Click Your Mortgage Blog

We are feeling the January 1st Mortgage Rule Changes

Late 2017, the government announced that they would be enforcing stricter mortgage rules across the board for Canadians. Until this time, only borrowers with less than 20% down were subject to this tighter qualification process. The new rule goes as such: All borrowers with less than 20% down (insured or insurable deals) must qualify at a rate of 5.14% over a maximum of 25 years. All borrowers with greater than 20% down, must qualify at the greater of the 5.14% or 2% higher than the contract rate (or more simply, the mortgage rate they are offered). The result of these stricter rules? Borrowers are qualifying for almost 20% less of a mortgage they would have prior to January 1, 2018. Having now pushed through the first quarter of 2018, we are noticing the impact these rule changes are having on potential borrowers. If you are thinking about purchasing or refinancing this year, or, if you have a mortgage coming to its maturity, be sure to reach out now to discuss your options....

8 Things to Avoid After a Mortgage Preapproval

You have word from your agent letting you know you are pre-approved for a mortgage. This is an exciting time as you are well on your way to purchasing a new home. A preapproval is usually good for 60 to 120 days depending on the lender. If you do not purchase a home within this time frame, the lender may require you to get preapproved again. Therefore, it is important to continue the great behavior that got you the preapproval, in the first place. Below are eight tips to help keep your financial situation preapproval ready. 1. Don’t apply for new credit Some lenders require the mortgage broker to do another credit check before they give final approval. If the credit check reveals new credit inquiries, they may want you to verify that you have not taken on any new debt which will delay the approval. Taking on any new debt can impact your credit score, so it is best not to take the risk. 2. Don’t make any major purchases If your credit report does get pulled again and it shows you are carrying a balance from making some large purchases, this may affect your approval status. Buying furniture, appliances or renovation material is fine if you have extra cash but putting it on your credit card will increase your debt-servicing ratio which is one of the guidelines used for qualifying a mortgage. This can reduce the loan amount and put your home you made an offer on, out of your price range. 3. Don’t pay off your debt Paying off debt is usually a good idea, but...

Qualifying for a Mortgage Just Got Tighter

Yesterday, Finance Minister, Bill Morneau, announced new rules that serve as another attempt to slow the housing market. At this point it has only addressed buyers looking to purchase with less than a 20% down payment. Here are the details: As of October 17th, all mortgages, regardless of the term, will need to be qualified at 4.64%. This is called the benchmark rate. The government essentially is only allowing lending up to what a client can afford if rates were at 4.64%, even if their interest rate is much lower. 1-4 year terms, and variable rate terms have always qualified at the benchmark rate, but now the 5 year term that most buyers would take with less than 20% down is facing the same scrutiny. Important to Know: Clients who already have accepted offers with a firm mortgage approval prior to Oct 17th are exempt from this new qualifying rate, as long as the completion date is prior to March 1, 2017. They will still have to pay the insurance premiums and they have not changed. A maximum amortization of 25 years still remains in effect. Action to Take: If you have an accepted offer on a home, make sure you have a mortgage approval prior to Oct 17th. If you are in the market and shopping, try to get your offer accepted in the next few days in order to qualify as per current guidelines. If you are shopping and likely won’t have an accepted offer by Oct 17th,  call your mortgage broker to find out what you qualify for based on the new...

Barrie Home Sales at a Record High in March 2016

Barrie, Ontario is breaking records when it comes to home sales both by unit and price. Barrie and are residential property sales recorded 553 units in March 2016- the highest March sales recorded to date, and a 22.6 per cent from March 2015. The second highest sales for March occurred back in 2010, when 468 units were sold. A few more stats:   The year-to-date average price figure for homes sold within the City of Barrie in 2016 was $379,227. This figure is up 17.2 per cent compared to the first quarter of 2015. The year-to-date average price figure for the surrounding areas in 2016 was $430,407. This figure is up 11.8 per cent compared to the first quarter of 2015. The overall supply of homes available for sale is currently trending near the lowest levels on record. Active residential listings on MLS was at 921 units at the end of March 2016, down 25.4 per cent from last year. Mortgage interest rates have dropped below 2.50% for a 5 year fixed in the last couple of weeks which is the lowest we’ve seen. If you’ve been wanting to do some home renovations, or pay off some higher interest debts (car loans, credit cards, lines of credit, etc.) Talk to one of us about a refinance and take advantage of the low rates and equity in your home.   Home sales information from the Canadian Real Estate...

