Housing, Housing and More Housing....

Marci Dean • November 23, 2023

Did you hear? The Federal Government released details on their plans for housing in this weeks’ Fall Economic Statement!  It's all about tackling the housing supply and affordability crisis that's keeping politicians and many Canadians up at night. 


The Liberal Government has committed to add a 3.5 million new housing units by 2030. That's a lot of new homes, if they can do it! Finance Minister Chrystia Freeland outlined the details in the House of Commons, saying her government is planning to spend $20.8 billion over six years, from which $6.3 billion is going straight into housing affordability. But here's the kicker – they're expecting a $40 billion deficit this year. Yikes, this plan is expensive! So, like it or hate it, we can all agree we need more housing and unfortunately that comes at a big cost.

 

I am going to steer clear of the politics and the macro economics of this plan and just outline the nitty gritty below. ?

 

Here's a break down of what was announced:


1.  Cracking Down on Short-term Rentals: They're giving a stern talking-to to non-compliant short-term rentals like Airbnb. The government wants more long-term homes for us Canadians, so they're nixing income tax deductions for owners who don't play by the rules. Say goodbye to tax breaks for short-term rentals in places like Toronto, Montreal, and Vancouver.


2.  Incentivizing New Housing: The government is throwing an extra $1 billion into their Housing Accelerator Fund, aiming to help build 100,000 new homes in five years. Plus, they're handing out low-cost loans, and even saying bye-bye to the GST on new rental construction, but that will cost them $1.1 billion.


3.  The Canadian Mortgage Charter: There's a new kid in town – the Canadian Mortgage Charter. It's all about making sure we get fair and timely mortgage relief if we hit a financial rough patch. If you're struggling, the government wants banks to cut some slack, like allowing temporary extensions and not charging interest on interest during relief periods. ***Watch for a lot more to come on this as we in the industry get copies of the actual document!***


4.  Clarifying the Mortgage Stress Test: Good news! The mortgage stress test won't be making a comeback for insured renewals. The stress test is the tool used by lenders to make sure you can handle your mortgage at a higher interest rate. The change is that now borrowers won't have to be “stress tested” at renewal and this applies even if they move lenders at renewal. As far as we can tell, this is “old news” and was released by OFSI a few weeks ago and since it applies to insured mortgages only, this impacts just 1 in 4 mortgages in Canada. The devil is in the details on this one so stand-by for more as soon as I get the full information AND we learn what our lenders have to say about this. 


5.  Canada Mortgage Bond (CMB) Program: They're upping the game on Canada Mortgage Bonds, planning to increase the annual limit from $40 billion to $60 billion. This extra cash – $20 billion worth – is supposed to help build 30,000 new rental apartments every year.


6.  Priority for Construction Workers: In May, the government started giving the VIP treatment to construction workers. They're fast-tracking permanent residency for those with specific skills, education, and certifications in the construction biz. So far, 1,500 lucky workers have scored permanent residency.


7.  Update on First-Home Savings Account: Remember that Tax-Free First-Home Savings Account they talked about last year? Well, it's official – over 250,000 Canadians have jumped on the bandwagon. You can save up to $8,000 a year, tax-free, for that dream home down payment. It's like a mix of the Tax-Free Savings Account and the Registered Retirement Savings Plan, but for your first home! I will be hosting a webinar on this early in 2024 with one of my Financial Planner referral partners. 


There you have it – the government's game plan to fix up the housing situation. Yes, it is expensive but we can all agree the housing shortages are a real problem in Canada. Time will tell but let's hope these initiatives make finding a home a little less stressful! ??

 

As always, please give me a call or book a time to talk below if you want to discuss your specific situation.

