New housing measures expected in upcoming federal budget

As your trusted mortgage broker, I’m always on the lookout for developments that can impact your homeownership journey. This month brings some hopeful news on the housing front that we're eager to share with you.

Federal Budget & Housing Investments

The Government of Canada is set to unveil its federal budget on April 16th, and early indications from Housing Minister Sean Fraser are incredibly promising for anyone looking to buy a home or struggling with housing affordability. The budget is expected to allocate billions of dollars toward the construction of new homes and support low-cost housing programs.

This commitment to substantial investments in housing comes at a crucial time. Canada's housing affordability crisis has been exacerbated by a rapidly increasing population and economic pressures like high inflation and interest rates — the highest we've seen in 22 years. These factors have made it more challenging for many Canadians to find affordable homes or keep up with rent and mortgage costs.

What This Means for You

The upcoming investments aim to ease these pressures by increasing the supply of homes and making housing more accessible to everyone. This includes significant support for the construction of new homes and enhancing low-cost housing programs. According to Minister Fraser, we're talking about an investment that could reach into the tens of billions of dollars.

Finance Minister Chrystia Freeland is expected to present the budget in Parliament on April 16th, which will reveal the full extent of these plans.

Looking Ahead

It's important to note that while these investments are a step in the right direction, the impact won't be immediate. Canada needs to build 315,000 new residences annually through 2030 to keep pace with population growth — a challenging but necessary target to ensure a future where everyone can afford a place to call home.

My Commitment to You

I understand that navigating the housing market, especially in times of change, can be overwhelming. I am here to help you understand what these developments mean for your individual situation and how you can leverage them to your advantage. Whether you're buying your first home, looking to invest, or exploring refinancing options, I’m here to provide you with expert advice and solutions tailored to your needs.

Feel free to reach out with any questions or for a personalized consultation. Remember, I’m more than just your mortgage broker; I’m your partner in making homeownership dreams come true.

March is Fraud Prevention Month

As your Mortgage Broker, I'm here to remind you: Stay vigilant, stay informed! Protect your financial health with these quick tips:

1.  Stay Informed: Educate yourself about common types of fraud, including phishing scams, identity theft, and financial fraud.

2.  Protect Personal Information: Safeguard your personal and financial information by using strong, unique passwords for online accounts, enabling two-factor authentication whenever possible, and being cautious about sharing sensitive information online or over the phone.


3.  Verify Requests: Be skeptical of unsolicited requests for personal or financial information, especially if they come via email, phone calls, or text messages. Verify the legitimacy of any requests by contacting the organization directly through official channels before providing any sensitive information.


4.  Monitor Accounts Regularly: Keep a close eye on your bank statements, credit reports, and online accounts for any unusual activity or unauthorized transactions. Report any suspicious activity to your financial institution immediately to prevent further fraud.


5.  Stay Vigilant: Remain vigilant and trust your instincts when it comes to potential fraud attempts. If something seems too good to be true or feels suspicious, take the time to investigate further before proceeding.

By following these tips and staying proactive about fraud prevention, you can help protect yourself and your loved ones.

This spring let's embrace the momentum of the season to advance your mortgage goals. Remember, even small steps can lead to significant changes.

Time to Spring Forward with Your Mortgage Goals!

As the days grow longer, we warmly welcome the arrival of spring – a season of renewal and growth. Just as we set our clocks forward for daylight saving time, it's a perfect moment to take proactive steps in managing your mortgage goals. Whether you're considering buying a new home, refinancing, or making strides toward paying down your mortgage, I encourage you to “spring forward” this month!

Re-evaluate Your Mortgage Strategy

With the change of seasons, it's an ideal time to review your current mortgage. The market is constantly evolving, and refinancing could offer you better terms that weren't available when you first secured your mortgage. Refinancing can significantly reduce your monthly payments or even shorten the term of your loan, bringing you closer to a mortgage-free life.

Quick Tip: Regularly comparing your current terms with new offerings can uncover opportunities to save money.

Considering Buying a New Home

Spring symbolizes a fresh start, and for many, this includes the search for a new home. The spring real estate market is known for its increased inventory and opportunities. If you're considering making a move, now is the time to explore what's available.

Quick Tip: Getting pre-approved for a mortgage is an essential first step. It gives you a clear understanding of your buying power and positions you as a serious buyer in the eyes of sellers.