Purchasing a Home over $500,000? 5% Down Doesn’t Cut it Anymore

Starting February 15, 2016, homes purchased for greater than $500,000 will require a little more down payment than the current 5% requirement. Under the new rules, 10% down is required on the purchase amount in excess of $500,000, while you would still only be required to have 5% down on the first $500,000. For example, under the current rules, if you were purchasing a home for $650,000, you would have to put a minimum of 5% down ($32,500). Under the new rules, on the same house you would have to put a minimum of 5% down on the first $500,000 ($25,000) plus 10% down on the remaining $150,000, ($15,000) for a total down payment of $40,000. The thought process behind this change in policy is to ensure that those purchasing homes over $500,000 have ample equity in their homes to protect themselves in a market where house prices are somewhat...

Mortgage Default Insurance Premium Rising June 1, 2015

In the market to purchase? Have less than 10% to put down? You will want to have that offer on the home accepted in the next couple weeks. Earlier this year, CMHC announced its premiums would be increasing by approximately 15% as of June 1.  This is the second time these premiums have been increased in the last 13 months. Canada’s other default insurance companies- Genworth and Canada Guaranty-are following suit with the premium increases. Currently, if you purchase a home with 5% down, you are paying an insurance premium of 3.15% to do so. As of June 1, this figure will increase to 3.6%. Currently, if you purchase a $400,000 home with 5% down, your default insurance premium is $11,970. As of June 1, the same scenario will cost you $13,680. The difference? $1710. Some people are pointing out that the increase isn’t really that much. And on this scenario, or a lower priced home, their statement is valid. And with this scenario, on a monthly basis- they may be right in saying so too. The new scenario will cost just $7.82 more each month at the current 5 year fixed rate of 2.69%. Like your mortgage payments, your default insurance premium is amortized over 25 years. However, it’s the big picture people tend to forget. At the end of this 5 year mortgage term, for example, the new scenario has paid an additional $469.20 in mortgage payments, and has paid the mortgage down $1453.01 LESS than the current scenario. The actual difference looks more like $1922. All mortgage commitments made prior to June 1, regardless of the closing date, will remain at...

Is Your New Years Resolution to Pay Down Debt?

The first week of 2015 has come and gone.  Statistically, 25% of people who made a New Years Resolution have now given up on it. If you’re one of many people who made the resolution to pay down your debt- you’re not alone. If you currently own your home, refinancing your mortgage to consolidate your debt in to one easy payment is a great way to get a handle on it, especially with today’s low rates. With the money you save by not paying 18-24% interest on your credit cards, you’ll be on your way to becoming debt free. Here’s one example: John and Cindy currently owe $252,795 on their home that is worth $355,000. They also owe $18,000 on a credit card that they have maxed out, and besides it starting to hurt their credit rating, they are paying interest on that money at the credit card’s rate of 19.99%! They are currently paying a minimum of $295 each month in interest on this credit card and are not paying down any principal. For the purpose of this example, we will use the same mortgage rate and amortization on their existing mortgage and the new mortgage to show you only the difference that consolidating their debt makes. Using 2.89% on a 5 year fixed mortgage amortized over 30 years, refinancing John and Cindy’s current mortgage (which has 18 months remaining on it) to pay off the $18,000 credit card, will bring their principal balance from $252,795 to $270,795, and will actually bring their monthly mortgage payment down from $1136.48/month to $1123.18/month. Why down you ask? Because their currently monthly payment is based on $274,000 that they borrowed 3.5 years ago. But since no...

