Tuesday, December 23, 2014

One little secret to avoiding a housing slowdown

We’ve been hearing about the risks of housing overvaluation in Canada for the last few years. While there’s no way to tell for sure when housing prices will stop increasing, as this article in the Globe puts it, it’s going to happen sometime. Whether it’s a more significant correction, or an extended period of stagnant housing prices, it’s best to prepare now for the inevitable.
This means abiding by the 10-year rule—buying a home that, if necessary, you could live in for the next 10 years. This sounds easier said than done—particularly in Canada’s more expensive housing markets—but, in many cases, it is possible. It might mean buying in a less desirable location, or purchasing a home with renovation potential should it become cramped within the next 10 years. It also means skipping the condo purchase if you’re a first-time buyer who might be starting a family within the next five years, or foregoing that large mansion if you’re going to find yourself with an empty nest in the same timespan.
When abiding by the 10-year rule, you’ll also have to consider your mortgage options. Sometimes the traditional 5-year fixed makes sense, but occasionally longer mortgage terms can benefit you as well. If you’re wondering what mortgage option is your best bet over the next decade, feel free to drop me a line and we can find a solution that makes the most sense for you.

Wednesday, December 3, 2014

Interest Rate Announcement

As expected, the Bank of Canada decided to stand pat on interest rates today, leaving the target for the overnight rate at 1%.
While inflation increased by more than expected since October, it still remains below the 2% target. The Bank attributes temporary factors to the increase - such as a lower Canadian dollar and sector-specific factors such as telecommunications and meat prices. Low oil prices also "pose a downside risk to the inflation profile".
The U.S. economy is strengthening - particularly in the area of business investment. On the flip side, growth in the rest of the world continues to remain slow, with some regions recently deploying further policy stimulus. While Canada's economy is showing signs of a recovery, low oil prices and a slow labour market continue to hinder significant progress. The Bank also noted household imbalances could potentially pose a risk to financial stability.
With this mix of news, many pundits believe the Bank will wait until later in 2015 to raise interest rates, which is good news for variable rate mortgage holders. Feel free to reach out to me to discuss how you can take advantage of these low rates by paying off your mortgage faster – or any other mortgage-related topic you have on your mind. I'd love to chat!

Wednesday, November 19, 2014

The Bank of Mom and Dad

Click below for a video featuring Jim Murphy on what the Canadian Association of Mortgage Professionals discovered about first-timers in the mortgage market:


Wednesday, November 12, 2014

No-buy November?

Here’s an interesting concept: What if, for the entire month of November, you only spent money on the bare essentials? That means no dinners out, no new clothes – no Starbucks. I'll be honest, I don't think I could do this for a week, let alone a whole month! Do you think you could do it?

Apparently it’s a trend that’s picking up in the US, and with the holidays around the corner, it might not be a bad idea. I would take it a step further and try to fit in a week of “freezer” cooking – minimizing your grocery shop to make use of all the items you've forgotten about in the bottom of the freezer.
One major flaw in this idea is that it doesn't allow for early Christmas shopping. But perhaps you could make a rule that the only non-essential things you're allowed to buy must be for others.

What do you think of this idea? Could you do it?

Friday, October 24, 2014

No Down payment? Here are a few ways around it...

You have a great job...you earn decent money...you`re pretty stable...and, you want to quit paying rent and buy a place of your own. Between the car payment, rent and those nasty student loan payments you just can`t seem to scrape together the minimum 5% down payment. Don’t despair! Here are a few different options available to individuals that do not have a down payment.

1.  Borrow your down payment. If you have room in your ratios (income vs. debts) you may be able to just borrow your down payment from a credit card or a personal line of credit. One thing to keep in mind with this option is that along with your new mortgage payment you`ll also have another added monthly payment to pay off that loan. I can set you up with a few institutions that would be happy to set up a personal line of credit for you to use for your down payment.

