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.

Stay Cool This Summer

General Trish Pigott 28 Jul

Can you believe we are already halfway through Summer?! To maximize your enjoyment for the remainder of the season, we have some great tips for staying cool AND saving money.

1. Cook in the Great Outdoors

Summer is all about enjoying the sunshine, spending time with friends and family, and relaxing in your own personal backyard oasis. Avoid cooking in your house to reduce heat in the kitchen and fire up that BBQ.

2. Take Advantage of Fans

Instead of cranking the A/C (and your electricity bill), consider cooling down your home with portable fans – That is if it’s not too hot! Portable fans work by creating a breeze, helping to circulate the air and causing a wind-chill effect that hits your skin and helps keep you cool.

PRO TIP: For an extra blast of coolness, place a bowl of ice in front of the fan to create a refreshing mist of air!

3. Shut Out the Heat

On days where the temperature is especially warm, keep the blinds and curtains drawn to reduce the heat coming into your home. It will reduce the stress on your air conditioning and portable fans and allow your home to stay cooler and more comfortable.

4. Maintain Your Air Filters

An often-overlooked aspect of home maintenance is changing the air filters. With summer in full swing, we suggest you check the filters in your home. Dirty filters slow airflow and make the system work harder, thereby reducing airflow and causing the heat to build up in your home. Plus, ignoring the maintenance on these can lead to expensive repairs down the road. Replacing your air filters every three months is ideal to keep dirt and dust out of your system and ensure they are working optimally.

5. Swap to Energy Efficient Lighting

You have probably heard some of the reasons why LED lights have become so popular, but did you know that they also produce 75 percent less heat than incandescent bulbs and can help keep room temperature down? This not only keeps your home cooler during those toasty summer months, but it can also help reduce monthly bills!

Whether you implement one or all of these handy cool-down tips, we hope you have an amazing remainder of your summer!

How to Create a Monthly Budget

General Trish Pigott 26 Jul

Creating a monthly budget is the quickest way to take control of your finances and understand where your money is going. You can then review your monthly spending habits to get a snapshot of your incoming and outgoing transactions, and determine areas for improvement.

Step 1: Calculate Your Income

The very first step to creating a budget is determining your income. It is important to know what your net income is each month, so that you know what you have available to spend.

Step 2: Track Your Spending

Once you have determined your income, you will want to take a look at your spending. Reviewing and categorizing all your monthly bills can help you break things down. To start, list out your fixed expenses – these are things like car payments, loans, rent or mortgage costs that do not change on a monthly basis. Next, take a look at your variable expenses – things like groceries, gas, entertainment, etc., and determine your average spend. This is typically the area where people are able to cut back.

Step 3: Set Realistic Goals

Realistic goals are vital for long-lasting financial health. It is important to determine what you cannot live without and where you can cut costs or scale back on spending. Ideally, when it comes to your monthly budget, you want to consider the 50/30/20 rule, which applies the following:

  • 50% of your spending is for NEEDS such as rent or mortgage payments, car payments, utilities and groceries
  • 30% of your income goes to WANTS such as shopping, vacations, streaming services, etc.
  • 20% of your income goes to SAVINGS OR DEBT such as emergency funds, retirement, child’s education and/or credit card payments

Step 4: Make a Plan

Once you have your goals set, you can now make a plan to tackle your financial position and ensure a healthy cashflow each month. For some, setting realistic spending limits for each category works well. For others, taking a look at their expense list and re-prioritizing can free up funds.

Step 5: Adjust Your Spending

Now you can take a look at adjusting your spending to ensure you remain on budget. This is also a great time to review your fixed expenses. Perhaps you can save money by getting a better interest rate on your mortgage or changing your payment schedule for your loan.

Step 6: Stay on Track With Your Budget

Lastly, once you’ve tracked all your spending and income, and determined a monthly budget, you will want to stay on track. Tracking your budget on a monthly basis is important to catch any changes in your spending habits. It is also a good idea to conduct an annual review and take into account any increase in expenses or wages that may require shifts in your overall plan.

Remember! A healthy, well-thought-out budget is key to financial freedom and comfort.

Financial Advice That Never Gets Old

General Trish Pigott 19 Jul

Looking for financial advice on your personal finances? Here are five timeless recommendations:

1. Start Investing Small and Early

Only around 5% of Canadians under 25 have a TFSA (Tax Free Savings Account), which means 95% have already missed out on seven years of compounded returns. Starting small could be as little as $100 month, and starting early means now! Invest what you can and don’t ever think that any amount is too small.

Investing $100 month at 5% for 47 years (age 18 to 65) will give you $68,754 more than someone who did the same starting from age 25.

2. Make More OR Spend Less?

Our financial advice is to do both, but there are limits on how much income you can generate and cutting back on expenses has a bigger impact on your bottom line. If you’re lucky, you may find some expenses you could easily do without, like that lightly used gym membership or seldom watched 200-channel cable package.

A part-time job or side hustle isn’t a bad idea, but you will spend more time working and less time enjoying life. Don’t forget that any extra income is fully taxable — you might need to earn $10 in order to get the same result as a $7 spending cut.

3. Re-Evaluate Your Wants and Needs

A 1200 square foot bungalow was the standard for most families in the early 1970’s. These days, houses are now over 2000 square feet on average and come with plenty of high-end finishes. Being able to live comfortably later in life will come from making smart spending decisions.

