Canada’s reverse mortgage debt grew by 1.33% month-over-month in August to reach yet another new high of $3.83 billion, according to latest data from the Office of the Superintendent of Financial Institutions.
This represented a 26.23% annual increase, with $50.63 million of the total volume coming from August alone. Over the past year, Canadian boomers and seniors have borrowed approximately $796.11 million.
Together, these trends have made reverse mortgages one of the nation’s fastest-growing debt segments, real estate information portal Better Dwelling stated in its analysis of the OSFI filings.
Around two months back, Equitable Group CEO Andrew Moor said that reverse mortgage applications have essentially tripled in volume over the past year alone.
“We’ve only been in this market for 18 months, but applications are jumping,” Moor told Bloomberg in an interview last September. “Canadians are getting older and there is an opportunity there.”
This supported the observations of Canada Mortgage and Housing Corporation, which noted that the nation’s seniors are becoming even more active in in the housing market – especially in Toronto, where the proportion of the senior population (those aged 65 and over) owning homes has increased by 4.5% between 2006 and 2016, ending up at 25%.
CMHC cited increased labour force participation as the major factor in greater ownership among seniors.
“In 2016, employment became the primary source of income (including self-employed) for close to one-third of homeowner households, compared to 20% among renters. With more seniors working, fewer have been reliant on income from government sources compared to a decade ago,” the report stated.
“Among homeowners, there has been a strong increase in the share of retirees for whom pensions (public and private) were their primary source of income. These trends have translated into faster income growth for seniors.”
By Ephraim Vecina
Remembrance Day was first observed in 1919 throughout the British Commonwealth. It was originally called “Armistice Day” to commemorate armistice agreement that ended the First World War on Monday, November 11, 1918, at 11 a.m.—on the eleventh hour of the eleventh day of the eleventh month.
The poppy is the symbol of Remembrance Day.
With all the news we have seen on the election, I thought I would sum it up from a mortgage industry perspective.
What the Liberal win means for your mortgage:
- We will see the continuation of the First Time Home Buyers’ Incentive. Check out the link for more information here:
- Property Transfer Tax modifications were on the platform, so we will await the date that change is applicable.
- Consumers will still be able to withdraw up to $35,000 from their RRSPs as part of the government’s Home Buyers’ plan.
- Bank of Canada Rates may not decrease as expected this year – unless there is a significant downtown in the market suddenly- based on the snapshot of recent activity that doesn’t appear as likely. It certainly makes it easier for the lenders not to pass the decrease down the line to the consumer.
- We will likely see a national housing tax implemented in addition to the provincial ones already in place.
For items 1, 2 & 5, here is a link.
It doesn’t appear we will see any of the changes to the stress test or amortization hoped for by many.
Stay tuned for more updates and what the BOC decides to do on Dec. 4.
While the constant in our market will always be change, I am here at the frontlines to help you navigate the market to your advantage and save you money. Please reach out with any mortgage questions on how I can help you or those you care most about.
Original Article By: Angela Calla – DLC
Co-signing on a loan may seem like an easy way to help a loved one (child, family member, friend, etc. ) live out their dream of owning a home. In today’s market conditions, a co-signor can offer a solution to overcome the high market prices and stress testing measure. For example, if you have a damaged credit score, not enough income, or another reason that a lender will not approve the mortgage loan, a co-signor addition on the loan can satisfy the lenders needs and lessen the risk associated with the loan. However, as a co-signor there are considerations.
- If you act as a co-signor or guarantor, you are entrusting your entire credit history to the borrowers. What this mean is that late payments on the loan will not only hurt them, but it will also impact you.
- Understand your current situations—taxes, legal, and estate. Co-signing is a large obligation that could harm you financially if the primary borrowers cannot pay.
- Try to understand, upfront, how many years the co-borrower agreement will be in place and know if you can make changes to things mid-term if the borrower becomes able to assume the original mortgage on their own.
