Debt Consolidation: To Do It or Not?

Mortgage Tips Trish Pigott 30 Aug

Have you considered debt consolidation? If you are a Canadian living in debt, you are not alone. According to Statistics Canada, household debt grew faster than income last year, with Canadians owing $1.83 for every dollar of household disposable income to debt(1). Canadian households use almost 13.48% of income for debt re-payment(2).

So how can one ever get out of debt? Debt consolidation.

What is debt consolidation?

Debt consolidation means paying off smaller loans with a larger loan, at a lower interest rate. For example, credit card debt with interest of 19.99% can be paid off by a 5-year Reverse Mortgage with an interest rate of 7.70%* from HomeEquity Bank. (*5 year fixed rate as of June 28 , 2022. For current rates, please contact us).

A lot of confusion surrounds debt consolidation; many of us just don’t know enough about it. Consider the two sides:

The Pros

• The lower the interest rate, the sooner you get out of debt. A lower monthly interest allows you to pay more towards your actual loan, getting you debt-free faster.

• You only have to make one monthly debt payment. This is more manageable than keeping track of multiple debt payments with different interest rates.

• Your credit score remains untarnished because your higher interest loans, such as a credit card, are paid off.

The Cons

• Consolidating your debt doesn’t give you the green light to continue spending. Consolidating helps you get out of debt; continuing to spend as you did before puts you even further into debt.

• A larger loan with a financial institution will require prompt payments. If you were struggling to pay your debts before, you may still be challenged with payments. The CHIP Reverse Mortgage may be a better option; it doesn’t require any payments until you decide to move or sell your home.

• You may require a co-signer who will have to pay the loan if you’re unable. Note that the CHIP Reverse Mortgage does not require a co-signer, as long as you qualify for it and are on the property title.

So how do you know if debt consolidation is the option for you? Start by contacting us at 604-552-6190 and ask if a CHIP Reverse Mortgage could be the right solution for you!



1 Debt-to-disposable-income ratio eases down from record 185% | CBC News

2 Key household debt-to-income ratio down in Q1 as income rises faster than debt | The Star

Kitchen renovations: Are they worth it?

General Trish Pigott 26 Aug

Thinking of doing kitchen renovations? Although they may add value to your home, it’s worth asking yourself why you want to renovate in the first place. Do you want to sell in the near future and boost the sale price? Or do you want to make changes to better suit your lifestyle? The answers to those questions will make a huge difference in evaluating whether kitchen renovations are the right move for you.

If you’re interested in maximizing your return on investment, here are a few figures to bear in mind before tearing up your kitchen:

  • According to a study by Royal LePage, kitchen renovations can boost the value of a home by 12.5% (Bloomberg)
  • Kitchen renovations can cost anywhere from $15,000 to $75,000+ depending on how extensive your plans are (TheSpruce)
  • The average cost of the renovation is $50,000 (GreedyRates)
  • Prospective sellers are willing to spend up to 5% of a property’s value on renovations on average, prior to listing their home for sale

Now that you have an idea of the numbers you’ll be working with, let’s take a look at two scenarios for your kitchen renovations.

I want to fix and flip it!

If the sole reason for renovating your kitchen is to increase the property value, it might be best to focus on more cost-effective changes such as:

  • Repainting or refinishing cabinets
  • Installing new faucets and new cabinet hardware
  • Installing new lighting
  • Replacing countertops with a higher quality material

It’s important to remember that the value added by a reno needs to be measured against what a buyer would have been willing to spend themselves, or if they would be satisfied with what’s already there. It’s always a good idea to see whether something can be repurposed or refurbished before starting from scratch.

I want my dream kitchen!

Now if you’re more interested in having a beautiful kitchen for you and your family to use, expect to invest a fair bit into it—after all, you’ll be enjoying the space yourself for years to come, so it’s worth paying top dollar. Here are a few things to consider:

  • New appliances will form a large chunk of the overall cost of your renovation—be certain that you’re splurging on the right ones!
  • “Behind-the-scenes” things like proper wiring and plumbing are worth spending money on to ensure good work. Again, you’ll be living with these changes and you’ll get what you pay for.
  • Always plan for an additional 20-30% in unforeseen costs. You never know what issues tearing up your kitchen might uncover, and the last thing you’ll want is to be scrambling to find the funds to cover something you hadn’t expected.

