13 Dec

Retirement Worries Weighing you Down?

Latest News

Posted by: Tracy Luciani Price

It’s natural to have uneasiness over the state of your retirement preparedness due to the inherent uncertainties involved:

  • How long will I live?
  • Will my health or my spouse’s health fail? and when?
  • How much will my current assets and investments grow in value?
  • How will inflation impact the next 5, 10 or 20 years?

There is no shortage of variables to consider when trying to figure out how you are going to fund your retirement dreams. There is also no magic number — often quoted numbers like $1,000,000 or formulas like six times your annual salary at age 50 have no basis in fact, especially not your facts. They have no way to know if your retirement plans include restoring a pricey vintage car or spending most nights glued to a hockey game on the TV.

A financial advisor can help crunch the numbers and offer investment alternatives, but you need to make the big decisions on the type of retirement lifestyle you envision and how much you can realistically afford to sock away along the way to fund that dream.

If you really need some kind of number for reference, 2019 Federal Government data showed the average annual spend for a household over 65 (including taxes) was $64,461. As you get closer to retirement and some of the bigger bills fade away (mortgage, kid’s education) you will have a clearer picture of your needs.

Retirement age and life expectancy are two more uncertainties to deal with. The average Canadian calls it a day just shy of 83 years, but it is on the rise. If you are 20 now, it is expected that you will have about a 50/50 chance to hit 90! The average age for retirement is 63, so simple math (83 minus 63) tells us you will most likely need at least 20 years of retirement income.

Hopefully you have been saving and investing with your RRSP and/or TFSA and have also developed some other passive income streams to supplement your government pension income. If your employer has a pension plan and you maxed out that and your CPP for 35 years, you may be able to live entirely off of your pension income and not worry about saving anything for retirement!

The key point is to confirm how much you are going to receive. The average CPP cheque is $625/month or just over half of the $1204 maximum. Makes sure you investigate any private or employer pension benefits you have as well as your CPP and OAS benefits to determine how much you will receive. A reverse mortgage may also be an option to generate cashflow.

It’s never too late to get started with retirement savings and investing, but you have to realize that catching up will be harder than it sounds, even as your income rises. If you have unused TFSA or RRSP contribution limits (you can easily check by looking at your latest income tax assessment), by all means, start playing catch-up as soon as you are able.

Another problem with starting late is that you miss out on the magic of compound returns. Maxing out your TFSA every year from age 25 to 65 with an index fund at 5% would yield $725,000. Starting at age 40 would leave you with only $287,000. You could try and compensate for a late start by taking on riskier investments with higher returns, but that doesn’t always end up well!

If you are planning to rely on a side hustle, spouse and/or inheritance to get you through retirement, just be aware that those options can be easily derailed. If your spouse dies, your survivor’s pension could be considerably lower. Side hustles are great, but your health may fail or maybe you can’t find a job – only 10 to 20% of retirees report doing some sort of work. As for inheritance, your parents may live to be a 100, they may make some bad investments, or they may even get remarried.

Anxiety is a natural by-product of retirement planning, and the cure is having the knowledge and facts you need to make your own judgement on how much is enough.

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22 Jun


First Time Home Buyers

Posted by: Tracy Luciani Price

Once again, the Canadian Mortgage and Housing Corporation (CMHC) is tightening the criteria to get a mortgage with less than a 20% down payment. Any potential home buyer with less than a 20% down payment must purchase default insurance on their loan and have a minimum down payment of 5%. CMHC is a federal Crown Corporation that provides such default insurance. Its mandate is to help Canadians access affordable housing options. Providing mortgage insurance to home buyers is one of its main activities. Mortgage default insurance protects lenders in the event a borrower ever stopped making payments and defaulted on their mortgage loan–a very infrequent occurrence in Canada.

There are private providers of default insurance as well–Genworth Financial Canada and Canada Guaranty. CMHC is the only insurer of mortgages for multi-unit residential properties, including large rental buildings, student housing, and nursing and retirement homes. It is the largest provider of mortgage default insurance by far and is also the primary insurer for housing in small and rural communities.

Investment properties are not eligible for mortgage insurance. Because of this, the buyer needs at least a 20% down payment to buy an investment property. Homes costing more than $1 million, as well, are not eligible for mortgage insurance. Typically, the lender chooses the mortgage insurer.

Why is CMHC Tightening Qualifications?

