What now? Making sense of a changing marketplace

Let me begin with my heartfelt hope that you and your loved ones are in good health.

We are in uncharted territory with the mortgage marketplace continually shifting. Here is a quick summary of some of the most common questions to help you make sense of it all

FOR CURRENT HOMEOWNERS

What do the mortgage payment deferrals mean and how do I access that?

Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. These are “compassionate” programs for those who are in serious financial straits and unable to make their mortgage payments. 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 help, get in touch. We can help you find the right channels to apply.

Will the lower Bank of Canada rate help me with my variable mortgage or line of credit?

Yes, 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 lockstep 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 defaults. If you do have a deep discounted variable rate mortgage, you are in a very good position.

What about my fixed-rate mortgage?

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

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.

FOR HOMEBUYERS 

Events that have impacted buyers include:

1.      Obviously, we’re seeing not as many listings and home visits are certainly not wise. Most activity will be on hold until the future becomes clearer. Use this down time to get in touch for a review of your situation so you are ready to go when the time is right for you.

2.       The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th.

3.       While rates initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime.

We all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term. Health and happiness to you and yours.

Need to defer Mortgage payments? Know the costs first.

Hi everyone, very interesting article written By Pattie Lovett-Reid Chief Financial Commentator, CTV , have a look below before you make any decisions on deferring mortgage payments.

A word of caution before you defer your mortgage payments amid the COVID-19 pandemic: it will cost you in the long run.

Remember, a deferral isn't mortgage payment forgiveness.

There seemed to be a collective sigh of relief when Finance Minister Bill Morneau, after consultation with the big banks, highlighted potential mortgage payment and credit card deferrals would be available for Canadians.

Understandably, Canadians rushed to the phones only to be met with frustration and confusion and left wondering:

Who would qualify?

• Is there an application process?

• Does the entire household have to be off work?

• Will they require documentation?

None of the banks could initially could answer those questions. As days pass, we learn a little more, yet frustration is still high. A mortgage deferral might not be the deal you think it is.

Here’s why.

1. A mortgage deferral doesn't mean an interest-free holiday.

2. If you choose to defer, the interest accrued during the skipped periods will be added to the principal balance. This will make a difference in how much you end up paying in interest over the life of the mortgage.

My take away: a deferral is not mortgage relief, it is simply the ability to skip a payment for a specific period of time and will be added to outstanding balance of your mortgage.

Here are some of your other options.

1. If you can't handle a larger payment once the deferral ends, you could try to extend your amortization period.

2. If you are able, you could make extra payments in an effort to get back to where you started prior to the deferral.

3. It might make more financial sense to borrow only what you need from a line of credit, paying the interest amount only, and paying back the principal amount as quickly as you can when you can.

Canadians are scrambling and worried about mortgage payments as many face layoffs in wake of the pandemic. I've been asked about liquidation of registered retirement savings plans (RRSPs), taking out cash advances on credit cards — all in fear of a foreclosure.

During this crisis, lenders have made it clear foreclosure isn't going to be the first course of action and there are solutions that will help keep you in your home.

If you are in a financial crisis, a mortgage deferral is exactly the lifeline you may need. However, it is always best to reach out and ask for assistance before missing a payment. Recognize it isn't going to free, but knowing all of your options can make it less costly. -

First-time buyers – take advantage of the RRSP down payment boost

Using your RRSP money for your down payment is a great strategy for some first-time buyers. It may help you achieve the 20 per cent down payment needed to avoid mortgage default insurance premiums, or simply give you a financial boost when you need it most.  First-time home buyers can withdraw up $35,000 per person ($70,000 per couple) under the Federal Home Buyers’ Program (HBP). 

