Mortgage deferrals and ten more timely tips

I hope you and your family are enjoying good health and finding some measure of happiness in this strange spring. Certainly, many Canadians are feeling the financial pressures mount as we work together to conquer this pandemic. The good news is there are strategies that can help.

The Mortgage Deferral Program has been the first line of defense for thousands of homeowners looking for immediate financial relief. However, a Mortgage Deferral is not a payment “forgiveness” that allows you to simply miss payments. While you don’t pay anything at all during the relief period, your lender will add the interest accrued during the skipped period to your outstanding balance, which means your mortgage balance will increase. Your payments remain the same for the rest of your term but can increase at renewal to account for the higher balance. Some lenders may increase your payments after the deferral. I can help you determine if this is right for you and advise how to apply.

Some additional strategies and tips:

1. Consider other options. Instead of using the Mortgage Deferral Program, perhaps you can borrow what you need from a Line of Credit, making interest-only payments until the financial stress begins to ease. Other possibilities include extending your amortization or moving from accelerated to monthly payments. I can help you compare all your options.
2. Applying for the CERB. You need to apply to the Canada Economic Relief Benefit (CERB) for each 4-week period that your situation continues, up to a maximum of 16 weeks. If you are receiving the CERB through EI, you simply complete your bi-monthly reports to continue receiving your benefit. Keep in mind that these payments will be taxable to you next spring.
3. Get your tax return filed. If you collect the Child Benefit or GST/HST credit, you don’t want your benefits delayed. If you’ll owe money, payment has been deferred until September 1, so don’t let that keep you from filing now.
4. Check your travel points program. Many points programs allow you to redeem travel points for gift cards that will help pay for gas, groceries and other essentials.
5. Ask your credit card provider about minimum payment deferrals. Some providers will allow deferrals to help get you through a tough patch.
6. Talk to your local utilities and communications providers. Again, many are willing to talk about payment options or deferral programs.
7. Look for money leaks. Go through your credit card and bank statements with a fine-tooth comb, looking at subscriptions or other expenses that can be eliminated or reduced.
8. Make a (better) budget.  Check out the good budgeting apps that are free – Mint, Wally, or check out KOHO, which is like a chequing account with the perks of a credit card. 
9. Be aware. These are unsettling times and unfortunately there has been a wave of fraudulent scams. Visit the Canadian Anti Fraud Centre for up-to-date information.
10. Adopt a positive mind. Use this time period to be better with money. There are many predictions that our new habits will carry forward with us, so adapting and keeping better money habits will serve us well in the bright future that is just over the horizon.
    
    

Please know that I am at the other end of a phone call, email, or video conference, ready to help. Be safe. Be well. Be happy. Let’s talk soon.

What now? Making sense of a changing marketplace 

Let me begin with my heartfelt hope you and your loved ones are in good health.

We are in uncharted territory with the mortgage marketplace continually shifting. Here is a quick summary of common questions to help you make sense of it all.

FOR CURRENT HOMEOWNERS

What do the mortgage payment deferrals mean and how do I access that?

Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. These are “compassionate” programs for those who are in serious financial straits and unable to make their mortgage payments. You will need to apply to the program, and assistance will be determined on a case-by-case basis so please do not just start skipping payments. If you urgently need this help, get in touch. I can help you find the right channels to apply.

Will the lower Bank of Canada rate help me with my variable mortgage or line of credit?
Yes, your interest rate will also drop. Keep in mind that it usually doesn’t happen instantly, and your own rate won’t necessarily move in lockstep with the Bank of Canada rate. Ultimately, it’s the lender’s decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in defaults. If you do have a deep discounted variable rate mortgage, you are in a very good position.

What about my fixed-rate mortgage?
If you’ve got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage.  However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today’s rates.

I have some credit-card and/or loan debt that now has me worried.

If you’re carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.

FOR HOMEBUYERS

Events that have impacted buyers include:

1. Obviously, we’re seeing not as many listings and home visits are certainly not wise. Most activity will be on hold until the future becomes clearer. Use this down time to get in touch for a review of your situation so you are ready to go when the time is right for you.
2. The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th.
3. While rates initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime.

We all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term. Health and happiness to you and yours.

Coming soon! Feds ease up on the stress test

Anyone looking for a mortgage in the last few years has been introduced to the “stress test”. In order to qualify for a mortgage, Canadians must prove they can withstand an increase in rates, which requires them to qualify for payments far above what they will actually pay. The good news is that the Canadian government has decided to ease up on the stress test. 

Lower qualifying rate

Effective April 6, anyone applying for an insured mortgage (less than 20% equity) will see a fairer stress test used. It’ll be based on the median five-year fixed insured-mortgage rate, plus two percentage points. This makes the stress test more dynamic and inline with actual rates people are borrowing at and will be set every week. 

It is expected that the same new benchmark rate will be used for mortgages that don’t require default mortgage insurance (more than 20% equity). Looks like the qualifying rate for uninsured mortgages will change to the greater of:

• The actual contracted mortgage rate, plus 2%; or
• The new benchmark rate described above. 

