This is the first of a two-part series and is one of the most important messages we have written to date.
Regulations governing mortgage (tightening) lending rules have already had a major impact on qualifying for a mortgage in the high ratio insured sector, that is, making it more difficult. But they are not done, not by a longshot. The changes cover both purchases and refinances.
Buckle your seat belts folks. The government is proposing to further TIGHTEN ALL MORTGAGES by including conventional low ratio uninsured mortgages which means the entire mortgage market.
The proposal will require Canadians with more than 20% equity in their homes to qualify at 4.84% versus current contract rates. In other words, instead of qualifying today based on 2.84%, you will have to qualify at a rate some 70.4% higher.
Why is this happening now when the real estate market has cooled, employment levels are high, inflation is very low and when mortgage defaults are not even on the radar screen? Everything is now more in balance, previous tightening has worked and there is no reason to go further.
This chart illustrates today’s status quo relative to a current mortgage qualification and what it would look like post further tightening.

The proposed changes can and likely will (as in past) be issued without advance notice and at any time and will hurt everyone, especially those on fixed and single incomes and for whom it is already more difficult.
The government is attacking the wrong kind of (good) low interest debt and is in fact forcing Canadians to take high interest options such as lines of credit, credit cards and consumer loans all of which put people (in harms way) and on the proverbial ‘slippery slope’.
Does any of this make any sense to you? Us neither. So there is something or somebody else behind this, right? We think so, and the only other possibility (culprit) is the big banks who wield tremendous power with the ability to influence government and regulatory bodies, bodies by the way that were (past tense) intended to protect the consumer.
What happened to the uproar several months back about unfair and predatory bank business practices that was so widely reported by the media? Somehow, someway bank scandals always seems to disappear quietly into the night don’t they?
Moreover, speaking of bank dominance, how did they get away (virtually unnoticed) with recrafting a basic traditional mortgage into a ‘Collateral’ mortgage which secures everything a customer has with the bank, gives the bank the right to increase rates on all instruments at its’ sole discretion, as well as substantial control over your financial affairs with them. Worst of all, consumers are not made aware of
any of the potential consequences. Heck, in truth, it is no longer a mortgage at all, it’s a revolving line of credit facility.
Please don’t miss next week’s article with more specifics about who (and how you) will be affected. If you have any (bad) high interest debt, NOW IS THE TIME TO GET RID OF IT before the window of opportunity closes.
We are on your side and our role is to inform, educate, advise and protect you. I would venture to say, no one else comes close! Please speak to your spouse, family and friends and make them aware of what is coming!

This is the second part of this two-part series on the impact of government intervention designed to make mortgage qualification much more difficult. The proposals if put into effect are entirely unnecessary since the real estate and mortgage markets have already contracted. MOST IMPORTANTLY the proposed changes will dramatically affect everyone.
Affordability will decrease by over 20% as you will need to qualify based on a rate 200 basis points or two per cent above the contract or commitment rate. Using current rates of 2.89% you will need to debt service using 4.89%.
Let’s say you qualify today for a $500,000 purchase price with 20% ($100,000) down today and a $400K mortgage. The new regulations will qualify you for a maximum $320,000 mortgage only and you will be required to make a down payment of $180,000 or $80,000 higher. If you cannot come up with $180,000 down, you will need to lower your purchase price expectation to $420,000 from $500,000. To repeat, this regulation change will apply to everyone.
THE IMPACT WILL BE EXTREMELY SIGNIFICANT since it will affect all mortgages not just purchases including refinances.
The result will mean fewer home purchases, purchases at lower prices and fewer refinances. Approvals of refinance mortgages will drop dramatically as well, forcing people into second mortgages, higher interest lines of credit, loans and credit card borrowing.
Single income households (one spouse working), households with worrisome credit card debt, single parents, retirees and the disabled on fixed incomes will be impacted the most and either qualify for much less or not at all. Some will also be forced to sell their homes longer term.
In short, the proposed new changes will hurt every one without a doubt.
In the bigger scheme, the real estate market will be impacted very negatively.
The new restrictions can and likely will be introduced (like last time) without warning or at least with very short notice.
We apologize for being the bearer of such alarming news, however we are compelled to warn and inform Canadians so that you can act before it is too late.
PLEASE CALL US AS SOON AS POSSIBLE to make an appointment to take care of your needs and PLEASE SPREAD THIS TO ALL YOU KNOW WHO INTEND TO PURCHASE OR REFINANCE. THANK YOU.

Living in Centre Wellington today, you have likely either met new people in the community that have ‘migrated’ out of the GTA or other areas in Southern Ontario where real estate values have exploded, or you know people that are ‘migrating’ out of CW to less populated and less expensive areas, due to rapid growth and changes to our local communities. In fact, it’s been cited that the population of CW could explode to up to 100,000 within the next 15 years!!

In a nutshell, here are the top 3 reasons we are seeing for the current migration trend.