The bottom line on kitchen renovations

Ultimately, a spruced-up kitchen will add value to your home, but only by about 60-65% of what you’ll spend on renovating it. Keep in mind, there are other projects that will still increase your home’s value, while being more forgiving on the wallet. Either way, the satisfaction and enjoyment of being in a space you helped shape is worth it!

Technology Upgrades For Your Home

General Trish Pigott 23 Aug

Are you an early adopter of technology? If you’re not, it can feel as though you’re constantly behind the curve with the ever-evolving startups, apps, and new devices. Trying to catch up can be daunting and very expensive. However, there are quick, reasonably-priced steps you can take in your home to bring it a step closer to the future. Here are four upgrades you can acquire right away, in order of practicality and ease of integration.

USB wall outlets

Oh yes, we’re starting off with real cutting-edge technology here; combination power outlets are the most electrifying innovation to hit the market in recent years! Although it’s a pretty tame entry point, the practicality makes up for the lack of sizzle. If you’ve owned an electronic device in the past twenty years, you likely have firsthand knowledge of the annoyances that come with charging them. Not only do you need to have the right cable and an appropriate adaptor, you also need to find a free (and conveniently located) power outlet to plug into. Wall outlets with USB charging ports have solved the adaptor and free socket issue. They sell for as low as $30 per piece and are fairly easy to install, even with no experience!

Smart appliances

A large majority of the technologically inclined have embraced Alexa, Google, Siri, or Cortana, and are happily integrating them into their homes. Basic smart home setups are getting more affordable by the minute, and you likely own at least three of the foundational pieces already (smartphone, digital assistant, smart TV). This brings us to upgrade option number two: “smart” appliances. If you’re already on your way to having a connected home, why not consider upgrading to appliances with smart home functionality? At best, you can enjoy a greater degree of convenience and control; at worst, you’ll have a feature that you can safely ignore if you so choose.

The fact is, smart functionality will likely become standard sooner or later. Even big-ticket appliances like fridges, dishwashers and washing machines have begun to include wifi-connectivity and apps that let you monitor and remotely control how they operate. Digital assistants are here to stay, so why go out of your way to avoid them? While compatibility isn’t generally an issue, certain appliances work best when paired with specific assistants, so we recommend getting ahead of the problem and planning for the ecosystem you might like to have.

Smart locks

Smart locks, like the smart appliances mentioned above, are also part of the Internet of Things, but they get their own category because of how useful they are.

There are two kinds of people in the world: those who have lost their keys at least once, and liars. We’re all familiar with timeless questions like “Where on earth are my keys?” and “Uh oh, did I lock the door?” Traditionally this meant upending your house until you find them in your pocket or suffering in mild annoyance until you get back home. However, the modern answer is: who cares? You have a smart lock!

What exactly is a smart lock? It’s an evolution of the traditional mechanical lock, using electronics to allow for keyless entry. Smart locks are easy to install, and either replace or upgrade the existing locking devices on your doors. Once that’s done, you can wirelessly unlock your door with a smartphone, combination code or key fob.

To be clear: while there are some security benefits to using smart locks (such as logs that list every time your door was opened, etc.), they’re not necessarily more secure than a standard lock. Really, you’d be upgrading for the convenience they provide, and an improvement to your quality of life. Features like remotely locking or unlocking your door, temporary access codes for guests and digital assistant integration all make the switch worthwhile. Moreover, almost all smart locks can still be unlocked with a traditional key as a failsafe (in case of power outages or depleted batteries).

It’s a small change for your home and the closest thing we have to futuristic Star Trek doors that swoosh open. It’s hard to find a downside here!

Electric vehicle chargers

For those of you trying to be more eco-friendly, there’s a simple argument to be made for installing electric vehicle chargers in your home: pretty soon, you’re going to need one. It’s no longer a question of electric replacing internal combustion engines, but when. The future of automotive technology is electric, and it’s easier than ever to join the revolution.