The economics team at CMHC has predicted that owing to the pandemic lockdown, home prices will likely fall by 9% to 18% over the next 12 months. They also believe that it will take at least two years for prices to return to pre-pandemic levels. The CMHC forecast for the economy is more pessimistic than many other forecasts, particularly that of the Bank of Canada, which asserted yesterday that the outlook for the economy was better than their April forecast suggested. Moreover, CMHC acknowledges the high degree of uncertainty associated with any forecast at this time. The Crown Corporation

highlights the post-shutdown job losses, business closures and the drop in immigration that adversely affect Canadian housing.

They also have emphasized the 15% of existing mortgages that are now in deferral and believe there is a risk that 20% of all mortgages could be in arrears when deferrals end. Their stated justification for tightening qualification requirements is “to protect future home buyers and reduce risk“.

What Are These Changes In Underwriting Policies

Effective July 1, the following changes will apply for new applications for homeowner transactional and portfolio mortgage insurance:

  • The maximum gross debt service (GDS) ratio drops from 39 to 35
  • The maximum total debt service (TDS) ratio drops from 44 to 42
  • The minimum credit score rises from 600 to 680 for at least one borrower
  • Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes

CMHC goes on to say that “to 

further manage the risk to our insurance business, and ultimately taxpayers, during this uncertain time, we have also suspended refinancing for multi-unit mortgage insurance except when the funds are used for repairs or reinvestment in housing. Consultations have begun on the repositioning of our multi-unit mortgage insurance products.”

Here’s What We Know So Far

Anecdotal reports suggest that it is likely that private default insurers will not match CMHC’s lower debt ratios. They might, however, be more selective in their approval processes.

Canadian fiscal and monetary authorities are expending huge sums to keep the economy afloat, cushion the blow of the shutdown, and to make sure ample credit is available. These actions are intended to minimize unnecessary insolvencies. It is, therefore, surprising that a federal Crown Corporation would take these pro-cyclical actions now.

The exact impact of these changes will not be known until more details are available: How the Big Banks will respond with their own prime mortgage underwriting rules; how these new rules will apply to the securitization market; and how far the private default insurers will go along with these new rules.

Suffice it to say that this batters buyer and seller confidence and, all other things equal, has a net negative impact on the near-term housing outlook.  Most importantly, in my view, these changes are unnecessary to protect the prudence of Canada’s home lending practices. Mortgage delinquency rates are meager, and even the Bank of Canada’s forecast is for delinquencies to remain less than 1% of all outstanding mortgages. Moreover, home buyers with jobs who meet former qualifications would undoubtedly have a longer than two-year time horizon when buying their first homes. They were already qualifying at the posted rate that is more than 250 basis points above the contract rate. If anything, the pandemic recession assures that interest rates will remain very low over the next two years.

14 Nov


Latest News

Posted by: Tracy Luciani Price

As many of you already know, Canada just became the second country in the world to legalize marijuana for medical and recreational purposes. Of course, this historic moment in Canadian history has cannabis activists jumping for joy while others are not s-toked on the idea.

With legalization comes the realities of growing your own pot at home which already has Global News giving Canadians a step-by-step guide on how to do so properly and legally — sorry Manitoba and Quebec!

We always have clients contacting us for restructuring advice on their current mortgages. However, through our initial discussions, we have found out that some have started growing pot plants within their homes. Since this legislation is new to everyone, including the mortgage community, we had to do some research.

Prior to September 17, growing cannabis at home was a legal grey area. Mortgage wise, it was a red flag. Any home that has previously or is currently being used in the growing of cannabis was treated as a “grow-op” and as a result is NOT financeable.

grow-op: a concealed facility used for marijuana plantation.

Since legalization day on October 17, the federal government officially set a limit of four pot plants per household — NOT by person. This information DOES NOT have to be disclosed on a property disclosure UNLESS damage has occurred within the household because of cannabis cultivation.

Just as a FYI — ALL property owners should consult their realtor or lawyer about how to properly disclose when selling their household.
After talking to our local Canada Mortgage and Housing Corporation representative (CMHC), she notified us that mortgage insurers are currently leaving lenders to create their own policies on how to deal with marijuana plants and their effect on existing mortgages. We contacted lenders about this ‘budding’ home-grown industry but were met with no answers.

This situation is certainly a waiting game and we’re all holding our breath waiting for the first move!

Let us share our advice.
If you are looking to sell your property or refinance your mortgage — get rid of those pot plants now!
Any home appraisal company can disclose in their report that cannabis is present within your home which could place your home on a list that DOES NOT foresee future sales or refinances.
It is your safest bet to keep your cannabis plant growth up to the licensed growers located across the country.
If you have any questions, contact your local Dominion Lending Centres mortgage professional.

