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The Fall Economic Statement from the federal government focused extensively on Canada's housing situation. Rather than solely addressing the demand for homeownership, most of the new spending aims to tackle the pressing need for adequate and affordable shelter. However, there's a particular item that seems tailored to grab the attention of most homebuyers.The Canadian Mortgage Charter aims to strengthen Ottawa's expectations regarding how federally regulated financial institutions should handle vulnerable borrowers. It includes provisions such as:- Allowing temporary extensions of amortization periods for at-risk mortgage holders-&nbsp;Waiving fees and costs that “would have otherwise been changed for relief measures.”- Exempting insured mortgage holders from re-qualifying under the stress test during lender switches at mortgage renewal.Other requirements involve:- Financial institutions contacting homeowners 4 to 6 months ahead of mortgage renewal to make them aware of their options.- Granting at-risk homeowners the ability to make lump sum payments without prepayment penalties, and avoiding interest on interest by waiving charges in cases where relief measures result in payments not covering interest.While these measures have generally received a positive reception, it's worth noting that most of them are already outlined in guidelines from the Financial Consumer Agency of Canada. They aren't legally binding, and there are currently no plans to enshrine them in legislation.Recent surveys indicate that a significant percentage of homeowners facing mortgage renewals, ranging from 35% to nearly 90%, express concerns about potential increases in payments. Including the Charter in the Fall Economic Statement seems to be a proactive move to reassure the growing number of homeowners worried about mortgage renewals amid the current high-interest rate environment.Reach out if you need to discus your mortgage renewal options. <a data-mce-href="http://www.calendly.com/snezhana" href="http://www.calendly.com/snezhana" data-mce-selected="inline-boundary">Book a call HERE.</a>

What is the Canadian Mortgage Charter?

<div class="xdj266r x11i5rnm xat24cr x1mh8g0r x1vvkbs x126k92a"><h3 dir="auto">The Bank of Canada decided to keep the overnight rate unchanged today!</h3><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">So, in today's update, Governor Tiff Macklem talked about how September threw a curveball with lower-than-expected inflation and the economy not flexing its muscles. That's why they're sticking with the 5% overnight rate for now.</div><div dir="auto"> </div><div dir="auto"><figure id="figure-snmd0lav4alo5x9dqz"><img id="snmd0lav4alo5x9dqz" src="https://cdn.durable.co/blocks/1bJCaUsc2u1RwsrIpeecEbiOIPtYBWGd9hooaVjdivvjcNUA7IjgQh4kqoAaLOC7.png" alt="" class="object-cover bg-gray-100 rounded-sm md:rounded-md lg:rounded-lg" style="aspect-ratio: 1/1; object-position: center center;" data-corners="default" data-aspect="1:1" data-caption="" data-positionx="undefined" data-positiony="undefined" data-mce-src="https://cdn.durable.co/blocks/1bJCaUsc2u1RwsrIpeecEbiOIPtYBWGd9hooaVjdivvjcNUA7IjgQh4kqoAaLOC7.png" data-mce-style="aspect-ratio: 1/1; object-position: center center;"></figure> </div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">The latest economic info tells us that the recent rate hikes over the last 18 months are starting to kick in.</div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">People are finally cutting back because higher rates are messing with their budgets. And businesses are thinking twice about hiring and investing as demand takes a breather.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">Basically, while the rest of us are sweating about the economy slowing down, the Bank of Canada is doing a happy dance because their rate hikes seem to be doing the trick.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">And there is always a BUT - and the Bank wants us to know they're not letting their guard down on inflation. It's still way higher than their magical 2% target, and we might get hit with more rate hikes if prices heat up again or people don't keep their spending in check.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">Even though the rate hikes might be tapping out soon, the burning question is when we'll start seeing rate CUTS. Word on the street from economists is that we might see a rate drop in mid 2024.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">Between now and the last announcement of 2023 on December 6th, the Bank of Canada will be watching key stuff like inflation, jobs, what folks are spending, and GDP.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">They're on the lookout for any signs that the economy is still sizzling. So, it's not exactly the end of the road, but hey, at least we can spot the light at the end of the tunnel.</div><div dir="auto"> </div></div><div class="x11i5rnm xat24cr x1mh8g0r x1vvkbs xtlvy1s x126k92a"><div dir="auto">Reach out if you have any mortgage related questions: <a data-mce-href="mailto:mortgages@snezhana.ca" href="mailto:mortgages@snezhana.ca" target="_blank" rel="noopener">mortgages@snezhana.ca</a></div></div>

