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Canadians Reach Highest Debt Service Levels to Date

Chilliwack, BC – Alarming statistics were released stating that Canadians are paying the highest percentage of their income, towards debt. Although the headline may seem alarming our Chilliwack mortgage brokers are advising that it’s in fact not as frightening as it sounds.

Yes, Canadians will have less disposable income left to spend on life outside of servicing their debts. The difference is that a significant amount of that debt payment is going towards principal pay-down rather than interest. In the early 90’s over 95% of debt payments went towards interest, whereas now 50% of our debt payments are going towards interest – that’s a 45% decrease in the percentage of that payment going towards interest while the remaining 50% is going directly towards paying down the principal amount on said debt owed.

The percentage of our income has barely budged for servicing mortgage debt, in fact majority of the increase in debt has been obtained outside of residential mortgages.

When talking to consumers, it appears that the mortgage payment itself isn’t core of financial stress for home–owners. The culprit causing this overwhelming amount of debt really derives from car loans, credit cards and lines of credit.

We think it would be beneficial for the government to consider regulating these industries in the same way they regulate mortgage financing.

For more information check out our Facebook page for a video of our founding partner and licensed mortgage expert, Jordi Browne – as he sheds some light on the topic.

 

Elections & Changes For Canadian Home Buyers

With elections six months away, Canadian home buyers are hopeful for a solution to address the housing affordability issue and so are we. It’s undeniable that certain rule changes have made housing unaffordable for several home buyers across Canada, but these changes not only affect those trying to buy, they also affect Canadians who have been home owners for several years.

Often referred to as the “stress test”, home buyers and home owners are required to qualify for a mortgage on the greater of either: 2% above their contracted rate or the posted benchmark rate. This mortgage stress test drastically limits funds available to those trying to buy, refinance and even renew their homes. It is likely that our government will take action to hopefully make housing affordable again, we just don’t know how beneficial those changes will be to Canadians.

There are rumors of a proposed change that could cost Canadians an extra $40,000 of interest on the average $400,000 – here is our take on it.

Government Introduces a Real Blunder of a Program for Home Buyers’

Chilliwack, BC – Here are my thoughts regarding the governments offer of an interest free loan in exchange for a percentage of ownership in your home.

On January 17, 2017 the BC liberals introduced something similar called the BC Home Partnership Program. The program offered to match home buyers’ down-payment costs with an interest free loan for the first five years. When NDP took power back in March of 2018, they removed the program stating that,

            “When the program was first introduced, it was anticipated it would provide 42,000 loans over a three-year period, however, as of January 31, 2018, there were fewer than 3,000 loans approved.”

While the program sounded advantageous and enticing, popularity was minimal simply due to an unachievable list of requirements and restrictions. These restrictions filtered several prospective buyers wanting to part-take in the program. In addition, the return was not equivalent when comparing to the hoops Canadian home buyers needed to jump through. Furthermore, lenders reacted to the program by putting a repayment factor on the interest free loan that hindered the initial benefit of not having to make payments for the first five years.

Moving forward, I predict that we will have even fewer loans approved as the number of insured mortgages in addition to the CMHC incentive, would be capped using a formula (4X your annual income up to a max of $480,000). In simpler terms, Fraser Valley home buyers making $60,000 a year, would qualify for a $240,000 purchase (that really doesn’t get you a whole lot).

We’re not yet certain as to how this will be implemented, but if there is a repayment factor attached to the loan, it will have very little impact on helping Canadians get into the housing market.

At this point I would not be surprised if there is further action taken by CMHC, allowing for 30-year amortizations for those that have less than 20% down-payment. I personally think this is a terrible idea, sure your monthly payment might be a few dollars less, but it ultimately extends the life of the loan and increases interest over time.

Should they proceed with the extended amortization strategy, I would expect it to take place closer to elections in an attempt to try and leverage themselves.

If the government is concerned about helping Canadians get into the housing market, they should consider lowering the stress test rate.

For more information on the 2019 Federal Budget, visit: https://www.theglobeandmail.com/politics/article-federal-budget-2019-highlights-10-things-you-need-to-know/

Do you qualify to buy a home? Give our team to find out 604.615.1315

BC Budget Speculation, Changes for Home Buyers

Chilliwack BC, The BC budget is set to be released in just a few days and as always, there are speculators weighing in on the changes we’re expected to see and where exactly we expect funds to be allocated. Housing affordability is a topical subject of course, as we’ve seen the rise and fall of transactions over the last few years and the impact these rules and regulations have had on home buyers and even home owners. These changes may consist of altering home buying programs and mortgage products, along with tax benefits for seniors, pharmacare and job training. Here is a more detailed look at those predictions:

Longer Mortgage Amortizations: Re-introducing 30-year amortizations for those who have less than a 20% down-payment.

Home Buyers Plan: Increasing the RRSP withdraw from $25,000 to $35,000 for first time home buyers without penalties with the stipulation that all moneys are repaid within 15 years.

