mortgages most asked questions

VERICO Newsletter | The Most Asked Question

The Most Asked Question

Hundreds of thousands of Canadians are asking the banks for a deferral on mortgage payments while others are looking to take advantage of the Bank Of Canada’s three half point emergency rate cuts since March 4th and are asking about extending their existing mortgage or getting a new one.

The big question is whether it’s better to take a variable rate or fixed term.

Before answering consider that all the pressure on mortgage rates is up. That’s why despite the fall in bond market yields, the 5 year fixed term is up. And despite the three half point emergency rate cuts and the accompanying drop in prime rate – new variable rate borrowers haven’t had the full advantage because the formula for establishing the rate has changed with the elimination of the “prime minus” provisions.

At the same time, the 5 year fixed mortgage rates haven’t reflected the full drop in the 5 year bond yields. In fact, recently 5 year fixed rates have been drifting upwards while the bond yields dropped.

It’s a reminder that the Bank of Canada can lower the bank rate and the yields of 5 year and 10 year bonds can fall but that doesn’t guarantee the mortgage rates will fall accordingly.

So back to the question – should someone take out a variable rate or lock in for 5 years – there are a great many individual factors that influence the decision but borrowers should know that all the risks point to higher rates. The bank rate is at .25% – how much lower can it go? To zero? Negative? My point is that the risk on the upside is much higher. Just like bond rates went down so dramatically in the last 6 weeks – they can go up just as fast if confidence in government erodes.

My approach is that people should know the risk they’re taking before they decide. And if they’re comfortable forecasting interest rates there are many other ways to play it besides with their home.

Government assistance to support you during the COVID-19 pandemic

These unprecedented times has left millions of Canadians struggling to cope financially as non-essential businesses are forced to close. Managing your finances has become more important than ever not knowing when you will be able to provide a steady income for yourself. If you are faced with financial struggles with your everyday expenses, it’s important to be proactive to look for options in assistance benefits, payment deferrals and appropriate loans.

The Government of Canada and many businesses has offered assistance to Canadians to help overcome their financial difficulties at this time. To see which assistance program you are qualified for, check out this summary from CTV which outlines support programs for each province: https://www.ctvnews.ca/health/coronavirus/interactive-which-benefits-am-i-eligible-for-during-the-covid-19-pandemic-1.4901012

Have mortgage questions? I’m here to help you!

Please feel free to contact me with any questions you may have. It would be a pleasure to assist you or any one of your friends or family members!

most common questions Mortgages - April 2020 Edition

VERICO Newsletter | April 2020 Edition

Let me begin with my heartfelt hope that this letter finds you and your loved ones in good health. I wanted to reach out with some words of reassurance. In short…I’m here. We are in uncharted territory, and the mortgage marketplace is continually shifting to keep pace with economic realities and the needs of Canadian homeowners. Several announcements have been released in quick succession: by the government, lenders, and mortgage insurers. Here is a quick summary of some of the most common questions to help you make sense of it all. I encourage you to give me a call at any time if you have questions about your own situation.

Q: Mortgage payment deferrals have been announced. What does it mean and how do I access that?

A: Mortgage insurers – Canada Mortgage and Housing Corp (CMHC), Genworth, and Canada Guaranty – have joined with lenders to announce that eligible clients can delay mortgage payments. These are “compassionate” programs for homeowners who are in serious financial straits and are unable to make their mortgage payments for a period of time. You will need to apply to the program, and assistance will be determined on a case-by-case basis – so please do not just start skipping payments. If you urgently need this kind of help, get in touch, and I can help you find the right channels to apply. Lenders have been swamped with calls, so you may need some patience to get through this process. But we can also talk about financing options that might help you at this time.

Q: The Bank of Canada has lowered interest rates a few times. Won’t that help me with my variable mortgage or line of credit?

A: Yes, any lowering of the Bank of Canada rate will likely mean that your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your own rate won’t necessarily move in lock-step with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in mortgage defaults.

Q: So if the rates have dropped so low, should I lock in my variable mortgage? Or trade for a low fixed rate?

A: I can go over the pros and cons with you. There is no simple answer.

Q: What about my fixed-rate mortgage?

A: If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today’s rates. I can do a cost/benefit analysis to see if the switch can save you money.

Q: I have some credit-card and/or loan debt that now has me worried.

A: If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.

We are all navigating turbulent waters and many things are changing. The most important advice I can give you is to get in touch early if you’re anticipating any challenges. Right now we all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term.

Have mortgage questions? I’m here to help you!

Please feel free to contact me with any questions you may have. It would be a pleasure to assist you or any one of your friends or family members!