Bank of Canada Rate Announcement

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A co-applicant (also referred to as a co-borrower) is an individual who is applying with the applicant and who will be registered on title and/or on the mortgage. The co-applicant’s income and debts are included in all mortgage calculations.A co-signer is a person who is helping the applicants get approved for the mortgage by being added to the application in the same way as an applicant or co-borrower and will also be registered on title. A co-signer may be required if the applicant does not have sufficient income to qualify for the mortgage. The co-signer’s income (and debts) will be included. A co-signer is as fully responsible for the mortgage as the applicant.A guarantor is an individual who is not registered on title but who is guaranteeing to the lender that if the applicant fails to meet his or her obligations under the loan the guarantor will meet those obligations. The guarantor’s income and debts are not included in the mortgage calculations unless he or she lives in the same home, however the lender still does a full application on the guarantor to ensure that the guarantor can make the mortgage payments if the applicant defaults. A guarantor may be required if the co-applicant(s) have poor credit but enough income to qualify.

Co-Applicant vs Co-Signer vs Guarantor

Owning a home in Canada is a significant achievement, but the journey to full homeownership involves managing a mortgage. This article is your guide to understanding and harnessing the potential of mortgage pre-payment privileges, a smart strategy that can save you money and bring you closer to paying off your mortgage sooner than you thought possible. What Are Pre-Payment Privileges?Before we delve into the different ways you can use pre-payment privileges, let's grasp the basics. Your mortgage has two main components: the principal and the interest. The principal is the original amount you borrowed to purchase your home, and the interest is the cost you pay to the lender for borrowing that money. Every mortgage payment you make is divided between reducing the principal and covering the interest. Pre-payment privileges empower you to make extra payments towards your mortgage, separate from your regular monthly payments. These extra payments go straight towards lowering the principal, effectively shrinking the amount you owe faster and reducing the interest you'll need to pay over time. Four Effective Ways to Utilize Pre-Payment Privileges1. Lump Sum PaymentsImagine being able to make extra payments beyond your usual monthly mortgage installments. That's what lump sum payments allow you to do. You can contribute fixed amounts or percentages of your principal mortgage amount, depending on the terms set in your mortgage agreement. These additional payments are designed to shrink your original mortgage amount, ultimately leading to lower interest payments over the life of the loan.Lump sum payments can be executed in four ways:<ul><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Before your mortgage term ends.</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">At the end of your term.</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">On specific dates outlined in your contract.</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">During specific times throughout your mortgage term.</li></ul>Here's a markdown table showing the prepayment difference for a mortgage of $500,000 at an interest rate of 5.54% and 25 year amortization, compounded semi-annually, using different lump-sum payment options. Please note we will use this scenario throughout the blog.<table class="mce-item-table" data-mce-selected="1"><tbody><tr><td>Annual Lump Sum </td><td>Total Interest Paid (Life)</td><td>Mortgage Payoff Time</td></tr><tr><td>None </td><td>$419,082</td><td>25 years</td></tr><tr><td>$1,000 </td><td>$393,808</td><td>23 years, 9 months</td></tr><tr><td>$2,500 </td><td>$371,714</td><td>22 years, 7 months</td></tr><tr><td>$5,000 </td><td>$319,283</td><td>19 years, 9 months</td></tr></tbody></table>*Disclaimer belowIn this table, the "None" row represents the scenario where no additional annual lump sum payments are made. The subsequent rows show the impact of making annual lump sum payments of $1,000, $2,500, and $5,000 at the end of each year, respectively. As you can see, making these lump sum payments accelerate the mortgage payoff time and results in significant interest savings.2. Increasing Regular PaymentsIf you find yourself in a position to comfortably increase your regular mortgage payments, this strategy can pay off immensely. By discussing this option with a mortgage broker and ensuring it's allowed, you can boost your bi-weekly or monthly payments. This acceleration can significantly expedite your journey towards a mortgage-free life and reduce the total interest you pay. <table class="mce-item-table"><tbody><tr><td>Payment Type </td><td>Monthly Payment&nbsp;</td><td>Mortgage Payoff Time</td></tr><tr><td>Standard Monthly </td><td>$3,063.61</td><td>25 years</td></tr><tr><td>Rounded-Up Monthly </td><td>$3,100.00</td><td>24 years, 5 