17 Apr

Thinking of Buying Rental Property? Read This First

General

Posted by: Patricia Kirkham

With interest rates remaining on the low side – and expected to gradually rise over the next few years – now’s an ideal time to think about becoming a real estate investor or building upon your existing portfolio of properties.

The key to success rests in taking a long-term approach to this investment. The cyclical nature of real estate will bring you out on top when you’re dedicated for the long haul. And even when real estate markets slow, rental income continues to rise.

It’s important to work with a mortgage broker who’s an expert in this niche and can provide you with ongoing information to help you make informed investment decisions and feel at ease – whether you’re purchasing your first property or your tenth.

After all, if the mortgages on your investment properties aren’t set up properly from the onset of each venture, you won’t be able to get future financing – a necessity for continuing to build your portfolio of revenue properties, if you so choose.

Financing investment property purchases
If you’ve accumulated equity in your primary residence, you may be able to access the required down payment funds to purchase your rental property – through either a refinance or a home equity line of credit (HELOC). I can help you decide what works best for your particular needs.

It’s important to crunch all of the numbers to make sure that becoming an investment property owner makes sense for both your financial situation and the location where you’d like to purchase. And be sure to plan for added expenses, such as maintenance and insurance costs.

As a landlord, you can claim many of your expenses, including mortgage interest, which will help you recover some costs involved in purchasing an investment property and earning/claiming additional income.

Planning on more than one purchase?
If your goal is to build a portfolio of investment properties, I can introduce you to other investment property experts, including real estate agents, lawyers, accountants, insurance agents and contractors, so you’re surrounded by a professional network.

I can also help direct you to other organizations that will offer you further insight into your real estate investment needs. If you join groups such as the Real Estate Investment Network (REIN), for instance, you can receive a wealth of added knowledge catered to your market-specific needs.

Have questions about purchasing investment property or your mortgage in general? Answers are just a call or email away!

*The postings on this site contain my own views and don’t necessarily represent the company’s positions, strategies or opinions.

10 Apr

The Activist Budget—There Is No Problem This Government Cannot Fix

General

Posted by: Patricia Kirkham

The Activist Budget—There Is No Problem This Government Cannot Fix

Patting himself on the back, the Finance Minister opened his speech by reminding us that “a little over two years ago…Canadians had the opportunity to stay the course. They could stick with a Government that favoured cuts and a set of failed policies that produced stubborn unemployment and the worst decade of economic growth since the depths of the Great Depression.” This, of course, was Stephen Harper’s Conservative Government. Never mind that the global financial crisis caused the recession, not the “failed policies” of the previous government. Throughout the budget documents, the message is that austerity was “needless” or “excessive.” Instead, Canadians chose, “a more confident and more ambitious approach…that gave Canadians the tools they needed to succeed. Starting with raising taxes on the wealthiest, so we could lower them for the middle class.”

The Liberals have forgotten their promise to run deficits no larger than $10 billion and to balance the budget by 2019. Instead, they now see sound fiscal management as a declining debt-to-GDP ratio—never mind that double-digit deficits remain as far as the eye can see—to a stunning $12.3 billion deficit at the end of the forecast horizon in fiscal year (FY) 2022-23.

The deficit figures have indeed improved—down more than $2.0 billion in FYs 2017 and 2018–thanks to the stronger-than-expected economy and rapidly reduced unemployment last year. But, initiatives in today’s federal budget add $6.3 billion to the current year’s (ending March 31, 2018) budget deficit, $5.4 billion to next year’s federal red ink and an additional $2.0-to-$3.0 billion annually over the forecast horizon ending in FY 2022-23 (see Table below).

Fortunately, Canada has by far the lowest debt-to-GDP ratios in the G7, reflective of the austerity programs of the past, beginning in the mid-1990s and continuing until the financial crisis in 2008-09 when counter-cyclical global fiscal policy was essential to assure financial stability and rebounding economic activity by late-2009. While the U.S. and much of the rest of the developed world suffered the longest and deepest recession since the Great Depression, Canada’s was the shortest and mildest recession in the postwar period—contrary to the impression left by the Finance Minister in his opening remarks.
Thanks to this backdrop, the debt-to-GDP ratio in Canada will continue to decline despite continued fiscal stimulus. The ratio is forecast to gradually edge downward from 30.4% this year to 28.4% in 2022-23, assuming the economy continues to grow. Clearly, all bets are off if we hit a pothole, such as the end of NAFTA or a recurrence of plunging oil prices.