- Consider the implications this will have regarding your personal income taxes. You may have an obligation to pay capital gains taxes and we would highly recommend talking to an accountant prior to signing off.
- Co-signors should seek independent legal advice to ensure they fully understand their rights, obligations and the implications. A lawyer can lay it out clearly for you as well as help to point out any things you should take note of.
- Carefully think about the character and stability of the people that you are being asked to co-sign for. Do you trust them? Are you aware of their financial situation to some degree? Are you willing to put yourself at risk potentially to take on this responsibility? Another consideration is to think about your finances down the road and determine how much flexibility will be needed for yourself and your family too! If you have plans of your own that will require a loan, refinancing your home, etc. being a co-signor can have an impact.
Co-signing for a loan is a large responsibility but when it is set-up correctly and all options are considered, it can be an excellent way to help a family member, child, or friend reach their dream of homeownership. If you are considering being a co-signor or wondering if you will require a co-signor on your mortgage, reach out as I am always happy to answer any questions or concerns and guide you through processes like this.
There’s nothing quite like stepping into your dream home for the very first time.
You have achieved your goal of homeownership! However, the journey from home seeker to home buyer can be challenging – unless you have a well-defined plan and guidance from the right professionals. As a mortgage broker, here’s how I will help you reach your objective:
STEP 1 GETTING TO KNOW YOU
In the discovery phase, we will discuss your situation, the essentials and “nice to haves” you’d like in your new home, and how long you plan to live there. Based on your desired move-in date, we’ll work out a timetable for your home-buying process.
STEP 2 BUILDING A BUDGET
I’ll help you create a monthly budget and then calculate a down payment and mortgage payments that fit into it. Together, we’ll also work through a financial check-up that considers how changes in income and expenses could affect your plan.
STEP 3 CUSTOMIZING THE SOLUTION
There are many different types of mortgages, and it’s important to select one that matches your current needs and preferences. I will ask you a series of questions that should help to reveal your priorities.
STEP 4 TESTING SCENARIOS
Together, we’ll try out different mortgage scenarios, and I’ll show you how changes in income, property taxes, condo fees, loans and other variables affect your maximum mortgage amount and mortgage payments. My goal is to make sure you can comfortably afford your mortgage.
STEP 5 ARRANGING PRE-APPROVAL
It’s a good idea to get pre-approval for a mortgage before you find your dream home and make an offer — that way, you can be confident that financing is available. I’ll walk you through the paperwork and guide
you towards the most suitable lender.
STEP 6 ANSWERING YOUR QUESTIONS
Now it’s time to get serious with a Realtor and view properties that fit your price range. If you have any questions along the way, be sure to give me a call.
STEP 7 SEALING THE DEAL
I’ll work closely with your Realtor & Notary to make sure everything is in place for the closing. That’s the day you pay your down payment and get the keys to your new home.
STEP 8 IT’S TIME TO MOVE IN!
From start to finish, the plan we develop together will see you through the home-buying process. Even after you’ve settled into your dream home, we’ll periodically review your current situation to determine if we need to make any alterations to your original mortgage plan.
Written By: Terry Kilakos – DLC
We are currently in a very unique situation when it comes to 5-year fixed and 5-year variable interest rates. For the first time in almost a decade, the lowest 5-year fixed interest rate is more than 0.30% lower than the lowest available variable interest rate for new mortgages. For some, their current variable rate is 0.80% higher than what a new 5-year fixed interest rate could be.
Why is this important?
Variable mortgage penalties are only equivalent to 3 month’s interest. On a $400,000 mortgage with a net variable rate of 3.10%, the penalty would only be $3,100 ($775 per $100,000 of mortgage debt).
What are the savings to switching to a lower rate?