Accelerate Your Mortgage Payoff

One of the most effective ways to spring forward in your mortgage journey is by making additional payments toward your principal. This strategy can drastically shorten your loan term and save you a substantial amount in interest.

Quick Tip: Utilize any extra funds, like tax refunds or savings from cutting back on non-essential expenses, to make these additional payments.

Upgrade and Renovate

Considering some home improvements? Focus on upgrades that not only enhance your living space but also increase your property's value. Financing options such as a cash-out refinance or a home equity line of credit (HELOC) can be smart ways to fund these projects.

Quick Tip: Renovations like kitchen and bathroom updates tend to offer the best return on investment. Plan your upgrades wisely to maximize the value added to your home.

RRSP contributions, home equity, and mortgage strategies to build wealth

As we find ourselves in the midst of RRSP season, it's an opportune time for homeowners like you to evaluate how your property can be a pivotal asset in boosting your financial growth. The deadline for RRSP contributions is fast approaching on March 1, making now the perfect time to consider the strategic benefits of homeownership beyond the routine of mortgage payments.

 Owning a home is much more than a monthly financial commitment; it represents a strategic asset that can significantly enhance your net worth. Many homeowners face the challenge of balancing mortgage payments, monthly bills, and the important goal of retirement savings. However, with a carefully crafted strategic plan, it's possible to streamline your debts, reduce interest outlays, and simultaneously bolster your retirement savings.

 A significant number of Canadians hold equity in their homes. This untapped equity can be a powerful tool in enhancing your savings and overall financial status. Let's explore two practical examples of how you can leverage your home's equity:

 1.      Borrowing to Invest: If you have enough equity in your home and unused RRSP contribution room, consider the option of using your home equity to invest directly into your RRSP. You can then apply any tax refund you receive toward your mortgage using your prepayment privileges. This approach can be a savvy method to augment your retirement fund while utilizing the value you've already built in your property.

 2.      Debt Consolidation: Another strategy involves consolidating high-interest debts, such as credit card balances or car loans, into your mortgage. This consolidation can lead to significant improvements in your monthly cash flow. Furthermore, by simplifying your monthly payments, you gain the dual benefits of financial efficiency and peace of mind.

 For many homeowners, these strategies have translated into reduced monthly debt payments, less interest paid over time, and the added bonus of a growing retirement fund. As your trusted mortgage professional, I'm dedicated to helping you explore these options and determine the best path forward tailored to your individual needs.

 A brief update: On January 24, the Bank of Canada held the overnight rate at 5% for the sixth consecutive month. With the softening of the Canadian economy, almost all economists who’ve weighed in on the forecast of the overnight rate for 2024 agree that there are most likely no rate hikes coming this year. This news increases buyer confidence and is setting the stage for a strong Spring market.

 What’s on the horizon for you this year?

Thinking of making a move? In the constantly evolving Canadian real estate market, staying informed and prepared is key to turning your dream home into a reality. I strongly recommend getting a mortgage pre-approval. A mortgage pre-approval is not just a preliminary step; it's a comprehensive evaluation of your financial health. This step clarifies your budget, locks in your interest rate (for up to 120 days, depending on the lender), ensures you're ready to make a confident offer on a home within your means, and marks you as a serious buyer, giving you an edge if you find yourself in a multiple offer scenario.

 Is your mortgage renewal coming up? If your mortgage is renewing this year or even next year, it’s never too early to start discussing options and strategies. We’ll review your current situation – in the context of the current interest rate environment – and develop a plan that will help you stay on track.

 As always, remember that I’m here to help you achieve your short- and long-term home ownership and wealth-building goals. Get in touch anytime! 

Exploring Mortgage Amortization Extensions

 Recent inflation numbers indicate that inflation is slowing, and many economists are saying that the most recent drop in the inflation rate will give the Bank of Canada the slack that it needs to hit pause on any rate hikes for the time being. While this is a positive sign, it is not necessarily translating to relief in the cost of living. Many people are still seeking solutions to mitigate the effects of sky-high grocery prices and other goods on their finances. This month, we are focusing on one strategy that could prove to be the difference maker in providing the financial breathing room you need – mortgage amortization extensions. 