Budget 2018 proposes to:

Put more money in the pockets of those who need it the most, by improving access to the Canada Child Benefit and introducing the Canada Workers Benefit, a stronger and more accessible benefit that will replace the Working Income Tax Benefit.

• Make significant progress towards equality of opportunity, by taking leadership to address the gender wage gap, supporting equal parenting, tackling gender-based violence and sexual harassment, and introducing a new entrepreneurship strategy for women.

• Support the next generation of researchers, by providing historic funding to increase opportunities for young researchers and provide them the equipment they need, while strengthening support for entrepreneurs to innovate, scale up and reach global markets.

• Advance reconciliation with Indigenous Peoples, by helping to close the gap between the quality of life of Indigenous and non-Indigenous people, providing greater support to keep First Nations children safe and supported within their communities, accelerating progress on clean drinking water, housing, and employment, and supporting recognition of rights and self determination.

• Protect the environment for future generations, by making historic investments to preserve our natural heritage, ensuring a price is put on carbon pollution across Canada, and extending support for clean energy projects.

• Uphold Canada’s shared values and support the health and wellness of Canadians, by partnering with provinces and territories to address the opioid crisis, taking action to advance national pharmacare, and bolstering support for Canada’s official languages.

This list summarizes 367 pages of more than 100 relatively small government initiatives impacting everything from Workers Benefits payments to low-income families, improving access to the Canada Child Benefit to supporting opportunities for women, pay equity for federal workers, strengthening trade, improving worker skills, and cracking down on tax evasion—all of this among the roughly 25 government actions described in Chapter 1 under the heading of Growth. The details of changes in the rules regarding the holding of passive investments inside private corporations as well as closing tax loopholes fall under this Growth rubric.

Chapter 2, called Progress, includes more than 35 initiatives under the headings of Investing in Canadian scientists and researchers, Stronger and more collaborative Federal science, and Innovation and Skills Plan—a more client-focussed Federal partner for business.

Chapter 3, Reconciliation, largely deals with Indigenous Peoples, including roughly 20 actions.

And finally, Chapter 4, called Advancement, covers the environment under Canada’s Natural Legacy, Canada and the World, Upholding Shared Values, and Security and Access to Justice. I lost count here at over 40 initiatives.

And, that’s not all! A bonus section called Equality, goes into detail regarding Canada’s commitment to gender budgeting, which includes $6.7 million over five years for “Statistics Canada to create a new Centre for Gender, Diversity and Inclusion Statistics, a Centre that will act as a Gender Budget Accounting data hub to support future, evidenced-based policy development and decision-making”.

I kid you not. At my rough count, I have been to 34 budget lock-ups, but I can’t remember ever seeing anything like this for sheer magnitude of the number of relatively tiny initiatives, nor can I ever remember leaving a lock-up with such a screaming headache.

Dr. Sherry Cooper

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

22 Mar

Prepayment Penalties: Banks Vs Monoline Lenders

General

Posted by: Patricia Kirkham

Simply stated, if you pay your mortgage off before the end of your term, you’re going to face a ‘prepayment penalty’. But there’s nothing straightforward about how that penalty is calculated when you compare banks and monoline lenders.

Monolines are dedicated mortgage lenders. While lenders such as banks and credit unions provide an assortment of financial products and services in addition to offering mortgage financing, monolines solely concentrate on mortgages. The term ‘mono’ literally means one, as in a singular focus.

Monoline lenders follow the same rules as Canadian banks, and actually help keep mortgage pricing competitive.

Most fixed-rate mortgages have a prepayment penalty that is the higher of three months’ worth of interest or the interest rate differential (IRD). IRD is based on: 1) The amount that is being prepaid; and, 2) An interest rate that equals the difference between the original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

Penalty calculations can vary drastically

When selecting a mortgage, it’s important to ask upfront about prepayment penalties. Let’s face it – life happens. A lot can change over a five-year period, or whatever term you select for your mortgage. If you have to break your mortgage contract before your term expires, it’s nice to know it won’t cost you a fortune to do so.

