How Do Car Payments Affect Your Debt Ratio

General Trish Pigott 25 Feb

“Should I buy or lease a vehicle?” This is a common question that we often hear and the answer depends on the specifics of your situation. Many consumers overburden themselves with car payments that they simply can’t afford. What people don’t realize, is how much it can affect your debt ratios and the ability it has to restrict your mortgage financing.

Should you lease or buy?

Leases and purchase loans are two different methods of financing. One finances the use of a vehicle while the other finances the purchase of a vehicle. Each has its own benefits and drawbacks. To determine which is best for you, you need to review your financial abilities and current debt ratios. If you’re unsure of how a car payment will affect you, it’s best to speak with a professional (like us here at Primex Mortgages!) prior to making your decision.

How does it work?

When you buy, you pay for the entire cost of a vehicle, regardless of how many kilometers you drive. This cost includes sales tax and interest, often based on your credit history. Later, you may decide to sell or trade the vehicle for its depreciated resale value.

When you lease, you pay for only a portion of a vehicle’s cost; the part that you “use up” during the time you’re driving it. At the end of the lease you have the option to return the vehicle or purchase it for its depreciated resale value. For example, if you lease a $20,000 car that has an estimated resale value of $13,000 after 24  months, you pay the difference of $7000. However, when you buy, you pay the entire cost of $20,000. This is why leasing offers significantly lower monthly car payments.

Both methods include additional fees, taxes and interest or finance rates.

Breaking Down the Car Payments

Loan payments have two parts – a principal charge and a finance charge. The principal pays off the full vehicle purchase price, while the finance charge is interest. All vehicles depreciate in value by the same amount regardless of whether they’re leased or purchased. Therefore, part of the principal charge of each loan payment can be considered a depreciation charge. Unfortunately, it’s money you never get back, even if you sell the vehicle in the future. Although the other part of the principal charge will go towards the equity, the longer you own it, the less you will have.

Lease payments are also made up of two parts – a depreciation charge and a finance charge. The depreciation part of each monthly payment compensates the leasing company for the portion of the vehicle’s value that is lost during your lease. The finance part is interest on the money that the lease company has tied up in the car while you’re driving it.

In conclusion, the monthly savings of leasing may give you the option of putting your leftover money into more productive investments. These could include your mortgage or an investment property, both of which will increase in value.

Why You Should Get a Home Inspection

Home Tips Trish Pigott 24 Feb

A home inspection may not be the most exciting part of your home buying journey, but it is extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, despite the competition, you should never skip out on things designed for buyer protection.

You may have a good eye for décor and love the layout of your potential new home, but headaches can lie beneath that. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

In fact, there are five reasons that a home inspection might just be the best $300-$500 you ever spend.

It Provides an “Out”

When buying a new house, it is always best to avoid taking chances. A house may look great on the surface, but there can be hidden structural issues such as a cracked foundation or damaged roof that can easily turn into expensive repairs. A home inspection can help reveal these issues and provide an ‘out’ for the buyer.

If you find something that will cost a considerable amount to replace or repair, you can ask the seller’s agent for a price reduction. For example, a leaky roof may cost a few thousand dollars to replace. It’s worth asking to see if the seller would split the cost with you. If the price cannot be re-negotiated then it is best to just walk away, unless you’re prepared for the expense.

It Confirms Safety and Structural Integrity

A home inspection confirms the structural integrity. During an inspection, the inspector will review everything from the attic to the basement, and will look for things like mold, holes in the chimney, saggy beams or improper wiring.

It Reveals Illegal Additions or Installations

Similar to determining safety and structural issues, home inspections can also reveal hidden additions or DIY installations. These can often cause trouble down the road. If the seller wired the house improperly or used sub-standard materials, it could null and void your home insurance.

It Forecasts Future Costs

A home is an ongoing expense. Unless it is brand new, there will be regular maintenance and updates required to replace things when they become old and inefficient. For instance, water heaters typically last 6-10 years, roofs around 20 years and furnaces up to 25 years. The home inspection report will include a life expectancy for each of these big-ticket items, as well as a replacement estimate.

And Lastly, a Home Inspection Provides Peace of Mind

Finally and perhaps most importantly, getting a home inspection is important for your own peace of mind. A home is a huge investment that you will be paying off for 20 to 30 years. It is much easier to feel good about your investment knowing that the house is safe and there won’t be any surprises. While a home inspection isn’t free, peace of mind is priceless and the cost of an inspection is worth it!

To see the original post shared by Dominion Lending Centres click here.

Understanding Your Credit Score

General Trish Pigott 22 Feb

Your credit score affects all aspects of your financial activities when it comes to borrowing money. It also has the ability to affect the job you get, the apartment you rent, and whether you can open a bank account.

What is a credit score?