2.  RRSP Home Buyers Program. If you have an RRSP (some people even have employer contributed RRSP`s) you can use them for a down payment! You must be considered a first time buyer and your RRSP`s must have been in your account for over 90 days. If you meet the requirements for the program, you`re able to withdraw up to $25,000 tax free! This is a fantastic program for first time buyers. Another great strategy is to take out an RRSP loan to purchase a set amount of RRSP`s. It will force you to save as you make your loan payment every month. Not only will you get a nice tax refund (which you can plunk down on your RRSP loan) but you`ll end up with a nice chunk of RRSP`s which you can withdraw to buy a place of your own. For more information on the program, please go to: http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html

3.   Ask for a gift! Do you have any parents or immediate family members that want to help you out with your down payment? Perhaps you are uncomfortable about bringing this up with your parents or grandparents. Money can be a tricky subject in families but you know, it never hurts to ask. Maybe you assumed your parents or grandparents weren`t willing to help. Whether they are or aren`t this might be a good opportunity to open up some dialogue on the subject. 

For more information, please contact me!

Wednesday, October 8, 2014

When will interest rates rise?

Now that the US economy is showing more significant signs of recovery, the topic of interest rate increases is dominating conversations once again. It’s a widely held belief that once our neighbour to the south starts raising rates, Canada will follow suit—but when will that be?

If you’re a variable rate holder, you’re probably watching the rate conversation closely—and growing frustrated by what you hear. Why? Because, in short, no one knows when rates will rise. Period. That being said, here’s what we do know:

-    The US has recently created more jobs than expected, and the unemployment rate is easing to below 6%.
-    That being said, the chair of the Federal Reserve, Janet Yellen, says there are still “too many” people looking for jobs and, with no obvious threat of inflation, there’s no reason to raise rates just yet.
-    The Federal Reserve committee has said, repeatedly, that it plans to leave the benchmark rate low for a “considerable period” after its quantitative easing program ends—something that is expected to occur next month.

With all that information in hand, most experts believe the Federal Reserve will start increasing rates in the spring at the earliest, while others say it may wait until summer. You can expect the Bank of Canada to start raising rates as well around the same time, although some are anticipating Canada may lag behind a bit.

So what can variable rate holders do in the meantime? If you haven’t already, you may want to increase your payment to prepare for the imminent hikes and pay some extra principal down while you’re at it. If you can, match your payment to the going 5-year fixed rate. If that’s a bit too much of a shock, consider raising your payment to an interest rate that’s 0.5% higher than what you’re already paying.

As always, if you have any mortgage-related  questions – variable or otherwise – feel free to drop me a line!

Monday, September 15, 2014

Do your due diligence when buying or building a condo

I feel terrible for the people that own units in this building. Not only have they been paying mortgage payments, property taxes and condo fees for a unit they cannot live in, now they are being told the building must be demolished at their expense. A very sobering reminder of why you need to read your condo documents in detail before you sign on the dotted line. I have a few lenders that are pretty picky about condo documents and I don't blame them. Who wants to be stuck with a mess like this? Read your condo docs, research your builder/developer. Make informed choices.

Monday, August 25, 2014

Dad knows best!

This article tells the story of how a Dad, who also happens to be a VP and Associate General Counsel specializing in finance and real estate at Goldman Sachs, wrote a financial literacy guide for kids. What started off as an endeavour to educate his children about the basics of investing and saving has turned into a full-out labour of love that he hopes to publish.

Tuesday, August 5, 2014


So you finally paid off your credit cards and you have a bit of money in the bank - but are you financially healthy? If you want a true reading of your financial health, you have to look beyond the obvious and dig a little deeper. Here are four numbers that can help you determine where you stand:

Credit Score
In Canada, a Credit Score over 600 is considered “good”, while anything over 750 is considered “excellent”. To uncover your score, you can purchase an online report from one of Canada’s credit bureaus, Equifax or TransUnion.

Retirement Savings
Your retirement nest egg obviously depends on the type of retirement you hope to have. There are plenty of retirement calculators and articles out there to help you determine what your end number should be. Work backwards from there to see if you’re on the right track.

Emergency Savings
Anything you put aside in an emergency savings fund is better than nothing, but most experts suggest saving between three and six months’ worth of living expenses to safeguard your household against such factors as unemployment, injury or illness.

Net Worth
When you take your assets and subtract your debts, what are you left with? If the answer is “nothing”, this is an area to work on!

If, after looking at these numbers, you’re lacking in a few areas—that’s okay! This exercise is simply to determine where you stand, and help you devise a plan of action for improvement. Sometimes your home can speed up this plan of action. Feel free to give me a call to see how you can use your home to improve your financial health.