Here is how to boost this opportunity even further. If you have saved up to $35,000 and have enough RRSP contribution room, you can contribute that amount to your RRSP by the March 2nd deadline. Then after 90 days, you can redeem those funds under the HBP so the money is available for your down payment. Since your contribution counts as a tax deduction, the tax refund you get this spring is an added down payment boost. Your refund is based on the amount you contribute and your marginal tax rate. So, in effect, you are letting the taxman help you buy your first home! The program does require that you pay the withdrawn funds back on a 15-year repayment plan.

Questions?  Get in touch at any time!

My home is my..........

My home is my castle! It’s also your greatest wealth building tool. Home equity can build nicely by chipping away at payments and through increasing home values, ultimately creating a terrific repository of wealth and making your home not only your castle, but so much more!

My home is – My start and my future. Home ownership makes great financial sense. Over the long term, residential real estate has been a very strong asset, showing excellent appreciation. The goal is to not help pay your landlord’s mortgage, but instead have that money build your own equity. I can help make that reality come true. Get in touch early; good advice can save time, money and stress.

My home is – Our daughter’s post secondary education. Your home may allow you to invest in your greatest asset – your children! The cost of higher education can be daunting, especially if you haven’t prepared for it. Tuition is just part of the cost. You also need to consider accommodation, food, textbooks, supplies, and transportation. Your home can be the most cost-effective financing option to help you achieve this important life goal.

My home is – My ability to retire my way.  A reverse mortgage can greatly assist cash strapped retirees who need to pay off their debts and live comfortably in their family home. Reverse mortgages are also a strategy for the well-heeled who want to unlock the value of their homes for wealth-building strategies or to enhance their retirement. You may also want to make sure you have a secured line of credit lined up before you retire.

My home is – Our renovated dream home. A smart home renovation can both increase your home’s property value and improve the way you live in your home. Putting a renovation on your high-interest credit card can wipe out the value you’re adding and create future financial stress. Whether you are looking at buying a fixer upper, or renovating your current home, I have options to help you achieve that dream home.

My home is– My smart investment strategy. Many Canadians are building personal wealth with an investment property, by starting a business, or investing in other assets. An investment property is being increasingly viewed as a pension plan, particularly since so many Canadians are not covered by workplace plans. Rental income typically pays for most or all the expenses and property appreciation has often outperformed stocks and bonds over the long term,

My home is – Our freedom from credit card debt. If high-interest debt is choking your cash flow, you may be able to move that debt to your lower-rate mortgage. You’ll get a fresh start that will allow you to save thousands in interest, boost your cash flow, have less stress with one manageable payment, and be mortgage free quicker. You’ll get the financial reset you need to start building wealth.

We are here to make sure you get the most out of home ownership. Get in touch anytime!

Who are mortgage brokers?

Unlike your bank’s mortgage specialists, who are employed by a specific organization and therefore mandated to see that organizations’s products, mortgage brokers have access to many mortgage companies in Canada & can help you with one that has the best mortgage solution for you.

The right mortgage broker will benefit you as a borrower as they have a wealth of knowledge in mortgage lending, both from a formal training and from experience. Mortgage brokers are required to complete formal training in Canada & are licensed provincially.

In an industry that’s constantly evolving, mandatory licensing help ensure that mortgage brokers stay apprised of regulatory changes and possess the skills required to service their clients. After all, mortgage brokers can help guide clients through what may be the most significant investment of their lives.

The President of Yhard Mortgages Brian Yhard is celebrating his 30th year in the mortgage industry in 2020 feel free to lean on his knowledge of the industry for your next purchase, refinance, transfer or any other mortgage related transactions.

10 Money Saving Tips for 2020

The fresh start of the new year makes it a great time to review your finances and particularly your spending. Whether you are saving to buy a home or pay one off, your “money leaks” can add up to some big bucks over time.  Here are ten ways to find some of your missing money or help you save over the long term:

1.      Watch unconscious spending. Track your spending and consider your impulse buys at grocery, gas station, convenience and other stores, or your brand name buying when generic will do. If impulse buying is a big culprit, always make a list and stick to it, only grocery shop once a week and never on an empty stomach! 