Your penalty amount will be larger the farther away you are from your renewal date.

Here’s a Monoline Vs Bank comparison example of how penalties are calculated:

I can help you decide if paying out your mortgage early makes sense for your specific situation.

Have questions about payout penalties or your mortgage in general? Answers are just a call or email away!

*The postings on this site contain my own views and don’t necessarily represent the company’s positions, strategies or opinions.

13 Mar

How the mortgage industry became green

General

Posted by: Patricia Kirkham

How the mortgage industry became green

When I started working as a broker in 2005, the mortgage industry and the financial industry in general weren’t very eco-friendly. Let’s face it. When someone buys a home, there’s a paper trail. Starting with the mortgage pre-approval which can run four pages,  the Offer to Purchase, which is another 12 pages, income documents, notices of assessment, appraisal, and MLS listing condo documentation to add to the pile of paper. Often you would end up with a stack of paper 50-60 pages high. I needed a copy, the lender needed a copy and then my broker needed to keep a copy on file for seven years. I found that I was going to Staples and buying a case of 5,000 sheets of paper every year. I recall going to my broker’s office and seeing the admin assistant struggling to find a place to put another big box of files as the storage room was full.
What a difference a few years makes. Lenders started to accept documents in PDF format, saving us from faxing them, while brokers and lenders started to use secure servers to store the documents and the paper pile dropped for me from 5,000 sheets a year to less than 500. With photo scanning apps on phones, I expect that the paperwork will continue to shrink.
However, there are other signs of greening in the financial sector. Products like CMHC’s Purchase plus Improvements allow us to encourage our clients to change their windows and doors for more energy efficient ones, adding insulation and putting the renovations into their mortgage. In addition, if the repairs result in an Ener-guide reading of more than 82, or if they buy a new Built Green Canada home, they can qualify for a 15% rebate in their mortgage default insurance premiums.
We may not be building windmills or using solar power, but the Mortgage Industry has definitely become greener in the past decade. If you have any questions, contact a Dominion Lending Centres mortgage professional near you.

David Cooke

David Cooke

Dominion Lending Centres – Accredited Mortgage Professional
David is part of DLC Clarity Mortgages in Calgary, AB.

16 Feb

Mentoring Drives Continued Success

General

Posted by: Patricia Kirkham

With new mortgage rules coming into force on a regular basis over the past few years, it has never been more important for mortgage brokers to sharpen their skills and ensure they have access to multiple solutions to provide the very best mortgage advice and choices to their clients.

At Dominion Lending Centres Clarity Mortgages, we offer both new brokers and seasoned professionals access to a broad range of expertise so they can mentor with, and learn from, veterans and specialists who know their way around multiple lending solutions.

Patricia Kirkham, Dennis Peterson and Judy Conrad are available to coach others within the team concerning everything it takes to succeed in today’s brokering reality – including how to structure a successful deal with A, alternative and private lenders. In addition, commercial expert Subhash Manro provides insight into the commercial realm and what works best for clients and lenders alike.

In today’s brokering world with ‘stress test’ qualification rules, one-size-fits-all mortgage products provided by traditional A lenders aren’t as reliable as they once were, and borrowers want to be assured that they have an experienced and diverse mortgage broker negotiating on their behalf.

Team approach

Dominion Lending Centres Clarity Mortgages believes that learning as a team helps fine-tune everyone’s skills. This includes running deal scenarios by each other and discussing best practices that work for specific lending scenarios.

While mortgage education provides a general understanding of the business, mentoring and ongoing education are keys to success for new brokers. There’s no doubt that a reliable mentor can mean the difference between brokering failure and success, so it’s important to seek out a brokerage that’s willing to go the extra mile for its team members.


A mentor shortens the learning curve for newer brokers by sharing experiences gained from real-life scenarios, working on live deals, and teaching beyond what’s offered in a structured textbook or classroom learning environment.

Experienced brokers can also benefit from refresher information on solutions they haven’t put to use in their businesses for a while, as well as by discussing ways to help clients who may no longer qualify within traditional means thanks to stress testing requirements.

Have questions about how mentoring can help streamline your brokering success? Answers are just a call or email away!