Number 1:  The cost of home ownership has become unattainable for many first time buyers in urban and suburban areas. There’s no doubt about it, the cost of real estate in Centre Wellington offers ‘better bang for your buck’ and it’s all about perspective. and this trend is affecting us all in many ways. To someone paying rent in excess of $3000/mo for an 800 sqft condo in downtown Toronto, a price tag of $500,000 for a house in Fergus is very appealing and actually works out to be less expensive on a monthly basis… plus, owning builds equity. (5% down of a $500K purchase price yields a mortgage payment of approximately $2100/mo + taxes & utilities = shelter expenses of about $2700/mo). For those that have the ability to work from home, commute a few days per week, or change jobs to something more local, this is a very attractive option.

Number 2:  A desire for an improved quality of life for families is driving people to more rural areas. Let’s face it, raising kids in heavily populated urban areas often comes with many limitations. Lack of personal dwelling space, competitive and limited access to extra-circular programs for kids, strict school catchments, etc can be difficult for families. Smaller communities are appealing for many reasons, and CW is certainly attracting many families. There are several reasons why year after year it’s continuously ranked amongst the most desirable places to live in Canada.

Number 3:  Many folks are cashing out, moving to more remote areas and retiring. We are seeing a trend of cash purchases in the CW area, resulting in people living mortgage-free, and often with a nest egg derived from their real estate profit.

These trends don’t only apply for people moving into Centre Wellington; they also mirror the reasons many are moving out of CW as well. Everywhere, first-time buyers are being pushed out by high prices, especially the ‘stress test’… in fact, the benchmark qualifying rate for high-ratio mortgages just climbed from 4.64% to 4.84% without warning. Growth in CW comes with increased density and congestion. For those averse to this, the desire for space and solitude is driving them further away as well.

Change is inevitable and it’s constant. If you’re thinking of making a move, contact us to explore your financial options. We’re here to help!

The rent-to-own concept soared in popularity several years ago. Recently, we’ve had many rent-to-owners who entered into contracts 3-5 years ago coming to us for help.

When properly executed, this type of arrangement can be a wonderful thing. For renters who aim to become owners, yet need time to repair credit, establish consistent income or acquire a down payment, this arrangement affords them that time. For owners of properties who experience difficulties selling for the price they want, this solution allows them to earn income from quality renters with the end goal of selling for a pre-negotiated higher price than they could sell for at the time the agreement is signed. Most rent-to-own contracts come with a 3-5 year term.

The exponential increase in market values has skewed the mutual benefits of the rent-to-own arrangements that were conceived of 3+ years ago. We are seeing the effects first-hand.

For instance, in 2014, Ryan and Janine owned a home in Elora that they tried to sell for $300,000. At that time, they had trouble finding buyers, but they knew the house was in a great location and would only appreciate in value. They decided to hang onto it and rent it out, with the option to own at the end of the term. This attracted several quality renters and ultimately, they selected a young couple that needed time to build solid income and down payment. Knowing they had some ‘skin in the game’, they offered a deal whereby Mark and Mandy would rent for three years for $2000/month. Over the next 3 years, $500 from the $2000 monthly rent was to go towards their down payment. (This equates to $18,000 which is roughly 5% of the purchase price, the minimum entry to home-ownership). So, instead of purchasing the home for $355K, Mark & Mandy’s purchase price would be $337,000 in 2017.

Three years ago, a return of $55K, or 18% seemed like a great return on investment to owners Ryan and Janine. The renters, Mark and Mandy were thrilled that a portion of their monthly rent was helping them build equity and a “down payment” over the next three years.

Fast-forward to present day, 2017. Enter, the rent-to-own conundrum as we’ve never seen it. Both couples know that property values have risen exponentially. Mark and Mandy want desperately to make good on the purchase. Ryan and Janine know they can sell for more than the pre-negotiated $337K.

When renter Mark contacted us for help to execute on the purchase, the first question we asked was “where is the down payment coming from”? Apparently, the owners didn’t hold onto the down payment portion of the rent. It was not placed in trust with a lawyer, and it could not be produced to the renters. After three years of paying inflated rent, Mark and Mandy could not produce a down payment to buy this home. They were devastated at the thought of losing their home and having to try to rent elsewhere. (This is happening all too often).

We came up with a solution for Mark and Mandy, which enabled them to stay put and graduate from renters to owners. And, they happen to be sitting on over $130K in equity, as their home was appraised at $475,000!

If you or anyone you know is in a rent-to-own, or considering getting into one, contact us ASAP.

We’ve all needed a little help in our lives and those of us who have been fortunate to receive it are (or at least should be) forever grateful. Helping a child, sibling or parent by co-signing for a mortgage or other type of loan can change the trajectory of your loved one’s life. However, it doesn’t come without risks or possible consequences. Before you co-sign, be aware of what the impact could be to your financial health and understand what the risks are. Above all else, have an exit strategy.

If we had a dollar for every time we’ve heard “but I only co-signed, my son/daughter makes the payments” we’d have a nice slush fund by now.

Too many times, we see parents whose debt-service ratios are crippled because they have co-signed for their children to help them purchase something. Even though their child makes all the payments, the co-signer is still 100% liable in case of default. It reports on both of your credit bureaus and it is treated as though it’s 100% your monthly payment (even if it’s serviced by someone else).