Tax Benefits for Seniors: Increasing withdraw flexibility from RRIF’s by raising the age requirement (currently 71 years of age) as Canadians seem to be living and working longer. Consideration to increase the income threshold for GIS has also been mentioned. As it stands, qualification is limited to a max of $18,240

Pharmacare: Potentially lower the cost of prescription drugs.

Job Training: Businesses have claimed to be struggling to find the right fit along with the appropriate skill set to fill job vacancies. This shortage is apparent in the tech area and other industries that require skilled trades. Proposal to expand tax credits that allow tax payers write off a portion of the cost that comes along with training programs and further education.

For more information regarding the speculation of the BC budget: https://globalnews.ca/news/5051109/federal-budget-2019-canada-preview/

The Truth Behind Best Interest Rates

Chilliwack, BC – When it comes to getting a mortgage for a home purchase, refinancing to consolidate debt or simply renewing your mortgage, most of us are interested in securing the best interest rate. You’ll often see websites such as rate hub, offer rates that beat just about anything you’ve been quoted by your bank or mortgage broker, but did you know that 4 out of 5 people do not qualify for the rate they saw advertised? That incredibly low interest rate you saw online, will likely come with a detailed list of restrictions.

Here are a few common mortgage scenarios and the percent you can expect to add onto that “best interest rate”.

 

The above figures are estimates and subject to change without notice E&O, O.A.C.

Market Update – Interest Rate Increase Oct. 24, 2018

We’re not sure about everyone else, but does it not feel like sunshine and 30-degree weather was yesterday? Is there anyone else wondering how it’s already mid October!? We are 16 days away from Halloween and Christmas is around the corner. The organized individuals of the world have probably started shopping however, there is something to be said about those who scramble last minute – we’re either mildly insane for doing so OR is there a sense of achievement attached if you manage to pull it off? It’s almost the same level of pride you experience when you successfully carry your groceries from the car to the house in one trip and who doesn’t appreciate a one tripper?

Speaking of scrambling last minute, let’s talk interest rates. While there is no need to panic, in just over a week from now the BoC should be increasing the benchmark rate a quarter percent on October 24th, followed by another potential increase in January 2019. You should speak with a mortgage consultant if you are 3 or more years into your mortgage term, in a variable rate mortgage or have considered refinancing, now would be the time to act.

There is a lot of speculation when it comes to the future of interest rates, some economists are predicting rates to reach as high as 6% by 2020 but it’s near impossible to predict such thing. While this may seem drastic to some (by some we’re referring to the millennial’s of the world who never experienced 13%-20% interest rates in the 80’s) it’s important to remember that the rates we have now are still considered historically low.

We are starting to see the affects of the new B20 mortgage regulations, introduced over the last two years. Together with interest rate increases, the real estate market in Abbotsford, Mission and Chilliwack have slowed down. Reports show a 33.2% decrease from the same month last year in residential unit sales. The average home price in BC is down 1.1% year-over-year, averaging the detached home price at $685,749.

If you’re interested in accessing the equity in your home, you might want to consider doing it sooner than later. Chances of this slow down continuing are relatively high especially with increasing rates in the forecast, it’s likely that these changes will result in further depreciation.

The slow down we’re starting to experience could open a window for interested home buyers but given all the recent regulatory changes it’s more important now than ever to work with a seasoned team of mortgage advisors who are familiar with the new requirements and know how to work around them.

If you have any questions about how the interest rate increase might affect your current mortgage, please feel free to contact our team. We offer complimentary mortgage reviews and will work with you to secure the best mortgage product suited to your financial goals and needs.

 

Important Update – Last Chance to Traditionally Qualify

With summer in full swing, we hope you are all enjoying the weather just as much as we are. Although our team has been remarkably busy, our families have managed to plan a getaway up to the cabin that we’re very much so looking forward to, especially considering the close call we encountered. Last year the forest fires burned their way right up to our front door on Green Lake, miraculously our cabin managed to survive.  It’s been 2 years since our last visit and to celebrate it’s survival, we plan on making this a trip to remember.

While this summer has been busier than usual, we believe it’s about to get even busier. Tomorrow, the Bank of Canada is going to make another rate announcement and if I was a betting man (which I am) I would say rates are going up. In addition to the rate increase, rumor has it ALL of our lenders will be applying the “Stress Test” within the next 90 days.

Earlier this year, the federal Government implemented a new policy which required lenders to qualify clients at 2% above their contract rate, this new rule reduces borrowing power as much as 20%.

Up until this point we were fortunate enough to have small group of lenders who were not required to follow these guidelines, which in return made it easier to qualify for a mortgage. Now there are rumblings that these two institutions will follow suit shortly and also abide by the new policy, ultimately decreasing the mortgage amount you’d qualify for. 

If you are considering any financing in the future you might want to to consider pushing that time line up to ensure you still qualify.