Your credit score, or beacon score, is a number that gives mortgage lenders an idea of your lending risk. Credit scores range from 300 to 900 and the higher you score, the better. This can often impact the interest rate that you qualify for and what mortgage products might be available to you.

What is a credit report?

A credit report lists all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money or make a payment on a loan or credit card, the lender reports the information to these two agencies. Liens, judgments, work history and your home address are also documented. Together, this information makes your credit report.

The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives.

One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct.

The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

What You Need to Know About Insurance

General Trish Pigott 15 Feb

Not all insurance products are created equal. One of the most common mistakes homeowners and potential homeowners make is that they hear the word “insurance” and just assume they have it! Well, you might have one kind of insurance, but you might be missing coverage elsewhere.

It is important to understand all the different insurance products to ensure you have proper coverage.

To help you get a better understanding of the insurance, below are the four main insurance product options you will encounter and what they mean:

Default Insurance

This insurance is mandatory for homes where the buyer puts less than 20% down. In fact, default insurance is the reason that lenders accept lower down payments, such as 5% minimum, and actually helps these buyers access comparable interest rates typically offered with larger down payments.

Default insurance typically requires a premium, which is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). This premium can be paid in a single lump sum, or it can be added to your mortgage and included in your monthly payments.

In Canada, most homeowners know of the Canada Mortgage and Housing Corporation (CMHC), which is run by the federal government, and have used them in the past. But did you know? We also have two private companies, Sagen Financial and Canada Guaranty, who can also provide this insurance.

Home (Property & Fire) Insurance

Next, we have another mandatory insurance option, property and fire coverage (or, home insurance, as most people know it by). This is number two on our list as it MUST be in place before you close the mortgage! It is especially important to note that not all homes or properties are insurable, so you will want to review this sooner rather than later.

In addition to protecting against fire damage, home insurance can also cover the contents of your home (depending on your policy). This is important for anyone looking at purchasing condos or townhouses as the strata insurance typically protects the building itself and common areas, as well as your suit “as is”, but it will not account for your personal belongings or any upgrades you made. Be sure to cross-check your strata insurance policy and take out an individual one on your unit to cover the difference.

One final thing to consider is that you may not be covered in the event of a flood or earthquake. You may need to purchase additional coverage to be protected from a natural disaster, depending on your location.

Title Insurance

Another insurance policy that potential homeowners may encounter is known as “title insurance”. When it comes to lenders, this insurance is mandatory with every single lender in Canada requiring you to purchase title insurance on their behalf.

In addition, you have the option of purchasing this for yourself as a homeowner. The benefit of title insurance is that it can protect you from existing liens on the property’s title, but the most common benefit is protection against title fraud. Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property.

Mortgage Protection Plan

Lastly, we have our mortgage protection plan coverage. This is optional coverage, but one that any agent can tell you is extremely important. The purpose of the mortgage protection plan is to protect you, and your family, should something happen. It acts as a disability and a life insurance policy in regards to your mortgage.

Typically, when you get approval for a mortgage, it is based on family income. If one of the partners in the mortgage is no longer able to contribute due to disability or death, a mortgage protection plan gives you protection for your mortgage payments. However, most homeowners don’t realize that if they buy one of these policies through their financial advisor, life insurance agent or bank, the policy will not be able to move with them to a new lender.

As your mortgage professionals, we have an exclusive opportunity with this product through Manulife. This means that, if you purchase a Manulife Mortgage Protection Plan with us, you are protected for the life of your mortgage. You do not have to stay with the same lender! If you move, your protection ports with you instead of other similar products where the plan is specific to that lender. In those cases, should you want to switch lenders, you would need to requalify for your mortgage protection plan – possibly at higher rates!

If you have any questions about mortgage insurance or what are the best options for you, please do not hesitate to reach out by phone at 604-552-6190 or by email at! We would be happy to take a look at your existing plan and discuss your needs to help you find the perfect coverage to suit you and your family.

Speculation and Vacancy Tax Declarations Are Now Due

General Trish Pigott 11 Feb


As 2022 begins to unfold, we are planning on doing a better job internally to help you with the regular reminders of home ownership. As we navigated the busiest real estate year in history last year, we ran into a few road blocks where clients were not aware that they had to submit their declaration for the Speculation and Vacancy Tax.

DON’T IGNORE THIS NOTICE** If you do not declare, this results in having a government charge on your title that will affect you if you are either selling your home or wanting to make any changes to your mortgage.

How the speculation and vacancy tax works

The speculation and vacancy tax is designed to turn empty homes into housing for British Columbians, and ensure foreign owners and those with primarily foreign income contribute fairly to B.C.’s tax system.

This tax is an annual tax that applies based on:

  • How property owners use their residential property
  • The property owner’s residency status
  • Where property owners earn and report their income
  • 99% of British Columbians are exempt but YOU still need to apply

The speculation and vacancy tax has an annual declaration process and is administered by using data from partner agencies.

