or a combination of all 3 with some lenders.
Dominion Lending Centres
]]>Unfortunately, many are not in this position and need to plan to save their own down payment.
When you can visualize the benefits of owning your own home and it becomes your number one desire, most of us can save that down payment.
Every time you feel like spending money that is not a need and takes away from you down payment, consider what you could be giving up, your home.
I recently did a mortgage for a couple buying their first home. During the process, they told me that 25 years ago they moved into a brand new rental home and they just finished paying off the landlords mortgage. The house had gone up about $800,000 in value over the 25 years. If the couple would have had their down payment and bought the home they would have a home worth over $1,000,000 paid for.
Here are some tips
Avoid borrowing money for a depreciating asset like a car or furniture. Did you know that most people who buy furniture interest free for a year do not pay it off and end up paying about 29% interest on that loan?
Open a Tax Free Savings Account (TFSA) and start contributing monthly. Try and maximize what you can put in the TFSA. Turn it into a game and see how fast you can make it grow. Remember the end game is your own home.
The Business Insider reports that 62% of your expenditure is spent on three areas: Housing, transportation and food. Focus on cutting down expenses in these areas and put the extra money in your TFSA. It may be tight living in a smaller place for a few years or even staying at home for a few years to save up that down payment, but if you could look down the road 25 years and have a choice of buying your first home or owning a million-dollar home with no mortgage, what would you choose? You need to keep that vision of owning you own home if front of you to make the sacrifices worth it. The longer you rent the more you are paying off someone else’s home.
I read a stat that 43% of the annual food cost are eating out. Then there are prepared meals that involve no cooking that when included add up to 60% of your food budget. I recently had a friend that stopped eating out and is now putting about an extra $350 a month in his investment account.
Create a budget, control your spending, and buy groceries on sale. Use the Flipp app and find the lowest price on main items and price match. You can save $100’s of dollars doing this.
All these savings can go into your TFSA. Ask friend for their money saving ideas. Stay focused and before you know it you will have your down payment.
Dominion Lending Centres
]]>We are delighted to announce the launch of our new website!
Our new website provides our existing and prospective clients with a simple yet interactive view of our work and the services that we offer. Stay tuned to our blog for new ideas! Sign up here so you never miss an update.
For any inquiries and feedback, please write to us at uwc@mortgageconnection.ca or call us at 8772453636
Generally, whether you choose a HELOC or a reverse mortgage, tapping into your home equity is a big decision that needs to be discussed with your family. However, having the extra money in one’s later years, when health issues and home retrofitting are needed the most, can make a big difference in our clients’ quality of life.
HomEquity Bank - Senior Vice President, Marketing and Sales
Questions please contact your Mortgage Advisor with Jencor Mortgage Corporation powered by Dominion Lending Centre's
]]>Your will is the easiest and most effective way to tell others how you want your property and possessions– called your estate– to be distributed. Even if you don't have much money or property, it's still a good idea to have a will so you can name an executor and make it clear who you want making decisions after you die.
Under the law in most provinces and territories, your nearest relatives are the people who will share in your estate if you die without making a will. Depending how complicated your estate is, your relatives may need to hire a lawyer and go to court to deal with your estate. Sometimes, a government agency will get involved to make sure that your estate is dealt with properly.
Your executor (also called your trustee, personal representative or liquidator) is the person you name in your will to be in charge of your property and possessions after your death. Your executor carries out the instructions you have written in your will. Being an executor can take quite a bit of time and involve a lot of paperwork. If there is no one close to you who can act as your executor, you might be able to appoint a professional such as a trust company, accountant, lawyer, or the provincial or territorial Public Trustee. If you are thinking about doing this, make sure that the person or organization is willing to take on the job before you name them in your will. Also check to see what their fees will be.
Estate planning means having a plan for passing on everything you own either through your will or by some other means. There are some things you may want to distribute before you die, and others that you may want to deal with separately from the rest of your estate, such as any business interests. For some of these things, you will need to make legal documents in addition to your will.
A lawyer or other estate planning professional can give you advice and help you choose how to deal with your estate.
You do not need to get legal advice, but because a will and other estate planning documents are legal documents, it is a good idea to have your will prepared by a lawyer. Will kits and guides can help you get organized, but they can't deal with everything. A lawyer will make sure that all your documents are prepared and witnessed properly. In Quebec and B.C., a notary public can also prepare a will.
Planning your own funeral can be as simple as telling your family and close friends what you want, or as complicated as pre-arranging or even pre-paying your own funeral. Pre-arranging a funeral means making arrangements for your funeral with a funeral home or memorial society. Pre-paying means you also pay for your funeral ahead of time.
Government of Canada / Seniors Forum
]]>What is Alternative Funding?
Dominion Lending Centres Leasing provides financing options for businesses who have been turned down for a traditional loan or for businesses that do not meet the requirements for a traditional loan. DLC Leasing matches businesses with lenders and investors within their network to provide funding outside of the traditional finance institutions. Brokers will assist business owners in finding the right loans to suit their needs and they will help with the application process as well.
Alternative funding is often grouped into specific niches. Lenders and investors will provide funding for certain needs rather than generalized financing. One lender may choose to provide funding for businesses which are in the construction field while another may choose to provide funding to businesses in retail or food service. This choice will often reflect the resources and network of the lender and will give the borrower a greater picture of where the money is coming from.
What Type of Loan Do You Need?
Every business is different and the needs of those businesses vary just as much. Where one company needs funding to pay for employee wages or utility bills, another may be looking for funding to purchase another location. The size of your business will be a determining factor for the amount of funding that you can receive. A larger business, with more income, will receive a larger loan where a small business will receive a lesser amount. Besides the size of your business, your loan broker will need to see detailed financial records, copies of your tax statements, and may even need to evaluate your accounts receivable.
When applying for a loan of any size, it is important to know what type of loan you need ahead of time. Here is an example of some of the most popular business loans available:
Once you have decided the type of loan that your business needs, you will need to find a reliable, honest and knowledgeable commercial finance broker to work with. Research your broker to make sure that you are protected throughout the entire process.
J. Okkerse
Director of Operations / Leasing Division
DLC
]]>Jencor / Highlander Wine and Spirits Appreciation Event is scheduled for November - watch for details and hope you can make it!
As for spending habits, almost half (45 per cent) of Canadians shell out between $100-$200 per child, and nearly one-in-four spend more than that. Here are the top five money-saving tips to help you stay on budget and make the best of the back-to-school transition this year.
Start a family budget battle. Start with a list of what the kids will need for the new school year and establish how much they have to spend. Then, break into teams and search your favourite stores online with the parents as the team captains. Teach them how to stretch a dollar; by taking advantage of sales, promo codes or cash back deals, they can get more bang for their buck. Whoever gets all the items on the list while sticking to budget - or even being under - gets an additional item on the 'want' list. Educational fun for the whole family!
Think outside the box. Check out summer clearance or look for savings on open box/refurbished items that kids will need during the school year, especially on big-ticket goods like tech accessories. Scour local classified sites or weekly yard sales to find deals (and save taxes) on anything from furniture to clothing. Parents helping their post-secondary kids move into dorms or housing can search for great travel deals on Groupon for hotels near the campus.
Don't dis discount. Let's get real: kids, especially younger ones, don't need to shop at premium stores. Discounters such as Amazon carry a wide range of perfectly good quality school supplies including binders, pens, markers, loose-leaf paper and even craft items. Same with basic house supplies for older students who are living away from home; everything from kitchen utensils to laundry and storage supplies can be had at a fraction of the price you'd pay elsewhere (and can save on shipping with an Amazonstudent account!)
Host a swap meet. Invite friends and family with kids to a back-to-school clothing swap or sale. Everyone can bring items of gently or unused clothing, accessories and supplies, or even books and toys. Set a maximum price of $2-$5 for a brand-name item in excellent condition. Kids won't feel it's a hand-me-down and parents will appreciate the low cost. Anything that's left over can be donated to a local charity.
Off peak can mean on point. Shop at unlikely times to save even more! Save yourself the lineups for Back to School shopping: shop online to avoid the rush to the store before closing time. Keep your eye on your emails late evening or early morning (or anytime in between) for extra discounts for those late owls or early birds for a limited period of time! You can also save on off-peak seasonal items like swimwear, lawn tools, grilling items and outdoor sporting goods. You will still have some time to utilize them for the rest of summer into colder weather and the savings can be sweet!
Sari Friedman is the Marketing Director of Ebates.ca and resident shopping expert. Ebates.ca is Canada's largest cash back shopping site. As a fashion enthusiast and new mom, Sari has an eye for finding and sharing amazing deals on the hottest trends and must-have styles.
]]>Material included 50 hectares of hard surface consisting of two runways, taxiways, surface parking lots and foundations. The asphalt, concrete and gravel has been processed and sold back to the construction industry.
Twelve airport buildings were also deconstructed and sold off to be reassembled and repurposed elsewhere. Those buildings not recycled as complete units were recycled in their component parts. Fixtures that were aviation-related, such as floodlighting, were purchased by another airport which is undergoing expansion.
Mark Hall, executive director of the redevelopment project, says the deconstruction phase was a huge task but, ultimately, the economics made good sense.
"It actually saved money to recycle buildings and materials as we avoided the cost of transporting material to landfill and paying the tipping fees," he explains. "The deconstruction process was undertaken in two phases and we diverted 92 per cent of all materials from landfill, which was a huge achievement. The volume of material was large and our goal was 80 per cent; we surpassed that.
"In May, we started installing the utilities that support residential development like power, cable, gas, telecommunications, water pipes, sanitation and the district energy system," he continues.
Globe and Mail https://beta.theglobeandmail.com/real-estate/calgary-and-edmonton/edmontons-blatchford-airport-redevelopment-project-takingoff/article35882291/
]]>Marv's Classic Soda Shop in Black Diamond Alberta is hosting their 10th Annual Rock & roll Car Show!
8am - 4pm - July 30
Hamburgers, hot dogs, milk shakes, fries, and ice cream just to name a few yummy things on the menu. Marv will even make you a malt in any flavor you want!
It's the 50's all over again, all retro right down to the uniforms. Great family fun event not to be missed.
This is something that has been a long time coming. There is a huge overhang of central bank debt around the world that now must be unwound. It will not be without pain. The following are a few articles on the subject that we hope will hep shed some light on what is happening and on what you can expect.
How The Bank of Canada rate hike will affect borrowers
Bank of Canada raisers interest rate for first time in 7 years
]]>Following the increase on July 12, Bank of Canada governor Stephen Poloz said that further rates would depend on data. The latest retail figures, released by StatsCan last week along with rising inflation have some calling for another rate rise before 2017 ends.
TD Securities' Fred Demers told Bloomberg that an interest rate hike in October 'is a very likely scenario,"
while Benjamin Reitzes of BMO Capital Markets added: "October is still a very reasonable call for the bank."
CIBC economist Avery Shenfeld is less certain due to the current rise of the loonie, even without support from commodities. He says that the BoC should make clear its policy if the Canadian dollar keeps rising.
"Better for the Bank of Canada to send a signal to markets soon that rate hikes could be deferred if the Canadian dollar extends its run," Shenfeld wrote in a new report. He added that Governor Poloz could give that assurance following September’s expected hold-steady on interest rates.
Shenfeld also expresses concern about the impact of policy on the housing market, which is already slowing.
"A soft landing that eases Ontario and BC house prices and mortgage growth would be welcome news for macroeconomic stability," Shefeld says. "But nobody can be too sure of what kind of landing we’re now in.
Better to carefully phase in further changes in rates and regulatory policy to avoid piling on to a market that might be facing a less-than-soft retreat."
Canadian Real Estate Wealth - Steve Randall
In a report Thursday, the federal agency said the rebuilding of 844 housing units has started and that number is expected to rise to about 1,000 this year. It said 122 of the projects were started last year and 722 in the first half of this year.
CHMC market analyst Tim Gensey said the agency underestimated how many construction workers would come to Fort McMurray when it suggested last December only 600 units per year could be rebuilt.
He said the strong numbers also reflect the devotion of residents.
He said the speed at which housing units are being rebuilt is due to factors including competent local builders, a communities reconstruction management plan and the municipality’s target of issuing building permits within 48 hours of completed applications.
The fire that swept through the community of about 70,000 last year caused an estimated $3.8 billion in insured property damage and destroyed nearly 2,600 homes, including almost 1,900 single-family houses.
At the current pace, all home rebuilding activity should be complete in three to four years, CMHC said.
The Canadian Press
Changes include:
uninsured mortgages requiring a qualifying stress test
LTV, loan to value measurements remain strong and adjust for local market conditions where they are used as a risk control, such as for qualifying borrowers
prohibiting co-lending arrangements that re designed or appear to be designed to circumvent regulatory requirements
Many brokers would argue that not enough time has been given to see how the impact of those changes from last summer have been.
Hard to say the impact of these changes if and when they come to pass, but keep an eye out....
Overall, 6 provides posted an increase with Ontario having the largest upturn, followed by BC and New Brunswick. Alberta and Saskatchewan saw the largest declines.
