Wednesday, March 1, 2017

Variable rate holders- no change to your mortgage rate!

The Bank of Canada is keeping the target for the overnight rate at ½ percent. In a rather brief interest rate announcement, the Bank noted that, while there are "significant uncertainties" that could impact the outlook of the Canadian and global economies down the road, for now things are consistent with the Bank's January projections, so it's staying the course.

The Bank did note that CPI inflation rose to 2.1 percent in January-something the Bank says reflects higher energy prices due, in part, to new carbon pricing measures in two provinces. Because of this, the Bank believes the increase in inflation is temporary.

Overall, the Canadian economy performed a little above expectations in the fourth quarter of 2016-thanks in part to higher housing indicators. That said, Canadian exports continue to face strong competition and, while there was growth in employment, wages and hours work remain rather subdued. These two factors are contributing to Canada's persistent economic slack, and preventing it from keeping pace with the rebounding United States.

If you have any questions about the most recent interest rate announcement, feel free to reach out to me. Alternatively, you can view the full release here: http://www.bankofcanada.ca/2017/03/fad-press-release-2017-03-01/.

Friday, February 17, 2017

Money talk

This time of the year there is lots of chatter going on out there about investing, since the deadline to contribute to RRSP’s for the 2016 tax year is March 1st. Naturally, all of this talk about investing leads to other discussions about financial planning, in general.  Here are some of my random thoughts, ideas, and rules of thumb when it comes to money:
  • Plan ahead. It’s always best in life to hope for the best, but plan for the worst. While that may sound negative it is always best to live on less than you earn and save some money for the future. No one knows where life will take you. Having savings not only provides you with a plan B should something go wrong but, more importantly, having some money gives you options in life whether it be in making an investment or starting a business. Who knows what opportunities will come your way. Having some money in the bank gives you the option to seize them! One of the fascinating aspects of the work I do is to be able to see how my clients approach money. I have been absolutely amazed at the saving abilities of some of my clients who are in lower income brackets. Saving is their mindset and it doesn’t matter how much or little they earn, saving is just what they do. The ability to save is definitely not about how much money you do, or don’t make. It is about your habits and mindset and the conscious decision to live under your means so you have some money left over to save.
  • Investing in an RRSP or TFSA?* If your income in retirement will be similar to your income right now then it may not make sense to contribute to an RRSP. RRSP’s are great for tax shifting in the sense that any contributions you make now will lower your current taxable income. When you withdraw the funds from your RRSP, in retirement, you will be taxed at whatever your income level is at that time. So, if you are in a high tax bracket now, but will be in a lower one in retirement it makes sense to contribute to an RRSP in your higher earning years. If your current income tax bracket is not high, then it may make more sense for you to save into a TFSA. While there is no tax deduction for contributions to a TFSA, any investment gains made within your TFSA grow completely tax free and there are no tax implications for withdrawals. Speak to your financial planner for more information on retirement strategies.
  • Pay extra on your loans. On mortgages and installment loans, it’s a great idea to get into the habit of paying extra, every month. You’ll be surprised at how much faster you pay off this debt (especially on your car loan). Set up the extra payments so they come out automatically and you won’t see it as optional. If anything goes wrong in your life (sickness, job loss etc), you can always revert to your original lower payment. My rule, when it comes to cars is, if you feel like you cannot comfortably afford the payment within a 5-year term (or less) then you are buying too much car. Time to check yo’ self and look for something more affordable!
  • Create healthy money habits when you are young to set yourself up for the future!. Getting in the habit of saving and spending less than you earn when you are younger will help you immensely as you get older. If saving is a regular habit when you have little money you will not even think twice about saving as your income grows.
  • What is your relationship with money? Mindset is a game changer when it comes to finances. Consider your relationship with money. Is it a healthy one? Is it positive or negative? Our thoughts can create our reality and if you treat money as a difficulty I believe it will be one. It’s important to treat the money we have with a healthy level of respect and to save for the future but to also enjoy life sometimes too.
  • Have some fun with your money. I firmly believe that you should leave some room for fun money in your budget, regardless of your financial situation. Every week pay yourself a cash allowance, which you set based on your budget. Allow yourself the freedom to do whatever you want with it, with no guilt attached. Depending on the amount you give yourself you could use it to go to a movie, eat out, buy fancy coffees, or clothes etc. Having cash is key in this exercise because it’s tangible and once it’s gone, it’s gone. We have been doing this in my house for years and it has worked very well for us. We take our money out every Friday, without fail, and it must last the week. Once it’s gone it’s gone but we allow ourselves to have fun and enjoy whatever we spend it on. We have kept this habit up through tough financial times and abundant ones and it has always helped keep us accountable but also allowed us to have some fun at the same time. It’s a great budgeting exercise!
  • If you can’t pay for it now, you can’t afford it. Yes, there are some exceptions to this rule for big ticket items like an education, and buying houses, or cars. Consumer debt is at an all time high. Many of us are living beyond our means and it’s time to get back to basics and start paying for things the way our parents generation did, by saving for things before purchasing them. Being in debt is optional and not a given. Allow yourself the freedom of being debt free. You deserve it!
  • Buy life insurance when you are young*. The article doesn’t agree with me on this. But, here me out. You buy life insurance for the future. If you are young and single right now you may think that buying life insurance is a silly expense. My philosophy is to buy it when you are as young as possible because the premiums are usually so cheap it’s a joke! As you get older (when you naturally start thinking about buying insurance), you will find that it’s often more complicated to get due to health reasons and it’s typically much more expensive. I say “set it and forget it”. Buy as much as you can possibly afford when you are young and you won’t need to think about it again as you get older!
  • Pay off debts while saving at the same time. if you spend all of your money tackling debt you will only get into debt again if the car breaks down and you need to pay the mechanic to get it back on the road. In my mind, it makes more sense to pay down debt but to also set aside some savings, at the same time. It will help as a mental exercise in saving and getting into a healthy savings habit. You will also be able to see your bank account grow  and this will help to create a mental shift to abundant thinking, as opposed to focusing on lack.
  • Be kind to yourself when it comes to money. There are lots of things we should or shouldn’t be doing when it comes to money and it is easy to place the blame on yourself if you aren’t financially where you’d like to be. The reality is that wages don’t often keep up with the cost of living your life and raising a family. So, don’t be too tough on yourself! But, do take the time to ask as many questions as you can so you can work within your means to create a better financial future for you and your family.