*The postings on this site contain personal views and don’t necessarily represent the company’s positions, strategies or opinions.

15 Jan

Comparing Fixed & Variable Mortgages

General

Posted by: Patricia Kirkham

There’s no doubt that the five-year fixed-rate mortgage is the most common choice selected by Canadian homeowners. But, this isn’t the best option for everyone, regardless of its popularity.

Your decision should be based on your tolerance for risk as well as your ability to withstand increases in mortgage payments. Historically, you can expect a financial reward for choosing a variable rate, although the savings varies depending on the economic environment.

A variable-rate mortgage often allows the borrower to take advantage of lower rates as the interest rate is calculated on an ongoing basis at a lender’s prime rate minus a set percentage.

Fixed-rate mortgages appeal to homebuyers who are looking for a dependable payment schedule, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income may be better off opting for the peace of mind that a fixed rate provides.

When do I lock in my variable rate?

There’s no one-size-fits-all answer to when the right time may be to lock in your variable mortgage to a fixed-rate product. If you’re considering locking in, your best bet is to talk to an independent mortgage professional so you can be advised on a decision that best meets your specific needs.

Also, be sure not to simply accept what a lender may be offering you as a lock-in rate. Again, it’s always best to have a conversation with an expert so that you don’t regret your decision once you’ve already locked into a rate.

Prepayment penalties

Whether you’re already in a fixed-rate mortgage or you have a variable product and you’re considering locking in your balance, it’s important to understand prepayment penalties.

With many fixed-rate mortgages, the penalty can be quite substantial, especially if it’s early on in your mortgage term.

Many borrowers assume the penalty for breaking a mortgage amounts to three months’ worth of interest payments, which in the case for a vast majority of variable-rate products. But, with a fixed-rate mortgage, the penalty is the greater of three months’ interest or the interest rate differential (IRD).

The IRD calculation is what’s responsible for those huge penalties you hear about borrowers paying to break their mortgages. Penalties vary from lender to lender, however, and there are different penalties for different types of mortgages.

As a homebuyer, your best option is always to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage – including many other aspects of your mortgage that are just as important as rate in ensuring your money is maximized each month – so you can make an educated decision.

Have questions about whether you should opt for a fixed- or variable-rate mortgage product? Answers are just a call or email away!

*The postings on this site contain my own views and don’t necessarily represent the company’s positions, strategies or opinions.

13 Dec

Are You Ready for New Mortgage Rules?

General

Posted by: Patricia Kirkham

By now, you’ve likely heard about the new mortgage rules coming into effect January 1st, 2018. But, it’s important that you have the correct information on hand.

While the changes aren’t applicable until the New Year, you must have a firm deal in place – not just a preapproval/rate hold – before January 1st. In other words, you need an offer to purchase and an approval if you’re buying, or a refinance approval to access home equity before the deadline.

In total, the Office of the Superintendent of Financial Institutions (OSFI) announced three new changes to the mortgage rules that govern all federally-regulated lenders, including:

  1. Minimum qualifying rate for uninsured mortgages
  2. Expectations around loan to value (LTV) frameworks and limits
  3. Restrictions on transactions designed to work around these LTV limits

 

Greatest impact on uninsured mortgages

The first change is the most impactful. This affects homebuyers who’ve saved more than a 20% down payment – or are looking to refinance their current mortgage. It’s now estimated that about 5% of new mortgages will be affected by this particular rule.

In January, mortgage applications for uninsured mortgages will be subject to a new ‘stress test’ using the higher qualifying rate between the Bank of Canada’s five-year benchmark rate (currently 4.99%) or the contractual mortgage rate +2% (5-year fixed rate at 3.19% +2% = 5.19%).

In other words, if you fall into the uninsured mortgage category, you’ll qualify for less money to put towards your home purchase in the New Year.

Previously, only borrowers who had less than a 20% down payment (high-ratio mortgage borrowers) were subject to a stress test.

We have time – if you act quickly – to examine your current mortgage needs and decide if you should make a purchase before the New Year or refinance now to free up money for the holiday season, home renovations, a winter vacation, or to use however you choose.

Have questions about the new rules and how they may affect you? Answers are just a call or email away!