2.      Know your prepayment penalty. When choosing between mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you thousands.

3.      Convenience costs.  It’s a lot easier to spend more than you intend to when you exclusively use your credit cards because you aren’t seeing the money. You might not be so liberal with your money if you actually had to hand it over. Consider withdrawing a fixed amount of cash for your spending every week.

4.      Renovate over relocate. The right renovation might be all it takes to turn the house you are in into the home of your dreams. It is almost always less expensive to renovate than to relocate. I have great renovation financing options for 2020.

5.      Examine your bills. Take a good hard look at your monthly bills and go through them line by line. Some of them may be for services you don’t use or can live without, or perhaps don’t remember requesting. Or they could be for services that you can actually live without. Even if the amount is small, why have it charged every month?

6.      Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get advice. Don’t renew with your eyes closed. This is your opportunity to negotiate the best possible deal and saving big over the long term.

7.      It doesn’t hurt to ask. Whether you are signing up for internet or buying a car, ask “is this the best you can do?” or “can you make it more affordable?”  Do research in advance so you are prepared and knowledgeable on all things related to what you are buying.

8.      Speed up your mortgage pay down. Change from monthly payments to weekly or biweekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you reduce on your principal.

9.      Don’t leave money on the table. Take advantage of all incentives that are available to homeowners. First-time buyers can take advantage of the Home Buyer Tax Credit that provides up to $750 in federal tax relief. There are also many incentives available when you make energy saving investments in your home.

10.  Plug your biggest money leak: high interest. All of the savings you make in lifestyle choices mean nothing if you don’t put a plug on paying high interest  If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to your lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties.

We are here to save you money in 2020 and throughout your mortgage years. Get in touch at any time!

What is the best mortgage rate?

A 1.9% online rate will definitely attract attention! But cheapest is not always best. Once the fine print is read, many will find they don't qualify, and often there are restrictions that could really cost homeowners in the long run. 

That low rate may be for quick close mortgages only i.e. closing within 60 days, or for those who have less than 20% down in which case mortgage default insurance is required to protect the lender. If you put 20% or more down, you don't need mortgage default insurance, but your rate will be higher because the lender doesn't have that protection. And that low rate definitely won't be for refinances or other situations like investment properties.

Rate is only part of a successful mortgage strategy. On a $500,000 mortgage, a rate difference of 0.1% only equates to a difference in payments of about $300 a year. The right mortgage privileges can save you much more than that. That's why I look deeper.

Mortgage contracts are full of devilish details that make winners and losers of Canadian homebuyers. Rates are just the lure. Often, the lower the rate, the bigger the catch. Sometimes a cut-rate mortgage comes with higher fees, penalties, or restrictive terms, which could prove more costly over the long term than a slightly higher-rate mortgage with flexible terms.

To get you the best mortgage for your situation, some of the things we'll look at include:

• The fee to break your mortgage. This is huge: there can be substantial differences between lenders. Remember life happens. If there's even a chance you'll need to break your mortgage, going with a lender that has reasonable fees can save you thousands.

• Prepayment privileges: those options that can help you pound down your debt by increasing your payments and/or putting down lump sums so you can save thousands in interest and shave years off your mortgage.

Important mortgage privileges don't fit in a rate ad. But trust us... this is where the rubber hits the road in building the right mortgage. Catch yourself looking at low online rates? Do all of the research you can but be sure to call us to discuss. we are here to save you as much money as possible over the life of your mortgage!

Why early payout penalties matter now more than ever

We are deep in the competitive spring real estate market! And we’re seeing a very interesting rate anomaly. Fixed-rate mortgages are very competitively priced and gaining in popularity, while variable-rate mortgages are looking overpriced. We’re even seeing ten-year mortgages at good rates back in the news. If the market is telling us that fixed-rate mortgages have an advantage, then be sure to look at the fine print because the devil is in the details and early payout penalties matter.