*While I have lots of ideas and thoughts on money, I am a Mortgage Broker, not a financial planner or life insurance agent. If you would like information on financial planning or purchasing life insurance I can refer you to some great people that would love to help you. If you have some general questions about money or budgeting or mortgages I’d be happy to chat so feel free to drop me a line! 

Monday, February 6, 2017

HOW MUCH ARE YOUR GRANDCHILDREN COSTING YOU?

Although Millennials are waiting to have children until they're a little older (and more financially secure), a new study from TD Ameritrade reveals they're still receiving quite a bit of help from their parents, both financially and otherwise.

The study reveals that, on average, grandparents spend US$2,383 per year on such things as toys (58%), clothing (55%), non-cash gifts (39%), cash gifts (42%) and school expenses (27%). On top of that, over half of Millennials said their parents provide at least one hour of child care or help running the household per week, with many saying their parents go all-out-spending 48 hours helping out per week.

The study cites stagnant Millennial incomes and exorbitant student debt as potential reasons for this trend. What do you think?

Tuesday, January 17, 2017

BREAKING: CMHC announces increase to insurance premium rates

In an announcement made earlier today, the cost of CMHC insurance will increase, starting on March 17th 2017. For buyers with the minimum 5% down payment, the premium will rise from 3.60% to 4.00% of the total loan amount. It is assumed that Canada's other two insurers, Genworth and Canada Guaranty, will likely also follow suit. If you are currently pre-approved and looking for a home, you will need to write an offer on a property prior to the March 17th deadline to avoid the premium increase.

If you have any questions, please drop me a line!



Wednesday, January 11, 2017

Resolve to pay your mortgage off faster

With the New Year just beginning, there's no better time to set some goals for the year ahead. But while health and fitness tend to be top-of-mind these days-particularly after the food-fest known as "the holidays"-it’s important to show your mortgage some resolution love as well.

One way to do this is to simply pull out that mortgage contract, blow off the dust and figure out when it's time to renew. If you're up for renewal in 2017, get the ball rolling early by locking down one of today’s low rates as early as possible-usually 120 days before your mortgage expires. 

If you're not up for renewal, there are still ways to save some money (at least, in the long run) by paying down more principal. You can do this by making a lump-sum payment, or increasing your monthly payments. These payments don’t have to break the bank! Rounding your payment up to the nearest even number-or putting a portion of your bonus towards it-can save you hundreds of dollars over the life of your mortgage.

