With 2020 just a day away I realized this is a time most of us reflect on the past year and set new goals for the upcoming year. Many people have resolutions to live healthier and exercise more but how many of us plan for a healthier financial picture?

Depending on how good – or bad – 2019 was for you this is definitely a time to evaluate our personal and financial strengths and weaknesses and set a plan for making improvements and accomplishing goals.

Coming out of the Christmas season many of us may be feeling the pinch of higher credit card balances and lower savings account balances while seeing winter heating bills that keep us eyeing the thermostat.

For a number of years now I’ve taken the time to go through my bank statements to see just where my money is going. Often small choices add an extra monthly bill for a service that is perhaps not really essential anymore. Things like subscriptions to apps or services that we don’t actually use. Even $10.00/month wasted per subscription can add up if we have a few of those. Time to shut them down.

This is also the time of year I take a look at my cell, TV and internet bills to see just where they stand. I once heard that getting in touch with these service providers at least once per year to see if they have any current promotions that you can take advantage of can really make a difference. The last time I called Telus I found out I could renew my plan early on their current promotion and it saved me $75.00 per month!

If you are able to lower your monthly cash output, why not consider putting the exact amount you are saving each month towards an investment, like an RRSP or a TFSA? If you’re able to handle the payments as they were why not start paying yourself instead.

And if the bills and credit card balances still seem overwhelming why not consider letting your home help you out of a jam. Tapping into equity to consolidate and lower your overall payments can be very effective as long as you’re not doing this on a regular basis. We should be careful of using our home as an ATM.

But if this is something you are considering it is well worth contacting a mortgage professional to do an in-depth analysis of your situation. Getting a break down of cost vs. benefit can paint a clear picture of whether refinancing is a good idea for you at the present time. The analysis only takes a few minutes to calculate but if there is a cost effective option for you it could take a lot of stress off your shoulders.

As always, let me know if you have any questions or concerns mortgage related. I’d love to help.

With approximately 1,000 people retiring every day in Canada it’s not surprising that there has been an increased demand for Reverse Mortgages.
A Reverse Mortgage can assist people aged 55+ realize their dreams in retirement. Whether they want to travel, help their kids or grand kids or even just supplement their monthly income a Reverse Mortgage can be an effective way to have their home assist them to meet those goals.
There is a lot of misinformation out there however, that could make people hesitant to get into a Reverse Mortgage.
Many people think that the Bank will own their home but this is completely untrue. A Reverse Mortgage is just that – a Mortgage registered on the home’s Title, just like any other bank mortgage. The client retains full ownership and control of their home. They have the freedom to decide if and when to move or sell.
Another misconception is that you could end up owing more than your house is worth. In fact, due to the Reverse Mortgage lender’s conservative lending practices, you can be confident that there will be equity left in the home when the loan is repaid. They will only issue a Reverse Mortgage up to 55% of your home’s value so there is lots of equity remaining to offset accrued interest charges even if you choose to make no payments at all.
In fact, over 99% of Reverse Mortgage clients have equity remaining in the home when the loan is repaid.
Many people view a Reverse Mortgage as a ‘last resort’. In fact financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Some people think that you cannot get a reverse mortgage if you have an existing mortgage. But many Reverse Mortgage clients use the funds to pay off their existing mortgage and other debts, freeing up cash flow for to use as they wish – and be free of regular mortgage payments too.
I personally have parents over 70-years that could be looking at the expense of Assisted Living for my Mom in the near future. They own their home outright and once both of them are retired that added cost could be too much for their pensions and could force them to sell their home before they’re ready.
I have advised them of the Reverse Mortgage option and we have decided to look into that possibility when the time comes. It is my belief that nobody should feel forced to sell their home and will explore any options available to them so they have choices.
If you’d like more information on how a Reverse Mortgage may work for you or to see if you qualify, you can visit my dedicated Reverse Mortgage website at www.ourreversemortgage.ca.

With the mortgage rule changes in recent years lenders have had to make some adjustments to their rate offerings.

There are different tiers and rate pricing based on the following 3 categories:

1) Insured – a mortgage that is insured with mortgage default insurance through one of Canada’s mortgage insurers, CMHC, Genworth or Canada Guaranty. A mortgage insurance premium based on a percentage of the loan amount is added to and paid along with the mortgage

2) Insurable – a mortgage that may not need mortgage insurance (20% or more down payment) but would qualify under the mortgage insurers rules. The client doesn’t have to pay an insurance premium but the lender has the option to if they choose.