Looking to invest in property? Call a Jencor Mortgage Advisor today and find out exactly how much you can afford and the best mortgage for you!
Canadian Real Estate Wealth - Steve Randall
]]>Kelly has been competing at the Calgary Stampede for 5 decades! Now, reaching the age of 65 its time to "hang up his reins"
Maclin Ford celebrated the milestone with two $50,000 donations - to the Calgary Women's Emergency Shelter and the Alberta Children's Hospital.
The dealership has been in its current location, just off Glenmore Trail, since 1987.
The original location was on Macleod Trail.
To ensure that you get the best mortgage for YOU, we like to make sure we ask some questions:
This is a lot of questions but, once we go thru these we can find you exactly what you want and you will have all the information you need to make the decision that is right for you!
]]>The mug has been to Japan, BC, Las Vegas, backyard BBQ's! Check it out on our facebook page https://www.facebook.com/pg/jencormortgagecorp
We want to know where you use your Jencor Mug or where is has been traveling this summer. At the end of summer we will be doing a give away for one lucky person.
Don't have a Jencor Mug - Stop by the office, Say Hi and get a mug!
]]>For most people buying a home is the single biggest purchase you will make in your lifetime. The choice when it comes to arranging financing can impact you for years to come. Not all mortgages are created equal! A mortgage broker has the experience and know how to ensure you get the mortgage that is best suited for you.
Customer service is an important element of using a Mortgage Broker. Their job is to represent you through the full mortgage transaction and to always act in your best interest. Your mortgage broker has a relationship with many different potential banks and lenders, this allows them to the shopping for you and the right options for your unique situation. When you shop for a new car, you settle for the first one you see, you do some comparisons, test drive a few, see how the knowledgeable are the sales people.
A mortgage brokers work is not finished after the mortgage transaction has completed. We want to stay in touch and time to time give you a call and see how everything is going and if you have any questions and provide you with strategies for paying off your mortgage quicker and planning for the future endeavors.
Jencor Mortgage Brokers are there for every step of the way, from start to furnish! Our clients are are a part of something bigger...the Jencor Family!
Jeff Yuzwak - Jencor Mortgage
]]>click on the link for the article
According to the 2017 Royal LePage Canadian Recreational House Report, recreational properties near the two cities have begun to see their markets turn a corner with slight year over year prices increase so far in 2017.
Average regional prices in Alberta include:
Edmonton Journal 06/20/2017
]]>This year the Government of Canada has released the Parks Canada Discovery Pass for Free! Now you will have unlimited opportunities to enjoy all Canadian National Parks, National Marine conservation areas and National Historic sites across our beautiful Country!
If you have not already signed up for your free pass check out the Government of Canada website:
http://www.commandesparcs-parksorders.ca/webapp/wcs/stores/servlet/en/parksb2c for more information.
Currently we have two major projects in progress, The Telus Sky project and the new Central Library. These international designs join a host of other major projects since 2000.
Take a Walk and check it out...
National Music Centre, 2016 - 850 - 4 Street SE
The Bow Tower, 2011 - 500 Centre Street S
Wonderland Sculpture, 2011 - 110 - 6 Avenue SE
Brookfield Place, East Tower, 2018 - 1st and 2nd Street and 6th and 7th Avenue SW
The Core, 2012 - 333 Seventh Ave SW
Stephen Avenue Galleria Trees, 2000 - 8th Avenue SW between 2nd and 3rd Streets
Eight Avenue Place, East Tower, 2011 - 525 Eighth Ave SW
707 Fifth - 2017 - 707 - 5th Street SW
Fourth Street LRT Station - 2012 - 4th St and 7th Ave SW
Centrium Place, 2007 - 332 Sixth Ave SW
Jamieson Place - 2009 - 4th Ave and 2nd Street SW
Peace Bridge - 2012
East Village Riverwalk - 2011
George C King Bridge, 2014
St. Patrick's Island Park - 2015 - 1300 Zoo Rd NE
At the turn of the century, Mother’s Day observances were growing across the United States. The federal government had yet to recognize the holiday, but many states had adopted the third Sunday in May as a special celebration day honoring mothers. It was during a Mother’s Day church service on June 20, 1909, that Sonora Smart Dodd was struck with the idea of creating a special holiday to honor fathers, too.
When Sonora was 16, her mother died while giving birth to her sixth child, the last of five sons. Back then, like today, single parenthood was no easy task. By Sonoma’s account, though, Mr. Smart did a wonderful job. Because of this love and esteem, Sonoma Smart Dodd believed that her father deserved a special time of honor just like that given to mothers on Mother’s Day.
In 1909, Sonoma Smart Dodd approached the Spokane YMCA and the Spokane Ministerial Alliance and suggested that her father’s birthday — June 5 — become a celebration day for Father’s Day. Because they wanted more time to prepare, the Ministerial Alliance chose June 19 instead.
The first Father’s Day was thus observed in the State of Washington on June 19, 1910. The idea of officially celebrating fatherhood spread quickly across the United States, as more and more states adopted the holiday. In 1924, President Calvin Coolidge recognized Father’s Day as the third Sunday in June of that year and encouraged states to do the same. Congress officially recognized Father’s Day in 1956 with the passage of a joint resolution.
Ten years later, in 1966, President Lyndon Johnson issued a proclamation calling for the third Sunday in June to be recognized as Father’s Day. In 1972, President Richard Nixon permanently established the observance of the third Sunday in June as Father’s Day in the United States.
Sonora Smart Dodd lived to see her idea come to fruition. She died in 1978 at the ripe old age of 96.
Article: A Brief History of Father's Day by Andrew Hollandbeck
]]>A number of brokers are already reporting cases where their clients have tried to refinance only to find it wasn't possible, or having to use private lenders with a higher interest rate and fees from the lender and the broker.
It has been noted that the restrictions aren't unique to mobiles homes, but can also include small condos under 550 square feet, homes on leased land, homes built using alternative building methods.
"To be very fair to a private lender, they realize that the ability for them to resell that home in the case of default is now very small and so their risk increases quite a lot as well." "They have a higher default on mobile homes and it cuts their losses that way, but that's still a very small number." (quote from Joel Olson, DLC Mortgage Expert in Kamloops)
"Article - Steve Huebel June 12, 2017 - Canadian Mortgage Trends"
]]>Tire Kings
911 - 48 Avenue SE
www.calgarycarkings.com /service@calgarycarkings.com
They have put together a great package of deals for everyday of the week, wow!!
Monday
Tuesday
Wednesday
Thursday
Friday
Valued clients would be required to show their Jencor Mortgage Preferred Partner card in order to receive the promotion pricing.
*Prices are subject to change*
]]>"Steven Mennill, CMHC's senior vice president of insurance, said most of the drop in demand for portfolio insurance in the first quarter was the result of a premium hike CMHC introduced January 1 because of new capital requirements for mortgage insurers that were introduced by Canada's financial regulator.
Mr. Mennill said CMHC doesn't know yet whether the drop in portfolio insurance signals a permanent shift in its business model or whether demand for the insurance product will swing back again.
"It's not clear at this point whether either of these changes will be sustained over the long term," he said. "Portfolio insurance (demand) is largely a function of the overall sources of capital and liquidity and funding available to lenders in the system, which is affected by a wide range of factors. The cost of portfolio insurance is just one of them."
The declining insurance volumes led to an 8.1% drop in premiums and fees earned by CMHC on new mortgage insurance written in the first quarter.
We are just wondering, perhaps CMHC's premium volume drop, is because of not accepting application for single unit rentals, not accepting applications of refinances, not accepting applications for properties valued at over $1 million rather than a premium hike.
CMHC used to promote itself as "helping house Canadians". CMHC now is in the business of preventing Canadians from achieving home ownership. Have all the changes CMHC instituted been in the best interests of the home buyer and mortgage consumer?
It would be very nice to see a dialogues about the role of CMHC in Canadian Housing. The House of Commons Standing committee did received testimony on the subject. The role of CMHC in our economy and in the housing market needs to be openly discussed and understood. Top down dictates from such an important institution do not serve Canadian well.
We all need to make ourselves aware of the government and CMHC's unintended consequences from mortgage rule changes. IF the VP of Insurance at CMHC is quoted as thinking the premium hike is responsible for the drop in revenue and not the restricted product offerings, perhaps more awareness is needed.
Croft Axsen
Broker Owner / President
Jencor Mortgage Corporation
]]>Statistics Canada's latest 2016 Census data release, will have big implications for the country's housing market suggests some economists.
Statistics Canada announced this week that the latest results mark the first time census data has down more seniors than children living in the country as those born during the post-war baby boom continue to reach retirement age.
There were 5.9 million people in Canada aged 65 and over last year, compared to 5.8 million who were no older that 14, according to the 2016 Census.
"The increase in the proportion of seniors from 2011 to 2016 was the largest observed since 1871 - a clear sign that Canada's population is aging at faster pace," reads the Statistics Canada release. One in five Canadians are aged 54 to 65 according to Statistics Canada.
Most of these baby boomers reside in detached homes and townhouses. A lot of these people may choose to retire outside the major urban areas, looking for value, looking to cash in the equity they built up in that house and maybe put some of that towards their retirement rather than another home.
Whether purchasing your first home, vacation property, renewing your mortgage or looking at some investment properties. Let us work with you and provide you with the service and expertise you deserve.
Bank employees can assist in mortgage financing but they do not require a license through The Real Estate Council of Alberta.
We have Mortgage Advisors licensed in Alberta, British Columbia and Ontario.
Refer to the RECA website: www.reca.ca / Searching for an Industry Professional. All mortgage brokers in Alberta must obtain a license thru RECA. For British Columbia FICOM, Finanical Institutions Commission http://www.fic.gov.bc.ca/index.aspx?p=mortgage_brokers/index. Financial Services Commission of Ontario http://www.fic.gov.bc.ca/index.aspx?p=mortgage_brokers/index
]]>Did you know that U-Haul releases an annual report which details the previous year's highest growth markets? The cities are calculated by the net gain of arriving one-way U-Haul trucks over departing one-way U-Haul trucks for a calendar year. The data is compiled from more than 1.7 million one-way U-Haul truck rental transactions that occur annually and is actually a highly sought after source of information as it offers the most comprehensive data of its kind.
Quick Facts
Population: 85,678
Unemployment Rate: August 2016: 6.8%
Mean Maximum Temperature: 26.94°C
Mean Minimum Temperature: (-4.2°C)
Average Household Income: $77,718
Economic Drivers: Tourism, agriculture, forestry, mining, manufacturing/retail, high tech
Location: 250 km (155 miles) north of US (Washington) border; 310 km (193 miles) northeast of Vancouver. Kamloops is in south central British Columbia in Canada at the confluence of the two branches of the Thompson River near Kamloops Lake.
Average House Price 2016: $419,000
Quick Facts
Population: 49,454
Location: Belleville is located at the mouth of the Moira River on the Bay of Quinte in Southern (Central) Ontario, Canada, along the Quebec City-Windsor Corridor.
Average Household Income: $69,041
Average House Price 2016: $274,900
Quick Facts
Population (city): 131,794
Population (CMA): 151,987
Location: Guelph is located in southwestern Ontario, Canada. Known as "The Royal City", Guelph is roughly 28 kilometres (17 mi) east of Waterloo and 100 kilometres (62 mi) west of Downtown Toronto
Average household income: $83,047
Average price detached home: $475,715
Other: For many years, Guelph has been ranked at the bottom of Canada's crime severity list. Even after a slight increase, it had the second lowest crime rate in Canada in 2014, at 43 (per 100,000 population); by comparison the national rate was 68.7.
Quick Facts
Population: 11,640 living in 4,674 of its 7,757 total dwellings
Summer Months: (tourism): 34,000
Land Area: 518.59 km2 (200.23 sq mi)
Average Household Income: $76,787
Average House Price 2016: $419,000
Quick Facts
Location: Located as the gateway between northern and southern Ontario, North Bay is located three hours north of Canada’s largest city, Toronto, and three and a half hours west of the nation’s capital, Ottawa.
Average Household Income: $56,609
Average House Price 2016: $239,546
Quick Facts
Location: Located on the eastern shore of the sound after which it is named. Parry Sound is located 160 km south of Sudbury and 225 km north of Toronto.
Average Household Income: $46,180
Average House Price 2016: $255,000
Quick Facts
Location: Woodstock is the seat of Oxford County, at the head of the non-navigable Thames River, approximately 128 km from Toronto, and 43 km from London, Ontario.
Average Household Income: $73,738
Average House Price 2016: $304,250
Other: Dairy capital of Canada!
Quick Facts
Population:16,770
Location: A community in Southern Ontario in the municipality of Quinte West, Ontario, Canada. Located on the Bay of Quinte, it is the main population centre in Quinte West, and is one of the largest freestanding unincorporated communities in the province.
Average House Price: $233,577
Other: Canadian Forces Base Trenton/8 Wing, located on the east side of the town, is an important facility for the Royal Canadian Air Force's transport and search and rescue operations, and is Trenton's main employer.