With rates expected to increase in response to recent mortgage rule changes, chances are the low rates you're used to today-whether they’re variable or fixed-won’t last forever. To prepare yourself-and pay down some extra principal-why not set your payment to mirror today’s "stress test” rate, which is typically two percentage points higher than the posted five-year fixed rate.

There are countless other steps you can take this year to shorten the length of your mortgage. If you’d like to hear more, feel free to give me a call or send me a note.

Friday, December 23, 2016

Merry Christmas and thank you!!!

The best part of the Christmas season is that work slows down enough that I can take some time to reflect on what has happened in the last year. 2016 was a great one, despite the rough times in Alberta’s economy. I feel so blessed!
I want to take a moment to thank everyone that has contributed to my success in 2016.  I am truly grateful for the people I have the privilege of working with every day, including those behind the scenes that work so hard to make my job look easy! My clients never get to speak with the underwriter or lender rep who dedicates so much effort into getting their loan approved. Let me tell you, I could not do it without their amazing service and expertise!
In the spring of 2017 it will be 10 years since I started out in this crazy business. Over the years, I have had the privilege of getting to know some truly dedicated and hard working Realtors who work tirelessly, at all sorts of crazy hours, for their clients. They do not have an easy job but the great ones make it look that way. Thank you to my Realtor partners for your many referrals in 2016!
This can be a stressful job but I love it. I am humbled to be part of such an important time in my clients' lives, helping them to buy a home and navigate the often-complicated process of obtaining a mortgage.  I count my many, many blessings. This is an amazing job! Thank you to my clients for trusting me with this huge purchase.
Merry Christmas and a very Happy New Year!

Wednesday, November 23, 2016

Your relationship is over and you want to keep the house. What happens now?

Fortunately, there is a program offered by Canada’s mortgage default insurers (CMHC, Genworth & Canada Guaranty) to help you buy out your partner and move on with your life.

Mortgage qualifying rules have changed so it’s best to contact me, right away, to ensure that the numbers will work for you to qualify to take over the house, using only your income. We’ll complete a mortgage application and see how things look.

I will need to know what your house is worth today. If you aren’t sure, this is a good opportunity to contact your Realtor and ask them to estimate what it might be worth.  A requirement of the new mortgage will be an appraisal on your property, which will happen later. To start, I just need a realistic estimate of the value of your home.
Take the value of your home and multiply it by 0.95. This is the maximum amount you can finance through the new mortgage.

If everything looks good, you’ll need to provide me with a signed separation agreement that clearly outlines who pays who (child support, spousal support, buy out amounts etc). The marital home needs to be addressed in the agreement. It should state who is keeping the house and what happens if you cannot qualify for the mortgage by a certain date (house will be sold etc).

Your file will be sent to a lender for approval. The maximum amount you can finance is 95% of the value of the home. The new mortgage will pay off the existing mortgage on the house, as well as the buy out amount and possibly some marital debts (they must be detailed in the separation agreement). Typically, legal fees cannot be included in the new mortgage.

So, as an example: 

Your house is worth $400,000. 95% of $400,000 is $380,000. This is the maximum amount you will be able to borrow.

You currently owe $330,000 on your existing mortgage and the penalty to pay the mortgage is $5,000. Typically, couples will split the penalty amount. Your portion of the penalty can be included in the new mortgage; if it is outlined in the separation agreement.

You have agreed to split the equity in your house, with your ex. Your equity is the difference between what your home is worth and what you owe.

$400,000 value of marital home
-$330,000 Mortgage balance
-$5,000 mortgage early pay out penalty
$65,000 equity/ 2 people =$32,500 each

Based on the above example, we would set your mortgage up for $365,000 ($330,000 mortgage + $2,500 your portion of the penalty + $32,500 buy out to your ex). This loan works out to 91.25% of the value of your home which falls within the allowable amount (under 95%).

I hope that helps to clarify this program. Separating from your spouse can be extremely stressful and convoluted. My best advice is to make sure your agreement covers the amounts that need to be paid in clear detail. If it isn’t included in the agreement, then my lenders will not allow me to add it to the new mortgage. It is important to also make sure that your agreement explains what will happen if you are not able to obtain the mortgage.

If you are currently going through a separation, and are thinking of keeping the home, or purchasing a new one, please contact me at 780-722-6287!