3) Uninsurable – a mortgage that does not meet mortgage insurer rules such as refinances or mortgages with an amortization longer than 25-years. No insurance premium required.

Insured mortgages are the safest type of mortgage loan for the banks and the most cost-effective way of lending mortgage money so clients seeking or in need of an insured mortgage will get the best rate offering on the market.

Insured as well as Insurable mortgages can be bundled and sold as Mortgage Backed Securities (MBS) meaning banks can get that money back quickly so they can lend more out. While Insured mortgages get the best rates Insurable mortgages are typically a close second.

If a mortgage is Uninsurable that means the banks have to lend their own money and have to commit to that loan for the full term at least. This makes it a more expensive loan for the bank so they pass the cost on to the consumer as a premium on the rate – typically 10-20 basis-points.

While there are rumors that the Government may start to allow refinances and 30-year amortizations to be insured again no formal announcements are expected in the next few months.

In the meantime, consumers looking to tap into the equity they’ve built (consolidation, investment, home renovations) or wanting to keep their payments as low as they can (30-year amortization) are paying the price.

If either a refinance or a longer amortization is something you are considering it’s wise to have a free analysis of your mortgage done so you can make an informed decision – and I can help!

As a self-employed person myself I was happy to hear that CMHC is willing to make some changes that will make it easier for us to qualify for a mortgage.

In an announcement on July 19, 2018 CMHC has said “Self-employed Canadians represent a significant part of the Canadian workforce. These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.” — Romy Bowers, Chief Commercial Officer, Canada Mortgage and Housing Corporation. These policy changes are to take effect October 1, 2018.

Traditionally self-employed borrowers will write as many expenses as they can to minimize the income tax they pay each year. While this is a good tax-saving technique it means that often a realistic annual income can not be established high enough to meet mortgage qualification guidelines.

Plain speak, we don’t look good on paper.

Normally CMHC wants to see 2-years established business history to be able to determine an average income. But they’ve said they will now make allowances for people who acquire existing businesses, can demonstrate sufficient cash reserves, who will be expecting predictable earnings and have previous training and education.

Take for example a borrower that has been an interior designer with a firm for the past 8-years and in the same industry for the past 30-years but just struck out on his own last year. His main work contract is with the firm he used to work for but now he has the ability to pick up additional contracts from the industry in which he has vast connections.

Where previously he would have had to entertain a mortgage with an interest rate at least 1% higher than the best on the market and have to pay a fee, now he would be able to meet insurance requirements and get preferred rates.

The other change that the insurer has made is to allow for more flexible documentation of income and the ability to look at Statements of Business Professional Activity from a sole-proprietor’s income tax submission to support Add Backs of certain write offs to support a grossing-up of income. Basically, recognizing that many write-offs are simply for tax-saving purposes and are not a reduction of actual income. This could mean a significant increase in income and buying power.

It is refreshing after years of government claw-backs and conservative policy changes to finally see the swing back in the other direction. Self-employed Canadians have taken on the burden of an often fluctuating income and responsible income tax management all for the ability to work for themselves. These measures will help them with the reward of being able to own their own home as well.

We are in a rising interest rate environment and it would be wise to consider where you are in your current term and where rates may land at maturity. What are the implications of refinancing now for a better rate? 

If you are 3-4 years into a 5-year mortgage term you still have 1-2 years left. If rates keep going up the way they have been you could be looking at rates at 4.5-5% when you’re up for renewal. They are currently at around 3.64% for a refinance. 

Let’s look at the two methods lenders have for determining your penalty if break your mortgage. They will either charge you 3-months of interest or an Interest Rate Differential (IRD). 

The first is fairly straight forward but an IRD is calculated if you pay out your mortgage and the bank has to lend that money back out at a lower rate. They will charge you the difference in interest on your remaining balance for the rest of the time remaining in your current term so they don’t lose any money.  

In a declining rate environment an IRD penalty can be quite hefty. But with rates on the rise the bank can lend that money out at a higher rate and make money so they can only charge you 3-months of interest. This can make breaking your mortgage and refinancing a lot less expensive.   

So, if penalty is not prohibitive then it would be prudent to consider tapping into your equity to accomplish goals such as consolidating higher-interest debt (credit cards, lines of credit, loans etc.), taking money out for investments or even home renovations. 