Quick Facts
Population: 83,788
Location: Chilliwack is the seat of the Fraser Valley Regional District and its second largest city. This city is surrounded by mountains and recreational areas such as Cultus Lake and Chilliwack Lake Provincial Parks. It is located 102 kilometres southeast of Vancouver.
Average Household Income: $75,844
Average House Price 2016: $397,911
Other: Chilliwack's mild climate with limited extremes provides excellent growing conditions for a wide variety of crops and agricultural products. When averaged from 1981 to 2010, Chilliwack had the warmest mean temperature for any city in Canada.
Quick Facts
Population: 934,243
Location: The capital and fourth largest city of Canada, Ottawa stands on the south bank of the Ottawa River in the eastern portion of southern Ontario. Ottawa borders Gatineau, Quebec.
Average Household Income: $94,700
Average House Price 2016: $417,374
Other: The city is the most educated in Canada, and is home to a number of post-secondary, research, and cultural institutions, including the National Arts Centre and the National Gallery. Ottawa also has the highest standard of living in the nation and low unemployment. It ranked second out of 150 worldwide in the Numbeo quality of life index 2014–2015, and it contains a UNESCO World Heritage Site.
Quick Facts
Population: 16,864
Location: Located on Georgian Bay in Simcoe County, Ontario, Canada. It is part of the Huronia region of Central Ontario.
Average Household Income: $45,256
Average House Price 2016: $259,900
Other: In the summer months, the area's population grows to over 100,000 with seasonal visitors to more than 8,000 cottages, resort hotels, provincial and national parks in the surrounding municipalities of Penetanguishene, Tiny and Tay.
Quick Facts
Population: 20,978
Location: A municipality 35 kilometres west of London, Ontario, Canada. It was created through the merger of the former township of Caradoc and the town of Strathroy in 2001. Its two largest communities are Strathroy and Mount Brydges.
Average Household Income: $59.108
Average House Price 2016: $269,000
Quick Facts
Population: 103,671
Location: Southwestern Ontario- the Municipality of Chatham-Kent is located on the Thames River 80 km east of Windsor.
Average Household Income: $71,542
Average House Price 2016: $175,703
Quick Facts
Population: 159,961
Location: Kingston is located on the eastern end of Lake Ontario, at the beginning of the St. Lawrence River and at the mouth of the Cataraqui River (south end of the Rideau Canal). The city is located midway between Toronto and Montreal.
Average Household Income: $77,140
Average House Price 2016: $409,356
Other: Kingston was named the first capital of the Province of Canada on February 10, 1841. While its time as a political centre was short, Kingston has remained an important military installation.
Quick Facts
Population: 40,116
Location: Vernon is located in the Okanagan region of the Southern Interior of British Columbia, Canada. It is 440 km (270 mi) northeast of Vancouver.
Average Household Income: $79,847
Average House Price 2016: $439,000
Other: Each winter, Vernon plays host to the Vernon Winter Carnival. First held in 1961, it is now Western Canada's largest and North America's second largest Winter Carnival.
The remaining cities that round out the top 25 2016b migration trends in Canada are:
Ontario was at the forefront of the Canadian Growth Cities, with a total of nineteen out of the top twenty-five located in the province.
Five British Columbia cities are represented, and Halifax is the only city outside of Ontario and BC to make the list. Not surprisingly, these cities are located in the two provinces that have seen the hottest housing markets (Toronto and Vancouver), which may explain the migration to other, more affordable areas to live in.
]]>You're thinking about buying a home, which means you'll most likely be in the market for a mortgage. As with any large financial transaction, there is a lot of paperwork involved. Below is a list of the standard documentation you'll need to provide. After your application has been filled out, the potential lender will set out to verify all of the information provided.
It's super important to be current and precise with information you provide, as any discrepancies between what you provide and actual document verification can thwart your approval or at the very least, stall the approval process. Below are items that are normally required, although there could be additional items required not listed, depending on the lending institution.
You'll need to provide some basic identification, including your Social Insurance Number and a form of Government issued ID with a current address.
The lender will want to ensure you can afford to pay back your mortgage and they'll want to see that your debt-to-income ratio is in line with their policies. They'll say yay or nay after having a look at a summary of your assets, including cash in accounts, investment balances, RRSP's, any vehicles you own outright, other property you might have or anything else of notable value that you might own.
On the flip side, they'll need to compare the above value to any debt you've got. This includes balances on credit cards, loans, other mortgages or any other notable things that you owe money to. They want to be sure that your cash flow can support your mortgage payments, and in the event that ever changes, they have some assets to go after if you default on payment.
For employees of a company, a recent pay stub and record of employment should suffice. This can be requested from the Human Resources or the payroll department and should include the date you started employment with the company, your annual salary or hourly wage, how many hours you work per week ((guaranteed hours) and your title and position.
For self-employed individuals, things get a little trickier.
If you work for yourself, tax returns are usually the go to for proof of income. Be prepared to produce tax returns from the past two (most recent) years, along with accompanying "Notice of Assessments" from Canada Revenue for the same time period. There are also a few other avenues that might be sufficient, such as profit and loss statements, bank statements, invoices and proof of payment from clients or other financial statements including a pension, social security, death benefit or investment documents.
The easiest and most accepted information is from tax returns, but speak to a mortgage advisor about how to work around things if you don't have access to that information. Depending on the lender, the other items above might get you approved.
The lender will need to know the source of your down payment, which can be verified by any of the following means:
You've got all your ducks in a row with the paperwork outlined above, but the fun doesn't stop there! You'll also need a few more things to complete the process, which are:
You've pretty much done your part if you complete the above asks. The rest is a waiting game to see which lenders will approve you and considerations of various terms you want to lock into once you've decided who is getting your money! With various mortgage types and terms available and other areas of the contract like pre-payment privileges, etc, it's best to sit down with a mortgage advisor to do a dry run through the process and options first. After all, buying a home is one of the biggest purchases of your lifetime! Being well prepared and arming yourself with as much knowledge as possible will help empower your decision making and alleviate a lot of stress!
]]>You've bought new home and there are a million things swirling in your mind to prepare as the closing day countdown ticks away. The normal hassles of changing your mailing address, canceling utilities and setting them up at the new place, enrolling kids at a new school, figuring out your commute to work- the list goes on and on.
One of the things that many dread the most, is the actual packing process. Some people start weeks in advance and meticulously wrap and label their valuables. Others use their move as an opportunity to purge items that have been stored in basements or attics for years. No sense in bringing clutter from home to home if you don't need to!
There's the normal concern of bigger and more breakable items, such as electronics, valuable artwork and Aunt Mable's antique china. The inevitable last minute items are low on the packing priority totem pole- things that you need day to day, such as clothing, toiletries and food.
This list looks pretty common so far and probably matches what the average household faces when moving from one location to another. But, there are a few very common things not accounted for yet- things we might not even think about as they've become second nature to most of us. Most likely the things that we look at right before bedtime and shortly after waking up. Our technology.
If you've ever updated your smartphone, you've probably had a few moments of doubt when syncing devices and clearing the old one off to sell or keep as a back-up for the kids. Either way, most people store a treasure-trove of personal, valuable and irreplaceable data on their phones, tablets and desktops.
As wonderful as cloud based storage is, there's a long, breath-holding pause as you check "yes" to the pulse-pounding question, "Permanently delete items from this device?" With rigid confidence we say "yes" and hope to heck we haven't inadvertently deleted hundreds or thousands of photos and videos.
And that's just for handheld devices! Have you given thought to what the ramifications would be if you were to lose valuable data from your other digital technology?
Most of us trust that we can securely and easily back up our computers and mobile devices by syncing them with an online or cloud based technology. In doing so, we can instantly access a massive archive of our most important information, from confidential financial data, private medical information, family photos and videos and everything in between. We take for granted this "at our fingertips" convenience of being able to readily source our data, even if something happens to the device or devices we might normally rely on.
There might be a bit of a risky gray area, however. If your devices aren't set up to perform regular back-ups to a secondary storage device, your information could permanently disappear.
Well in advance of moving day, make time to transfer backup copies of everything to your preferred service. While it's not a bad idea to use physical storage such as freestanding hard drives or thumb drives, these are not going to be as secure as a web-based provider.
There have been too many tales of damaged or lost computers and drives, broken tablets and other breakable devices or cameras that disappear during a move. Why even tempt fate on what is said to be one of the most stressful things in life- MOVING DAY! By taking a few hours to back your files up properly, you could save valuable time, frustration and possibly some tears if something goes sideways with your electronics.
It's not unusual for professional moving companies to enlist a policy of "non-allowable" items in their terms and conditions.. These lists include more obvious things like hazardous materials, produce, plants, propane tanks, etc. But many companies have expanded their policy to now include cell phones, tablets, laptops and desktops. At the very least, most moving companies will list these items on their websites under "Items you should move yourself".
If you do decide to risk packing some of these in boxes and handing them over to the moving company, make sure you've arranged adequate insurance with the moving company in the event of loss or damage. There are after market boxes available for purchase, specifically for these items, in case you've long since tossed the original packaging. These specialty boxes will have all of the appropriate shock absorbing styrofoam and other materials to help litigate any potential damage from bumps, bangs or drops.
Make sure your computer is completely cooled before packing it, otherwise, plastic bubble wrap could have a melting party in your hardware as it sits in the moving box. If you're not familiar with the set up of a computer, including cords, take a picture of it for future reference and tape a label on each cord with its description. That way hooking everything back up will be a breeze instead of a frustrating puzzle. Pack computers right side up and mark the box as such. Not a good idea to turn a computer upside down. Lastly, take your back up devices (external hard drive, thumb drives, CD's, whatever method you've chosen), WITH YOU in your personal vehicle on moving day.
Happy packing and remember, back-up, back-up, back-up!
]]>For the third time in four years, the Canada Mortgage and Housing Corporation (CMHC) recently announced it will again increase mortgage insurance premiums, which would average an additional $5 per month ($60/year) for the typical insured mortgage.
The increase will apply to newly insured mortgages only and will take affect on St. Patrick's Day (March 17th), 2017.
The move is in direct response to stricter changes made legislation, which were outlined in our January post found here www.jencormortgage.com/blog/jencor-news/year-review-looking-ahead-2017/.
It's one piece of a much broader undertaking to make the mortgage industry more responsive to what regulators view as potential risks to the housing market.
Historically, home buyers with less than a 20% down payment were mandated to take out mortgage insurance so lenders would be covered in the event of defaulting on payments. Payments would typically be rolled into the borrower's monthly mortgage payments.
The new changes coming next month will affect more than those with small down payments. They will actually be more significant for home buyers with bigger down payments.
Buyers with a 5% down payment will have their premiums increase by 40 basis points. Those with a 15% down payment will have an increase of 100 basis points (a basis point is one one hundredth of a percentage point.)
To put that in more relatable terms, if a buyer has 5% down for a $150k mortgage, it will cost just under $3 extra per month. On an $850k mortgage, even with 15% down, the new change will boost the monthly mortgage insurance premium by an additional $40. This totals $480 per year, just to cover the upcoming increase on insurance premiums..
About two-thirds of borrowers who need the insurance have less than 10% for their down payment. Combine that with mortgage rates that have gone up approximately 50 basis points over the past three months and much tighter approval restrictions implements last Fall, and home buyers are left trying to plan how to bring it all together.
First time home buyer's, especially in Canada's booming hot spots in and around Toronto and Vancouver, will probably be shell shocked when they try to enter the housing market. It would be fair to say that it's the most difficult time to enter the market in the last decade, with little show of reprieve in the imminent future.
Positioned as the dominant government-owned mortgage insurer, CMHC sets the benchmark price in the industry and historically initiates any rate changes. It's expected that private-sector insurers will follow CMHC's lead and adjust their premiums, as well.
It's a rather telling story of the bustling real estate activity and rocketing home prices in pockets of Canada, when the third increase to insurance premiums is announced in a rather small space of time compared the past decade, as a whole.
CMHC also piggy-backed another announcement that non-traditional insured mortgages (ie where a down payment has been borrowed), would also see a premium increase.
CMHC has released its first quarterly report for 2017, which contains good news and not so good news. Their evaluation is based on four factors, which include overheating, price acceleration, overbuilding, and overvaluation.
The report consists of a "report card" of sorts, of 15 Canadian urban centres. Canada overall, is then weighted on this data. As with any statistical data, using a base for measurement and applying the findings across a much larger scale can lead to some skewing in both directions.
Below are a few highlights and red flags:
Calgary's residential market's risk rating has been downgraded from "strong" to "moderate".
A more balanced market is expected in Calgary for 2017, coming off the heels of a "buyer's market".
There's was a 1.3% increase of Adults 25 to 34 in the Calgary area in Q3 2016 versus year over year.
Calgary's single-family home benchmark price was down 3% last year compared to 2015($505,166 versus $521,958). Source: Calgary Real Estate Board.
Cities with a "strong evidence of risk" rating include Victoria, Vancouver, Saskatoon, Regina, Hamilton and Toronto.