Electric vehicles (EVs) rely on high-powered chargers to refuel and are consequently most common among people living in or very close to major cities. Drivers have to plan around access to chargers when they’re away from home, so until these charging stations become as common as conventional gas stations, people will still rely heavily on their own homes to get a full charge. Powerful EV chargers for the home aren’t exorbitantly expensive at the moment, are reasonably straightforward to install, and will serve as a source of convenience or potential income.

Bottom line

Fortunately, for those of us frantically running behind the technology curve, we can still make changes. Our recommendations above aren’t from the bleeding edge of technology development, but they don’t need to be. They’re practical, accessible upgrades that could improve your life with minimal intrusiveness. Though we’re looking ahead to the future, there’s no time like the present for the technologically-tardy!

How to Qualify for a Mortgage

General Trish Pigott 18 Aug

When it comes to shopping for a mortgage, it’s important to know what you need to qualify – However, it’s just as important to understand some of the reasons you don’t qualify. This will allow you to make some changes and budget accordingly for when the time is right.

If you are in the market for a home, here are five major reasons why you may not get approved for a mortgage:

1. Too Much Debt

To begin with, one of the biggest reasons that people fail to qualify for a mortgage is because they are carrying too much debt. This debt can be in the form of credit cards, lines of credit or other loans. Regardless of where it comes from, it all contributes to your Total Debt Servicing ratio (TDS). Ideally, your monthly debt payments should NOT exceed 40% of your gross monthly income.

PRO TIP: Find ways to lessen your expenses and consolidate debt where possible.

2. Credit History

Secondly, people may not qualify for a mortgage because of their credit history. It is important to pull your credit score before you start house hunting so that you can determine the amount you qualify for. Credit scores are a direct reflection of potential risk and if you have a poor credit history, it makes it harder to secure a loan.

PRO TIP: To improve your credit score be sure to avoid late or missed payments and don’t exceed your credit card limit or apply for multiple new credit cards.

3. Insufficient Assets or Income

With rising housing prices and stagnant income levels, one roadblock to mortgage approval can be a lack of sufficient income.

4. Not Enough Down Payment

Another reason you may not qualify for a mortgage  is not having enough of a down payment. In Canada, a 20% down payment is required to avoid mortgage default insurance. However, you can still purchase a home, you just need to account for the insurance premiums. These are calculated as a percentage of the loan and based on the size of the down payment.

5. Inadequate Employment History

Lastly, employment history can have a big impact on your mortgage approval. Most lenders prefer a two-year consistent employment history so if you do not have this, you might find it harder to get a mortgage loan.

Whether you’re looking to get your first mortgage or just simply shopping around, understanding what can impact your application will help ensure you have greater success.

If you are currently struggling with your mortgage approval or have recently been denied – that’s okay! With a little effort and patience, as well as the support of us, you will be able to put yourself in a better position to reapply in the future!  If you’re ready, contact us today to discuss your options.

Inflation Update Brings Good News

Latest News Trish Pigott 12 Aug

It was widely expected that US consumer price inflation would decelerate in July, reflecting the decline in energy prices that peaked in early June. The US CPI was unchanged last month following its 1.3% spike in June. This reduced the year-over-year inflation rate to 8.5% from a four-decade high of 9.1%. Oil prices have fallen to roughly US$90.00 a barrel, returning it to the level posted before the Russian invasion of Ukraine. This has taken gasoline prices down sharply, a decline that continued thus far in August. Key commodity prices have fallen sharply, shown in the chart below, although the recent decline in the agriculture spot index has not shown up yet on grocery store shelves. US food costs jumped 1.1% in July, taking the yearly rate to 10.9%, its highest level since 1979.

The biggest surprise was the decline in core inflation, which excludes food and energy prices. The shelter index continued to rise but did post a smaller increase than the prior month, increasing 0.5% in July compared to 0.6% in June. The rent index rose 0.7% in July, and the owners’ equivalent rent index rose 0.6%.

Travel-related prices declined last month. The index for airline fares fell sharply in July, decreasing 7.8%. Hotel prices continued to drop, falling 2.7% on the heels of a similar decrease in June. Rental car prices fell as well from historical highs earlier this cycle.