The following is an example to consider and assumes leaving your existing lender and transferring the existing mortgage balance, term and amortization to a new lender at a lower fixed rate:
$2,152.76 current monthly payment
$437,857.16 current outstanding balance
4 years and 0 months remaining on term and 24 years and 0 months remaining on amortization
$3,800 approximate penalty to break mortgage including discharge fee (legal fees and appraisal covered)
$2,061.88 new monthly payment on 5-year fixed rate
$437,857.16 new outstanding balance
4 years and 0 months remaining on term and 24 years and 0 months remaining on amortization
$90.88 savings per payment
Interest paid with current lender for remainder of term: $50,847.29
Principal paid with current lender for remainder of term: $52,485.19
Remaining balance at end of term: $385,371.97
Interest paid with new rate for remainder of term: $44,025.53
Principal paid with new rate for remainder of term: $54,944.71
Remaining balance at end of term with new rate: $382,912.45
For $3,800, this client has the potential to save almost $6,800 in interest, save $90.88 a month, while at the same time owing less on their total balance at the end of their term.
Now, this might not be for everyone. Variable, as you know, can go up and down. Locking into a 5-year fixed rate also takes away your ability to get out of your mortgage for only 3 months interest penalty compared to staying in a variable rate. For some people, maintaining the variable for an opportunity of having that rate drop below current 5-year fixed rates is worth waiting too.
There is no right or wrong decision. It is how you want your monthly payments structured and how much risk you want to allow for, both in rate variances and potential penalties.
To find out what kind of savings you could see with moving your variable rate into a fixed rate, please feel free to contact me.
403.245.3636 x 2027
Let’s take a closer look at how a Refinance Plus Improvements mortgage can get you the extra cash you need to get your renovations completed.
The Standard Refinance
An everyday refinance allows the home owner to access up to 80% of the fair market value of the home. The value is typically determined by a Market Appraisal on the home. Here is how it would look:
- Current Appraised Value of the home: $250,000.00
- Max New Mortgage Amount: $200,000.00 ß 80% of present value
- Your current Mortgage Balance: $190,000
- Equity Available to you for the renovations: $10,000.00
*Note: some of the equity will cover closing costs (it is a new mortgage after all, so a new registration and fund advance needs to happen. If you are breaking a current mortgage, there could be a pre-payment penalty as well)
The remaining equity can be used towards your improvements. But what happens if it’s not enough to cover the improvement costs? You’re now stuck with either making sacrifices to your dream reno, covering the additional costs out of pockets, use a higher interest line of credit or not doing the renovations at all. None of which are a great options.
The Refinance Plus Improvements Mortgage
Here is how the Refinance Plus Improvements mortgage can make all the difference.
For argument sake, let’s assume for a moment that the home owner is thinking about renovating their kitchen and main bathroom. These are in no way a small improvement. They are quite significant improvements…new flooring, cabinets, counter tops and paint in the kitchen along with a full gut and renovation in the main bathroom.
After sitting down with a Mortgage Broker to determine mortgage affordability, the home owners next step is getting estimates for the renovations. After having multiple contractors quote on the work, the home owner settles on a contractor that has quoted $20,000.00 for the job (Labour and materials costs, all in, turn key project). Let’s also assume for a moment that the renovations are going to increase the value of the home by $30,000.00 (side note: Kitchen and Main Bathroom Renovations can have the biggest impact on the value of a home). Here is how it would look:
Refinance Plus improvements:
- Current Home Value: $250,000.00
- Post Renovation Home Value: $280,000.00
- New Max Mortgage Amount: $224,000.00
- Your Current Mortgage Balance: $190,000.00
- Equity Available for the renovations: $34,000.00
See the difference? The refinance plus improvements in this scenario can get the home owner access to an additional $24,000, far exceeding the improvements planned for home. No sacrifices required. No unsecured higher interest financing required. No need to tap into personal savings. Just a nice new mortgage with a low interest rate and one simple payment.
If you have questions about how a refinance plus improvements mortgage can make all of the difference with your renovations plans, please feel free to contact me. I am always happy to discuss mortgage strategy with you.