Bank of Canada Qualifying Rate Drops to All Time Low

Qualifying for a variable, or 1-4 year fixed rate mortgage has become easier this week. The qualifying rate has dropped to its lowest ever: 4.79% This decrease gives borrowers who may have not previously qualfiied for a variable rate mortgage, or a term of less than 5 years, more flexability in choosing their mortgage type and term. High Ratio mortgages, as well as some conventional mortgages with variable rates or fixed terms under five years, require applicants to qualify at the posted, higher rate (most recently 4.99%)  in order to ensure borrowers can afford their mortgage payments in the event that rates go...

Become Debt Free in 2014

Is it your goal to pay off your debt this year? Or save for a down payment on a home? Here are some tips to help you do just that.   1. Set goals. Make sure they are specific. For example, you may say, “my goal is to pay down my VISA by $10,000 this year.” or, “My goal is to save $15,000 for the down payment on a house”. 2. Find money you already have. Make adjustments to your current expenses: lower your cable package, turn off lights and unplug appliances when they’re not in use, try and reduce your water consumption, keep your home slightly cooler than usual, eat foods that you have in your cupboards and freezer rather than buying groceries. These types of changes can save you a couple hundred dollars in just one month! 3. Make your meals at home! Eating at drinking at restaurants is one of the biggest expenses you can cut out to help save money. 4. Sell items you do not need and clothing you have not worn in the past year. 5. Earn some extra cash. If you can, take another shift at work. Work overtime, freelance, do odd jobs for people, or get another part time job. Even making $100 more per week could have you attaining your financial goals. 6. Don’t cut up or throw out your credit cards, but don’t keep them in your wallet. A handy trick is to put your credit cards in a Tupperware container and fill it with water. Then, place the container in the freezer. You’ll be far less inclined to make purchases...

June’s Quiz Question

Q: Accelerated Bi-Weekly Payments will pay off your mortgage how many months quicker than if you were to pay your mortgage Monthly? (based on a 25 year amortization)   Add your answer below! All correct answers will be entered into a draw for a $20 Tim Card! Good...

Flashback to 1969… Is housing really more unaffordable today?

We keep hearing it on the news, from government, economists and banks… housing is more unaffordable today than it was for previous generations.  Is it really as much as people claim? We thought we would take a look and see at what the differences are. In 1969 the average household income was hovering at around $8000.00 per year.  Most were single income and if you made $10,000.00 a year, you were considered to be well paid.  A new car would cost you anywhere from $600.00 to as much as $25,000.00 depending on the make and model.  A quart of milk was about 10 cents, a loaf of bread the same. If you wanted to buy a single family home in Toronto, you would be paying anywhere from $25,000.00 to as much as $100,000.00 (if you wanted a mansion).  Today that seems like a steal of a deal, but let’s take a look at some of the differences between then and now… In 2001 the average size of a home was about 1700 square feet, 58% had 3 or more bedrooms, 57% have one and a half or more bathrooms.  In 2001, 76 percent of homes had a washing machine, 73 percent had a dryer, 56 percent had a dishwasher, and 44 percent had a kitchen sink garbage disposal; 58 percent of homes had a garage, and 80 percent had an outdoor deck or patio. In 2001, 82 percent of homes had some form of air-conditioning and 55 percent had central air Compare that to 1969… the average size of the home was LESS than 1200 square feet.  Fewer than...

