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 trish@primexmortgages.com! 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.

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

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.

In line with the Bank of Canada’s forecast, the economy rebounded sharply in the third quarter following the weak performance in Q2. Stats Canada announced this morning that GDP grew by a whopping 5.4% in Q3 following the downwardly revised 3.2% earlier in Q2. As pandemic restrictions phased out and businesses resumed normal operations, consumer spending accelerated, growing at a 17.9% annual rate. Expenditures on clothing (+26.8%) and footwear (+30.3%) surpassed pre-pandemic spending. Expenditures on services rose 27.8%, led by a jump in accommodation and food services sales. Transport services (+40.3%), recreation and culture services (+26.1%), food, beverages and accommodation services (+29.0%), and personal grooming services (+35.8%) all showed significant increases.

Exports rebounded after a sharp decline in Q2. Business investment barely changed, hampered by supply chain disruptions.

Consumers remained flush with cash as incomes grew, boosted by wage gains and government transfer payments. The household saving rate fell from 14.0% in the second quarter to 11.0% in the third quarter, still strong from a historical perspective. Although spending surpassed income this quarter, this was the sixth consecutive quarter with a double-digit savings rate. The rate also remained higher than in the pre-pandemic period. The household savings rate is aggregated across all income brackets. In general, savings rates rise with income.

Housing Investment Declines

After four consecutive quarters of solid growth, new construction and renovations fell in the third quarter. The 5.2% (not annualized) drop in new construction was the most significant drop since the second quarter of 2009. The decrease in investments for the new construction of detached and multiple-unit dwellings was substantial, especially in Newfoundland and Labrador and Prince Edward Island. Nationally, there were $96.3 billion additions to the stock of homes in the third quarter.

Housing Investment in New Construction and Renovations

Ownership transfer costs (-10.0%) fell for the second consecutive quarter as activity in the resale market slowed. The decrease was widespread, and only Newfoundland and Labrador and Yukon posted increased ownership transfer costs.

The remarkable accumulation of residential mortgage liabilities in the previous quarter continued, with households adding $38 billion in the third quarter, more than double that two years earlier.

Bottom Line

Today’s release is, in some respects, ‘ancient history.’ Monthly GDP by industry data released this morning for September showed a modest uptick of 0.1%. And preliminary information indicates that real GDP rebounded in October, up 0.8% with increases in most sectors. Manufacturing led the growth after contracting in September due in part to the effects of the semiconductor shortage. Other notable increases were in the public sector, construction, finance and insurance, and transportation and warehousing.

All in, GDP in Canada is still below its pre-pandemic level. And uncertainty has increased with the announcement of the new Omicron variant. Traders are betting that the Bank of Canada will begin hiking the key overnight rate by April of next year and markets are currently pricing in five rate hikes in the next 12 months. Inflation remains a troubling concern, and Fed Chairman Jay Powell said today in testimony before Congress that he would accelerate his plan to taper all bond purchasing. In addition, according to Bloomberg News, “Powell also told a Senate banking committee that it’s time to stop using the word “transitory” to describe inflation”.

Article by:

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca

Here we are once again at a cross road to either lock in or remain in your ultra low variable rate mortgage.

Basically we are sitting at all time historical lows with mortgage rates. We have never seen the Bank of Canada reduce rates to this level which in turn affects the Prime rates which is what the banks charge. We have also never seen fixed rates (driven by the bond market) as low as they have been for the past 18 months, however they have already moved back to pre-pandemic levels. The media tends to make out that the sky is falling in situations like this, however it is far from that. Any rate under 3% is phenomenal.

As inflation has risen, the Bank of Canada has announced that they are going to slowly start to bring rates back to where they were pre COVID. The start of the pandemic forced them to reduce rates in order to keep the economy moving. Analysts are predicting (remember no one has a crystal ball, not even your best friend, neighbor or coworker) that we will see the Bank of Canada start to raise rates anywhere from early to mid (most predicting mid) 2022.

When that starts to happen, that will affect Variable Rate Mortgage holders and rates generally go up in .25% increments. If the Bank moves too quickly, it would have another negative effect on the economy which they try to avoid. We are anticipating that the rates will return to a more normal level in the next 24 months which allows home buyers and home owners to take advantage of ultra low rates until that time if they remain in a variable rate.

When choosing between a fixed and variable rate in today’s market, I always suggest taking a mortgage that will not keep you up at night. For those that stress at the sheer thought of a possible rate increase, perhaps a fixed rate mortgage is better suited. For those that want to take advantage of the extreme savings and pay your mortgage off sooner, a variable rate may be a better choice. We also look at the down payment amount and equity in the home as well as cash flow. If someone can withstand the payment increases that may come with a variable rate, then it may be a good choice. If someone is living paycheck to paycheck and barely qualifying, a fixed rate mortgage may allow a bit more security knowing that your payment will not change over the next 5 years.

My best advice is to take a mortgage that allows you to sleep at night, whether due to knowing your payments won’t change, or because you are paying your mortgage off 10x faster in a variable rate. There is really no right or wrong answer, it’s about the borrower’s comfort, and remember, no two borrowers are the same. More than anything, let me help reduce your stress over this process and reach out so I can look at your personal situation and help you make the best choice.

The Bank of Canada surprised markets on Oct. 27th with a more hawkish stance on inflation and the economy. The Bank released its widely anticipated October Monetary Policy Report (MPR) in which its key messages were:

* The Canadian economy has accelerated robustly in the second half.
* Labour markets have improved, especially in the hard-to-distance sectors. Despite continuing slack, many businesses can’t find appropriate workers quickly enough to meet demand.
* Disruptions to global supply chains have worsened, limiting production and leading to both higher costs and higher prices.
* The output gap is narrower than projected in July. The Bank now expects slack to be absorbed in Q2 or Q3 of next year, one quarter sooner than earlier projected.
* Given persistent supply constraints and the increase in energy prices, the Bank expects inflation to stay above the control range for longer than previously anticipated before easing back to close to the 2 percent target by late 2022.
* The Bank views the risks around this inflation outlook as roughly balanced.

Bottom Line

Since the Bank last met in early September, the Government of Canada five-year bond yield has spiked from .80% by a whopping 60 basis points to a 1.40%. That is an incredible 75% rise. A year ago, the five-year bond yield was only .37%.

The Bank believes the surge in inflation is transitory, but that does not mean it will be brief. CPI inflation was 4.4% y/y in September and is expected to rise and average around 4.75% over the remainder of this year. Macklem now believes inflation will remain above the Bank’s 1%-to-3% target band until late next year.

There is also a good deal of uncertainty about the size of the slack in the economy. This is always hard to measure, especially now when unemployment remains elevated at 6.9%, while sectors such as restaurants and retail are fraught with labour shortages. Structural changes in the labour force are afoot. Many former restaurant employees have moved on or are reluctant to return to jobs where virus contagion risks and poor working conditions. There was also a surge in early retirements during the pandemic and a dearth of new immigrants.
Concerning housing, the MPR says the following: “Housing market activity is anticipated to remain elevated over 2022 and 2023 after having moderated from recent record-high levels. Increased immigration, solid income levels and favourable financing conditions will support ongoing strength. New construction will add to the supply of houses and should help soften house price growth”.

This article was written and provided by our own Chief Economist Dr. Sherry Cooper

CLICK HERE to read the full article and of course if you want to chat more about it, please call us at 604-552-6190.