Vancouver and Toronto are the culprits for strong price growth being spread to neighbouring areas (including Hamilton and Victoria).
St. John's, Halifax and Ottawa, have been pegged for moderate overbuilding for the past two quarters, but have been given a thumbs up for overall health/
Overvaluation and overbuilding remain the most prevalent problematic conditions across the 15 markets studied.
House prices in Canada increased by 7% year over year, at the end of 2016's third quarter.
If Ontario was removed from the calculation, house prices would be flat through to the third quarter.
The data shows that new home construction was off to a strong strong start in 2017, with 199,834 units started in January, up from 197,881 in December.
Ontario "starts" continue to drive the national trend upwards and BC has seen a slow down since last July, when it reached a near record high.
The CMHC’s quarterly Housing Market Assessment (HMA) is regarded as an early warning system, alerting the industry to areas of concern developing in housing markets so that they may take action in a way that promotes market stability.
If home prices were to correct in the Greater Toronto Area (GTA), other Ontario markets would take a hit, says Canada Mortgage and Housing Corporation's most recent Housing Market Insight report.
Some highlight excerpts from the report include:
Shockwaves would be tied to what the national housing agency calls “price spillover,” which occurs when high home prices in a certain market send buyers packing for cheaper municipalities. This has been most obvious in the pricey single-detached segment, which includes detached and semi-detached homes.
Recently, buyers have been shifting attention to even farther flung markets, including St. Catharines-Niagara, which was recently named one of the tightest resale markets in the country.
CMHC says the correlation it sees between the GTA and surrounding markets in terms of price growth suggests “some potential buyers are unable or unwilling to purchase an apartment in the GTA, and are instead choosing to purchase a property in a nearby CMA when GTA low-rise home prices rise.”
The average price of a detached home on the GTA’s resale market last month was $1,016,145, representing an increase of 23.1% from a year prior, according to the Toronto Real Estate Board.
Builders have been completing fewer detached homes in recent years as demand persists.
There were only 789 new detached homes up for sale across the GTA at November’s end, the Building Industry and Land Development Association states, and the average listing price for that housing type reached $1,230,962 that month, up 27% year over year.
Price spillover can work both ways and with GTA prices driving home values in other Ontario markets, if there were to be a correction, it could also result in a pull back the same surrounding markets.
CMHC estimates if home prices dropped 1% in the GTA, Hamilton's prices would be affected by 1.4%. A 10% correction, in theory, could slice 14% of Hamilton home prices. CMHC is careful to state "these are in no way predictions,” in a news release.
Canada's still experiencing a pretty hot housing market in the bigger urban centres. With lots of speculation that it "can't last" and the "bubble's got to burst", time will tell exactly when that is, as there's not a lot of slow down quite yet. Time will also tell how much impact last Fall's new legislation, coupled with CMHC's new mortgage insurance premium increase announcement will have overall.
]]>In July 2016, BC's government unexpectedly mandated a 15% tax on any foreign national buying real estate in Metro Vancouver. This maneuver was to put a major speed bump on the steady flow of offshore money (mainly Chinese), streaming into the province, which bore the brunt of the blame for Vancouver's record high real estate last year.
The composite benchmark price, a representation of the typical residential property in Greater Vancouver, was $897,600 in December, representing a 17.8% jump from December 2015. For detached homes, the benchmark price was $1.48 million in December, representing a 5% decrease from six months earlier (June 2016), but an astounding 18.6% increase from December 2015.
In light of the red-hot market, the government introduced (and implemented within 10 days) an additional 15% property transfer tax on foreign nationals, corporations and trusts that purchased real estate in Metro Vancouver. For example, the new regulation would add $300,000 tax to the final purchase price of a home worth $2 million.
The province’s new tax measures, which also included a potential vacancy tax for the city of Vancouver, aimed to address the lack of rental supply and housing affordability, which was attributed, in large, to foreign investment.
Based on data that the B.C. government released last July, stats showed that foreign nationals had invested more than $1 billion into B.C. property between June 10th and July 14th alone, with more than 86% of that focused in the Lower Mainland.
The tax seems to have achieved its desired effect- at least initially. The second half of 2016 clearly showed a cooling real estate sector, as both sales and prices experienced a decline. The Real Estate Board of Greater Vancouver said sales were down 39.4% December, compared with December 2015.
In and around Vancouver, foreign citizens were involved in 4.1% of all homes purchased last November, which was a 3% increase from October and more than four times the amount from August, which is the first month after the province launched the 15% tax levy.
“It’s still too early to draw any real conclusions from the data about the long-term effect of the additional property transfer tax,” a finance ministry statement said. “The purpose of the additional property transfer tax is to help manage demand in Metro Vancouver’s residential real estate market, to allow the housing market to respond by building new homes to meet local needs.”
According to data released by the BC Finance Ministry, in the first four months of the new levy, the province brought in more than $49 million in extra revenue from foreign buyers. About half of that — $24 million — was in November alone. There was another $152 million from property transfer taxes related to all home sales. The proceeds from the levy is said to be funding housing affordability measures in the region.
After the market nearly froze in August, foreign activity remained highest in the two Vancouver suburbs where, in six weeks prior to the tax levy, saw almost 25% comprised of international buyers.
In all, the government projects that about $2 billion in property transfer taxes will be paid in the 2016/17 fiscal year, up from $1.5 billion last year.
Vancouver shares the spotlight with other “super-prime cities", including Tokyo, Shanghai, Hong Kong, Singapore, London, Paris, Monaco, San Francisco, New York and Los Angeles. These cities attract high-net-worth people who want to establish a residence- where confidence is high that a real estate investment is safe and secure.
Along with the "brand" of each of these cities, there's a laundry list of other factors that make them so attractive, including their reputation for safety and lawfulness, world-class services, access to amenities, quality of life and the prospect of capital appreciation.
As Chinese currency, the renminbi, continues to fall, foreigners are looking for new places to protect and invest their wealth. With Vancouver having an established, vibrant Chinese and Asian community, there is a natural draw to investing in the city. Putting down roots with a home or real estate is a great means to become a part of the Vancouver culture.
In Vancouver, only 4.4% of buyers were foreign in November, compared to 15% in the month and a half before the tax. In Vancouver and Richmond, but not Burnaby, foreign buyers bought more expensive homes compared to locals, data shows.
Realtors, economists and industry insiders have speculated that international money could shift east to Kelowna and Toronto, but data won't easily be available to confirm the prediction, as Kelowna and Toronto do not have statistics that track foreign ownership.
The housing market is expected to play a prominent role in the upcoming provincial election campaign, which has been tentatively scheduled for May 9th, 2017.
Canadian economist Jim Brander states, “The economics of it are pretty straightforward: it’s supply and demand, and if you cut back the demand, you do hold down prices”. Brander expects the tax policy to persist into the long term, along with a slight decline in prices, although the ministry says it’s still too early to draw any real long-term conclusions from the data.
]]>As we enter into 2017, we take a look back at major headlines in 2016 and projections for what might lay ahead for Canadians in the next 12 months.
Last October, Canada's Federal Finance Minister made an announcement that would affect those trying to qualify for a mortgage as of November 30, 2016. In the past, borrower's could qualify for a mortgage based on discounted rates. Up until the announcement, a homebuyer could be approved if their debt-ratios showed they could make mortgage payments based on the Bank of Canada’s qualifying rate. The mortgage qualifying rate (MQR) was based on the posted five-year fixed rate and in 2015, it hovered around 4.65%.
With the announcement, anyone applying for a five-year fixed didn’t have to use the 4.65% rate, but rather the much lower contract rate. To add some perspective, in 2015, this contract rate bounced between 1.99% and 2.99%. The contract rate is essentially equivalent to a discounted rate, which in Fall 2016 was about 200 basis points below the stress-test mortgage qualifying rate.
The new rules also restrict insurance for these types of mortgages based on new criteria, including that the amortization period must be 25 years or less, the purchase price is less than $1 million, the buyer has a minimum credit score of 600 and the property will be owner-occupied.
The new rules, simply stated, will stress-test whether or not a buyer could withstand a 1% to 2% increase in mortgage rates. Historically, any changes to mortgage regulations focused on minimum down payments. However, the Federal Finance Minister stated that the reason for the change to mortgage qualification rules was to “Bring consistency to mortgage insurance rules by standardizing eligibility criteria for high- and low-ratio insured mortgages, including a mortgage rate stress test.”
It's been estimated that the new Federal regulations could potentially impact 7% to10% of Canadian home buyers. Nearly one third of Canadian homebuyers who had been approved for "high-ratio mortgages" a short time before last October, wouldn't actually qualify under the new rules. A high ratio mortgage is when a borrower has less than 20% in equity, with a particular vulnerability if the total value of a loan is at least 450% of annual income.
CREA (The Canadian Real Estate Association), released some interesting stats last month (December 2016). Some highlights from their report include:
The national average price continued to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remained two of Canada’s tightest, most active and expensive housing markets.
The Central Bank also noted that means house prices are now "just under six times average household income, their highest recorded level." The good news is that the central bank thinks the new rules will eventually achieve the goal of bringing down debt levels.
Canada's leading economists, analysts and realtors share some predictions as to trends Canada will see unfold over the coming year:
Last November, RBC and TD Bank raised their fixed mortgage rates, even in light of the Bank of Canada having announced it would hold the overnight interest rate at 0.5%. A senior Canadian economist predicts a more pronounced downturn in housing activity to prompt the bank to cut interest rates to 0.25%.
The Bank of Canada cut its economic forecasts through 2018, predicting a slower housing market and conceding the export sector is not rebounding the way it had anticipated.
Gross domestic product growth is expected to pick up to 2% in 2017 and 2.1% in 2018. The bank expects the Canadian economy to return to full capacity by mid-2018, about six months later than it had previously expected.
The weaker outlook is due largely to slower-than-expected growth in the export sector and an anticipated slowdown in housing sales — two major engines of growth.
Benoit Durocher, a senior economist at Desjardins, cites a 3.5% Q3 rebound in real GDP, job creation, heightened consumer confidence, and potential stimulus from federal spending on infrastructure, a pillar of Prime Minister Justin Trudeau’s campaign.
According to CREA (The Canadian Real Estate Association), 2017's national sales are forecasted to represent 518,900 units. Transactions in B.C. and Ontario are anticipated to remain strong but fall short of 2016's record levels, as a result of deteriorating affordability, an ongoing shortage of affordably priced listings for single family homes, alongside newly tightened mortgage regulations (see above). British Columbia home sales are forecasted to decline by 12.2%, while annual sales in Ontario are forecasted to retreat by 2.7%.
Sales are also forecasted to pull back slightly in Saskatchewan (-1.2%), Nova Scotia (-2.1%), Prince Edward Island (‑2.2%) and Newfoundland and Labrador (-1.4%).
Sales in 2017 are forecasted to rise by 3.5% in Alberta and by 1.2% in Quebec. Improvements are also forecasted in Manitoba (+0.8%) and New Brunswick (+1.6%).
The national average price in 2017 is forecasted to decline by 2.8% to $475,900, with modest price gains near or below inflation in Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia, combined with small declines of a similar degree in Alberta, Saskatchewan, Prince Edward Island and Newfoundland and Labrador.
While the average sale price in British Columbia is expected to decline by 7.8% in 2017, this largely reflects an anticipated decline in single family home sales activity at the higher end of the market – particularly in the Lower Mainland.
The forecast drop in the national average price in 2017, in conjunction with a decline in BC, is expected to mirror the trend of 2012, when a more normal year for activity in Greater Vancouver followed record level sales activity for multi-million dollar homes in 2011. The forecast decline reflects the influence experienced by the composition of sales activity on average prices (as it did in 2012 versus 2011).
With Donald Trump becoming President of the US on January 20th, there is a lot of speculation as to how his position will impact Canada. Some speculation and predictions across Canada follow. Only time will tell if they're on the mark.
University of Calgary tax-policy expert Jack Mintz has said Canada’s ability to lure business investment and top talent would be threatened if the U.S. moves ahead with Trump’s vows to significantly cut tax rates for U.S. corporations and for the highest income earners.
Trump has also made it clear he wants Buy American rules in his planned $1-trillion infrastructure program, which could leave out Canadian companies.
Trump has also called for the renegotiation of the North American Free Trade Agreement, which could put many Canadian jobs in jeopardy.
That will also mean tough negotiations on softwood lumber, most likely an expanded Buy American government procurement program that freezes out Canadian competition and, most dangerous of all, the threat of a 35-per-cent penalty on goods entering the U.S. from American-owned manufacturers.
The purpose of that tariff would be to prevent American companies from moving operations to Mexico and elsewhere to take advantage of lower wages. But would it also apply to goods entering the U.S. from American-owned companies with operations in Canada? Common sense says no. The two economies are inextricably intertwined.
Although there are lots of dire predictions, some experts say the expectations of Trump’s business-friendly promises are poised to lift the U.S. economy, which would help Canada. Canada's might also benefit if the American economy continues to react positively (US dollar hit an 11 month peak since his win), a stronger U.S. dollar could send even more buyers north of the border.