This tax is also different from Vancouver’s empty home’s tax

Annual Declaration Process

Registered owners of residential property in a designated taxable region must complete a declaration each year to declare their residency status and how their property has been used.

You have to declare each year because your circumstances may change during the year.

Declaration timeline

  • Receive your declaration letter mid-January to mid-February
  • Declare by March 31You declare how you used your property last year. If asked about your income, use income from the year before last year.
  • If you owe tax, pay by the first business day in July

Why Everyone Must Declare

If a property has more than one owner, a separate declaration must be made for each owner, even if the other owner is your spouse or relative. 

Because this tax is based on how each owner uses the property and whether they have foreign income, we need each owner on title to declare separately.

Why We Need You to Complete a Declaration

You need to declare your residency status, whether you pay taxes in Canada and how you use your property so that we can determine:

We don’t use information from other sources such as your home owner grant application because that process doesn’t collect the right information for this tax.

For more information, call us at 604-552-6190 or CLICK HERE.

RSP Season is Around the Corner

General Trish Pigott 8 Feb

With RSP season right around the corner, now is a good time to understand some of the limits and important dates for 2022.

What is the 2022 limit for RRSPs?

For the 2022 taxation year, the contribution limit for an RRSP is 18% of earned income. While the percentage has not changed for a number of years, the maximum dollar amount increases annually. For this new year, that number has gone up to $29,210, which is approximately $1,400 more than the previous year.

Keep in mind there is carry forward room if you did not use all of your prior contribution room and also the ability to make an RRSP spousal deposit.

You have 60 days after the end of the year to make an RRSP contribution for the previous year. That means March 1, 2022 is the deadline for the 2021 taxation year.

What is the 2022 limit for TFSAs?

The annual limit for a TFSA this year is $6,000, which has remained the same since 2019. Since there is a lifetime contribution limit, you may be eligible to deposit more due to unused room from 2009 onwards.

CPP and OAS Payments

When it comes to CPP, the maximum payment is $1,253.59 per month for 2022.

Monthly payments for Old Age Security payments in 2022 is capped at $642.25. This amount is revised every quarter in January, April, July and October, as the cost of living increases.

If you are looking for a financial planner, bookkeeper or accountant, we have great connections that we can refer you too.  Being prepared and understanding the amounts and timelines will help ease the stress around this.

Here is an article to help with preparing to file your taxes for 2021. 

Note: The information above was sourced from the CRA website.

Interest Rates Will Begin to Rise

Latest News Trish Pigott 4 Feb

Last week the Bank of Canada announced that they would leave the overnight target rate unchanged but has given indications that they will begin raising rates back to a normal pre-pandemic level going forward.  This is good news for Variable Rate Mortgage holders, those with lines of credits or loans tied to your banks prime rate.  Your interest rate and your payment will not change.

The Bank of Canada announces interest rates 8 times per year and this is the first of 2022 when more than 70% of analysts predicted they would raise rates today.  Below is the Bottom Line from Dr. Sherry Cooper, Chief Economist for Dominion Lending Centres. Her prediction is that we will see rates back to normal levels by the end of 2022 to where they were in early 2020.  If that is the plan, that would change our Prime rate today from 2.45 to 3.70%.  Those with a variable rate mortgage at Prime -1.00% would give you an interest rate of 2.70% and that would mean a payment increase of roughly $60 for every $100,000 in mortgage.

Bottom Line from Dr. Sherry Cooper

It surprises me that economists in Canada would expect the Bank to hike interest rates during a Covid lockdown without properly measured signaling beforehand. Bay St’s hysteria about inflation seems to have muddied thinking. The Bank will be taking out the big guns to get inflation under control. Overnight rate hikes begin at the next policy meeting on March 2 and then Quantitative Tightening shortly after that. The downsizing of the Bank’s balance could have even more dramatic effects on the shape of the yield curve, hiking longer-term interest rates.

In today’s policy statement and Monetary Policy Report, the Bank emphasized the strength of the housing market and the impact on inflation of the more than 20% rise in Canadian house prices last year. The MPR suggests that housing market activity strengthened again in recent months, led by a rebound in existing home sales. Low borrowing rates and high disposable incomes continue to contribute to elevated levels of housing activity in the first quarter. At the same time, other factors that support demand, such as population growth, are also now picking up.”

Traders continue to bet that the Bank of Canada will hike interest rates by 25 basis points five or six times this year. This would take the overnight rate from 0.25% to 1.5% to 1.75%. It was 1.75% in February of 2020 before the pandemic easing began. Markets also expect two more rate hikes in 2023, taking the overnight rate to 2.25%.

You can read the full article here.

The next rate announcement is March 2, 2022.  If you want to discuss how future rate announcements could affect you, please call us at 604-552-6190.