Bank of Canada Holds Steady on Overnight Target Rate

General Trish Pigott 21 Apr

Today, the Bank of Canada held its target for the overnight rate at the effective lower bound of ¼ percent. The Bank is also adjusting its bond-buying program from weekly net purchases of Government of Canada (GoC) bonds of $4 billion to $3 billion. This adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.

Finally, the Bank now suggests that the remaining slack in the economy could be fully absorbed by the second have of 2022–rather than 2023, suggesting that they may begin raising overnight interest rates before the end of next year. The Bank went on to aver that this timing is more uncertain than usual, however, given the uncertainty around potential output and the highly uneven impacts of the pandemic.

The Bank of Canada now believes that first-quarter growth in Canada is considerably stronger than they were expecting back in the January Monetary Policy Report (MPR). This partly reflects a better global backdrop, particularly in the United States. The US recovery is supported by a rapid rollout of vaccines and substantial fiscal stimulus, bringing spillover benefits to Canada through higher demand for exports and stronger commodity prices.

To read more from Dr. Sherry Coopers report, click the link below.

CLICK HERE

Wondering About RRSP’s? The deadline is approaching…

General Trish Pigott 8 Feb

Below is some information that was provided by Enriched Academy pertaining to RSP’s and whether one should consider investing in them…

The RRSP Deadline is March 1, 2021.

A comprehensive breakdown of the RRSP (Registered Retirement Savings Plan) and how to take full advantage of its features.

📈 What is an RRSP?

An RRSP is a registered retirement savings plan. It is critical to understand that your RRSP is not an investment.

It’s an account that holds your investments.

The difference between an RRSP that loses money and makes money, are the investments held inside the account.

Remember this: Your RRSP is only as good as the investments inside of it.

Pros:
✅ 
Tax free growth. Each year you do not have to pay divident, capital gains or interest on the growth of your investments.
✅ Tax deductible. That means you can claim the money you put in your RRSP as a tax deduction when you file your income tax return, which lowers the overall tax you pay.
✅ Freedom to choose your own investments (more on this a bit later)
✅ Unused contribution room can be carried over. If you don’t contribute
✅ Spousal RRSP can increase your tax savings even MORE!

Cons:
❌ Taxable income upon withdrawal. When you invest in an RRSP and decide to take that money out, you will have to pay income tax.
❌ Further the first point, you will eventually have to pay tax on both the money you put in and the growth. There are ways to minize this through RRIF’s (Registered Retirement Investment Fund’s, learn more here)
❌ Forced withdrawal at age 71.
Three Common Myths About RRSPs

  1. You are limited to the investments you hold inside your RRSP. There are several different accounts that you can hold in your RRSP.
  2. You have to INVEST in something to take advantage of the RRSP tax refund. If you want to put money into your RRSP and are unsure of what to invest in, BUT still want to take advantage of the tax refund (will explain this later). You can simply transfer your money into your RRSP and leave it in cash until you’re ready to invest.
  3. RRSPs are a scam and not worth because you have to pay taxes in the end. Yes, you do  eventually have to pay tax, BUT don’t underestimate the power of interest-free growth and the tax deductions. Also, having a smart strategy on how you take that money out in a tax efficient way is key.

What you may not have known about RRSPs:

1) You are PAYING fees! 100%.
The fees are dependent on the investments you own. Here is the MER (Management Expense Ratio), which is the annual fee you pay of on our our students.

2) There are two ways to take money OUT of your RRSP:

  1. You can borrow money up to $35,000 from your RRSP to buy your first house under the Home Buyers’ Plan (HBP). You won’t pay taxes on the withdrawals but you have to pay it back within a certain amount of time.
  2. If you or your spouse is considering going back to school, you can take out up to $20,000 to pay education costs under the Lifelong Learning Plan (LLP). You won’t pay taxes on the withdrawals but you have to pay it back within a certain amount of time.

3) Use your RRSP over contribution limit.
You can over contribute by $2,000 to your RRSP before paying the fee of 1%. Some people purposely over-contribute up to the limit to take advantage of tax-deferred growth and compounding in their RRSPs. You can learn more here.