Tuesday, July 22, 2014

Build a budget that works

The key to successfully managing your money is to create a monthly budget that actually works. Everyone spends differently so it's important to be realistic (make achievable goals) and to stick with it. It will take some time to get used to but the rewards can be significant.

Here's a great budgeting tool from the "Queen of Debt Reduction", Gail Vaz-Oxlade to help you achieve your financial goals: http://www.gailvazoxlade.com/resources/interactive_budget_worksheet.html

Thursday, July 17, 2014

Bank of Canada holds interest rate at 1%- again

As predicted, the Bank of Canada announced yesterday that it will maintain its overnight rate at 1% -allowing variable rate mortgage holders to, yet again, breathe easy.

Although CPI inflation reached the 2% target sooner than originally expected, core inflation has yet to meet that threshold. In addition, the higher CPI inflation is largely attributable to the temporary effects of increased energy prices, rather than a more permanent change in domestic economic fundamentals. For these reasons, the Bank doesn't believe an interest rate increase is necessary - yet.

Another factor contributing to the Bank's decision is the state of the global economy, which doesn't seem to be doing as well as the Bank had predicted back in April. Because of this, the Canadian economy isn't expected to perform as well as anticipated either - and the Bank doesn't believe it will reach full capacity until mid-2016 at the earliest.

All these factors spell good news for variable rate mortgage holders. If you're wondering if a variable rate mortgage makes sense for you - or if you have any mortgage questions at all - feel free to contact me, anytime. I'd love to help!

Thursday, July 3, 2014

What if bi-weekly payments don't fit with your lifestyle?

Have you heard? 68% of people in their twenties, who responded to a survey conducted by Manulife, don't consider mortgages to be debt.  Folks, no matter which way you slice it, when you borrow money, and have to pay it back, it's debt. There is good debt (appreciating assets) and bad debt (depreciating assets like cars) but either way your debt must be repaid and there is an interest cost, and an opportunity cost, to getting in debt.

With Canada's household debt near all time highs, this is probably a good time to talk about ways to pay that mortgage debt down as quickly as possible.

I'm sure you've heard it before from your parents or your friends; pay your mortgage bi-weekly, instead of monthly and you'll pay your mortgage off faster. This is true. Why? Because in two months out of the year you will make three mortgage payments; which works out to one extra monthly mortgage payment a year being made on the balance outstanding of your mortgage.

When I explain this to some of my clients they get excited, realizing this simple step will help them to pay off their mortgage faster, and cost them less interest overall. But, for some clients, bi-weekly payments just don't work. Examples include individuals that are paid on the 15th and 30th every month or self employed individuals that would find it difficult to budget for a mortgage payment every two weeks.

I am one of those people. I don't want a mortgage payment every two weeks. I am busy and have enough on my plate and I don't want to make three mortgage payments in two months of the year, because those months will just plain suck. So, is there an alternative? Yes!

If you take your monthly payment and divide it by 12, and then increase your monthly mortgage payment by this amount every month, the effect will be the same as paying your mortgage with bi-weekly accelerated payments.

Here's an example:

$250,000 mortgage @ 2.99% over a 5 year term
Monthly mortgage payment:
Balance at the end of the term:
Bi-weekly accelerated payment:
Balance at the end of the term:
Monthly payment with an increase of $100/month (approximately one monthly mortgage payment divided by 12)
Balance at the end of the term:

As you can see from the example above, there are alternatives to paying your mortgage bi-weekly and still paying it off quicker. Mortgage Brokers know what's up and can help to give you creative ideas on how to reach your financial goals. If you would like more information on this concept feel free to get in touch!

Monday, June 30, 2014

8 Money Blunders Just-Married Couples Often Make

Anyone who is (or has been) married will certainly agree with this list! Financial matters can create a lot of strain on an otherwise healthy relationship so this is a really good article to send to anyone you know that has just gotten married or will be soon!  

Have a safe and fun Canada Day! 

Wednesday, June 4, 2014

Did you know? Alberta Introduces New Home Warranty Legislation 

Have you heard? As of February 1st 2014, all new homes built in Alberta will require new home warranty. The Alberta Government's New Home Buyer Protection Act encourages higher quality standards to protect buyers.