9 May


Bank Industry News

Posted by: Tracy Luciani Price

The pace of (technological) change is so fast now that it is considered to be of revolutionary proportion.

Much of what we have learned in our lives is about to become obsolete. In fact, much of it already has.

For example, our schools teach us to get an education, get a good job, get promoted and earn a higher salary, all without teaching us about financial literacy. Then we are told to save part of our pay, to put that into a savings account with interest rates less than inflation (which gets taxed…lol), to invest in RRSP’s, RESP’s etc., supposedly to grow into a retirement nest egg.

The problem is with fees and taxes, unless one invests in the stock market (risky) or real estate (less risky) it is impossible to become financially secure, let alone wealthy.

Some believe that the ‘system’ is designed to keep most people poor, or at least working hard their entire lives just to keep their heads above water. We are seeing this more and more and more.

From a technological standpoint, the advent of (ro) bots and artificial intelligence are about to disrupt our lives in every way possible in the years ahead. Driverless cars? How can this be possible? What is certain however is that bots will result in the elimination of tens of thousands of jobs as we know them, even entire industries.

More and more our lives are affected by the so-called ‘internet of things’. Everything is gravitating towards the Internet. The validity of getting a college or university degree (to get ahead) is being challenged like never before. In short, disruption of the status quo will become the norm.

Much of this coming change will force humans to think and act differently than we do today. However, it is within the internet that lies promise of a more prosperous future for many, in fact for everyone that embraces it because it is ‘levelling the playing field’ like never before.

The truth is that we are seeing more and more people becoming wealthy online. Starting an online business takes less effort, less capital and less time than a conventional grass roots start up. Money, lots of money is being made faster than ever before.

The internet also gives us the opportunity to educate and become informed in a more savvy, meaningful way, and the key is for us to forget what we’ve been taught about making money in the past. We need to learn how to educate ourselves, create our own jobs and make our own money moving forward. Growth in recent years in self employment has accelerated dramatically and will only continue to rise.

Undeniably, personal financial security and wealth creation is largely dependent upon how we view and understand today’s big bank culture and business practices, much of which has been chronicled in the media in a less than favourable light; such that it appears things have gotten ‘out of hand’ and in need pullback. Trust and transparency used to be the pillars of our financial system. Unfortunately, this is no longer the case. As politicians, governments and school systems have become outdated and less trusted, so have our banks.

Yet we continue to deposit our paychecks giving the banks free money with which to profit. The banks take fees in an instant while holding our cheque deposits for days (more free money) even when we have more than sufficient funds to clear the cheque. Lending practices including mortgages have in fact become predatory with (potentially harmful) terms and features that are not disclosed to the borrower, which is not only unfair, but not right. Bank mortgage penalties have been systematically manipulated such that when a mortgage is paid out prior to maturity, the lesser of 3 month’s interest somehow no longer applies. Rather the greater of, or the IRD interest rate adjustment factor does, costing Canadians often (tens of) thousands more. Many agree that today’s reality is that the banks’ quest for ever increasing profit at the expense of and on the backs of unsuspecting Canadians is unconscionable.

Just as Fintech (new financial technologies) have begun to revolutionize banking and financial services, we need to revolutionize the way we think about and treat our money. Those in the know pay no annual fees on credit cards, use online bank institutions who charge less or no fees, pay more interest, and they are more likely to obtain the services of a trusted and transparent independent mortgage (broker) professional.

We are reminded from time to time that many people still believe that to use our services means having to pay a fee. This could not be further from the truth since our services are free for arranging prime mortgages (OAC) on approved credit where we are paid a finder’s fee from the lender. Only more difficult, more time consuming mortgages and private mortgages require a fee from the borrower since that is the only way we can be compensated for our services.

Most importantly, we always put you the customer (your interests) first and foremost. We are all about helping you find the most advantageous, cost effective financing possible and our professional advice is invaluable.

If you have relied on the banks until now, perhaps it’s time to become more protective of your money and investigate the mortgage broker option.

Our industry has grown significantly, particularly over the past decade, and there is a growing awareness of the validity and value of our services. But we still have a long way to go before we are thought of as (mainstream) the better option when it comes to mortgage financing.

For your next mortgage need, be part of the revolution and call us first, or at the very least, get a second opinion and experience the positive difference.

15 Mar


Bank Industry News

Posted by: Tracy Luciani Price

The Financial Post reported that TD Bank stock has been downgraded after CBC News reported allegations of aggressive sales tactics and admissions of law-breaking by bank employees last week.