By refinancing now and securing a new rate for another 5-years while they’re still near historical lows could keep you sitting pretty while rates go up to their highest point and you could be in another declining rate environment when you get to the end of your new term. 

Definitely something to consider before that option is off the table. As always, I can do a free mortgage analysis for you to weight the costs vs. benefits. You can contact me here if you need any help. 

So, you’ve decided to jump into the real estate market – good for you! It will be extremely beneficial to start paying your own mortgage instead of a landlord’s.

If this is your first home purchase there are some definite advantages available to you.

There is a national program called the Home Buyer Plan where the Government of Canada will allow you to draw up to $25,000 from your RRSP for your down payment without having to pay the taxes on it. You will have to repay the amount you withdraw over the next 15-years by annual instalments. This program is available to all Canadians who haven’t owned a home in the previous 4-years.

The Province of BC a program for First Time Homebuyers (FTHB) as well. You can get an exemption from having to pay thousands in Property Transfer Tax (PTT) as a FTHB as long as you are a Canadian citizen, have lived in BC for the last 12-months and have never owned a home anywhere in the world.

PTT is calculated as 1% of the first $200,000 and 2% of the rest. So on $500,000 as a FTHB you will save $8,000.00! If your purchase is between $500,000-$550,000 you can still get a partial exemption.

If the home you are purchasing is brand new and you are buying it from a builder or developer you don’t have to pay PTT on a purchase up to $750,000. That’s even more savings.

There is also the BC HOME Partnership Program available until March 31, 2018 where the BC Government will match your down payment to a maximum of $37,500.  It is an interest free loan for the first 5-years and while it sounds great there are only a few circumstances where I’ve found it to be beneficial to my clients.

You will still have to come up with your minimum 5% down payment and 1.5% of the purchase price in addition to cover closing costs. Closing costs include legal fees, Title Insurance, Land Title registration, possible appraisal fee and pre-payment of some, if not all, property taxes for one year.

The overall costs of a home purchase can vary but if you’d like more information on what you can expect to need for your ideal home purchase just give me a call, I’d love to help.

The Simple Truth About Your Debt-Service Ratio (DSR)

If you want to borrow money there is a simple way that banks determine if you can afford it. How much of your annual income can comfortably make the payments on what you owe to creditors? Simple, right?

The rule of thumb for unsecured debt (credit cards, loans and lines of credit) is that 42% of your gross annual income must be enough to cover those payments. Take it one step further for mortgages.

Banks – and even more importantly, mortgage insurers (CMHC, Genworth and Canada Guaranty) – need to ensure that you can cover your property expenses as well as your other credit payments.

The Gross-Debt Service ratio (GDS) determines how much of your annual income it takes to cover the property costs on a prospective purchase. These include the mortgage payment, annual property taxes, strata fees (if applicable) and a heating allowance. The rule is that 35% of your gross annual income must be able to cover these costs.

Then there is the second qualifier, the Total Debt-Service Ratio (TDS). This is how much of your annual gross income it will take to cover the property expenses above plus any other payments you are obligated to make on credit cards, lines of credit and or loans. The rule for TDS is that 42% of your annual income must be enough to cover all of this.

Now, if you are responsible with your payments you may get a bit of a break. If your credit score is 680 or higher (good for you) your ratios go up to 39/44. 39% to cover the property expenses and 44% to cover everything.

Here’s the kicker… these ratios are determined using a mortgage payment using the Bank of Canada Benchmark Rate (currently 5.14%) which means you have to prove you can cover payments should mortgage rates go up that high by the time your current mortgage is at maturity. That takes a bite out of pretty much everyone’s purchase power today.

Doesn’t sound so simple now, does it? That’s OK, that’s why I’m here. To help you determine what you qualify for ahead of making the decision to buy. Knowledge is power so let me help.

Yesterday I was enjoying the magic of the Super Bowl with friends in the comfort of my own living room and it occurred to me how privileged I am to have a place I can call home.

I have been a homeowner for years and am so happy not to have to answer to a landlord anymore. My mortgage payments are helping me to build the equity in my home, not to mention the appreciation in value I have been fortunate to experience.

As a First Time Homebuyer back in the day I remember how confusing and stressful the buying process was but wow, was it ever worth the exercise. If I’d just remained a renter I would have likely paid off someone else’s mortgage by now!