In contrast to the Canadian dollar, the mining sector saw shares of many companies rise in response to the former reality TV star's promise of major infrastructure spending. As a result, the price of copper alone rose around 30 per cent. Relied upon heavily in infrastructure, the metal is used for electric cables that power cars, telecommunications, and manufacturing.
With lots of speculation as to the ripple affect our southern neighbours will have on the Great White North, we should start to see the beginnings of new trends, whether upwards or downwards, in the coming months.
Wishing everyone a very happy and prosperous 2017!
]]>A mortgage is a considerable financial investment for anyone. It is likely one of the biggest investments an individual will make in their lifetime and there are many aspects to consider to ensure that your type of mortgage is the right one for you. A large part of the decision will be based on your personal situation (how much down payment you have, do you have a stable income, is your employment seasonal, what is your debt to income ratio, do you need more flexibility with monthly payments or do you want to lock in and speed up the payments for the term, etc).
With so many things to consider, surrounding such a large financial commitment, it's a smart idea to do your research and talk to a mortgage specialist. There might be elements of a mortgage you might not consider to be of significance at the time of signing, but could come back to haunt you down the road, should your needs drastically change within the term.
One of these often "glossed over" conditions is the prepayment privilege.
A prepayment privilege gives you the opportunity to pay off more than the regular mortgage payments you have agreed to pay in a mortgage contract. Prepayment privileges allow you to pay more than your regular payments without triggering any prepayment charge.
Lump Sum Payments
Typical pre-payment scenarios on a closed term mortgage would allow a prepayment of the original principal balance each year based on the anniversary of the loan (usually with a minimum payment of $100). This is usually expressed as a percentage of the original principal of the mortgage that can be paid each year.
Some lenders calculate this period to be from calendar year to calendar year and some lenders calculate this period from anniversary date to anniversary date. The terms usually range from 10% to 20% of the original principal.
Increase in Regular Payments
This is usually expressed as a percentage increase of the contracted monthly payment. The increased allowable amount typically ranges from 10% to 20% of the original payment. Most lenders allow payments to be increased by switching to a bi-weekly accelerated or weekly accelerated payment schedule, in addition to your prepayment privileges.
Other "Custom" Options
Some lenders offer a "skip a payment" or "double a payment" option, with restrictions on how many times each can occur in a specified period.
Closed mortgages generally have lower interest rates than open mortgages do, but borrowers are prone to less flexibility- mainly the loan can't be paid prepaid without avoiding a penalty. Most closed mortgages allow for accelerated payments of some kind (see above), but each lender sets its own prepayment terms.
With a closed mortgage, the client is essentially agreeing to keep the loan for the entire term. Borrowers who sell their can end up with less money than anticipated as a result of high penalties for breaking the terms of the mortgage.
An open mortgage comes at a higher interest rate, but also gives a homeowner the flexibility to pay off their mortgage any time. This in itself, could outweigh the interest rate difference between an open and closed mortgage.
If there are a lot of unknowns in the future in terms of job location, major life changes (ie getting married or expanding the family where a new home might be required), an open mortgage should be considered. If the next five to ten years (or however long the term of the mortgage is) looks fairly stable with very little change, a closed mortgage might be a better fit.
To sum it up: closed mortgage = lower interest rates with little flexibility and open mortgage = higher interest rates with a lot more flexibility.
In Canada, prepayment penalties on closed mortgages are generally calculated as either the sum of three months of interest on your mortgage or the interest rate differential (IRD), whichever is greater.
An 'Interest Rate Differential (IRD) is a differential measuring the gap in interest rates between two similar interest-bearing assets. It is the difference between what you would have paid in interest and what the bank can now make on the funds they lent you, based on the current rates, for the remainder of your term.
If you were paying the bank 6% interest and they can now only lend the money out for 4%, you have to pay back the difference. The greater the time left on the term of the mortgage, the greater the IRD penalty, as the difference in interest is incurred for a longer period of time.
There are lots of IRD calculators offered online to satisfy any curiosity of what the approximate penalty would be to break the current terms of your mortgage. Armed with some info from your mortgage contract, simply populate the information into the calculator and a ballpark number will be produced- oftentimes it's shockingly high. There are generally more fees incurred at branch level in addition to the IRD figure, as well (ie discharge fees, etc).
The outright way to avoid a prepayment penalty on a mortgage is to not break the terms of the mortgage for the life of the contract (ie 5 years). Upon renewal, the terms of the existing mortgage contract have been satisfied and can no longer impose a penalty should the borrower wish to switch to a different lender or explore a different type of mortgage.
However, life can be unpredictable, and oftentimes curveballs can be thrown out of nowhere. If you find yourself in a situation where you need to break your mortgage terms, there are a few ways to reduce the penalty.
If you've confirmed what the penalty is through either your mortgage broker or bank, and if it's huge, check or ask about the above mentioned prepayment clauses in your contract. If you have money somewhere else that can be applied to a lump sum pre-payment against the principal, now would be a good time to use it.
With a mortgage of $400,00 and 36 months left on the term, a prepayment of $80,000 applied directly towards the principal before making the break, can effectively shave several thousand dollars off the penalty. Instead of incurring a $15,000 penalty, it might be brought down to $11,000-$12,000 by this strategic maneuver.
Sometimes it might even make sense to take out a short term loan to come up with the lump sum, if you're able to pay it off right away with the proceeds of the sale of your home or other means. The cost to temporarily borrow the money would often be much less than the savings on the penalty, making it a viable option to explore.
If a large lump sum payment isn't accessible, even doubling up your payment or making an extra full payment until you break the mortgage will help reduce the penalty. The time of year can play a role in saving money on a penalty, as well. If the terms of your contract are calendar year, you could take advantage of the prepayment privileges in both December and then again in January. Check with your lender first to determine if your terms are on a calendar year or anniversary basis, as you don't want to go through the trouble of securing funds to only find out they can't be applied to the principal in enough time to be of any advantage.
Subject to conditions explained below, the prepayment penalty might be deductible from your business income. If the criteria is met, the Income Tax Act redefines the penalty and instead deems it to be interest. From there, the normal rules for the deduction of interest apply, with some limitations.
For the deduction to be permitted, the penalty must be paid on money that you have borrowed in the course of carrying on your business or in the course of earning income from the property, otherwise know as "debt obligation".
The penalty must also be categorized as having been paid because of an early loan repayment and no other reason. The penalty will not be deemed "interest" if is calculated on variable elements, such as production of goods or dividends to shareholders. The penalty must be paid to compensate the bank for loss of interest on the loan, not for a participation in the business.
If you meet the criteria, the prepayment penalty is determined to be interest and becomes deductible from your income.
If the Income Tax Act does not deem the prepayment penalty to be "interest", it is generally not deductible. There are three exceptions to this rule, though:
With high stakes, fine print and few ways around it, prepayments can be a tricky thing to navigate on your own. The best time to become educated on your options and their potential ramifications is before committing to a mortgage. A mortgage broker can offer an unbiased and broad range of pitfalls to avoid and guide you to the right mortgage for your needs.
]]>If you've ever thought about trying to make more money, the idea of making an investment has probably crossed your mind. Perhaps you've thought about getting into real estate, as investing in property could potentially offer the perfect opportunity to expand your income. From new to experienced, there are many things to know before crossing over to "real estate mogul" status. Making money is the name of the game, so you need to be armed with tons of knowledge, from the rental process, to different types of mortgages, responsibilities of a landlord, the ins and outs of flipping a house, to name a few areas you could pursue.
Securing a mortgage is one of the first things you need to think about, even before you've found your first property. It can be difficult navigating the choppy waters of searching for the right type of mortgage as there are so many options these days. Reaching out to a mortgage specialist, who generally offers a no-obligation consultation, would be an excellent starting point. By answering questions unique to your situation, you can start to shortlist your possibilities before starting your investment property search. This way you'll be educated and feel more confident about what you can afford and the required terms.
When you're ready to start your investment property search, the first thing you need to consider is the number of units your building will have and how it is zoned. Most buildings zoned as residential have one to four units, making qualification for financing more challenging versus a traditional principal residence, but not by miles. Buildings with five or more units, however, are zoned commercial, with even tougher qualification criteria and higher interest rates.
If it's a multi-unit property, you will need to determine if you (the owner) will be living in one of the units. If you will be living at the property, it would be considered owner-occupied. If all of the units will be rented out, it would be classified as non-owner occupied. The major difference between the two is the required down payment amount.
If you have a credit rating of at least 680, you will be considered a lower risk for a rental property and to receive more favourable interest rates. It's not a bad idea to check your credit score before applying for a mortgage, to avoid any surprises as to where your credit standing falls.
The lender will need all of the required paperwork to apply, which could include current proof of income, a letter of employment, recent NOA (notice of assessment) or income tax returns. If you are commission-based or self-employed, it’s more than likely that notice of assessments, income tax returns and other business related financial documents and verification will be required.
The lender will require that the majority of the property’s operating expenses, including the mortgage payments and property taxes, are covered by legal income. If the property income does not fulfill the operating expenses, you will need to show proof that you can personally cover any financial shortfalls.
You’ll also need to understand how cash flow works. This term represents the total rental income minus all allowable expenses such as mortgage interest, maintenance, potential vacancies and property taxes. In many instances, the rental income will be exceeded by the expenses and create a monthly negative cash flow. A negative cash flow allows an investor to reduce their income tax since it can be deducted from earned income.
The traditional benchmark is a minimum of 20% of the purchase price. You will have to show proof that the 20% hasn't been borrowed, as well. This condition is often satisfied by showing the money has been in your bank account for more than 90 days prior to the due date of the down payment. It can, however, come from the sale of another property, but you will need to provide the purchase of sale agreement to prove how much money was made from the sale.
In addition to the down payment, the lender might want proof of closing costs being covered, usually a minimum of 1.5% of the purchase price. If you already own other properties, the lender will want to see property tax and mortgage statements and lease agreements for any rented units. If the properties have a negative cash flow, you’ll need to provide proof that you will be able to personally cover monthly expenses.
When you're considering an investment property, you might decide that it would be better to build one. If you fail to find somewhere which really lives up to your expectations, this might be a viable option for you. If this is the case, you will need to learn about construction mortgages.
The two popular types of construction mortgages are the completion mortgage and the progress draw mortgage.
This is a standard mortgage that gets paid out after the home is built. Once construction is complete and the closing date has been determined, funds will be transferred or paid out just as they would in a home purchase. This type of mortgage is used when purchase pre-constructed or quick-close homes or ones currently under construction by the builder.
A progress draw mortgage is not available in all areas, but makes the process much smoother where it is available, as funds are released throughout the construction process. With this type of mortgage, the lender will release funds during the completion of each pre-determined phase of completion. Traditionally, these are at intervals of 35%, 65% and 100% completion.
It's hugely important to have a great support system in place. It can be taxing jumping into a real estate investment on your own, especially if it's your first time venturing down this road. It makes sense to have the support of those who really know what they are doing. With the right realtors, contractors and mortgage brokers, you can feel more optimistic about the success of your investment.
It's important to have a strong entrepreneurial spirit, which so often sets apart those who succeed and those who don't. Happy hunting on your perfect investment property!
]]>No matter what kind of home you live in, it's probably safe to assume that you want it to be as close to your taste as possible, which is often more difficult than it sounds. If you find yourself in a home that doesn't float your boat, but rather slowly sinks it, you might fall into one of the following categories- moving to a property which meets your needs or improving the one you're already in. Lets have a quick look at both, to help you discover which side you might be on.
Lets review some common situations which can lead to some tough decision making, as there are many factors that can lead you down the road of contemplating a reno or an outright change of address. One of the most common reasons to move is that the home is no longer a suitable size for those living there. This can be a result of a growing family, whether it be the birth of a child, grown kids moving back home, cohabitation with elderly parents or other variables. If you find that you don’t have enough bedrooms, you might be faced with a tough decision.
If this is this case, it might seem as though moving is your only option. However, this isn't necessarily true. Building an addition might be a viable option for your situation, which comes with the distinct advantage of being able to customize any finishings to suit your personal taste. An addition could be the answer you've been looking for, which would add square footage, offer a change of scenery with the new layout and give you a pass on the hassle of moving and everything that comes along with it (new school, neighbourhood, neighbours, change of address for mail, bills, utilities, friends and family members, etc).
Of course, a growing family is only one example of why you might feel the need to change your situation. Another itch you might want to scratch is the desire for change. That doesn’t have to mean moving from your current home. Making changes, whether structural, aesthetic, interior or exterior, might be all you need as the path to living in the home of your dreams. Choosing to invest in the space you're already in, is a very realistic option to dodge the extreme measure of ripping up your roots for a change of scenery.
For many people, it all boils down to the potential your current home holds and how much it would cost to make it the way your heart envisions it could be, versus the cost of relocating and all of the extra dollars that come with a move. Realtor fees, mortgage fees (and potential penalties should you attempt anything other than a port), and all of the extras that come with a new abode (perhaps appliances, window coverings, paint, lights, or anything else you'd need to make your new space "your own"). To figure out whether it’s worth investing the money into the home you already have, you really should evaluate the level of happiness you could foresee at your current location.