Thinking About Selling Over the Winter Months? Get Your Home Ready…

General Trish Pigott 2 Feb

Selling Your Home in the Winter
While you might think selling your home in winter is harder, with the right considerations it doesn’t have to be! When selling your home during warmer months, the focus is typically on curb appeal and gardening, as well as having bright colors and patterns to draw out different rooms. While curb appeal should not be forgotten in winter months, the focus should be centered on creating a warm, comfortable and welcoming space. Below are some tips on how to do this:

  •     Curb Appeal: If you live in an area that receives high amounts of snow, be diligent about keeping your sidewalk and driveways clear for visitors, and to keep your home looking clean for the viewing. Always make sure to sweep any fallen leaves or debris.
  •     Make Your Entrance Welcoming:  Clear your front door area so it is warm and welcoming, have a nice planter, welcome mat or wreath on your door.  Setting the tone as they enter will change the showing.
  •     Keep it Cozy: Ensuring your home is sufficiently heated during showings will also go a long way to making it feel more comfortable; a steady 68 to 70 degrees Fahrenheit during showings is ideal.
  •     Light and Inviting: With days being shorter and darker during winter, ensuring your home is well-lit and inviting can make a big difference. In some cases, you may consider repainting the walls before listing your property.
  •     Declutter: When selling, it is important to declutter your home so that it looks its best and gives room for people to imagine their own belongings in your space.   Clear your counters, remove large amounts of family photos from bookshelves and put away the mountains of toys.  Even if you have to box them up for a period of time while the house is being shown.  This is great for young kids as it feels like they get new toys once they dig into the boxes again.  It also gives people a vision of how they want to live in the home.  Clutter free and organized!
  •     Bake Cookies!:  Everybody loves a home that smells like baking, this helps envision living in the space.
  •     Define Property Boundaries: If you are showing your home in the middle of snow season, be sure to mark the four corners of your property so that potential buyers can see exactly what they are getting.

While there is some extra work with selling your home in the winter due to the weather conditions, it can pay off! Buyers tend to be highly motivated and often there is less competition for sales during this time giving more focus to your home.

2020 Was a Blockbuster Year for Housing

General Trish Pigott 15 Jan

Despite the fears leading into the pandemic last Spring, 2020 marked a record number of home resales as new listings lagged and prices climbed. December housing data released by the Canadian Real Estate Association (CREA) today, shows national home sales surged 7.2% month-over-month (m-o-m) at a time of the year when housing is normally slow.

Click here to read the full report from our Chief Economist Dr. Sherry Cooper

Property Tax Time

General Trish Pigott 11 Jun

Property taxes are due in most municipalities on July 4th… Some cities have pushed out the due date into September because of COVID. One thing to not forget is to claim your Home Owners Grant if you live in your home as your principal residence.  If you do not claim the grant, you will receive a bill that the grant plus interest is outstanding.  You can claim the grant by going online to your cities website or by going to city hall.

If your mortgage lender collects taxes for you, they will pay the bill directly with the city and send you a summary in the first few weeks of August confirming how much they paid and if your new tax withdrawals will be adjusted at all.

NOTE ** Even if your lender pays the tax bill on your behalf, you still need to claim the grant.

If you have any questions or concerns, please do not hesitate to contact us here in the office 604-552-6190!

New CMHC Mortgage Qualifications

General Trish Pigott 5 Jun

You may have heard already that CMHC has made changes to their qualifying ratios for those with less than 20% down…  We have not heard whether or not Genworth or Canada Guaranty will follow suit and make the same changes.
What Are These Changes In Underwriting Policies

Effective July 1, the following changes will apply for new applications for homeowner transactional and portfolio mortgage insurance:

  • The maximum gross debt service (GDS) ratio drops from 39 to 35
  • The maximum total debt service (TDS) ratio drops from 44 to 42
  • The minimum credit score rises from 600 to 680 for at least one borrower
  • Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes
What these changes look like
“Someone earning $60,000 with no other debt and 5% down could afford approximately 10.9% less home under CMHC’s new rules,” the site noted. “That’s like jacking up the minimum stress test rate from 4.94% (where it lies today) to 6.30%!”
What is the driver behind these changes
CMHC’s economy forecast is definitely more on the pessimistic side.  They are predicting that home prices will likely fall by 9% – 18% over the next 12 months.  They also feel that it will take minimum 2 years to see home values back at a pre-pandemic levels.  These changes are being implemented to “protect the homebuyer and reduce risk”.
To read the full article from Dr. Sherry Cooper, DLC’s chief economist, click here!

Will the minimum downpayment be increased from 5% down to 10% down?

General Trish Pigott 27 May

Rumour has it that the minimum downpayment is going to be increased from 5% down to 10% down.
Our (Dominion Lending Centres) Chief Economist, Dr. Sherry Cooper just spoke on this and a variety of other topics around the current Canadian housing and mortgage markets.  I am going to summarize the highlighted points that I think will be of most interest to you.
 
Minimum downpayment from 5%- 10%
Her thoughts on increasing the downpayment from 5% to 10%  is counterproductive.  This would slow housing even more!  Every part of the Government is doing everything it can to stimulate and encourage spending.  She said “this decision would be the wrong one”.   So we can only hope this does not happen.
This has been suggested for the reason being when a person purchases with the minimum 5% down, immediately an insurance premium is added on top of the mortgage, decreasing the equity available and increasing the loan to value.  Now let’s say we see values dip like most are expecting or projecting… by even the smallest amount – this client is in hot water, when time comes to renew or remortgage, they already owe more than this home is worth.
Housing Values
 
So far the price movements we have seen have been small!  It is mostly in the luxury market where we are seeing the biggest decrease.
 