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Alternative Lending Provides You With Options

By Marci Deane • February 19, 2025
Alternative lending refers to any lending practices that fall outside the normal banking channels. Alternative lenders think outside the box and offer solutions to Canadians who wouldn’t otherwise qualify for traditional mortgage financing. In an ideal world, we’d all qualify for the best mortgage terms available. However, this isn’t the case. Securing the most favourable terms depends on your financial situation. Here are a few circumstances where alternative lending might make sense for you. Damaged Credit Bad credit doesn’t disqualify you from mortgage financing. Many alternative lenders look at the strength of your employment, income, and your downpayment or equity to offer you mortgage financing. Credit is important, but it’s not everything, especially if there is a reasonable explanation for the damaged credit. When dealing with alternative lending, the interest rates will be a little higher than traditional mortgage financing. But if the choice is between buying a property or not, or getting a mortgage or not, having options is a good thing. Alternative lenders provide you with mortgage options. That’s what they do best. So, if you have damaged credit, consider using an alternative lender to provide you with a short-term mortgage option. This will give you time to establish better credit and secure a mortgage with more favourable terms. Use an alternative lender to bridge that gap! Self-Employment If you run your own business, you most likely have considerable write-offs that make sense for tax planning reasons but don’t do so much for your verifiable income. Traditional lenders want to see verifiable income; alternative lenders can be considerably more understanding and offer competitive products. As interest rates on alternative lending aren’t that far from traditional lending, alternative lending has become the home for most serious self-employed Canadians. While you might pay a little more in interest, oftentimes, that money is saved through corporate structuring and efficient tax planning. Non-traditional income Welcome to the new frontier of earning an income. If you make money through non-traditional employment like Airbnb, tips, commissions, Uber, or Uber eats, alternative lending is more likely to be flexible to your needs. Most traditional lenders want to see a minimum of two years of established income before considering income on a mortgage application. Not always so with alternative lenders, depending on the strength of your overall application. Expanded Debt-Service Ratios With the government stress test significantly lessening Canadians' ability to borrow, the alternative lender channel allows expanded debt-service ratios. This can help finance the more expensive and suitable property for responsible individuals. Traditional lending restricts your GDS and TDS ratios to 35/42 or 39/44, depending on your credit score. However, alternative lenders, depending on the loan-to-value ratio, can be considerably more flexible. The more money you have as a downpayment, the more you’re able to borrow and expand those debt-service guidelines. It’s not the wild west, but it’s certainly more flexible. Connect anytime Alternative lending can be a great solution if your financial situation isn’t all that straightforward. The goal of alternative lending is to provide you with options. You can only access alternative lending through the mortgage broker channel. Please connect anytime if you’d like to discuss mortgage financing and what alternative lending products might suit your needs; it would be a pleasure to work with you.

Benefits of Working with an Independent Mortgage Professional

By Marci Deane • February 12, 2025
If you need a mortgage, working with an independent mortgage professional will save you money and provide you with better options than dealing with a single financial institution. And if that is the only sentence you read in this entire article, you already know all you need to know. However, if you’d like to dig a little deeper, here are some reasons that outline why working with an independent mortgage professional is in your best interest. The best mortgage is the one that costs you the least over the long term. An independent mortgage professional can help you achieve this. Mortgages aren’t created equally. Oftentimes slick marketing leads us to believe the lowest “sticker price” is the best value. So when it comes to mortgage financing, you might assume the mortgage with the lowest rate is the best option. This isn’t always the case. When considering a mortgage, your goal should be to find the mortgage that will cost you the least amount of money over the total length of the mortgage. There are many factors to consider, such as your specific financial situation, the rate, initial term length, fixed or variable rate structure, amortization, and the penalties incurred should you need to break your mortgage early; the fine print matters. An independent mortgage professional can walk through all these factors with you and will help you find the mortgage that best suits your needs. Sometimes taking a mortgage with a slightly higher rate can make sense if it gives you flexibility down the line or helps you avoid huge payout penalties. Working the numbers with an independent mortgage professional will save you money in the long run instead of just going with what a single lender is offering. Save time by letting an independent mortgage professional find the best mortgage product for you. Let's face it, getting a mortgage can be challenging enough on its own. Everyone’s financial situation is a little different and making sense of lender guidelines is a full-time job in itself. So instead of dealing with multiple lending institutions on your own, when you work with an independent mortgage professional, you submit a single mortgage application that is compared to the lending guidelines of various mortgage lenders. This will save you time as you don’t have to go from bank to bank to ensure you’re getting the best mortgage. Simply put, an independent mortgage professional works for you and has your best interest in mind, while a bank specialist works for the bank and has the bank's best interest in mind. It’s no secret that Canadian banks make a lot of money. It seems every quarter they turn billions of dollars in profit (despite the economic environment). They do this at the expense of their customers by charging as much interest as they can and structuring mortgages to their benefit. It’s all about the alignment of interest. Bank employees work for the bank; the bank pays them to make money for the bank. In contrast, independent mortgage professionals are provincially licensed to work for their clients and are paid a standardized placement or finder’s fee for matching borrowers with lenders. When you work with a single bank, you only have access to the products of that bank. When you work with an independent mortgage professional, you have access to all of the lenders that mortgage professionals have relationships with and all their products. Working with an independent mortgage professional will save you money, time, and provide you with better mortgage options. Plus, you have the added benefit of working with a licensed professional looking out for your best interest, providing you with the best possible advice. If you’d like to know more or to discuss mortgage financing, please connect anytime; it would be a pleasure to work with you.