Under the new legislation, all home builders- with the limited exception of owner-builders - have to buy a warranty policy, estimated at $1,700 to $2,000 on an average home, before being eligible for a building permit.

Warranties must be purchased for single-family homes, condos, manufactured, modular and mobile homes, as well as recreational properties, such as cottages. Warranties are currently available from one of five registered private firms (Aviva Insurance Company of Canada, Blanket Home Warranty, Progressive Home Warranty, Alberta New Home Warranty & Travelers Insurance Company of Canada).

Builders also have to register each property online for $95, creating a public record of the status of the warranty for future buyers. The standardized warranty terms include protection for a minimum of one year on labour and materials, two years for plumbing and electrical systems and five years for building envelope protection against water damage. While most home builders already provide those basic warranties, the major change is a doubling of coverage term on major structural parts from five to ten years.

For more information visit www.homewarranty.alberta.ca

Source: AMBA matters

Friday, May 30, 2014

Are baby boomers skewing housing prices?

There's been a lot of talk in the media lately about the "bank of Mom and Dad effect" on the Canadian housing market. CMHC has recently launched a study to determine how much this phenomenon is affecting the real estate market. A few experts have argued that gifted down payments from parents have allowed many millennials to buy into the housing market when they otherwise wouldn't qualify. Others argue that providing financial assistance to children so they can buy their first home is a right of passage. They also argue that they are helping their children attain financial freedom by investing in the housing market sooner than they could afford on their own.

There's no question that there is a large prevalence of gifted down payments and financial support from baby boomer parents to their millennial children. The question is whether this support will help or hinder their children in the future and the housing market as well.

Listen to an episode of CBC's "The Current" investigating this topic here: http://www.cbc.ca/thecurrent/popupaudio.html?clipIds=2460688638

Wednesday, May 28, 2014

Trading in my laptop for a paint brush...

On May 2nd, I had the pleasure of spending the day on Habitat for Humanity's Southside build with an awesome group of Axiom employees and Mortgage Brokers. It was a real pleasure to learn more about this organization, spend the day away from my computer, and have fun making a difference in the lives of a few families here in Edmonton. 

I can't say enough positive things about my experience there. The staff members were friendly, knowledgeable and put a lot of effort into making sure the homes are perfect for the new families that will be living there. I highly recommend taking a day out of your busy lives to work on one of their projects! 

Tuesday, May 27, 2014

New rules for prepaid credit cards (finally)

If you’ve ever used a prepaid credit card, you’re likely familiar with their flaws. Fortunately, the Federal government has also caught onto them and has recently created new rules to govern them.

Despite the government’s move to eliminate expiry dates on gift cards, prepaid credit cards—which are essentially gift cards you can use anywhere—were, until recently, allowed to do so. They were also allowed to charge exorbitant “activation” fees (which could be as high as $5 on a $50 card) and “monthly fees” (which could be as much as $2.50/month if you didn’t use up the balance after six months).

Thankfully, the government’s moves will now prohibit expiry dates and maintenance fees (within the first 12 months of activation), and will require all key information to be revealed in a manner that is “clear, simple and not misleading”.

Do you have a prepaid credit card horror story to share? Would you ever consider giving them another try, now that the new rules are in place?

Thursday, May 22, 2014

The four best money-saving rules

It's been such a busy spring marketing Edmonton that I haven't had much time to focus on my blog lately. However, I came across this article earlier today and wanted to post it as it offers some great advice on how to save big.
Hope you're enjoying the warm weather (finally)!

Tuesday, April 22, 2014

Writing an offer without a financing condition is playing Russian roulette; here`s why

In this crazy spring market I have started to hear rumblings of home buyers writing offers on homes without a financing condition because they have been `pre-approved`. I would NEVER recommend writing an offer on a home assuming the financing will be fine. This article does a great job of explaining why. 