4. Understand Credit and Debt

131 months! That’s how long it takes to pay off a $1000 credit balance paying the minimum amount — Plus it will cost you almost $1000 more in interest charges! Many people carry a credit card balance and are blissfully unaware of just how much it is costing them each month.

The key is to be knowledgeable about your debt. Track what you owe and how much that debt is costing you. For example, refinance your mortgage or draw on home equity to pay off higher interest loans and credit cards.

5. Get Financially Literate

Managing your money has become more difficult as we have a lot more spending, saving, and investing options. But, we also have access to a lot more information and tools to help us. For example, diving into the real impact of those investment fees on your mutual funds (it’s a lot!) can easily be investigated online in just a few minutes.

Bank of Canada Increases Prime Rate Again

General Trish Pigott 14 Jul

Yesterday the Bank of Canada surprised all economists and financial industry professionals by an increase to the overnight target rate of 1.00%. This was in response to the continued rise of inflation across the country.  Most were only predicting an increase of 0.75%, so the 1.00% was higher than expected.

Here’s what you need to know about yesterday’s increase:

  • The Prime rate pertaining to mortgages and lines of credits will increase to 4.70%; most will be today or at the first of the month
  • Your discount off of your mortgage will still apply, meaning that if you have a mortgage at Prime -0.90%, your new rate would be 3.80% (4.70% – 0.90% = 3.80%)
  • For every $100,000 in mortgage amount, it will cost you an extra $55 per month
  • A Variable Rate or Adjustable Rate will determine if your payment changes when Prime does; call our office if you need help to clarify that
  • The Bank of Canada indicated that they are predicting we will see additional increases by the end of the year in order to combat inflation.  Until Canadians slow down on spending, whether it’s cars, houses, entertainment or shopping, the Bank of Canada will do what it can to curb spending. You need to budget and plan accordingly with your finances in the next 12-24 months
  • Avoid jumping to conclusions when you hear things in the media. We can do a full analysis of your mortgage if you reach out to us.  Please call us directly at 604-552-6190 or email trish@primexmortgages.com
  • There are a number of options that we can look at when deciding how to handle future rate increases, whether it is locking in, transferring your mortgage, extending your amortization or consolidating other debts

As we have said before, it is important that you do not panic! Let us help you work out the best strategy for your unique situation.

What to Look for During a Home Tour

General Trish Pigott 12 Jul

Have you found your dream home and can’t wait to check it out in person? Here are a few important things to look for when you go for a home tour.

  1. Odor: Unusual smells can indicate problems such as mold or mildew issues.
  2. Plumbing and Electrical: Check water pressure and electrical systems to ensure there is no erosion or exposed wires. You should also check for a properly functioning HVAC system, sealed water heater, etc.
  3. Noise: This can often be overlooked. Pay attention to any noises in the house, as well as the street and neighbourhood.
  4. Home Layout: Does the layout and function of the home suit your needs?
  5. Number of Rooms: Does the property have enough bathrooms and bedrooms?
  6. Wall and Flooring Condition: What is the condition of the walls and floors? Defects such as warping, cracks, watermarks, etc, can be indicative of larger issues.
  7. Additions or Updates: On occasion, you may go to view a home that was listed as having 2 bedrooms and 1 bathroom, only to find that it actually has an extra bathroom. As great as this might be for your needs, you’ll want to double-check that permits were pulled with the city. Construction done without permits can create issues when it comes to insurance coverage and potential structural headaches if not done professionally.

Remember, things like furniture, decor, wall or floor treatments, and fixtures can be easily updated. These are things that can be changed if the rest of the home suits your needs!

In addition to the above items, there are also a few specific questions you should be asking your realtor. These include:

  1. Is there a deadline for offers?
  2. Have any offers been made?
  3. Why are the sellers moving?
  4. What are the sellers’ preferred possession and completion dates?
  5. Do they have any concerns with the property?

It is important that you work with a professional to ensure that they guide you through the home buying process and find answers to all of the questions above. If you do not have a realtor that you are currently working with, we would be happy to refer you to someone in your area.

As always, we are here if you have any questions. Please reach out to us here or by calling 604-552-6190 or emailing support@primexmortgages.com.

3 Advantages of a Pre-Approval

General Trish Pigott 7 Jul

Mortgage pre-approval means that a lender has stated (in writing) that you qualify for a mortgage. They will specify the term, interest rate and amount you qualify for based on the documentation you submitted of your current income and credit history.

There are three benefits to getting a mortgage pre-approval:

1. It confirms the maximum amount you can afford to spend

People are always tempted to start their search at the top of their budget but it is important to remember that there will be additional fees. Closing costs can range from 1% to 4% of the purchase price. By factoring these into your budget, it can help you narrow down a home that is affordable and ensure future financial stability.

2. It can secure you an interest rate for 90-120 days while you shop for your new home

Getting pre-approved guarantees that the rate offered to you will be locked in from 90 to 120 days. This helps if interest rates rise while you are still shopping. However, if the rates decrease, you would be offered the lower rate.

3. It lets the seller know that securing financing should not be an issue

Lastly, having a pre-approval lets the seller know that you are able to make the purchase. This can be very helpful in competitive markets.

Once your pre-approval is in place, you’ll want to make sure that you do not jeopardize it. It is important that you don’t quit or change jobs, buy a new car, transfer large sums of money between accounts, leave bills unpaid or open up new credit cards.

If you have any questions or want to get your pre-approval started today, don’t hesitate to reach out to us at 604-552-6190 or by applying online here.

« First…56789…20…Last »