 To start, let us clarify what an amortization period is. It represents the duration it takes to fully pay off your mortgage through regular payments. An amortization extension, on the other hand, refers to any period beyond your initially qualified amortization.  

 Which Lenders and Banks Offer Amortization Extensions? 

 Prime lenders, who are federally regulated, typically do not offer amortization extensions beyond 30 years. However, if your current mortgage has a shorter amortization period (i.e.: 20 years), you can extend it when refinancing with them. Alternative mortgage lenders, often referred to as "non-bank" lenders, may offer extensions of 35 to 40 years, provided you have at least a 20% down payment or more than 20% equity built up. 

 Who Can Extend Their Mortgage and Why? 

 First-time home buyers are typically limited to a maximum amortization period of 25 to 30 years. Most put less than 20% down needing default mortgage insurance that restricts amortization to a maximum of 25 years. However, if they have 20% or more to put down, they can extend the amortization beyond 25 years.  

 In contrast, renewers may have the option to extend their amortization at the time of renewal. For example, they can go from 20 years back to 25 years or from 25 years back to 30 years to lower their monthly payments. Keep in mind that these options vary based on individual situations. 

 It is important to understand that extending your mortgage amortization outside of renewal would require refinancing, which may incur penalties and necessitate requalification at current rates. Nevertheless, refinancing can be a viable solution in certain circumstances.

 Extending your mortgage amortization can be an effective financial strategy, but as with any important financial decision, it is essential to weigh the risks and benefits carefully. If you have any questions or would like to explore your options further, please reach out to me.

Bank of Canada's 2024 Outlook: A Year of Consideration

Happy New Year!

I hope you had a wonderful holiday season and are ready to embark on a prosperous 2024. As we usher in the new year, I want to keep you informed about the latest developments in the Canadian mortgage market that may have an impact on your financial decisions.

Interest Rate Cut on the Horizon?

According to a recent article by Bloomberg, there's a possibility that the Bank of Canada may lower interest rates in the coming months. However, Governor Tiff Macklem has stressed that any rate reduction would be contingent on several months of sustained downward momentum in core inflation. This cautious approach underlines the central bank's commitment to ensuring the stability of the Canadian economy.

Shifting Focus: From How High to How Long

As we begin this new year, we witness a shift in the focus of Canadian officials. They are now more concerned about how long interest rates should remain at their current levels rather than how high they should go. This shift reflects their dedication to prudent economic management.

BANK OF CANADA
2024 INTEREST RATE ANNOUNCEMENTS

JANUARY 24  |  MARCH 6  |  APRIL 10  |  JUNE 5   |  JULY 24
SEPTEMBER 4  |  OCTOBER 23  |  DECEMBER 11

Comparing to the Federal Reserve

Across the border, the Federal Reserve in the United States has decided to maintain borrowing costs at their current levels. However, forecasts indicate a consensus that rate cuts may come into play in 2024. Federal Reserve Chair Jerome Powell has been vocal about policymakers' contemplation of rate adjustments as inflation gradually approaches the target goal of 2%.

What to Anticipate in 2024

As we venture into this new year, I want you to know that we will continue to keep you well-informed about any significant developments in the Canadian mortgage market and their potential impact on your financial situation.
 

Do not hesitate to reach out should you have any questions or require assistance with mortgage or financial planning. I'm here to provide you with personalized guidance and support.

Why Choose a Mortgage Broker Over a Bank in 2024: The Smart Mortgage Guide

In today's dynamic real estate market, finding the right mortgage to suit your needs is more critical than ever. With economic conditions and interest rates constantly evolving, it can be challenging to navigate the labyrinth of mortgage options available. This is where a seasoned mortgage broker comes to your rescue. In 2024, here are compelling reasons why you should opt for a mortgage broker over going directly to a bank: 

 1. Unbiased Expertise: Mortgage brokers are your personal financial consultants, working solely in your best interest. They have access to a wide array of lenders, including major banks, credit unions, and alternative lenders. Their role is to identify the mortgage that aligns perfectly with your unique financial situation, not to sell you a bank's mortgage product. 

2. A Diverse Lender Network: While banks are limited to offering their in-house products, mortgage brokers have a vast network of lenders to choose from. They can source mortgages with terms, rates, and conditions that cater to your specific requirements, ensuring you get the best deal possible. 