Co-signing for a mortgage can produce a miracle for a loved one. It gives them a chance to get into home-ownership, which can truly set them up for their future in many ways. It comes with risks and these risks aren’t to be taken lightly. Co-signing should be treated as a short-term solution… a means to an end. We can help you plan for an exit strategy.

Marion was happily in a relationship and living in a house owned by her partner. Her son Jeff, was purchasing a new condo and discovered some issues on his credit that required him to have a co-signer. Marion happily co-signed for Jeff for his 5-year fixed rate bank. She had strong income, great credit and no debt. Tragically, a couple of years later, Marion’s partner passed and she found herself evicted from her home. When she came to us for a mortgage, we discovered Jeff’s credit had become even worse, and penalties to break the bank mortgage were astronomical. There was no way we could refinance Jeff and remove Marion from title at that time. We found another solution for Marion and are working with them to get them both into a prime mortgage within a couple of years.

Richard was preparing to co-sign on a mortgage for his daughter Bailey, when his son Bobby’s car died. Richard happily co-signed for a new lease for Bobby, not realizing the impact it would have on his ability to co-sign for Bailey. We had to find Bailey a new strategy to enable her to purchase her first home. Richard was just trying to be fair to his two kids, but the timing of everything was a disaster.

Always look at the big picture and consider the options you’d like to have available to you down the road. If co-signing might impact you negatively and remove your options, consider saying no. Be sure to consult with a professional that has your best interest in mind; one that will look at all of the factors in your life help you plan for the future. We are just a phone call, email or walk-in away and we’re here to help!

We were very happy to hear this week, that finally, the youth of Ontario will be learning about financial literacy as part of their school curriculum. The details are yet to be rolled out, but it’s a step in the right direction.

As it stands, we learn our financial habits primarily from our parents and self-education. We spend years in school memorizing math equations that are rarely ever applicable in the real world. Yet, the fundamental principles of earning money, saving, establishing and using credit wisely, are things that are not taught in school. It sounds like that’s about to change, and hopefully soon.

We see it all the time. Consumers who have overextended themselves with credit card debt, lines of credit, car loans – you name it. And we aren’t just talking about young, inexperienced people. Professionals earning hundreds of thousands of dollars find themselves in the same boat quite regularly and often have trouble establishing and maintaining a strong credit score.

We often help our clients whom have equity in their property, by refinancing to consolidate debt, saving thousands in interest. Lenders often put conditions on refinances that require credit cards and lines of credit to be paid off and closed. They want to mitigate risk that clients will find themselves maxed out again, unable to carry the payments, resulting in default.

We agree with this in some cases, but we fight to enable our clients to keep their credit in tact, and help encourage them change the behaviours associated with credit. Good credit habits last a lifetime and it’s never too late to improve.

HERE ARE 3 WAYS TO STRENGTHEN YOUR CREDIT:

1. MAINTAIN AT LEAST 2 CREDIT CARDS. Lenders need to see that you handle credit responsibly so rather than closing everything, pick and choose wisely. Keep your 2 oldest credit cards – the longer you’ve had them, the better it looks on your credit bureau.
2. FOLLOW THE 2/2/2/RULE. Lenders want to see 2 trade lines (credit cards) with a minimum $2000 limit, paid on time each month. They also need to stay within the limit – don’t max it out. The more room there is between the balance and the limit, the better.
3. USE REGULARLY, WITH RESPECT. These 2 trade lines need to be actively used. Set yourself up with a monthly gym membership charge, or cell phone bill. Then set yourself up to pay it off in full every month.

Following these steps and teaching them to your kids and grandkids will help in the long run. Contact us for a mortgage and credit check-up, we’ll be happy to help.

Debt has now become a nightmare in the mortgage world. Prospective homeowners have to be very careful about the debt they accumulate because they could find themselves becoming eliminated from the housing market.

The federal government recently changed the rules surrounding unsecured lines of credit, so now lenders must use 3% of the balance as a payment when calculating debt service ratios.  Recently, we had a client trying to buy a house. His line of credit balance was $35,000 with a minimum monthly payment of only $400.

However, for mortgage qualifying purposes the payment must be stated as 3% of the balance, which is a whopping $1050.

This is a fictitious number, which completely skewed his debt service ratios and disqualified him from being approved for a mortgage. He now has to scramble to try and pay this right down so that his ratios work.

Another big ‘debtmare’ we often see are vehicle loans. It’s easy to get caught up in the moment when looking for a new vehicle.

Leasing is actually better for debt service purposes when buying a home because payments are considerably less and the purchase price is much lower.  While it seems like a good idea to purchase a vehicle with a loan, consider the amount you are borrowing and keep the payment as low as possible, especially now that the qualifying rate for mortgages has been increased to 4.64%.

Above all, do your best to live within your means and not incur consumer debt. Debt is like a yoke around your neck, which gives control of your life to your creditors.

If you need help with consolidating your debt load so you can get a fresh start, the time has never been better. 30 year amortizations are still available until the end of this month.