How to Ensure a Smooth Home Purchase

By Marci Deane • February 5, 2025
Chances are, buying a home is one of the most important financial decisions you’ll make in your life. And as mortgage financing can be somewhat confusing at the best of times, to alleviate some of the stress and to ensure your home purchase goes as smoothly as possible, here are six very high-level steps you should follow. While it might seem like the best place to start the home buying process is to browse MLS on your phone and then contact a Realtor to go out and look at properties, it’s not. First, you’re going to want to work with a licensed independent mortgage professional. When you work with an independent mortgage professional, instead of working with a single bank, you’ll be working with someone who has your best interest in mind and can present you with mortgage options from several financial institutions. The second step in the home buying process is to put together a mortgage plan. Unless you have enough money in the bank to buy a home with cash, you’re going to need a mortgage. And as mortgage financing can be challenging and not so straightforward, the best time to start planning for a mortgage is right now. Don’t make another move until you discuss your financial situation with an independent mortgage professional. It’s never too early to start planning. As part of your mortgage plan, you’ll want to figure out what you can afford on paper, assess your credit score, run some financial scenarios, calculate mortgage payments, and have a clear picture of exactly how much money is required for a downpayment and closing costs. You’ll also be able to discuss which mortgage product is best for you, considering different mortgage terms, types, amortizations, and features. Now, what you qualify to borrow on paper doesn’t necessarily mean you can actually afford the payments in real life. You need to consider your lifestyle and what you spend your money on. Understanding your cash flow is the key. Make a budget to verify you can actually afford your proposed mortgage payments and that you have enough funds to close on the mortgage. No one wants to be house-poor or left scrambling to come up with funds to close at the last minute. If everything looks good at this point, the next step will be to get a preapproval in place. Now, a pre-approval is more than just typing some numbers into a form or online calculator; you need to complete a mortgage application and submit all the documents requested by your mortgage professional. Only proceed with looking at properties when you’ve been given the green light from your mortgage professional. When you’ve found a property to purchase, you’ll work very closely with your mortgage professional to arrange mortgage financing in a short period of time. This is where being prepared pays off. As you’ve already collected and submitted many documents upfront during the preapproval process, you should be set up for success. However, remain flexible and provide any additional documentation required by the lender to secure mortgage financing. Once you have firm lender approval and you’ve removed conditions on the purchase agreement, don’t change anything about your financial situation until you have the keys. Don’t quit your job, don’t take out a new loan, or don’t make a large withdrawal from your bank account. Put your life into a holding pattern until you take possession of your new home. So there you have it, six steps to ensuring a smooth home purchase: Work with an independent mortgage professional. Put together a mortgage plan. Figure out what you can actually afford. Get a pre-approval. Provide the necessary documentation. Don’t change anything about your financial situation until you take possession. If you’d like to discuss your personal financial situation and find the best mortgage product for you, let’s work together. We can figure out a plan to buy a home as stress-free as possible. Please connect anytime; it would be a pleasure to work with you.
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