3. Customized Solutions: Every homebuyer is different, with distinct financial situations and goals. A mortgage broker tailors mortgage solutions to your needs. Whether you're a first-time homebuyer, looking to refinance, or seeking an investment property loan, they will craft a mortgage that suits you perfectly. 

4. Time and Money Savings: Mortgage brokers are experts in streamlining the mortgage application process. They know the industry inside out and can expedite the approval process, potentially saving you weeks of waiting. Moreover, they often secure more favorable rates and terms, resulting in long-term financial savings. 

5. Independent Guidance: A mortgage broker acts as your financial advocate, ensuring you understand the terms and conditions of your mortgage agreement. They'll provide valuable insights and answer your questions, empowering you to make informed decisions. 

6. Eliminate the Guesswork: Navigating the complex mortgage landscape can be overwhelming. Mortgage brokers simplify the process by providing you with straightforward information and presenting the best mortgage options available. 

7. Access to Exclusive Deals: Brokers often have access to exclusive mortgage deals and promotions that are not available directly through banks. These offers can translate into substantial savings on your mortgage. 

8. Peace of Mind: Buying a home is one of the most significant financial decisions you'll make. With a mortgage broker by your side, you can have confidence that you're making the right choice for your financial future. 

 In 2024, the Canadian real estate market continues to evolve, and so do the intricacies of mortgage options. A trusted mortgage broker is your ally, simplifying the process, saving you time and money, and ensuring that you secure the best possible mortgage for your unique situation. When it comes to mortgage expertise, personalized solutions, and unbiased advice, choosing a mortgage broker is the smart homebuyer's choice. 

A fresh look at the opportunities in today’s housing market

When news reports present a consistently gloomy view of rising rates and the distinctly negative impact on the housing market, it’s easy to feel discouraged. But the news frequently doesn’t tell the full story, especially when it comes to the opportunities presented by uncertain times. Historical evidence indicates that for most Canadians, a housing market investment remains the most important wealth-creation decision they will ever make, providing a resilient foundation with leveraging opportunity to build out a strong portfolio.

How it stacks up

The Bank of Canada’s most recent rate increase of 0.75% markedly slowed the housing market. With speculation of more rate hikes to follow, fewer properties are available and potential buyers are very carefully considering where and when to invest. Simultaneously, a shortage of rental units has driven up rental prices and has potential renters clamouring for fewer units. In just 13 months, rental rates have increased by a whopping 16.8%, including a 13% increase for single family homes, 7% for condos and 5.5% for apartments. As demand for rental units continues to surge, the upward trend for average rent prices is likely to continue, creating an opportunity for those wishing to expand an existing portfolio of rental properties, and for first-time rental property investors.

Why now?

Compared to just a few months ago, rental properties may be available at lower prices, and expected cash flow from rental investments may be higher. The currently slower market also provides more time for investors to find the right rental property at the right price, and to carefully consider financing options in alignment with their personal wealth-building goals.

For existing homeowners feeling the pinch of rising rates and inflation, it’s also a uniquely opportune time to consider creating a rental property within their own home. Compared to a year ago, it’s relatively easy to find qualified tenants who are willing to pay higher rental rates for in-home apartments, resulting in potentially increased positive cash flow, with lower effort for the homeowner.

Customized financing

Whether you’re interested in a new home, a rental property or a renovation to create or upgrade rental units, mortgage restructuring can help mitigate the challenges of cost-of-living increases while enabling you to achieve your goals. I look forward to customizing a mortgage solution that helps you take advantage of these opportunities.

Hold that rate!

The next Bank of Canada interest rate announcement is a few weeks away and another rate increase is widely anticipated. If you’re considering a rental property purchase or a renovation to create a rental suite in your home, a pre-approval is a smart first step. You’ll have a better understanding of what you can afford and you’ll also get a rate hold for up to 120 days which means you’re protected from possible rate increases.