 

*The postings on this site contain my own views and don’t necessarily represent the company’s positions, strategies or opinions.

 

24 Nov

Mortgages are About More than Just Rate

General

Posted by: Patricia Kirkham

Mortgages are About More than Just Rate

There’s a lot of talk about interest rates these days since the Bank of Canada began raising rates in the summer for the first time in nearly seven years.

Despite rates being on an upward trend lately, however, they still remain extremely low.

It’s important to understand that shopping for your ideal mortgage is about way more than simply securing the best rate. Rate really is the lowest common denominator when it comes to ensuring you’re paired with a mortgage that best meets your needs both now and into the future.

The problem is, most people ask about rate because that’s what they’ve been told matters. While rate is one factor that I look at when finding the best mortgage for your specific financial situation, I also want to ensure you’re not going to pay extra money down the road such as extra fees to change and/or break your mortgage early.

Most often, the lowest rate mortgage products also translate to the least flexible available options. They rarely come equipped with the desired prepayment privileges and other very beneficial options like porting and transferability.

Often, you end up getting locked into the rate without the ability to refinance and you can only discharge the mortgage if you sell the property.

But let’s face it – life happens. If you suddenly need to access some of your home equity or if you become ill or even separated, there’s peace of mind in knowing you’re in a flexible mortgage product.

When the lowest rates are helpful

There are some situations where these low-rate mortgages can come in handy, including for:

  • First-time homebuyers who want fixed payments and have limited opportunities to make lump-sum payments during the first five years of their mortgage; and
  • Property investors who need a low fixed rate and aren’t concerned with making lump-sum payments

Otherwise, these low-rate options can often end up costing you thousands of dollars down the road.

It’s understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you’re not planning on moving anytime soon?

But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have babies, change careers, etc. Five years is a long time to be anchored to something.

Save without giving up mortgage perks

You can still obtain great mortgage savings without giving up the benefits of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick” close.

And there are many other ways to earn your own discounts. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you’ll be ahead of the typical discount of a low-rate product before you know it – and you won’t have to give up options.

Banks don’t give anything away for free – they’re there to make money. That’s why it’s essential to discuss the full details surrounding the small print behind the low rates. It’s also important to consider your longer-term goals and ensure your mortgage meets your unique needs.

Do you have questions about interest rates or your mortgage options? Answers are just a call or email away!

3 Nov

Be Cautious Until Your Mortgage Funds

General

Posted by: Patricia Kirkham

With new mortgage rules coming into play more frequently these days, which often make it more challenging to qualify for the desired mortgage amount to fund your dream home, it’s important to be careful what you do between the time your mortgage is approved and when it funds.

It’s not uncommon for lenders to pull new credit bureaus prior to funding, especially if there’s a long wait between the time of approval and when your mortgage is actually set to find.

Here are five important things to keep top-of-mind between your mortgage approval and funding dates:

  1. Don’t buy a new car/increase your lease payments. This can negatively impact your debt ratios. Just wait until after your funding date.
  2. Don’t buy furniture on the ‘Do not pay for XX years plan’ until after funding. Even though you don’t have to pay upfront, this type of purchase will still be reported on your credit bureau, and will become an issue – especially if your approval was tight.
  3. Don’t quit your job or change jobs. Even if it’s a better-paying job, you’re still likely to be on probation. Don’t change industries, decide to become self-employed or accept a contract position even if it’s within the same industry. Delay the start of your new job, self-employment or contract status until after your funding date.
  4. Don’t transfer large sums of money or deposit a lot of cash. Lenders get especially uneasy about this type of bank account activity because it looks like you’re borrowing money. Be prepared to document all money transfers and cash deposits.
  5. Don’t forget to pay your bills, even ones that you’re disputing. This can be a real deal-breaker. If the lender pulls your credit bureau prior to closing and sees a collection or a delinquent account, the best you can hope for is that they make you pay off the account before they’ll fund. Still, you don’t want to have to scramble to pay off debt at the last minute.

While you may not risk losing your mortgage approval because you have broken one of these rules, it’s always best to talk to your mortgage professional before doing any of the above just to be sure.

Do you have questions about additional cautions to take before funding or about your mortgage in general? Answers are just a call or email away!