In April we saw a  57% decline in sales, however we also saw a 55% decline in listings!
We are expecting some downward pressure on pricing in the near future but may not see it until the Fall/Winter of 2020/2021.  We MAY see house prices edge downwards by 5-10%, which again really depends where you are in the Country.
We do believe that there is pent up demand and feel strongly that it will be a busy Spring and Summer.
 
Where interest rates are headed?
 
She believes and we also believe that rates will remain very very low.  She said “I do not see the Bank of Canada raising rates this year or next”.
 
 
Dr. Sherry Cooper is forecasting a U shaped recovery, she is expecting  the 2nd quarter to be slow and it will be 2022 before the economy is back to where we were in 2019/2020.  What do you think?
What do we think?  We think that we have already seen the market take a turn for the best and the busiest over the past 2 weeks!  We are hoping for more of a V shaped recovery where it just shoots back up.

Stressed from debt?

General Trish Pigott 22 May

Are you stressed out from debt?  See below how we saved some clients $1,156.00 a month by refinancing and consolidating their debt

 

Mortgage:                    $425,000.00

Monthly payment:     $1,785.00

New Mortgage Balance:           $500,000.00
Credit Card Debt:       $16,000.00

Monthly payment:     $480.00

New Monthly payment:            $1,959.00
Car Loan:                      $18,000.00

Monthly payment:     $370.00

SAVINGS per month:                  $1,156.00
Line of Credit:             $24,000.00

Monthly payment:     $480.00

This would give you a cushion leaving some cash left over in these unprecedented times
Total Debt:                  $483,000.00
Total Monthly Payments:      $3,115.00 NEW MONTHLY PAYMENT:      $1,959.00
 

Current mortgage terms estimated at 2.99+% with 30 year amortization and minimum monthly credit and loan payments made

 

Current mortgage terms estimated at 2.45% with 30 year amortization OAC

Down-payment Sliding Scale…

General Trish Pigott 14 May

Did you know that most lenders have a “sliding scale” for purchases that are over 1.25 million dollars??

Most of our buyers believe that if you are purchasing over 1 million dollars you need 20% down… Which is true, until you hit the 1.25 million dollar mark.  At that point you will have to put more than 20% down.  The sliding scale differs with each lender, but the majority of them will lend up to 80% of the first 1.25 million and then up to 50-60% of the price above 1.25 million.

For example:  You are purchasing a home for 1.6 million dollars.  The down payment required would be $425,000.

$1,250,000 x 20% down payment = $250,000
$350,000 x 50% down payment = $175,000
Total = $425,000

If you are looking within that price range, contact us!!

A “how to” obtain mortgage financing during COVID

General Trish Pigott 11 May

We have noticed that the market is picking back up and almost as hot as this weather we are having!  With that being said we wanted to provide you with a “how to” and a step by step process to obtain a mortgage approval:

  • First step is to take a Mortgage Application – we can do this over the phone or we have a secure online application 
  • Upon receipt of application, we will contact you “the client” by phone and go over all of the details and your goals
  • Request documentation – Lenders are requiring this upfront before issuing approval or working on your application
  • Documents can be uploaded to our secure client portal or emailed to us directly
  • Files are generally approved by most lenders in 24-72 hours, lender dependent
  • Once Approval is received then we will send the details over to you to review
  • Appraisal will be required in most cases.  If down payment is less than 20% then NO appraisal is needed  (Appraisals are taking place about 2-3 days after they are ordered) 
  • Documents are then drafted and sent over to you to sign electronically.  We will schedule a phone call or Zoom meeting to go over all details of the mortgage with you
  • Once signed documents are received they will be sent back to the lender
  • Update from lender approving and signing off on all conditions
  • We need to know which lawyer or notary  you wish to work with for completion
  • We continue to monitor rates on your behalf to ensure you are obtaining the best rate right up until your mortgages closes
  • We will verify all details with the lawyer/notary prior to your signing appointment with them
  • Your mortgage funds!

We continue to monitor your mortgage for you, if you have any changes… for example:  you want to change the frequency or put a lump sum down, increase the amount you are paying, find out how much you owe – we can do all of this for you!   Each year on your mortgage anniversary we do something called an annual mortgage review where we make sure you still have the best rate out there.  If we think we can save you money, we absolutely will!

 

Contact us at the office to have us fully look after your mortgage and obtain 5 star service!