Six tips for financial fitness this Fall

It’s September and there is some optimism that we may be moving towards the end of life in a global pandemic. The Fallhas always been a great time to go back to school on financial fitness, and this year it may be more important than ever. Here are some tips to help make sure your finances are fit and stay that way: 

1.  Splurge, just a little. Many of us dealt with stressors that we didn’t even know existed, like not being able to see loved ones. That’s why we all want to live a little, but perhaps do it strategically so you don’t break the bank. Maybe have some celebratory days with a set amount that you can spend where you go out and do the things you’ve really missed.
2. Revisit (or start) your budget. Having a budget is one of the most important ways to achieve a solid financial future. It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand and how much you can truly spend. You’ll also be able to determine how much money you can allocate to your “live a little” fund. While preparing your budget, first take a new look at your monthly bills and go through them line by line. You may have signed up for services you never really use or perhaps don’t remember requesting. Look for small, unexplained charges, fees, and add-ons, and the services that you can now live without. 
3. Maintain your credit. Your credit score is essentially your passport to financial opportunities. It can mean the difference between getting approved or denied for any kind of credit and can prevent you from getting the lowest mortgage rate. The good news is that you have a lot of control over your score. That’s why it’s important to always have good credit behaviours. The single biggest factor to having a good score is a timely bill payment history so never let a bill get past due. Be sure to know your credit limits and try not to use more than 30% of the available amount, don’t be tempted to apply for store cards just to save on your purchase that day, and before you cancel a credit card get advice.
4. Focus on your high-interest debt. Always keep an eye on your high interest debt and pay down your credit cards as much as possible. If you find that your debt is making things difficult, you may be able to move that debt to your lower-rate mortgage if you have enough home equity. You could save thousands in interest, have one lower monthly payment that greatly improves your cash flow, and enjoy much reduced financial stress.
5. Spend time, not money. We’ve all gained a new appreciation of the value of being able to spend time with loved ones in person, that it’s something to treasure. Focusing on this may keep you from spending money you might not have or might not want to spend! 
6. Help others. There are many that weren’t very fortunate during the pandemic. Consider committing some money to giving back – charities, shop local, tip restaurant workers and others generously.  

I’m here to help so please get in touch at any time. It’s my goal to help you maximize your financial fitness so you can build wealth for the long term.  

6 Ways for Homeowners to Build Wealth

History has proven that homeownership is a solid long-term investment. You build your equity stake through your regular mortgage payments and your home’s price appreciation over time. But wealth building doesn’t have to stop there. Here are 6 ways to do more throughout your mortgage years.  

1. Speed up your mortgage paydown. Change from monthly payments to weekly or biweekly, effectively increasing your number of payments, which will take years off your mortgage. Also consider putting found money like raises and tax refunds against your mortgage principal. Check your mortgage contract for the amount you can prepay each year.  
2. Get a financial reset when needed. Too much high-interest debt over long periods of time is a definite wealth killer. It chokes your cash flow and having multiple debt payments can be stressful. If you have enough equity, you may be able to move that debt to your lower-rate mortgage, giving you one comfortable payment and thousands in interest savings. 
3. Renovate using your lowest-cost funds. With historically low mortgage rates, homeowners with enough equity are using the opportunity to roll the cost of their renovation into their mortgage for one easy monthly payment, and then using their prepayment privileges to pay it off faster. It’s a win-win when you increase the comfort and enjoyment of your home, while also improving the long-term value. 
4. Apply for incentives to help pay for energy-saving investments in your home.The federal government recently launched a new program that offers Canadians grants of up to $5,000 to pay for energy-saving home upgrades – such as insulation, furnaces, solar panels, windows, and doors – and up to $600 to help with the cost of home energy evaluations. Additionally, if you paid mortgage default insurance when financing your home, you can also get a savings boost from your mortgage insurer. If you make retrofits to improve energy efficiency, you can apply for a refund of either 15 or 25% of the default insurance premium that you paid. Applications are accepted within two years of the closing date of your mortgage.
5. Look at your mortgage renewal as an important moment of opportunity. When your lender sends out a letter suggesting you renew your mortgage at their current offer, get in touch. Everything pertaining to your mortgage can be renegotiated, giving you the opportunity to get the best possible deal for your current situation, which may be very different from when you first got your mortgage. 
6. Know your prepayment penalty. When choosing between fixed-rate 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. If you take a lower rate mortgage with a high prepayment penalty, the benefit of that lower rate could mean nothing if you overpay on the penalty to get out of your mortgage. 

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

Fixed or variable-rate mortgage? 

This spring we’re seeing aggressive pricing for variable-rate mortgages, while fixed mortgage rates continue to be at historically low levels. Which is best for today’s uncertain environment? 

First, a refresher on the differences. With a fixed-rate mortgage, you’ll know with absolute certainty what your rate and payment will be each month for the term of your mortgage, offering you stability and peace of mind. Since fixed rate mortgages are not affected by fluctuating interest rates, you can "set it and forget it." Typically preferred by those on a tight budget, first-time buyers, or those who haven’t owned a home for a long time.

A variable mortgage has an interest rate that will move in conjunction with your lender’s Prime rate, which in turn tracks the Bank of Canada’s overnight rate and will be expressed as “prime minus x percent.”  If the Bank of Canada raises or lowers its rate, then you’ll likely see that reflected in your mortgage payment. Since it can be difficult to predict what kind of rate ups and downs are ahead, a variable-rate mortgage is best suited to people who have a flexible budget and can tolerate slightly more risk. 