Bottom Line

The expectation is that the softening in inflation will give the Fed some breathing room. Fed officials have said they want to see months of evidence that prices are cooling, especially in the core gauge. They’ll have another round of monthly CPI and jobs reports before their next policy meeting on Sept. 20-21.

Treasury yields slid across the curve on the news this morning while the S&P 500 was higher and the US dollar plunged. Traders now see a 50-basis-point increase next month as more likely than 75. Next Tuesday, August 16, the July CPI will be released in Canada. If the data show a dip in Canadian inflation, as I expect, that could open the door for a 50 bps rise (rather than 75 bps) in the Bank of Canada rate when they meet again on September 7. That is particularly important because, with one more policy rate hike, we are on the precipice of hitting trigger points for fixed payment variable rate mortgages booked since March 2020, when the prime rate was only 2.45%. The lower the rate hike, the fewer the number of mortgages falling into that category.

You can read the original article on Sherry Cooper’s site here.

7 Steps to Becoming a Homeowner

General Trish Pigott 9 Aug

Becoming a homeowner is one of the most exciting and rewarding moments in life! While people don’t always dream of the perfect mortgage, we do grow up dreaming of a white picket fence and our dream home. Even if you imagined your dream home as a 6-bedroom mansion, we all have to start somewhere!

This post will take you through the important steps and considerations for your first home.

1. Are You Ready to Become a Homeowner?

Before you jump on in, there are some things you should ask yourself. As amazing as it is to be a first-time home buyer, it is important to remember that this is likely the largest financial decision you will ever make. There are a few questions you can ask yourself to make sure you’re ready to take this leap!

  1. Are you financially stable?
  2. Do you have the financial management skills and discipline to handle this large of a purchase?
  3. Are you ready to devote the time to regular home maintenance?
  4. Are you aware of all the costs and responsibilities that come with being a homeowner? Let’s find out!

2. Do You Know the Costs?

There are two major costs associated with being a new homeowner:

Upfront Costs: The initial amount of money you need to buy a home, including down payment, closing costs and any applicable taxes.

Ongoing Costs: The continued cost of living in a home you own, including mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance. It is also important to keep in mind potential major repairs, such as roof replacement or foundation repair, that may be needed now or in the future. In addition, if you choose a property that is not hooked up to municipal services (such as water or sewer) there may be additional maintenance costs to consider.

3. The Down Payment

The minimum down payment on any mortgage in Canada is 5% but putting down more is beneficial whenever possible, as it will lower the amount being borrowed. However, if you can only afford the minimum that is perfectly okay! Just remember, if you are putting down less than 20%, default insurance will be mandatory to protect the investment (also known as CMHC).

RRSPs can be a great resource for first-time home buyers and can be cashed in up to $35,000 individually towards a down payment. In fact, most mortgage professionals will tell you nearly half of all first-time buyers use their RRSPs to help with the payment. Those first-time buyers who choose this option will have 15 years to pay it back and can defer these payments for up to two years if necessary. Always remember though, deferring a payment can increase the time to pay off the loan and you will still owe the full amount!

Another option for securing your down payment is a gift from an immediate family member, typically a parent. All that is required for this is a signed Gift Letter from the parent (or family member) providing the funds, which states that the money does not have to be repaid and a snapshot showing that the gifted funds have been transferred.

4. Mortgage Pre-Qualification

This process provides you with an estimate of how much you can afford based on your own report of your financial situation. The benefit of this is that it sets the baseline for a realistic price range and allows you to start looking for that perfect home within your means! Now, it’s important to note that this process is not a mortgage approval, or even a pre-approval, it just helps to establish your budget.

5. Mortgage Pre-Approval

While this may seem similar to pre-qualification, the pre-approval process requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.

As a result, getting pre-approved can help determine:

  • The maximum amount you can afford to spend
  • The monthly mortgage payment associated with your purchase price range
  • The mortgage rate for your first term

Getting pre-approved doesn’t commit you to a single lender, but it does guarantee that the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping.