403.245.3636 x 2027
Mortgages are complicated but there are steps a homebuyer can take to make the process smoother and obtain a mortgage product that is in your best interest and not in the banks best interest!
1. Use a Qualified Mortgage Broker
Obtaining a qualified mortgage broker should be the first step you take when obtaining a mortgage! Enlisting a trusted broker to work with can help secure a mortgage that is in your best interest. This is one of the biggest (if not the biggest) purchase you will make in your lifetime. Working with a professional will make a difference.
2. Budget, Budget, and Budget
Budgets aren’t the most glamorous element of homebuying but, they are a necessity as you can often overlook costs that can “make or break” the purchase of a home. A few things to be considered are:
- Property transfer taxes
- Legal fees
- Home inspection/appraisal fees
- Down payment
- Mortgage insurance…and the costs don’t stop once you own the home.
3. Understand the Importance of the Down-Payment
- Many home-buyers simply focus on setting money aside for the down payment. While this is crucial, there are other considerations.
- How big of a down payment can you make
- You must meet the federally mandated minimum down payment: 5% for all mortgages up to $500,000, and 10% on any portion above $500,000 up to $999,999.99.
- Insured mortgage loans are only available on properties valued under $1 million.
- The size of the down payment will reduce the interest you pay out over the life of your mortgage.
- The size of the down payment will reduce the amount of mortgage insurance required.
- Take advantage of the Home Buyer’s Plan to withdraw up to $35,000 tax free from their Registered Retirement Savings Plan (RRSP).
- Leave plenty of time to move down payment funds from whichever source you are taking them from.
- You will need to leave adequate time to obtain a certified cheque or bank draft to take to the lawyers office when you meet with them, before taking possession of the property.
4. Do NOT Become Fixated On the Interest Rate
The interest rate is important, but do not be hasty and jump into a mortgage purely based on the interest rate. Consider other areas such as the terms, i.e. penalty to break the mortgage, amortization, porting a mortgage to another property, etc. A good mortgage broker will help you understand the “ins and outs” of a mortgage.
Considering the above points will help you be more prepared when beginning the home buying process. If you would like guidance to ensure you are obtaining a mortgage product that is in your best interest with minimal stress, please do not hesitate to email or call.
Currently, all borrowers in Canada need to qualify for a new mortgage at the current Bank of Canada Benchmark Qualifying Rate or at their approved mortgage interest rate plus 2.0%, whichever is higher.
For more than a year, this Bank of Canada Benchmark Qualifying Rate has been 5.34%. Now, for the first time in 3-years, the Bank of Canada has decreased that Qualifying Rate to 5.19%, a 0.15% decrease.
What does this mean?
The Bank of Canada Qualifying Rate is essentially a lender’s Stress Test Rate. If a borrower has an annual gross income of $60,000, they can qualify for a $265,000 purchase price with a 10% down payment at a 5.34% qualifying rate.
By changing the qualifying rate to 5.19%, that same borrower qualifies for a $269,000 purchase price at 10% down payment. This is a $3,700 increase in borrowing ability.
A borrower with $80,000 of gross annual income and a 20% down payment qualifies for a $455,000 purchase price at the 5.34% Bank of Canada Qualifying Rate. Change it to 5.19%, it increases to $462,000. A $5,600 increase in borrowing ability.
The ironic part of this is that the Stress Test was implemented to protect consumers against rising interest rates. The government’s concern was that borrowers would not be able to cover their monthly payments when they came up for renewal.
Highest 5-year interest rate since January 2010? 3.79%.
Highest 5-year fixed interest rate in the past 5-years? 3.24%.
Last time someone had to pay an interest rate above 5%? For one month in 2009 and before that, summer of 2008.
Food for thought! If you have any other questions regarding the Bank of Canada qualifying rate or the mortgage Stress Test rules, please do not hesitate to contact me!