Right now, variable rate offers are very compelling causing the demand to be at some of the highest levels ever seen. But it’s not just about the rate. If your circumstances change and you need to get out of your mortgage – and approximately 2 out of 3 people with fixed mortgages do end up breaking their mortgage -- you will appreciate the much lower penalty to get out of a variable vs a fixed mortgage.  It’s important to consider the many “what if” scenarios that could happen over the term of your mortgage.  

Most variables allow you to exercise an option to “lock in” a fixed rate with no penalties when the time is right for you to lock into a fixed-rate mortgage. You can also set up your payments at what they would be if you took the higher fixed rate, which helps you pay down your mortgage faster, and creates a financial buffer for you if rates rise later.

With inflation concerns on the horizon, the Bank of Canada may raise the overnight rate sooner than expected, which will affect those in variable mortgages. While most economists agree that no one can predict what will happen with inflation as the economy continues to reopen, it is a going forward concern. 

Bottom line is to always get advice; the best choice depends on your situation. If you are looking to purchase, renew, or refinance to get today’s low rates or for debt consolidation, get in touch so we can discuss your situation and determine the best option for you. 

New stress test for all mortgages now in effect 

The Department of Finance has announced that insured mortgages will have the same stress test that OSFI recently introduced for uninsured mortgages. The stress test for both will be the greater of the borrower’s mortgage contract rate plus 2% or 5.25%, up from the current 4.79%, which means qualifying has become slightly harder for some. 

Recent mortgage rule changes

There had been speculation that the government would act to cool the hot housing market, but the industry saw only modest measures in the April 19 federal budget. A national annual tax on foreign-owned properties that are left vacant or under-occupied was announced, which will take affect in 2022.  This will only apply to "non-residents” to discourage offshore buyers.

New stress test. The budget also referenced the recent announcement by the Office of the Superintendent of Financial Institutions (OSFI), which is proposing a new stress test rate for uninsured mortgages of 5.25% effective June 1. This is higher than the current 4.79% and, going forward, will no longer be based on bank posted rates. It will be set a minimum of once per year by OSFI. 

What is the stress test? When getting a new mortgage, lenders must ensure that you pass a stress test, which means that you can handle payments at a certain qualifying rate. This is not the same rate as your actual contract rate, it’s for mortgage qualifying only.  

Why June 1 matters. Uninsured mortgages (i.e. when you have more than 20% equity) approved before June 1 are not subject to this tougher stress test so qualifying will be slightly easier. This applies to purchases that close after June 1 with a signed purchase and sale agreement. As a result, if you are thinking refinance to get a lower rate or for debt consolidation, or a purchase with more than 20% down, it’s a good idea to get in touch so we can discuss your situation.

What about high-ratio mortgages (i.e. less than 20% down)?  This stress test has not changed but it is certainly possible that it may also become slightly tougher at some point.  If you are looking to purchase, get a pre-approval so you are house shopping within your budget and have rate protection. It’s important to purchase when you are financially ready and not be driven by market conditions.

I am here to help so if you have questions on any matter, please let me know.

Be safe. Be well. Be happy.

The lowdown on the mortgage approval process

Whether you are purchasing, refinancing, or moving your mortgage to a new lender, it’s important to have a clear understanding of the mortgage approval process. It’s a big financial commitment so you’ll want to be sure you can move through the process with confidence. Here is a general overview:

What’s your need?

First, it’s important that we review your situation so I can help you with any hurdles you may encounter and answer your questions. For instance, I can provide tips that can help quickly bolster your credit score, a very important aspect of the mortgage approval process.  If you are ready, we’ll then move forward with getting the mortgage application completed. I will also let you know what documentation you’ll need to collect to secure your financing.

Application processing

Once I have all your documents, I’ll recommend and submit your application to the best lender with the right mortgage product for your needs.

The lender will verify your employment and banking information, review your credit report, and make sure that both your finances and the property meet all the qualifying guidelines for the mortgage. They will also order a property appraisal if required. Your application will also need mortgage insurer approval if you have less than 20% down.

If your application meets all the guidelines, we’ll receive a mortgage commitment, which means you are approved subject to certain conditions being met. We’ll review the lender’s conditions and make sure they’re satisfied and accepted so we get a “file complete” You’ll sign the commitment and it’ll be returned to your lender. If you are purchasing a home, you can then waive your financing condition.

It’s important that you don’t make any significant changes to your income or debts before your mortgage closes.

Pre-Closing & Funding

You’ll meet with your lawyer approximately a week before your mortgage closes, who will advise what you need to bring. Your lawyer will submit the documents to be registered on title and will transfer the funds on closing day.   

Follow-Up

Some brokers would say goodbye at this point, but I think your mortgage is way too important. I’ll stay in touch all the way through, exploring every option to save you money and help you achieve your long-term goals. I’m with you every step of the way!

Get a pre-approval!

If you are shopping for a new home, a preapproval will tell you how much you qualify for, what your mortgage payments will be, and you’ll get an interest rate that will be held for a specific period of time, like 120 days. This way, you won’t fall in love with a home you can’t afford, or you may find that you’re ready for the house of your dreams and didn’t know it. You’ll be shopping with a full wallet!