If there are many things on the checklist that are a positive, which would be difficult to find elsewhere, this probably tips the hat in favour of considering a renovation. These items could include lot size, location, proximity to a great school, commuting distance to work, a wonderful, safe neighbourhood, great friends close by, friendships your kids might have forged with kids on the street, etc.
These are things that might not be so easily replaced with a move. But, for example, if you love swimming and you want a pool- need a pool- MUST have a pool!!!...to find any fulfillment and happiness in your life and you live on a 30' x 90' lot, chances are, the only pool you're getting is of the Mr. Turtle variety. That definitely warrants consideration of a move.
If you just want to rid your eyes of the glorious 80's theme rampant throughout your abode, but you really like your deck, garden, square footage, neighbour to the right and the five minutes it takes you to hop on the highway, a design consultation, not a "for sale" sign, is likely better suited for your future.
The kitchen is the main area that people are interested in when viewing homes. Even if you've decided to stay, it's always great advice to put money into your kitchen and this is a room that should be on the top of the list when renovating your space. Bathrooms are also high on the list of not only making a huge impact aesthetically, but also for your return on investment in terms of adding value to your home.
A little ingenuity can go a long way when it comes to trying to find space that previously didn't exist, especially if you have restrictions with set-backs and by-laws regarding how high or wide you can build. Knocking out an unused linen closet can really open up an adjacent bathroom layout. Adding a wall in a large room can give you the extra bedroom or office space you needed. Older homes often have pitched roofs which can offer very exciting potential for turning out an extraordinary loft space. A grungy, unfinished basement can be turned around into a magazine worthy area, renewing your love and long term commitment for your home.
Another key piece of the puzzle that could play a large factor in your decision is how hot the market is in your area. If houses are being sold in days with bidding wars, it would be a great time to unload your property. But don't forget, you need to buy back into the market, as well. Could potentially backfire, especially if you're looking to re-locate in a similar area. You need to seek the advice of a professional to ensure you're not making any hasty decisions that might cost you down the road.
When it comes to deciding whether to stay or to go, you must really weigh your options, the pro's and cons, make a checklist and most importantly, listen to your gut. If you're very attached to your space but need to re-work it to accommodate a need, do some research, speak to some experienced professionals and make an informed decision. If you have the financial means to help make your dream home out of your current spot, go for it! If your space is never, ever going to get you to the level of happiness and satisfaction that you know you deserve and want, it might be time to start surfing the real estate listings in search of your new "There's no place like home"!
]]>For anyone who wants to earn a little extra money on the side, real estate can offer the perfect opportunity. No matter what level of experience you have in this area, chances are you can make a decent side profit from real estate. There are, of course, many different ways of earning money through property. Probably the easiest, and most common, is to acquire property and then rent it out. This can be a great way of getting into the real estate game. And getting your foot on that ladder is often the most difficult part. However, it is not the only option available, by any means. You also have the opportunity to buy property and flip it. Most often, this will involve significant improvements of the property in order to add value, while at other times and depending on the circumstances, it might only mean refreshing the ascetics of the home with zero structural or other major updates.
Whichever kind of real estate venture you end up finding yourself in, certain things remain the same. One of the most important things to bear in mind at every step of the way is the financial constraint. There is a lot to consider in terms of the money you need to pay out. And you will need to make sure that you have taken it all into consideration if you want to get the process right. With that in mind, we are going to look at some of the major costs involved in the process of buying a house. For now, we will not even concern ourselves with the other parts of the process. Let’s jump straight to the closing part of the real estate transaction to review what costs there are to consider. No matter what your financial situation is, you need to know what to expect and the closing can really put a dent in your budget if you don't know what to expect.
First of all, what do we mean by closing costs? To put it simply, these are the costs which come at the end of the whole property buying process. It sounds simple enough, yet it can be surprising how quickly items add up to the thousands, or tens of thousands of dollars. Some of these fees apply to all typical property closings, while others might not always happen. You should always check in advance of making a real estate purchase so that you're not caught off guard and put in a position of scrambling, trying to secure additional money that wasn't planned for.
There are some closing costs that are incurred by the buyer, and some that the seller has to pay.
Let’s take a closer look at the Land Transfer Tax. First of all, what exactly is it? To put it simply, the land transfer tax is a tax payable by the buyer of a property. You pay it to the province when the transaction itself closes.
Depending on where you live, closing costs will probably be between 1.5-4% of the purchase price of the property. Luckily for Calgarians, buyers in Alberta and Saskatchewan don’t pay land transfer taxes, but smaller land transfer fees instead.
There are two major parts to the fee: one on your home’s value and the other on your mortgage amount. The rates for the two parts are as follows:
Educating yourself and researching is the the best advice to make sure you're armed with the proper knowledge of what to expect in closing fees. It's a good idea to keep a sizeable chunk of money aside to ensure you have all costs covered. Keep in mind to budget for items items that may not be included in the actual property, such as appliances and window coverings. Making a real estate purchase is a very involved process and it would be a great idea to reach out to a mortgage broker for free advice to make sure you have all of the bases covered.
]]>When it comes to securing a mortgage, it can be a tricky process. Anyone who has ever gone through it will know that there is a huge amount to take into consideration. Getting a decent mortgage is, for the most part, a process of figuring out every detail as fully as possible. And it really pays to have as much help with that as possible. One particularly common form of help in this area is with the use of mortgage apps. With the rise in the smartphone, we have seen more and more apps dedicated to helping homeowners with mortgage information. But which ones should be avoided, and which might actually be helpful? In this article, we are going to take you on a tour of some of the most popular mortgage apps. We will look at the different kinds of app, how they might be able to help you and ultimately if they are worth using or not.
When it comes to looking for an app to help you with your mortgage, there are many different kinds out there. As we will see, they are not necessarily all useful, but it is worth taking a look at them. It is often the case that something is useful for one person in one situation, and not in another. So for the sake of appealing to as many mortgage-hunters as possible, we will go through a wide variety of these apps.
First up is the mortgage calculator. It goes without saying that calculating your mortgage is arguably the most vital part of the entire process. Any financially-sensible individual needs to know whether they can actually afford their mortgage. Fortunately, there are a huge number of mortgage calculators to get started with. Of course, this is something of a mixed blessing, in that there are almost too many to choose from. Later, we will take a closer look at how to decide between them.
Another popular kind of mortgage app is the comparison tool. A mortgage is not the kind of decision you rush, and it definitely helps to know what you really want from it. With the right mortgage comparison app, you can feel more confident that you are getting just the right mortgage for your needs. The value of this is hard to overstate.
If you are keen to carry out any affordability checks, then there is an app for that too. One particularly useful example is the mortgage assistant. This is a handy little all-rounder of an app which combines a calculator with an affordability tool as well as a live checker. It is linked to the major banks, making its information somewhat more reliable compared to those that are not linked to banks.
Finally, there is help at hand for the actual process of paying the deposit. If you are in need of software which will give you a helping hand with payments, there are a couple of examples of that too. This category of app is much rarer than the others, however.
Lets discuss which of the above are most suited to your needs, starting with the most common kind, the mortgage calculator.
What is it that you should look for in a mortgage calculator app? First things first, you want to have faith that the information it provides is accurate. Even the slightest mistake or error could make a huge difference to your finances in the long term. As such, you need to be able to know that you can rely on your mortgage calculator app. You should always be careful to look at reviews when you are choosing your mortgage calculator. If you are buying on the app store, it would be worth the extra time of scrolling through reviews to see what people are saying. These reviews are not always trustworthy, however, so it might also be worth carrying out some extra research. Easy Mortgage Apps is a great place to start, as they offer a fairly in-depth service.
For the comparison tools, the main thing is that you want the live information to be accurate. You are probably also looking for a fair comparison, which takes into account a number of variables. Generally, the more detailed, the better. It is most helpful when you have many different aspects being compared on the same page. It might even be worth paying for an app that offers a wide cross-section of information, versus a free app that only offers a limited selection of data and calculations.
Possibly the best all-round mortgage app is the Canadian Mortgage App. This is a useful app produced by Bendigi Technologies, and it benefits from being able to do everything in one. It has a top of the range calculator tool, as well as a comparison tool linked to all the major banks. It offers a level playing field and unbiased perspective from all the major players, which is a handy resource to have at your fingertips. The only other tool that comes anywhere close is the Mortgage Assistant, which was mentioned above. This is, again, a great all-rounder, and it has a lot to offer which the others don’t. One of its main advantages, funnily enough, is its aesthetics and user-friendly handling. It operates smoothly too, and is unlikely to eat up your phone's storage space too much.
Mortgage apps are by no means essential, but there are some available which most people could find useful in some way, whether they are in the research stage, homeowner stage, or renewal stage. As time and technology continues to progress, it seems likely that we will only see more and more of these types of apps. When it comes to choosing the right one, just remember to read as many reviews as possible. Remember to look in different locations for the reviews, for example, within the app and on Google, as this can help you decide which one to go with. Unbiased reviews from users typically hold a lot of weight, as peer reviews generally offer honest, unsolicited opinions from real people. Beware of the "trolls" or "others" (ie competitors, etc) who might post negative reviews under the guise of a "regular person", which are generally fairly easy to weed out.
]]>For potential homeowners, arranging to pay the deposit is only half the battle. Then, they need to think about the different types of mortgage and what’s best for their specific buying situation. Buyers will need to choose between a variable rate mortgage versus a closed mortgage when purchasing their home. To understand what the right decision, they first need to know the difference.
Variable rate mortgages (VRMs), essentially mean that the interest rate is completely adjustable. It could change at any time without warning during your mortgage. Closed mortgages have fixed interest rates. Essentially, what you pay at the start of the mortgage will be the same throughout the closed period.
Interestingly, the difference between the two isn’t quite as massive as it first seems. Recently the difference between VRMs and closed mortgages has, no pun intended, been closing. It’s not at the point where it’s difficult to tell the difference between the two. However, home buyers shouldn’t make the mistake of thinking that their choice here no longer matters. It does, and the right decision will depend on factors that include lifestyle, income and how willing they are to take a risk.
VRMs are by far the riskier option. They regularly have lower interest rates compared to closed mortgages at the onset. Home buyers should not let this fact fool them, though. The danger is in the variation. Since variable rate mortgages can change without warning, there is no guarantee they will always be affordable. At a certain point during the mortgage, you could find the interest rate dire.
This makes closed mortgage rates safer yet more expensive. Interest rates are higher initially but unlike VRMs they won’t rise. They also won’t be reduced, and this is certainly a disadvantage. If the market improves, a VRM interest rate might fall. Closed mortgages will stay the same.
As mentioned, this is going to include the assessment of a number of different factors. To consider whether a VRM could be the right choice, home buyers must think whether they can afford an increase in interest. The first step they need to take is to look at their income. Are they in the position where there could be an increase in income in the future? Or, could they be in the position of making less money in the next few years. For instance, a freelancer will always find it difficult to handle a higher interest rate. Their income is not steady enough.
Before jumping on a VRM, buyers also need to look at the current state of interest rates. If they are quite low as they are now, it might seem like the perfect opportunity to invest and buy property. Using a VRM, you can get an initially great deal. While this is true, lower rates tend to mean that they will increase shortly.
Personality is another important factor when it comes to variable rate mortgages. People who constantly worry are not going to find this the best option. They will always be wondering when or if the interest rates will rise and that’s no way to live. Of course, there is a way to mitigate this type of situation.
A VRM will be best when home buyers can afford to pay a higher rate of interest. Ideally, buyers should pay the rate equivalent on a VRM that is the equivalent to a fixed mortgage. By doing this, they will have a lot of wiggle room if the rates do rise. They will also be able to benefit from the cheaper rates of interest in the future. It might seem like then there is no difference from a VRM and a closed mortgage. This isn’t quite true though because on a VRM you’ll still be able to access lower interest rates when you need them. That’s not possible on a closed mortgage.
Some people will try to get the best of both worlds by keeping a VRM when rates are low and switching to fixed when rates rise. On paper, this sounds like a brilliant idea, but home buyers must be careful. First, it’s very difficult to predict what on earth the interest rate is going to do from one day to the next. If you jump over too quickly, you might miss a major decrease in the interest rate on a VRM. At which point, you’re already locked into rate mortgage and paying more. If you start with a VRM, it might be best to stick with it.
The ideal candidate for a closed mortgage is someone who knows exactly what they are doing. In a closed mortgage, borrowers enter into a contract with terms and conditions. Borrowers agree to pay a set amount over a set period of time. During that time, home buyers will be expected to pay the exact amount. The benefit of this is that a homebuyer will have access to a fixed period of interest. However, they won’t be able to change the deal. So, if the homebuyer comes into money, they still won’t be able to pay off the mortgage faster, outside of any pre-determined pre-payment options, which have limitations. Outside of those pre-payment options, any incremental pre-payments will come at the cost of a penalty, which could be massive. Arguably, this is the biggest disadvantage of a closed mortgage.