Admissions of high pressure sales tactics and unethical practices including “breaking the law with practices such as increasing lines of credit, overdraft protection and credit card limits without customers’ knowledge.”

If anyone thinks this issue is with one bank only, then they are either kidding themselves or have something to hide. We believe there is little doubt that all our big banks have similar practices. Will they be sued? This remains to be seen suffice to say that this could become “A Wells Fargo moment”.

Wells Fargo was fined US $185 Million on Sept 8, 2016 by U.S. regulators when ‘abusive’ sales practices by the bank were uncovered. That bank was fined for opening hundreds of thousands of retail bank accounts without client approval according to the Associated Press.

One Canadian analyst suggested that the reported revelations could inflict damage that may have a “material impact on the (TD) bank’s reputation” and earnings and valuation.

Is this just the tip of the proverbial iceberg? Only time will tell but this isn’t going away anytime soon and will likely be news for some time. Are other banks involved in the same type of practices? Is there more to the story, meaning other practices not yet uncovered? When will it be deemed more than just unethical? When is it deemed that they’ve crossed the line and broken the law? Canadians deserve to have such questions answered.

On the mortgage front, we have being informing our readership about the perils of bank Collateral Mortgages now for over five years. For example this type of mortgage product gives the banks the ability to secure previously unsecured debt instruments, thus giving them the power to ultimately force the sale of a property without any missed mortgage payments whatsoever, charge higher interest ‘at will’ etc. While the mortgage product itself is legal, they don’t disclose to consumers the general nature of the new product. Isn’t the act of omission, by not mentioning to the customer that they are signing a Collateral Mortgage, in and of itself illegal?

As your trusted mortgage advisors, we suggest that the lack of disclosure practised by our big banks, which has become commonplace, should perhaps be investigated and challenged to establish whether it is in fact breaking the law. If so, then the potential damages could become astronomical.

The value the mortgage brokerage industry brings consumers has never been more clear. We also keep the banks competitive. Without us, Canadians would be paying much more.

Please understand that obtaining a mortgage is much more than about ‘Rate’. It’s about the ‘Terms’ of the mortgage and the ‘Trust’ you have in the supplier. Call us to discuss.

28 Feb


Bank Industry News

Posted by: Tracy Luciani Price

There may finally some progress being made with the Federal Government after Dominion Lending Centre’s Founder and CEO, Gary Mauris, presented to the Standing Committee on Finance in Ottawa on February 8th about the imbalance in the Government’s new mortgage rules.

In October 2016, the Federal Government made changes that are limiting and threatening to average Canadians and their ability to buy housing and access equity from their homes… Especially those of that live outside of major city centers.

How is purchase power affected? Let’s look at Barry & Louise’s situation. Combined, they earn $65,000/year. He works at a local factory and she at a grocery store. They have great beacon scores, a $400 car loan payment and minimal credit card debt. They have $16,500 saved for a down payment on their first home.

Before the changes, Barry & Louise would have been able afford to purchase a $330,000 home with 5% down, qualifying for a mortgage of $313,500, paying 2.89%.

Now, because they are forced to qualify under the “stress test” at a rate of 4.64%, they can only qualify for a $253,500 mortgage, lowering their affordability to $270,000. That’s a $60,000 difference in purchasing power. They are priced out of the market.

The bottom line as we see it, is this. There was no logical, ethical reason for the Federal Government to implement such rigid regulations so swiftly. The mortgage default rate in Canada is less than 1/3 of 1% … that’s only 0.003%!!! Mortgages are not the issue. High interest rate, easily accessible consumer debt products are.

Through the Mortgage Broker Channel, monoline lenders now account for 38% of all mortgage funding in Canada. This is great for Canadians! Competition is always beneficial for consumers. Look at airlines and cell phone companies. Lack of choice = monopoly, which means more expense and less flexibility for consumers. The same thing goes for mortgages.

The only mortgage institutions that don’t benefit from more choice are the big chartered banks. Banks make multi-billion dollars in profit, year over year. They are in the business of cross-selling multiple high interest rate products and charging massive penalties for early mortgage pre-payments.

The moment a bank has a new mortgage client, they start enticing them with great offers on lines of credit, credit cards etc. They have the power to lock you in and change the rates on the fly, making it difficult to go elsewhere. They often don’t approve clients for refinances for debt consolidation as they make their money on your consumer debt.
The government consulted with a few banks before making these rash changes. They did not consult with the broker channel or monoline lenders. There is something unjust about this and it favours the banks. We support choice, competition and what’s best for Canadians. Contact us and see how we can help protect you.