Don’t Lose Out on the Home You Love Over a Couple Coffees

I have seen purchases of homes fall apart over a couple thousand dollars, and with today’s rates that amounts to just a few dollars a month- or, as I like to put it: a couple of coffees. Here’s an example: Mr. and Mrs. X put an offer of $270,000 on a home that was listed at $279,900. Their offer was countered back at $277,900. Mr. and Mrs. X signed back at $274,000. They agreed that this the absolute most they were willing to pay for this home, even though it had most of what they were looking for, was in their desired neighbourhood, and they only had 2 months until having to move from their current home. Unfortunately for Mr. and Mrs. X, the sellers came back with $276,000, $2000 more than their final offer. Without further consideration, Mr. and Mrs. X decided to walk away from the purchase. They headed to a local coffee shop, tired and frustrated. Mr. X purchased a coffee for himself and a latte for his wife, and sat down. They were upset that their offer of $274,000 wasn’t accepted, considering they had even agreed to the seller’s desired closing date. “I wasn’t going to pay $2000 more for that house”, Mr. X told his wife, “I can think of a lot more things I’d like to spend that money on.” He took a sip of his coffee. Mrs. X agreed. “Maybe we’ll just have to rent until we find another home.” But what Mr. and Mrs. X didn’t realize, is that with their 20% down payment, the monthly mortgage payment on a purchase...

Stop Paying Rent!

Are you still renting? If so, reading this may change your mind. According to the October 2012 Rental Market Report, the average rent for a single detached home in Barrie is $1281/month. In comparison, a mortgage on a $240,000 home with 5% down will cost you $1095/month. Add in your property taxes, (we’ll estimate them to be $2600/year) and you can own that home for just over $1300/month. Even more reason to buy, at the end of the first 5 years, you will have paid down your mortgage by $34,453! Perhaps you’re reading this and thinking to yourself, “I don’t have 5% to put down on a home, that’s why I have to rent”. WRONG! If your credit is good, you may qualify for a cash-back mortgage. What this means is the lender actually gives you the down payment in exchange for paying a premium on the interest rate. If you’re thinking about jumping into the housing market, now is a great time to do so! Begin by getting pre-approved for a mortgage to see what you qualify for, and then let the House Hunting commence....

3 Impactful 2013 Resolutions for Your Home

Whether it’s most important for you and your family to shrink your bills or reduce your carbon footprint, these resolutions are commendable. Here are some useful tips that can benefit ecological conservation, make more time for family, and lead to home harmonization. Use these simple strategies to reduce your carbon footprint and also save on energy costs for your family:                                                                                                                                                     Update lamps with high efficiency light bulbs and place them in corners as the light will then reflect off of the walls. Your ice dispenser increases your fridge’s energy consumption by as much as 20% whereas using old fashioned ice cube trays won’t. Have you ever considered using a faster spin cycle on your washing machine? The clothes will be drier at the end of the wash cycle and, therefore, take less time in the dryer: using less energy. These statements would imply that not using your appliances is more energy efficient, but this is not the case with dishwashers. One would think that hand washing would be better but, in fact, dishwashers use about 30% less water than hand washing. Just make sure you only run full loads! Do an inventory of your family’s material possessions, coordinate your family, and de-clutter your home. Take the time needed to go through each room of your house with some diligence and clear out items that you don’t use. Pay it forward by recycling and donating...

Why an RRSP Loan is Not a Bad Idea

Maximizing your annual RRSP contribution is a good way to build a secure retirement. But what’s more appealing is the benefit you see right now. Your contributions to your RRSP reduce your taxable income, and in turn, can save you from paying more income tax than you have to. Sounds pretty good, right? As we all know, it can be tough to come up with a lump sum of money if you haven’t made any contributions throughout the year. Most financial institutions offer an RRSP Loan. The interest rate on this type of loan varies, as does the amount you can borrow, but most allow a minimum loan amount of $5000 up to a maximum of about $50,000, and currently rates may be around 5%. RRSP loans are generally paid back in monthly installments over a term of 1 month – 5 years. Say your marginal tax rate is 20%. Borrowing $5000 for a term of 1 year at 5%  will save you $1000 in income tax, and will only cost you $136 to borrow over the term. What’s more is your RRSPs earn you interest as well. If you’re really smart, you’ll apply the $1000 in tax savings directly to your loan and reduce the time to pay off the loan from 1 year to 10 months, which in turn cuts back the cost of borrowing to about $105.  ...