The greatest advantage is definitely the consistent interest rate regardless of what's happening in the market. This makes these deals perfect for new, young homebuyers. They are generally on lower incomes and won’t be expecting massive rises in pay anytime soon. As well this, they could live in the home for ten years without looking for a change. The term will not be a major issue for them. In fact, a closed term mortgage could be a lot easier for them to manage.
It’s clear that there are a lot of considerations to make when choosing your type of mortgage. Personality, income, and knowledge of the housing market all play a part. Home buyers must analyze and assess all the issues before committing to any mortgage agreement. A mortgage broker can help guide clients through the various options and help determine what product is best suited to their lifestyle.
]]>Finance Minister Bill Morneau had announced on Monday October 3, 2016 sweeping changes aimed at ensuring Canadians aren’t taking on bigger mortgages than they can afford in an era of historically low interest rates.
Effective October 17 2016 the change regarding mortgage qualifying, described as "Mortgage rate stress test for all insured borrowers”, means that for insured mortgages (down-payments under 20%), lenders will now have to use the Bank of Canada benchmark rate of 4.64% to qualify clients, regardless of the rate or term they are taking. Up until now buyers taking a fixed rate on a 5-year or longer term were able to qualify on the actual fixed rate they were offered (which is currently in the range of 2.44% or lower). Going forward at 4.64% one can easily see the huge impact on the mortgage amount available to high-ratio buyers – it will be in the range of a 20% or more reduction in maximum mortgage amount.
These new mortgage qualifying changes will also push more business away from Mono-line Lenders into the arms of the Big-6 Banks, primarily because the Mono-line lenders are required to insure their mortgages because they have to sell them to investors, while the Big-6 Banks can carry those mortgages on their balance sheet.
Jencor has been busy contacting our clients and referral partners to advise those who will be affected by this change. Please feel free to contact one off our Mortgage Advisor's today to review your options.
]]>www.theglobeandmail.com/real-estate/four-major-changes-to-canadas-housing-rules/article32223470/
]]>Calgary, Canada's energy capital, is a gorgeous city located in Alberta. It’s in the top five largest cities within the whole of Canada. Amongst all the beautiful landscapes and the electric city skyscrapers, there are loads of fun things about this place. For anyone interested in moving to this excellent city, here are some awesome facts to enjoy:
Calgary can proudly claim to host the largest outdoor event in the world. The Stampede is a ten-day event that’s held annually. There are tons of fun and exciting things to experience during these ten days. It welcomes the largest rodeo in the world, as well as various concerts and sublime stage shows. As if that isn’t good enough, there are also competitions, wagon racing, and a big parade. The people of Calgary will boldly tell anyone about this great event; it’s something that makes this city special. Throughout the ten day Stampede, over one million people turn up to enjoy the party. It’s an incredible thing to experience, and on many people’s bucket lists!
Most people assume that Canada is full of snow and cold all year round. But, this isn’t the case, and Calgary is proof of that. The city gets over 2500 hours of sun each year. What does this mean? Well, it means that Calgary is officially the sunniest place to live in Canada. The warm climate makes it a perfect place for people to settle down and not worry about snow. It’s no wonder that so many people are moving to Calgary from colder Canadian cities!
Calgary is famous for its warm winds (Chinooks), that make the city hot. Some say that these winds can raise the temperature by ten degrees centigrade in just a few hours! When combined with the shining sun, Calgary ends up with a Mediterranean climate!
A fun fact about Calgary is that people like to call it Cow Town. This is down to it having loads of green land and looking like a typical cowboy town. However, despite this nickname, the city is extremely clean. In fact, some say it’s the cleanest city you will ever find. People love visiting this city because they know they won’t have to deal with dirt sidewalks and rubbish everywhere. A lot of people think the reason behind this cleanliness is a large number of volunteers. Calgary can boast more volunteers per population than any other city on earth!
Another interesting fact about Calgary is that it’s very diverse. If you think Canadians only speak French or English, then you’re greatly mistaken! There are over 100 languages spoken in this city. When you think about it, that’s pretty incredible for one city. The benefit of this is that the city is a multicultural paradise. Live there and you can enjoy tastes and experiences of cultures from all over the world.
One thing that stands out about Calgary is that it’s consumed by youth. Interestingly, the average age there is just 37 years! The result of this is that a lot of the city is dominated by young people. There are trendy bars and restaurants that stay open late into the night. This gives the city a real buzz and the energy is felt throughout. It’s certainly not a sleepy old town where people go to retire. Calgary is youthful, and that’s reflected in the upbeat mood of the residents.
When looking for Canadian millionaires, there’s no better place that Calgary. It has the most per population in the entire country. As such, this means people can enjoy lots of gorgeous houses and lofts in the city. It adds to the visual appeal of the place and makes it look fancy and modern. Plus, there’s always the chance of seeing a famous Canadian millionaire walking around the city.
For people that love sports, Calgary has two professional sports teams to cheer on. The Calgary Stampeders play their football in the CFL, and finished second in their division last season! They play their games in the impressive McMahon Stadium, which is owned by Calgary University. With a capacity of over 35,000, things can get rowdy when watching a live game. But, Canadians are more interested in ice hockey, and the Calgary Flames are this city’s NHL team. They play in the gorgeous Scotiabank Saddledome, and the atmosphere is electric.
Although it’s the sunniest city in Canada, Calgary also has good snowfall in the winter. As such, it made the perfect setting for the first ever Winter Olympics. That’s right; this amazing city was the first host of a Winter Olympics. The legacy still lives on today, as the speed skating track is still present. And, it’s open for public use if anyone fancies a skate. Plus, there's the Canada Olympic Park that lets people try out a range of other winter sports.
People will look long and hard throughout North America and struggle to find a zoo as good as Calgary’s one. It’s an amazing place that’s packed full of lots of great animals. So many gorgeous species of bird are on display, as well as gorillas and more!
The Bow River runs through the city and is famous for its fish. There are loads of trout here, and fishermen come from far and wide to get a good catch. Plus, the river is beautiful and makes the city look even more stunning. Especially when the sun is out, and the water is glistening.
Perhaps the best fact about Calgary is that it’s one of the best places to live on earth. It’s a city that’s famous for its amazing quality of life. So many tourists visit it for this reason, and it’s always abuzz with activity. There’s no doubt about it; Calgary is a fun place to live.
]]>With excellent healthcare and a stable economy, Canada is one of the best places to live in the world. It has a diverse climate and plenty of amazing natural sights to see. Plus, the standard of living in Canada is rated as one of the highest on the planet.
There are so many great cities within this wonderful country. But, which ones are the best to live in? This post will take you through the top Canadian cities in 2016:
The city of Ottawa is one of the largest in Canada. It’s long been seen as one of the best places to live in the country. And, there are many reasons for this. One of the best things about this city is that it has very low crime rates. This makes it perfect for anyone that’s looking to settle down and not fear for their safety. Ottawa can also boast a great climate, meaning residents will have lovely weather throughout the year. In addition to this, there are plenty of cycle paths and public transport links within the city. As such, it’s easy for locals to get around and commute to and from work every day. Regarding jobs in Ottawa, it’s seen as a city that offers high incomes. It’s a wealthy place to live but does grant low taxes to benefits. This city is also very multicultural, with residents speaking both English and French. On the whole, it’s a fantastic place to live and provides people with a very good standard of living.
Many newcomers decide to move to the City of Vancouver. Not only is it thought of as one of Canada’s best cities, but it’s also got global popularity too. Many experts say that it’s amongst the best places to live in the world! Vancouver has a glorious natural setting and is a wonderfully beautiful metropolitan city. There are plenty of great job opportunities in this brilliant city. Although it can’t boast a job market as good as some other cities, there’s still lots on offer. Vancouver is home to lots of big companies and has a strong technology and film industry. Also, the city is known to be a great place for small businesses.
Plenty of people move there to set up a business of their own. The economy is booming, and there is a strong education sector too. The highly acclaimed University of British Columbia is found in Vancouver, as well as many other excellent colleges. Perhaps the biggest selling point is that it’s a city renowned for its arts and sports community. This makes it an exciting place to live as there’s always something fun to enjoy.
Burlington is a beautiful city found right next to Lake Ontario. It’s become a popular tourist destination thanks to its close proximity to Toronto and the Niagara Falls. But, it’s also a highly popular place to live in Canada. Although the city isn’t the biggest, the population has been growing in recent years. Burlington offers residents a wonderful way of life. There are plenty of jobs available, leading to a very low unemployment rate. To add to this, the city has one of the lowest crime rates in Canada. Furthermore, the weather is right up there as the best this country has to offer. Many people move here because the climate is so good and compliments the vast amount of parkland. It’s an ideal place to raise a family, with so many amazing attractions and activities within city limits.
St Albert may be a small city, but it packs a big punch. It isn’t as well known as some of the other cities on this list, so think of it as a hidden gem of sorts. This city has a community that’s perfect for families. Everyone is made to feel welcome, regardless of their background. Recent studies by MoneySense has put it as the number one place to raise your kids in Canada. And, it’s one of the safest places in the entire country. What sets this city apart from a lot of others on this list is the property market. Houses in St Albert are very affordable and come in various price ranges. Potential residents don’t have to be worried about being priced out of moving there. The city also offers something called a ‘New Resident Package.' This is a little package that helps new residents get to grips with the community. It includes lots of contact details for utility services and schools, as well as a visitor guide. It’s a lovely little touch that speaks volumes about the city itself. People know that when they move there, they’ll be joining a caring and loving community. And, to make things even better, St Albert offers exceptional healthcare for all its residents.
Waterloo is a thriving city and one of the top places to live in Canada. It’s a city that’s on the rise and growing in popularity each year. There are plenty of job opportunities within the city, as well as some great educational options for students. What sets this city apart from some others is its diverse setting. Waterloo is a magnificent combination of modern city life and stunning countrysides. It has excellent public transport links and plenty of places for people to walk and cycle. This makes the bustling city easy to get around without any fuss at all. One of the top reasons to live in Waterloo is that it’s a high-tech city. You’ll find plenty of big tech companies residing here, including Google and IBM! It’s a very cultural city and represents a great chance to enjoy modern life. There are lots of housing options here too, from quirky lofts to magnificent contemporary new builds.
For anyone looking to move to Canada, these five cities are the best places to go. And, it’s not just newcomers that are migrating over to enjoy these cities. Current Canadian residents are often leaving their homes in well-known cities like Toronto and Montreal to live in one of the places above.
The housing market in Canada is very stable. However, prices can fluctuate depending on the region being looked at. To help make some sense out of everything, here are the most and least expensive housing markets in Canada:
To start things off, let’s take a look at the most expensive places to live in Canada housing markets. Some of these cities might be great places to live, but they’ll cost an awful lot of money:
The City of Vancouver is seen as one of the most costly places in all of Canada. It’s dubbed ‘seriously unaffordable’ by many real estate experts. The most recent figures for the average house price in Vancouver are shocking. For people in this city, houses will cost a staggering 10.8 times more than the average household income. The average price is thought to be around $750,000! Although the city is a wonderful place to live, with figures like that, it’s way out of most people’s price range, and tops Canada housing markets as the priciest housing investment that you're likely to make across Canada.
Another well-known city that’s highly expensive to live in. The housing market in Toronto is hardly any better than the one in Vancouver. It’s the second-most expensive place to purchase a home in the country. The average house price is around $480,000, which is far less than Vancouver. However, when you look at this regarding the average yearly wage, it doesn’t look good. House prices in Toronto are 6.8 times as much as what people earn on average each year. So, it can hardly be seen as the most affordable housing market in the world. Again, it’s a brilliant city to visit and enjoy lots of cool cultural things. But, for the majority of Canadian residents, it’s just too expensive to live in.
The third most expensive housing market in Canada is the city of Victoria. The average price sits at approximately $421,939. Again, this doesn’t make for good reading when compared to the average annual wage of Canadian residents. It's about six times as much as what people are earning on a yearly basis. To buy a house in Victoria, you have to be very well off. Some experts believe the reason for high housing costs is down to the warm climate. Lots of Canada is still dealing with snow during the start of March. But, residents of Victoria are enjoying a relatively warm spring, complete with plenty of flowers.
All three of these cities are popular tourist destinations and well-known across the world. Perhaps this is the reason they’re all so expensive to live in. The housing markets are reserved for people with a high income. As such, the areas can be very nice to live in, and crime rates are generally quite low.
Having seen the most expensive housing markets, some might assume Canada is a costly place to live. However, at the other end of the spectrum, things can be very affordable for residents of this wonderful country. Below are the least expensive places to buy a house in Canada:
The small city of St John represents one of the least expensive housing markets in the country. Although the average price has risen in the last decade, it’s still well below the national average. In the whole of Canada, the average house price is around about the $350,000 mark. In St John, you can get a house for an average of $165,000. This is more than half as much as the national average, meaning residents can get a great deal here. Plus, the market here is said to be fairly steady. Prices will rise over time, meaning it’s a safe place to make an investment. A house bought here ten years ago is now worth 60% more!