This means the stress test for uninsured mortgages will still be a slightly tougher hurdle.

What’s the bottom line?

Any drop in the qualifying rate – with the new stress test or declining rates in general - will make qualifying easier and increase your purchasing power. So, the upcoming change on April 6 is good news.

Is the mortgage world still confusing? Yes absolutely, probably more so! That’s why great advice based on experience and access to multiple lending options is so important. While the stress test may be less stressful, my goal is to reduce stress from your entire mortgage experience and help you build wealth with the right mortgage now and excellent advice going forward. Get in touch at anytime, these are exciting times for buyers and homeowners!

My home is my…

My home is my castle! It’s also your greatest wealth building tool. Home equity can build nicely by chipping away at payments and through increasing home values, ultimately creating a terrific repository of wealth and making your home not only your castle, but so much more!

My home is my castle – My start and my future. Over the long term, residential real estate has been a very strong asset, showing excellent appreciation. The goal is to not help pay your landlord’s mortgage, but instead have that money build your own equity. I can help make that reality come true. Get in touch early; good advice can save time, money and stress.

My home is my castle – Our daughter’s postsecondary education. Your home may allow you to invest in your greatest asset – your children! The cost of higher education can be daunting, especially if you haven’t prepared for it. Tuition is just part of the cost. You also need to consider accommodation, food, textbooks, supplies, and transportation. Your home can be the most cost-effective financing.

My home is my castle – My ability to retire my way.  A reverse mortgage can greatly assist cash strapped retirees who need to pay off their debts and live comfortably in their family home. Reverse mortgages are also a strategy for the well-heeled who want to unlock the value of their homes for wealth-building strategies or to enhance their retirement. You may also want to line up a secured line of credit lined up before you retire.

My home is my castle – Our renovated dream home. A smart home renovation can both increase your home’s property value and improve the way you live in your home. Putting a renovation on your high-interest credit card can wipe out the value you’re adding and create future financial stress. Whether you are looking at buying a fixer upper, or renovating your current home, I can help.

My home is my castle – My smart investment strategy. Many Canadians are building personal wealth with an investment property, which is often viewed as a pension plan, particularly since so many Canadians are not covered by workplace plans. Rental income typically pays for most or all the expenses and property appreciation has often outperformed stocks and bonds over the long term.

My home is my castle – Our freedom from credit card debt. If high-interest debt is choking your cash flow, you may be able to move that debt to your lower-rate mortgage. You’ll get a fresh start that will allow you to save thousands in interest, boost your cash flow, have less stress with one manageable payment, and be mortgage free quicker. You’ll get the financial reset you need to start building wealth.

I’m here to make sure you get the most out of homeownership. Get in touch at anytime!

10 ways to plug the money leaks!

The fresh start of the new year makes it a great time to review your finances and particularly your spending. Whether you are saving to buy a home or pay one off, your “money leaks” can add up to some big bucks over time. Here are ten ways to find some of your missing money and help you save over the long term:

1. Watch unconscious spending. Track your spending and consider your impulse buys at grocery, gas station, convenience and other stores. If impulse buying is a big culprit, always make a list and stick to it, only grocery shop once a week and never on an empty stomach! 
2. Know your prepayment penalty. When choosing between mortgages, be sure to compare how the early payout penalty will be calculated. If you ever need to get out of your mortgage early, having the right mortgage could save you thousands.
3. Convenience costs.  It’s a lot easier to spend more than you intend when you exclusively use your credit card because you aren’t seeing the money. You might not be so liberal with your money if you had to hand it over. Consider withdrawing a fixed amount of cash for your spending every week.
4. Renovate over relocate. The right renovation might be all it takes to turn the house you are in into the home of your dreams. It is almost always less expensive to renovate than to relocate. I have great renovation financing options for 2020.
5. Examine your bills. Take a good hard look at your monthly bills and go through them line by line. Some of them may be for services you don’t use or can live without. Even if the amount is small, why have it charged every month?
6. Renew with your eyes open. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get advice. This is your opportunity to negotiate the best possible deal and save big over the long term.
7. It doesn’t hurt to ask. Whether you are signing up for internet or buying a car, ask “is this the best you can do?” or “can you make it more affordable?”  Do research in advance so you are prepared and knowledgeable on all things related to what you are buying.
8. Speed up your mortgage pay down. Change from monthly payments to weekly or biweekly payments. Or take your tax refund and put it against your mortgage principal. Your interest costs will go down with every dollar you reduce on your principal.
9. Don’t leave money on the table. Take advantage of all incentives that are available to homeowners. First-time buyers can take advantage of the Home Buyer Tax Credit that provides up to $750 in federal tax relief. There are also many incentives available when you make energy saving investments in your home.
10. Plug your biggest money leak: high interest. All the savings you make in lifestyle choices mean nothing if you don’t put a plug on paying high interest  If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to your lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties.

I’m here to save you money in 2020 and throughout your mortgage years. Get in touch at any time!