22 Aug

Stress Test Rate & Recent Decrease


Posted by: Debra Carlson

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!

15 Aug



Posted by: Debra Carlson

Cash back mortgages are typically a 5 year term and you receive a percentage of the mortgage financing back in cash, after the mortgages is disbursed. The percentage of cash back received varies from 1% to 5%, in most cases. Funds can be used to build a fence, landscape, buy window coverings, etc. The idea behind the cash back mortgage is to use the money to help assist with purchases/costs that are not covered by down payment or closing costs when purchasing a home. The following are a few points to consider when taking a “cash back” mortgage:

  1. There are several lenders who have cash back mortgages. Do not sign up for the first one that you look into; they all have different terms and conditions.
  2. Interest rate given is the banks “posted” rate, not a discounted rate.
  3. The cash back portion received is basically a loan on top of the mortgage. In most cases you will have paid the “cash back” and more by the end of the term. Remember, lenders do not give money away for free and the cash back repaid can sometimes be twice as much as what is received in cash.

Most cash back mortgages are a 5 year term. The average Canadian historically moves every 36 months, therefore be very careful when trying to terminate the mortgage contract prior to the end of the term. With a cash back mortgage you are required to pay a penalty as well as a prorated portion of the loan given. For example, when 36 months into a 60 month mortgage term you are required to pay back 2 years worth or 40% of the cash back; In some cases the lenders require 100% repayment of the cashback portion of the mortgage.

Before signing for a cash back mortgage do your due diligence and speak with a professional mortgage advisor; we can provide alternatives that could potentially save a lot of “hard earned money”.

403-245-3636 x 2027


8 Aug

Mortgages Are Like Coffee


Posted by: Debra Carlson

Getting a coffee at the lowest price is usually not going to give us a coffee that meets our needs. We want quality beans, flavour, extra features like a shot of caramel, maybe make it a macchiato, froth on the top, an alternative milk option, and the list goes on.

The same goes for mortgages. Lowest rate mortgages may come with a lack of portability (moving the mortgage from one property to another upon the sale of a home), the inability to make extra payments, and you may be locked into a good rate today without the flexibility for better rates in the future. They may be the lowest rate without the lowest monthly payment amount, they may be for term lengths that are too long and have significant penalties when the mortgage needs to be broken.

The lowest rate mortgage may be a collateral charge mortgage that allows a bank to foreclose on your property because you were delinquent on your credit card payments. The 4 strategic priorities that every mortgage needs to balance are: low risk, low cost, a payment that makes sense and maximum flexibility

The next time you apply for a mortgage, try not to fixate on the best rate but ask how you can get the best mortgage that meets your needs.


403-245-3636 x2027

2 Aug

First-Time Home Buyer Incentive


Posted by: Debra Carlson

Program Details

How does it work?

The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.

Through the First-Time Home Buyer Incentive, the Government of Canada will offer:

5% for a first-time buyer’s purchase of a re-sale home

5% or 10% for a first-time buyer’s purchase of a new construction

How do I know how much I have to pay back?

You can repay the Incentive at any time in full without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold, whichever happens first. The repayment of the Incentive is based on the property’s fair market value.

  • You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000.
  • You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.

NOTE: If your property value goes down, you are still responsible for repaying the shared equity mortgage based on the current home value at time of repayment.

Funding Available

The total amount of funding will be $1.25 billion over 3 years.

Eligibility & Requirements

Who can apply?

  • Canadian citizens, permanent residents, and non-permanent residents who are legally authorized to work in Canada
  • Borrowers must have a maximum qualifying income of $120,000
  • Total qualifying income must be $120,000 per year or less
  • This is subject to qualifying income requirements set out by lenders and mortgage loan insurers
  • At least one borrower must be a first-time homebuyer, as per the definition below.

Are you a first-time homebuyer?

You are considered a first-time homebuyer if you meet one of the following qualifications:

  • you have never purchased a home before
  • you have gone through a breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements).
  • in the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned

IMPORTANT: It’s possible that you or your spouse or common-law partner qualifies for the First-Time Home Buyer Incentive (if you are in a married or common-law relationship) with the 4-year clause even if you’ve owned a home.

How does the 4-year period work?

The 4-year period begins on January 1 of the fourth year before the year you purchased your home. It ends 31 days before the date you purchase your new home. Here are a few examples:

  • if you purchase a home on March 31, 2016, the 4-year period begins on January 1, 2016 and ends on February 28, 2020
  • if you sold your home you lived in in 2014, you may be able to participate in 2019 or if you sold the home in 2015, you may be able to participate in 2020

Are there other mortgage details?

  • Total borrowing is limited to 4 times the qualifying income. The combined mortgage and Incentive amount cannot exceed four times the total qualifying income. The amount for the mortgage loan insurance premium is excluded from this calculation.
  • The maximum threshold for debt service ratios are GDS 39% and TDS 44%. This is only applied on the first mortgage and is subject to requirements by lenders and mortgage loan insurers.
  • The Incentive is a second mortgage on the title of the property. There are no regular principal payments. It isn’t interest bearing and has a maximum term of 25 years.
  • The Government of Canada will share in the upside and downside of the property value upon repayment.

Is Mortgage Loan Insurance required?

  • Mortgages must be eligible for mortgage loan insurance through either Canada Guaranty, CMHC or Genworth. The first mortgage must be greater than 80% of the value of the property and is subject to a mortgage loan insurance premium.
  • The premium is based on the loan-to-value ratio of the first mortgage only. That is, the first mortgage amount divided by the purchase price. The Incentive amount is included with the total down payment.
  • Mortgage loan insurance premiums may be subject to provincial taxes.

What are the down payment requirements?

  • Minimum down payment is 5% of the first $500,000 of the lending value and 10% of the lending value above $500,000.
  • The minimum down payment must come from traditional down payment sources.
  • Traditional down payment comes from the borrower’s own resources and may include:
    • savings
    • withdrawal/collapse of a registered retirement savings plan (RRSP)
    • non-repayable financial gift from a relative
  • Note: Unsecured personal loans or unsecured lines of credit used to satisfy minimum down payment requirements are not eligible for the program.

What properties are eligible?

The Incentive is to help first-time homebuyers purchase their first home. Eligible residential properties include:

  • new construction
  • re-sale home
  • new and re-sale mobile/manufactured homes

Residential properties can include 1 to 4 units.

Types of residential properties include:

  • single family homes
  • semi-detached homes
  • duplex
  • triplex
  • fourplex
  • town houses
  • condominium units

IMPORTANT: The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

What are the terms of repayment?

The first-time homebuyer will be required to repay the Incentive amount after 25 years or when the property is sold, whichever comes first.

The homebuyer can also repay the Incentive in full at any time, without a pre-payment penalty. Refinancing of the first mortgage will not trigger repayment.

How is repayment calculated?

  • If a homebuyer receives a 5% or 10% Incentive, the homebuyer will repay 5% or 10% of the home’s value at repayment.
  • Repayment is based on the property’s fair market value.


403-245-3636 x 2027