Why? Sometimes you just need to get out of your mortgage! It’s impossible to plan for many of the things that will happen in our lives, like job loss, illness, divorce, relocation, or another personal matter. Or when much better mortgage rates become available. Your needs and the market can shift easily during the term of your mortgage and the last thing you want is a painful penalty to get out early. That’s why it’s important to consider what your early payout penalty might be before you get your mortgage. We all want to believe that none of these scenarios will transpire, but when they do, it’s a relief to have a cost-effective option to get out.

Generally, to break your mortgage, you can expect to pay the greater of either a) three months’ interest, or b) the interest-rate differential (IRD). With the IRD, your mortgage lender will want you to pay the equivalent of what they will lose by releasing you from your mortgage and lending the money at current rates.  Not all lenders calculate IRD the same way, and the differences can amount to thousands or even tens of thousands of dollars.

Early payout penalties are particularly important to consider if you are looking at a 10-year mortgage. If you break a 10-year mortgage before 5 years, the penalty with most lenders can be substantial. If there is a chance you could break the mortgage in the first 5 years, you may not want to consider a 10-year term.

Don’t let anyone tell you early payout penalties are “all the same”. They’re not. When choosing between mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you stress and big money.

Advice on how to avoid painful penalties is part of the service I provide to my clients every single day!

The Lowdown on Downpayments

We get questions about downpayment all the time! So here is the lowdown on how much you need, and how you might get it.

How much do you need? Not surprisingly, most Canadian homebuyers purchase a property with the absolute minimum downpayment. The thing is, the minimum can vary, so you want to be sure you know how it's calculated.

Will you live in the home? If the house will be owner-occupied, then you need 5% down for the first $500,000 of the purchase price, and 10% for any amount over $500,000 up to $999,999. If the purchase price is $1,000,000 or more, the minimum down is 20%.

Hoping to skip the cost of mortgage default insurance? Then you'll need at least 20% down. Any downpayment less than 20% of the purchase price requires this insurance, which will be added to your mortgage principal.

Buying a rental or recreational property? If it's not going to be your own principal residence, then you'll need 20% down. Genworth and CMHC have a vacation/second home program that allows you to put 5% down but mortgage default insurance will be required. Rental properties require 20% down.

Are you new to Canada? If you're a permanent resident, then you'll need the same downpayment as a Canadian citizen: 5% for the first $500,000 and 10% after that. If you are a non-permanent resident, then you may need 10% down. And if you're not a resident of Canada, then you'll need at least 35% down from your own resources (not borrowed).

Smart ways to come up with a downpayment

If you're looking to buy a second home, then your best path to a downpayment is often to refinance your existing home. A review of your situation is the best starting point.

If you're saving for your first home, here are some ways to come up with the cash:

1. A financial gift: If you're lucky enough to have financial support from a parent or other blood relative, you'll need to get a form signed that says the funds are a gift and that you are not required to pay the money back at any time.

2. Your RRSP: You can withdraw up to $35,000 tax-free from your RRSP or $70,000 per couple. The recent federal budget increased this from $25,000 and also announced that in 2020, this program will be available to divorced individuals. You will be required to pay the funds back over 15 years.

3. TFSA/Investments: If you withdraw from your TFSA to boost your downpayment, you're allowed to re-contribute, so you never lose your TFSA room. If you haven't set up a TFSA, then do it today and set it up so money goes in every month.

4. Early inheritance: Many parents and grandparents would rather help with the purchase of a home while they're alive rather than having their children wait for an inheritance.

5. Sell assets: For instance, a vehicle, or jewelry. You need to show 3 months of bank statements to support your downpayment, and explain any large deposits.

6. Money from outside of Canada: If you're bringing funds from outside of Canada, you'll want to have those funds in Canada for at least 30 days before closing, and you'll need to provide 3 months of financial history from the original account they came from.

Often home buyers are actually closer than they think to buying that first or next property. Get in touch any time. Early advice can save time, money and stress!