Today’s rental market is a tough one. There are not many options out there and if you do find your perfect place you are likely to pay at least $1,500.00 per month for a one-bedroom condo – that’s insane…

So how would it look to get into your own place? Let’s take an example of a one-bedroom condo in Port Coquitlam or Maple Ridge. You can get a decent place for $350,000.00. You would need at least 5% down ($17,500) and enough to cover closing costs (approximately $5,000.00). That may seem like a lot but there are many ways to put together that down payment. You can save, possibly get a loan for all or some of it, and you can even get a gift from a direct family member.

So if you were able to get your down payment and find your ideal new home, at today’s interest rate of 3.19% your monthly payment would be $1,670.00. That’s just $170.00 more a month than renting the same condo.

Jumping off the fence and getting into the market can seem like a daunting task but if you have the right team around you to help you navigate the process it becomes a lot easier to make some confident decisions. A realtor can help you find the right place, a mortgage broker can make sure you select the best mortgage and a lawyer will help protect your interests.

It all starts with a little research and if you, or anyone you know, needs a little help deciding if the time is now let me know. I’d be happy to help.

The mortgage market is still adjusting to the new rules that came into effect on January 1, 2018. With all borrowers now having to qualify at the Bank of Canada Benchmark Rate (currently 5.14%) or the contract rate plus 2% regardless of how much down payment they have, we are seeing a drop of about 20% in purchase power across the board. The impact on consumers can be painful in some cases. Here are just two stories from clients I’m currently working with.

First a young mother who qualified about 3-years ago for a condominium but at the time she didn’t realize her RRSP was not accessible for her down payment. She had to pull out of the market to work on accumulating the required down payment.

Shift forward to today and she has received a gift from her parents of $285,000 for a down payment and wants to take another run at the market. You may think that having this much to put down would make a suitable purchase a no-brainer.

Unfortunately, she is currently on disability after a car accident. She receives pretty much 100% of her regular pay and carries no credit balances but having to now qualify as if her interest rate were 5.49% (contract rate of 3.49% plus 2%) she can only get a mortgage of $100,000 putting her maximum purchase at $385,000. In today’s Vancouver real estate market this likely puts her into an aging building about a 45-minute drive from her child’s school. She now wonders if it’s even worth it.

Case number two… a recently retired government worker.

He and his brother inherited their parents home this summer after their mother passed. They will sell the house this spring and my client will have about $400,000 to buy a modest retirement home.

Because of a reduced income and a higher qualifying-rate he now no longer has any bank options even though his payments will be quite manageable. We need a mortgage based on pure equity and these options are slim and come at a higher rate from only a few lenders. How fair is it that this gentleman with stellar credit will be basically penalized by having a higher rate and payment after years of public service?

The government’s efforts to protect the public from overextending themselves has gone too far with this last move. Canadians are extremely responsible when it comes to paying their mortgages. Less than 1/3^rd of a percentage of mortgages are in default – we just make our payments, period.

Consumers who have been concentrating on building equity and down payments are feeling the brunt of the impact. Instead of being rewarded for their efforts they have been given fewer options. If this is the new mortgage reality, now more than ever a Mortgage Broker is truly an asset.

A recent article featured on www.mortgagebrokernews.ca brings up some interesting points to consider.

With approximately 47% of mortgages in Canada coming up for renewal in 2018 and in a rising rate climate it would be wise to consider the impact on our personal mortgage. What will these increases mean for you?

70% of Canadians are in 5-year fixed rate mortgages and the rates these people secured in 2013 are still similar to what is being offered in 2018 so a possible increase in payment that comes along with a slightly higher rate could be quite easy to handle.

However, in 2019 rates will likely be significantly higher than what consumers locked into in 2014. The payment shock could be substantial. Not to mention that increases in the Prime rate will also affect unsecured credit such as lines of credit and credit cards. And the Bank of Canada is certainly in an upward trend with the Prime.

Translation… as rates go up for mortgages and other credit accounts, so do payments.

What can you do? If your mortgage is maturing this year or in 2019 it is highly advisable to contact an experienced Mortgage Broker to evaluate your position. You will likely have seen a healthy appreciation in value in your home in the past few years so perhaps it’s time to get ahead of the “rate train” and consider consolidating your unsecured credit with your mortgage and lock in at today’s still low rates before you start to feel the pinch.

The latest rule changes that came into effect January 1, 2018 could also have an impact on your ability to qualify for what you need so getting a free evaluation will be more valuable than ever.

If you’d like to read the full article CLICK HERE and as always, feel free to contact me with any questions you may have.