Moncton is another city that can boast very affordable house prices for the Canadian public. Much like St John, the average price falls well below the national mark. A house in Moncton can cost around $175,000. There’s plenty to do in this city, and it has a large metropolitan area. This makes the low average price all the more impressive. Buying a house here will cost Canadians 2.3 times the average annual salary. Although this might look like a lot, it’s very reasonable. Especially when compared to the more expensive housing markets in the country. It’s interesting to note that both Moncton and St John are found in the province of New Brunswick. So, if someone is looking for a cheap area of Canada to live in, this is the best place.
Moving over to Ontario and Thunder Bay is another city with affordable housing. The average house price here is slightly higher than the previous two cheap cities. It comes in at a tad over $200,000 but is still way below the national average. What sets this city apart is that it’s one of the cheapest places to live in the province of Ontario. This region is typically an expensive place to buy a house, so Thunder Bay is a rarity. A quick look at some of the average housing prices in other cities will back this point up. In the City of Hamilton, the average price is a whopping $400,000! That’s double what people pay in Thunder Bay, and is higher than the national mean too. Then, there’s the capital city Ottawa, that has a housing market that falls in line with the national average. So, it’s plain to see that Thunder Bay represents great value for money in this expensive province.
It’s clear that the housing market in Canada can be very diverse. There’s a very obvious pattern appearing when you look at the country on the whole. If someone wants to live in one of the big, popular, cities, then they have to pay top dollar. People can get more bang for their buck if they choose a house in a smaller city, where the housing market is far less expensive. Of course, it all boils down to how much someone earns and what house they’re looking for. Any stats and figures in this piece are taken as an average. So, it stands to reason that one can find houses that are cheaper or more expensive that what’s been quoted.
For many people, property investment - or buying a home - is seen as a necessity. Everyone is told that it makes sense to own a home, rather than rent one. And, when the economy is on the up, there are rarely any arguments against this. However, what about when the economy is on the downturn, like right now?
Is buying a home a smart investment in today’s economy? The answer to this question is perhaps a bit more complex than one might think. There are many pros and cons, and it can depend on what type of house buyer you are.
Without further ado, let's take a look at some of the pros for buying a house during an economic downturn:
When the economy is in a downturn, this tends to mean house prices drop. It’s easier for a buyer to get better value for money during this period. Some experts claim that prices can drop between 30-50%, depending on the area. These are huge savings for someone to make. And, the flip side of this is that prices tend to go up over time. It’s unlikely that a recession will last for decades. Eventually, the economy will turn around, and the housing market will be booming again. This means that any investments made during the downturn will prove to be big earners. It’s a great idea to buy a house if you’re looking for a family home. Homebuyers like this will be looking to stay in their property for a long time. As a result, they can live happily and wait for the economy to turn around and boost the house price. After a decade or so, they might decide it’s time to leave and can sell their house for a big profit.
Interest rates tend to be lower during an economic downturn. What does this mean for homebuyers? It means that home loans tend to work out cheaper. With low-interest rates, it won’t cost as much to pay the loan back over time. For people that are in the early stages of buying a home, it makes sense to get a loan during this downturn. Secure a low fixed-interest rate and then spend the loan whenever you please. First-time buyers can get a much better deal when they buy when the economy isn’t good. It’s amazing how much someone can save by getting a home loan and buying a house in this economy.
Buying a home in today’s economy is much smarter than renting one. Renting a home isn’t a good investment at all. There’s more tax to pay, and renters don’t own anything. This means that a landlord can decide to sell their property whenever they want. It’s a waste of money to pay rent during an economic downturn when house prices are so low. The smart move is to invest in a house, buy it cheap, and wait for the prices to rise again.
These three points make some good arguments for buying a home in today’s economy. However, it’s important to remember that there are two sides to every story. Before rushing into the housing market and investing in property, take a look at some of the cons below:
Although house prices are lower, and history suggests they rise over time, nothing is certain! It would be unwise to invest in a home based on the past. Just because house prices grew over time before, that doesn’t mean they will now. This is why it’s thought that families are in the best place to invest in a home now. If someone purchases a home to live in, then they can sit on the investment for as long as possible. It doesn’t matter if the value doesn’t increase within a couple of years, a family can wait it out for decades. For people trying to make quick money from flipping houses, there’s no guarantee of an increase in value. It’s possible, maybe even probable, but no one is 100% certain.
When an economy is in a downturn, this has a huge bearing on the job market. Many companies can’t afford to keep their full quota of staff on. So, what happens? Businesses make cuts, and people are made redundant. It’s more likely that someone will lose their job in a recession than when the economy is good. Regarding buying a home, this has a big impact. Purchasing a home is a very big financial decision. It’s important that homebuyers have good job stability. Otherwise, they may be unable to keep up with mortgage repayments. Or, they struggle to pay bills and tax on their home. In a booming economy, most people can feel safe in their jobs. So, investing in a home is smart because there’s a steady income. In an economic downturn, the risk of being made redundant is higher. Thus, someone may buy a home, lose their job, and not have a regular income. Thanks to the unstable job market, buying a home can be a big risk.
For many homeowners, they have to sell their home before they invest in a new one. This is something that a lot of people forget about when they read all the pros of buying during a recession. If someone has a home and is still making mortgage payments, then it’s unwise to buy another one. It doesn’t matter how cheap the new home is, it means there will be dual mortgage payments. The only other option is to sell the current home and buy a new one. But, in a downturn, house prices are low, correct? So, there’s a chance of making a heavy loss on the home you sell. It’s being sold for much less than what it’s worth when the economy is stable.
As this post shows, the answer to the original question is complex. For investors, a property investment during a downturn can be a risky move, but it might pay off. First-time buyers have the most to gain from today’s economy. They can buy a family home for a low price, and have low-interest rates on their mortgage. Hopefully, this post has helped shed some light on the matter and lets people make the right decision.
The mortgage market is flooded with dozens and dozens of products, each with their own set of pros and cons.
It’s actually rather daunting to sift through them all - which deal is right for you? Am I missing out on something better?
One of the most popular mortgage products on the market is the CHIP Reverse Mortgage. A CHIP Reverse Mortgage is a loan that’s created specifically for senior citizens, of 55 years or older.
This means that if you’re on the younger side of 55, you will simply be denied access to this product. CHIP Reverse Mortgages are a great way for senior homeowners to access some of the equity built up in their home.
At a basic level, a CHIP Reverse Mortgage works in the way you’d expect. It’s a mortgage, but reversed. This means that you will receive a lump-sum of cash, rather than borrowing from the lender.
The amount of money you will receive is determined by the value of your home, and how much of your mortgage you have left to pay. The difference between these two values is the equity in your home.
So the less money you have left to pay off and the more valuable your home, the more money you will receive.
When you receive this money, you won’t have to leave the property, either. You will still keep ownership of the home and won’t have to sell it or move away. You can carry on living there as normal.
Additionally, the money you receive is 100 percent tax-free, and you won’t have to make any repayments on the loan. You can receive your money either as one big lump sum, or as regular payments over time.
This means that you can use your equity as another regular source of income. Want weekly payments? Want monthly payments? Want is all in one go? The options are incredibly flexible.
And once you have the money, it’s yours. Yours to do whatever you please! You could go on holiday, improve your home, invest it or save for a comfortable retirement.
As with any kind of mortgage deal, you must contact your mortgage broker for more information. They’ll be able to guide you through the process, and will help you complete the reverse mortgage.
Before you consider applying, make sure you meet the following criteria:
Once you’ve decided to go for it, you’ll have initial meetings with your broker to discuss your product options. As soon as you’ve opted to go ahead with the process, you will have a home appraisal scheduled. A home appraisal is a rough estimate of your home’s value.
Once this value has been determined, you will be told how much money you are eligible for. This is based on numerous factors, including property location, condition and type (house, condo).
Once you’ve confirmed you are happy with that amount, your broker will work with you to finalize the application process. When the funds become available, you are free to begin using them - tax-free!
We’ve previously discussed some of the merits of a CHIP Reverse Mortgage, but here are your bite size benefits:
Additionally, your CHIP Reverse Mortgage will not affect any other senior benefits you may be receiving. Your life will carry on as normal, and the only thing that will change is how much cash you have!
While for the most part, a CHIP Reverse Mortgage is free from caveats, there are a couple of things for you to bear in mind before making your decision.
The first is that you will be subject to several fees in order to complete the reverse mortgage process. These include:
Your mortgage broker will discuss these fees with you, including any others that may arise. As long as you’re aware of them beforehand, there will be no surprises!
Secondly, upon your death, there will be less money for you to leave to your children, grandchildren and heirs. This is because you’ve already accessed a good chunk of the value of your estate. If you wish to leave behind a large sum of cash, consider this carefully!
But, this in mind, you don’t have to take every last drop of cash that you can. For example, you could opt for 20 percent of the money that’s offered to you, or 30 percent. This way, you still receive a lump sum but have more assets to leave behind.
Good stuff! To apply for a CHIP Reverse Mortgage or to learn more about them, simply get in touch with your mortgage broker today. This will allow you to begin the process quickly!
]]>For those looking to move houses in a much quicker, easier fashion, mortgage porting exists to make the process simple.
For those not in the know, the practice of mortgage porting means to transfer your mortgage from one house, to another. The debt you owe the lender will still exist, and you’ll carry on paying it as normal - you’ll just be in a new property.
Mortgage porting is a fantastic opportunity for couples and families who are looking to upgrade, or even downsize. But it can be a daunting process if you’ve never done it before, which is why it’s important to discuss your options with your mortgage broker.
In most cases, yes. If you’re already on the property ladder with a mortgage, you’ve proven you can keep up repayments which should make porting no problem.
However, mortgage porting is, in some cases, not built into some mortgage contracts. Instead, it’s a feature you can add in at no extra cost. Contact your mortgage broker, who will be able to inform you of whether or not this is the case.
Additionally, when you port a mortgage you’re effectively re-applying for that same package. This means that if your situation has changed since you first got the mortgage, you may find it difficult to get a mortgage than you did the first time.
A change of situation could involve a lower paying job, or perhaps you’ve recently entered self-employment.
The way the lender assesses you could also be different now than it was when your first applied, meaning you may not get the same deal again. Usually though, these two issues aren’t a concern, but it’s best to be prepared.
Firstly, since you’re moving house, you need to find a suitable property! You’ve already had experience with this on your first mortgage, so you likely know where to start.
There are two porting scenarios that could apply. Porting if you need to borrow more money, and porting if you don’t need to borrow more money.
Your mortgage broker will give you advice on which option is best for you, because one could prove more costly than the other.
Simply put, it’s still possible to port if you need more money (for a bigger house) but you’ll need to pay a fee to scale your loan.
There will be other fees too, such as a valuation fee for the new property and all fees needed to arrange the sale. Again, your broker will discuss these with you, so make sure you enquire about fees!
Since you need to borrow more money, it would be wise to look at other deals on the market. You could be eligible for a better one! If you do find a better deal, you’ll have to exit your current mortgage and apply for a new one.
This means you’ll have to pay a mortgage exit fee or penalty. Keep an eye on all those fees and extra costs - they can quickly add up. Once you’ve discussed deals with your broker and chosen the best option, your broker will help you move forward with the port.
Mortgage porting is much, much easier if you don’t need to borrow more money. You could be downsizing, buying a house in a cheaper area, or buying a cheap repossessed house.
Whatever the case, with a few minor differences. It’s unlikely you’ll need to shop around for a new deal if you don’t need more money, so you don’t need to pay a mortgage penalty.
On your current mortgage, you’ll have built up a lot of equity in your house, which could make you eligible for better rates.
Make sure you work with your mortgage broker to assess the current market. If interest rates are at a particularly low amount, it may be wise to apply for a new mortgage, regardless of your port.
Take a look at how long you have left on your current mortgage. If it’s a few years, then the penalty could be quite high. If it’s a few months, then the fee will be quite low. Factor this in if you’re considering a new mortgage deal.
Make sure you keep a good credit rating. This will be factored into the lender's decision to give you more money.
Before you begin the process of selling your home and looking for a new one, meet with your mortgage broker. There’s no point home shopping if you can’t port your mortgage, of if you can’t afford to borrow more.
By sticking with the same mortgage and transferring it to a new property, you don’t have to pay any mortgage exit fees.
Plus, if you are locked into a lower interest rate but the market interest rates are higher, you’ll be laughing! You’ll carry on paying that low rate at your new house.
Mortgage porting allows you to move home without going through the mortgage application process again.
By porting your mortgage, you’re sticking with the same deal. Same interest rate, same lender, largely same contract.
This means that you could be missing out on another better deal with a lower interest rate if you shopped around.
You’ll still have certain fees to pay, like a valuation, arrangement fees and perhaps an exit fee. The cost of these fees could outweigh any financial benefits of mortgage porting.
Mortgage porting is a superb way for families and couples to move house in a stress-free fashion. As always, stay in touch with your broker throughout every stage of the process, as they can guide you through the terms and conditions. Good luck!
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