Pre-approvals have limitations. As a mortgage broker I do my very best to give my opinion on whether or not I believe your file will be ultimately approved once you`ve written an offer on a home but it is sometimes difficult to predict the outcome. I also ask for documentation at the time of your pre-approval to try to mitigate any issues ahead of time. All that being said, if you are putting less than 20% down on a home, the final decision is always up to the insurance company (CMHC, Genworth or Canada Guaranty) and they don`t review your file until there is an offer on the table. It is definitely an imperfect system but I believe that if you are working with an honest mortgage broker they will explain to you the pros and cons of your file and the varied possible outcomes before you go shopping for a home. 

I would never recommend shopping for a home until you have spoken with a reputable mortgage broker and completed a pre-approval and, again, unless you have the money to buy the home, in full, with cash, you NEED a financing condition on your offer to purchase.

Thursday, April 17, 2014

Bank of Canada: no change on key lending rate

As per the rate announcement yesterday, the Bank of Canada decided to leave its key interest rate unchanged. The Bank announced it would maintain its target for the overnight rate at 1%--a decision that spells good news for variable rate holders.

The primary reason for the decisions was low inflation—something that is expected to continue for the remainder of 2014. While consumer energy prices and a low Canadian dollar are predicted to put upward pressure on inflation in coming quarters, it likely won’t exceed the 2% target.

On the global front, unusual weather caused slower-than-expected US growth, but the Bank expects the overall recovery to remain on track. Europe’s recovery, while progressing, is still subject to low inflation—and the Russia-Ukraine situation could cause issues down the road. Emerging economies, including China, are growing at a solid rate, but financial vulnerabilities could potentially pose a problem as well.

Overall, the Bank expects global growth to increase to 3.3% in 2014, while Canada’s real GDP growth is expected to average about 2.5%. The Bank is also predicting a soft landing for the housing market as debt-to-income ratios stabilize. Household imbalances are still quite high, though, and wouldn’t be able to weather a deterioration in economic conditions. So hopefully that means interest rates remain low for some time.

The next policy announcement is scheduled for June 4, 2014. In the meantime, if you have any questions regarding your variable rate mortgage—or any mortgage question—please don’t hesitate to call.

Tuesday, March 18, 2014

Can you really afford that home?

Here's a great article from Rob Carrick of the Globe and Mail explaining that one should "never take a lender’s word for it that you can afford a house". I actually agree with him. I ALWAYS think it's a smart idea to make sure you can qualify for your mortgage at a higher rate than the one you're actually paying (and make that higher payment every month instead of your minimum), and that you would/could still pay your mortgage should one of you become sick, or that in additional to what I say you qualify for, you stop for a moment, sit down and write down all of your monthly expenses versus your income to ensure you are doing the right thing before you make an offer on a home. 

When a mortgage lender and/or broker qualifies you for a mortgage we must take into account certain expenses such as current monthly debt payments, heating costs for the new home and property tax payments. What do we DO NOT take into consideration? EVERYTHING ELSE. This includes power, cable, daycare costs, car insurance, groceries, home maintenance costs, general child rearing costs, annual vacations, hobbies etc. It goes on and on. These costs really add up and vary widely from person to person and are not even factored in on your mortgage application. 

The bank's job, as well as my own, is to ensure you qualify for the mortgage you are applying for based on the lending criteria at the time you apply. It is not my responsibility to ensure you have really sat down and accounted for all the extra expenses in your lifestyle and what if's in life. That is up to you. And, while I think it is an excellent idea, a responsible idea, I cannot make you do it. I can only make suggestions and hope that you think this through. At the end of the day, the onus is on you, the consumer to make responsible borrowing decisions. 

Over my years of mortgage brokering I have seen many stressed out couples who have a strained relationship because of financial issues. Finances are the most common source of relationship breakdown and divorce. While we all want a beautiful home and think it will make us happy or complete our family, what is really good for our family and relationship is spending within our means and being in control of our financial lives. In my experience, some home buyers do not want to hear anything other than you are approved and the keys to their new home. They don't want to really think about what happens financially after the home is theirs. Then I see the flip side, with very responsible borrowers who go into this with their eyes wide open, good saving habits and a low debt load. 

My advice is to really think this through, have a Plan A and also a Plan B for when things go wrong. Because things do go wrong in life! If you go into this with eyes wide open you'll be better able to handle the added costs of home ownership and can enjoy your new home with as little added stress as possible.  

If you have questions about how to prep yourself financially for purchasing a home, please contact me!