After  You Have Been Pre-Approved:

  • Refrain from having additional credit reports pulled
  • Refrain from applying for new credit, closing off credit accounts or making large purchases
  • Be prepared to show a paper trail – any unusual deposits in your bank account may require an explanation

6. Financial Approval

You’re almost there! Financial approval is the last step to getting your mortgage and buying your first home! You will need to keep in mind that just because you are pre-approved, it doesn’t guarantee that the final mortgage application is approved. Being entirely candid with your home-buying team throughout the process will be vital as hidden debt or large purchases during your 90-120-day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home.

7. Closing Day For the New Homeowner

Phew, you made it. Closing day is one of the most exciting moments where all the house hunting and paperwork really pays off! It is on this day that you will want to make use of your lawyer or a notary.

To complete the process of closing the sale, your lender gives your lawyer the mortgage money. You would then pay out the down payment (minus the deposit) and the closing costs (typically 1 to 4% of the purchase price). Typically, this payment is done through a bank draft, which will require a bank run ideally 10 days before closing. This is then brought to the lawyer on your closing date. From there, the lawyer or notary then pays the seller, registers the home in your name, and gives you the keys!

Congratulations, you are now a homeowner!

Investing in TFSA or RRSP

General Trish Pigott 5 Aug

A common financial mistake that people make is not investing in their Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) early enough. They often don’t start contributing until later in life when they are more financially stable. The truth is, starting smaller and earlier, will be more beneficial. Your retirement fund could grow to seven figures, even if you only contribute a fraction of the allowable yearly maximums.

If you make $60,000 a year, you can contribute over $10,000 to your RRSP account and another $6000 to your TFSA annually. There are huge tax-saving benefits that come with this as well.

It’s important to note that your yearly contribution limits can be carried over as you grow older and have more disposable income. However, you do need to be very disciplined with your spending. As you get older and start earning more, you will also likely spend more. Think kids, vacations, cars, etc. That extra disposable income you were envisioning may not materialize until you are in your mid 50’s. But if you scrape together what you can now, it will make a huge impact in the long run, even if it’s just saving 5% ($200/month at a $60,000 salary). Investing $200 a month from age 18 to 65 at 7% would give you $790,139. The same $200 at 7% from age 28 to 65 would yield just $384,810.

There are plenty of rules, regulations and strategies to consider and every angle of the TFSA vs RRSP debate has been extensively written about. While you do need to understand the basics of how they work, the simple goal for the vast majority of us should be to put something, anything, into one (or both) of these accounts on a regular basis and start investing — you can’t go wrong!

Use an Investment Property As Your Pension

General Trish Pigott 2 Aug

An investment property can be a great option if you’re looking for a way to generate additional monthly income. It can also be a great opportunity to help grow your wealth over time. We’ve summarized three key benefits of owning an investment property below.

  1. Supplement your income now and boost your future pension, creating more financial freedom
  2. Buy your dream retirement home now and rent it out until you’re ready to use it
  3. Increase your monthly cash flow for potential expenses beyond retirement savings

However, before you buy an investment property, there are a few things to know:

  • Buying a property for the purpose of renting it out comes with different qualifying criteria and mortgage product options, than traditional home purchases.
  • The minimum down payment required is 20% of the purchase price. It is important to note that these funds cannot be gifted; they must come from your own savings or the equity in your current home. Consider factoring the funds in for closing costs, potential repairs and maintenance if you’re refinancing to use equity.
  • Only a portion of the rental income can be used to determine how much you qualify for. Some lenders will only allow you to use 50% of the rental income, while others may allow up to 80%.
  • Interest rates usually have a premium when the mortgage is used for a rental property. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.
  • When it’s time to sell, you will be subject to capital gains tax.

With the right purchase price, this can be a great way to supplement income and make the most out of your retirement. You will have the opportunity to produce monthly cash flow now, and cash out by selling the property later.

Before getting started, it is important to calculate the cost of your investment (purchase price and closing costs), as well as the maintenance (approximately 1% of the property value for the year). Then, compare it to the current rental prices to be sure it’s a profitable investment.

If you’re looking to purchase an investment property, be sure to reach out to us here to discuss your options and understand what’s required.