First Time Home Buyer Incentive

Budget 2019 Introduces First-Time Home Buyer Incentive

To help make homeownership more affordable for first-time home buyers, Budget 2019 introduces the First-Time Home Buyer Incentive.

  • The Incentive would allow eligible first-time home buyers who have the minimum down payment for an insured mortgage to apply to finance a portion of their home purchase through a shared equity mortgage with Canada Mortgage and Housing Corporation (CMHC).
  • It is expected that approximately 100,000 first-time home buyers would be able to benefit from the Incentive over the next three years.
  • Since no ongoing payments would be required with the Incentive, Canadian families would have lower monthly mortgage payments. For example, if a borrower purchases a new $400,000 home with a 5 per cent down payment and a 10 per cent CMHC shared equity mortgage ($40,000), the borrower’s total mortgage size would be reduced from $380,000 to $340,000, reducing the borrower’s monthly mortgage costs by as much as $228 per month. Terms and conditions for the First-Time Home Buyer Incentive would be released by CMHC.
  • CMHC would offer qualified first-time home buyers a 10 per cent shared equity mortgage for a newly constructed home or a 5 per cent shared equity mortgage for an existing home. This larger shared equity mortgage for newly constructed homes could help encourage the home construction needed to address some of the housing supply shortages in Canada, particularly in our largest cities.
  • The First-Time Home Buyer Incentive would include eligibility criteria to ensure that the program helps those with legitimate needs while ensuring that participants are able to afford the homes they purchase. The Incentive would be available to first-time home buyers with household incomes under $120,000 per year. At the same time, participants’ insured mortgage and the Incentive amount cannot be greater than four times the participants’ annual household incomes.

Budget 2019 also proposes to increase the Home Buyers’ Plan withdrawal limit from $25,000 to $35,000, providing first-time home buyers with greater access to their Registered Retirement Savings Plan savings to buy a home.

Find more useful tips at www.canada.ca/healthy-home
www.newscanada.com

Accredited Mortgage Professional Squamish

Sold a home? Know your tax obligations

If you’ve recently sold a home, there are some things you need to know at this time of year.
When you sell your own home (or principal residence) you usually don’t have to pay tax on any profit from the sale. But what you might not know is that even if you are entitled to the principal residence exemption, you need to report the sale on your income tax and benefit return. This became mandatory in 2016.
It is also important to remember that on your tax return, you need to include income from property sales other than your principal residence. For example, if you sell a property you bought with the intention of re-selling it and you make a profit, your profit is taxable. If you bought a home to renovate and re-sell, or bought a pre-construction condo unit to re-sell, your profit is also taxable. In the case of the sale of a secondary home, such as a cottage or a rental property, there are also tax implications. In some situations, this profit is considered business income; in other situations, it is considered to be a capital gain. There may also be GST/HST implications.
In recent years, the Canada Revenue Agency has increasingly been identifying cases where taxpayers did not report their income from real estate transactions. The penalties and interest associated with unreported real estate sales can be substantial, so make sure you get some advice from a trusted source on how to report correctly if you are unsure.
If you didn’t fully declare this income on a past tax return, the Voluntary Disclosures Program at the Canada Revenue Agency may give you a second chance to correct your tax affairs. Find out more at canada.ca/taxes-buy-real-estate-to-sell-for-profit.
www.newscanada.com
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Squamish Mortgages - What did we get for the government's effort to slow the market?

What did we get for the government’s effort to slow the market?

The following is an excerpt from the VERICO Economic Report written by Michael Campbell

So what does a new trade agreement between Canada, the US and Mexico mean for Canadians? In a nutshell, higher interest rates. When the Bank of Canada met on October 24th, there was a rate hike to 1.75%. And the consensus is that there are at least two – probably three more hikes coming in 2019, which would put rates at the highest level since the 2008 subprime mortgage crisis.

The new USMCA trade deal looks an awful lot like NAFTA and for the overall economy that’s good news especially compared to the uncertainty that has been surrounding the talks over the last 18 months. Given over 70% of our exports go to the US and half of Ontario’s economy is tied to US/Canada trade, failing to reach a deal was not an option.

Arguably Canada’s greatest economic advantage internationally is access to US consumers and businesses, which has become even more important given the current protectionism impacting global trade. Now the uncertainty for Canada surrounding access to the US is over.

The Bank of Canada has specifically cited the ongoing uncertainties surrounding the NAFTA negotiations as the most important obstacle holding a rate hike back but with the new agreement the vast majority of analysts believe that Bank will act.

Canada’s bond market has also seen rates move higher recently in anticipation of a rate hike, which will put significant upward pressure on mortgage rates and in turn price some people out of the market.

Why Should You Use a Canadian Mortgage Broker - Squamish Mortgage Broker

Why Should You Use a Canadian Mortgage Broker?