A look at how rate increases impact different mortgage types

With inflation at its highest level in almost 40 years, the Bank of Canada continues to take drastic action to cool the economy with the latest of five consecutive rate increases announced on September 7. Rising interest rates impact everyone with a mortgage but how and when you will see the impact depends on the type of mortgage you have. We often classify mortgages as either fixed-rate or variable-rate. What may not be commonly understood is that there are actually two types of variable-rate mortgages– adjustable payment and fixed payment – and the impact of rising rates on these two types is dramatically different. Here's a look at how each mortgage type is affected:

Fixed-rate

Many Canadians choose a fixed-rate mortgage specifically for the peace of mind that comes from knowing exactly what their rate and payment will be for the duration of their mortgage term. Fixed-rate clients don't have to be concerned with rate fluctuations until renewal time or if they are considering refinancing. Many fixed-rate customers will be faced with the prospect of renewing at a higher rate but for now, the rate increases will have no immediate effect on their mortgage.

Variable-rate with adjustable payment

If you have this type of mortgage, you likely have already felt the impact of rising rates with incremental increases in your mortgage payment over the last several months. The good news is that the higher payment means you are continuing to pay down your mortgage at the same pace and your amortization won't be adversely affected. If the higher monthly payments are beginning to cause a cashflow concern, get in touch for a review of your situation and we can discuss some options that will work for you.

Variable-rate with fixed payment

Variable-rate mortgages with a fixed payment also have a fluctuating rate which increases or decreases with prime, but unlike adjustable payment mortgages, your mortgage payment remains consistent. This certainly makes life easier from a budgeting standpoint but when rates increase, a greater portion of your payment is allocated to interest and less toward principal. If rates climb high enough, you may eventually hit what's called the "trigger rate".

What is a trigger rate?

A trigger rate is the rate at which the allocation of your payment is 100% interest and 0% principal. At this point, your lender may suggest increasing your monthly payments or converting to a fixed-rate mortgage. Although you are generally not obliged to take immediate action, any interest not covered by your monthly payment will be added to your principal. And when the balance outstanding reaches your original loan amount, you hit your trigger point. You will then be required to take action by making a lump-sum payment, converting to a fixed-rate mortgage, or increasing your monthly payment. If you receive a notification from your lender, be sure to reach out to review your options before responding.

How do I find my trigger rate?

Your trigger rate will depend on your balance outstanding, your current monthly payment and your repayment schedule. Formulas will vary by financial institution. If you'd like to know what your trigger rate is, feel free to get in touch.

Think you may hit your trigger rate soon? Want to discuss your options if you do? I am just a phone call away. Please reach out anytime – I'm here to help.

The Tax-Free Home Savings Account Explained

If you or someone you know is saving for a down payment on their first home, the Federal government announced a new program aimed at first-time buyers in their recent budget. The First Home Savings Account combines the features of an RRSP and TFSA to give prospective homeowners some tax relief and a boost toward their homeownership goals.

Here are the highlights:

• Account holders can contribute up to $8,000 annually, up to a lifetime maximum of $40,000.

• Just like an RRSP, contributions made to an FHSA are tax deductible.

• Like a TFSA, funds can be withdrawn from an FHSA tax-free – provided the funds are used for a home purchase.

• Funds in an FHSA can be invested in allowable (not yet disclosed by the government) investment assets such as stocks, bonds, mutual funds, etc. and any growth/income from these investments are not taxable.

• Transfers can be made from an RRSP to an FHSA but are subject to the annual contribution limit of $8,000. However, when money is transferred from an RRSP to an FHSA there is no adjustment to available RRSP contribution room.

• Transfers can be made from an FHSA to an RRSP or RRIF if not purchasing a home and this will not affect RRSP contribution room – essentially giving qualified account holders an additional $40,000 in RRSP contribution room.

For those who are in the saving stage of their homebuying journey, there is no downside to the FHSA as a savings vehicle. You'll get the tax deduction on contributions, like an RRSP, and the tax-free growth and withdrawal of funds when it's time to purchase a home. If the home purchase doesn't materialize, funds can be transferred to an RRSP or RRIF tax-free and added to a retirement nest egg.

The FHSA does not replace the existing RRSP Home Buyer's Plan but provides another tax-advantaged home-savings opportunity for Canadians buying their first home. The two programs cannot be used in tandem. Unlike the RRSP Home Buyer's Plan, however, the FHSA does not require that funds withdrawn from the account be repaid.

The First Home Savings Account is expected to be up and running sometime in 2023. There are numerous eligibility requirements, and rules and conditions and I would be happy to explain the details to you – if this is something you think you'd like to take advantage of.