Hi everyone, and welcome back to the Mortgage Studio Blog! I’m Michele Ellis, Senior Mortgage Broker at the Mortgage Studio. In last month’s post about new federal mortgage regulations due to come into effect in January, I urged any readers thinking about changing or applying for a mortgage to give me a call so we could talk through your options. I know I heard from some of you, and I hope to continue helping people wondering what to do between now and the end of the year with regard to these particular new guidelines. However, my job as a mortgage broker extends far beyond guiding Canadians through big changes to the mortgage market, and so I wanted to take this post to briefly explain the services I provide even when there aren’t big changes like these on the horizon. So, without further ado, why should you use a Canadian mortgage broker?

Brokers Can Help You Figure Out Your Perfect Mortgage

A lot of people who come to me looking for mortgages are first-time home buyers who have never had reason to give mortgages a second thought. Even for more experienced homeowners, it’s difficult to take personal goals and desires about the future and translate that into smart personal mortgage policy today. Is it better to look at fixed or variable-rate mortgages? How much of a down payment do you need to save, and, for that matter, how big of a mortgage can you reasonably expect to be approved? Questions like these – and the countless others that stem from the minutiae of federal, provincial, and private mortgage requirements – are ones that I’ve encountered every day for the past 20+ years. I know not just how to answer them but how to answer them in the way that makes the most sense for you and your personal financial situation. And since I’m not tied to any single lender – unlike the mortgage representatives at your bank – you can trust that my advice is 100% unbiased and professional.

Brokers Deal With Complexity So You Don’t Have To

Buying a home is one of the biggest purchases you’ll ever make, and it’s complicated and stressful enough already without trying to hunt down the best rate for your mortgage (and that’s if you even know what sort of rate you’re looking for!). Mortgage brokers like myself handle this entire process on your behalf, from getting a sense of your financial situation and shopping for rates to getting you pre-approved, approved, and finally, securing financing. Your only role in the process is giving me a call to get the conversation started – after that, you can sit back, relax, and let my years of experience do all the hard work for you.

Brokers Don’t Cost You a Dime

This is the part that sounds too good to be true, but 99% of my clients don’t pay for my services at all. This is because mortgage brokers are paid directly by lenders, who are just as happy to be hooked up with perfect customers as my clients are to be hooked up with perfect rates. The only exceptions to this involve situations where a client has trouble getting a mortgage through traditional lenders – such as if they have a particularly bad credit history. If you don’t fall into that category (and if you’re unsure, ask!), then I can help you figure out your perfect mortgage and get it for you – all at no cost to you. If that sounds like a pretty good deal, I urge you to give me a call at 604-892-4647 and get the conversation started.

 

Michele Ellis – Senior Mortgage Broker, The Mortgage Studio

Debt Consoldation - Squamish Mortgage

Debt Consolidation Main Reason for Mortgage Refinancing

There are a variety of reasons why Canadian homeowners refinance their mortgage. Simply put, refinancing means renegotiating an existing mortgage loan agreement. This year, refinancers accounted for 15% of respondents to CMHC’s Mortgage Consumer Survey.

The main reason for refinancing was to consolidate debt, followed by to fund home improvements. Here’s more of what we learned about refinancers, powered by the 2018 Mortgage Consumer Survey:

  • 24% are Generation Xers (35 – 44 years old) and 35% are baby boomers (55+ years old)
  • 54% are married
  • 61% are employed full time, 7% are self-employed and 17% are retired
  • Refinancers, along with repeat buyers, represent the highest proportion of self-employed mortgage consumers
  • 72% own a single-detached home
  • 23% have a household income of $60,000 – $90,000

Refinancers do go online to use a mortgage calculator and compare interest rates. Still, they’re the mortgage consumer segment most likely to conduct offline research only. About half indicated they’d feel comfortable using more technology to arrange their next mortgage transaction. However, face-to-face interaction was still rated as important.

Broker and lender share remained relatively stable among refinancers. Sixty-eight percent were satisfied with their broker and 79% were satisfied with their lender. When asked what type of additional information they’d have liked to receive from their mortgage professionals, the top answers were: information about mortgage or purchase fees, types of mortgages, closing costs and interest rates.

Almost one third of refinancers indicated that their current level of debt, including their mortgage, is higher than expected. Additionally, more than one quarter don’t have a

monthly budget. Still, 69% are comfortable with their current level of mortgage debt. What’s more, 63% indicated that if they run into financial difficulty, they have other assets (investments, other property, etc.) they can use to help meet their needs.

Refinancers also showed significant confidence in homeownership. A full 80% believe that homeownership is a good long-term financial investment and 74% feel emotionally attached to their home.
Get all the findings on refinancers