months</td></tr></tbody></table>*Disclaimer belowIn this comparison, the "Standard Monthly" payment type refers to the regular monthly payment without any extra payments. On the other hand, the "Rounded-Up Monthly" payment type involves rounding up the standard monthly payment to the nearest hundred and making that rounded-up amount the monthly payment (+$36.39/m). This approach results in paying off the mortgage faster and saving significantly on interest payments ($12,026) over the life of the loan.3. Double-Up PaymentsNo, we're not talking about a double-double coffee – we're talking about doubling your mortgage payments. Double-up payments allow you to make an additional payment equivalent to your regular mortgage payment. While not all lenders offer this option, some provide the opportunity once a year. This can be particularly advantageous if you receive bonuses, pay raises, or any extra income on a regular basis.<table class="mce-item-table"><tbody><tr><td>Payment Type</td><td>Total Interest Paid (Life)</td><td>Mortgage Payoff Time</td></tr><tr><td>Standard Monthly</td><td>$419,082</td><td>25 years</td></tr><tr><td>Double-Up Payment</td><td>$126,929</td><td>8 years, 7 months</td></tr></tbody></table>*Disclaimer belowIn this table, the "Standard Monthly" payment type refers to the regular monthly payment ($3,063.61) without any extra payments. The "Doubled-Up Payment” payment represents a scenario where a doubled-up payment (total of $6,127.22) is made for every payment. Both the "Standard Monthly" and "Doubled-Up Payment" scenarios have different monthly payment amounts, with the latter strategy drastically reducing the interest paid and shortening the mortgage payoff time by more than 16 years sooner.&nbsp;4. Accelerated Payment OptionsBy opting for accelerated payment options, you can make weekly or bi-weekly payments instead of the typical monthly schedule. This might sound simple, but it's a powerful method to chip away at your mortgage paying it off 2 to 3 years sooner. By the end of the year, you'll have essentially made an extra monthly payment, effectively reducing both your principal and interest payments. <table class="mce-item-table"><tbody><tr><td>Payment Frequency</td><td>Payment</td><td>Total Interest Paid (Life)</td><td>Mortgage Payoff Time</td></tr><tr><td>Weekly </td><td>$705.75</td><td>$417,473</td><td>25 years</td></tr><tr><td>Weekly Accelerated</td><td>$765.90</td><td>$345,180</td><td>21 years, 2 months</td></tr><tr><td>Biweekly </td><td>$1,412.24</td><td>$417,956</td><td>25 years</td></tr><tr><td>Biweekly Accelerated</td><td>$1,531.80</td><td>$346,019</td><td>21 years, 3 months</td></tr><tr><td>Semi-Monthly </td><td>$1,530.06</td><td>$418,036</td><td>25 years</td></tr><tr><td>Monthly </td><td>$3,063.61 </td><td>$419,082</td><td>25 years</td></tr></tbody></table>*Disclaimer belowPlease note that these calculations are based on the provided mortgage amount, interest rate, compounding frequency, and different payment options. The "Standard" payment type refers to regular payments without any prepayments, while the "Accelerated" payment type includes additional payments equivalent to one extra payment per year. <ul><li aria-level="1">Navigating Potential Pitfalls</li></ul>While pre-payment privileges are undeniably beneficial, it's crucial to be aware of potential financial penalties that might come with them. Some lenders impose penalties for pre-payment, especially if it occurs during restricted periods or exceeds certain limits. To avoid unpleasant surprises, it's wise to consult a mortgage broker before making use of pre-payment privileges. <ul><li aria-level="1">Harnessing the Benefits</li></ul>Pre-payment privileges are valuable tools for Canadian homeowners. They empower you to take control of your mortgage, pay it off faster, and save significantly on interest payments. Whether you choose lump sum payments, higher regular payments, double-up transactions, or accelerated options, each step you take towards reducing your principal balance is a step closer to debt-free homeownership.Remember, to make the most of pre-payment privileges, you should:<ol><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Understand the terms and conditions associated with your specific lender.</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Consider any potential penalties and restrictions.</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Calculate the impact of extra payments on your overall mortgage.</li></ol> Conclusion: A Path to Financial SecurityIn todays real estate market, mortgage pre-payment privileges are a potent tool for securing long-term financial freedom. By making smart use of these privileges, you're not only investing in your home but also taking charge of your financial future. So, whether you're a seasoned homeowner or just stepping into the realm of property ownership, remember that with the right approach, pre-payment privileges can pave the way for a brighter, debt-free future. Your mortgage isn't just a monthly payment; it's an opportunity to shape your financial destiny. *Disclaimer: Please note that these calculations are approximate and based on the provided mortgage amount, interest rate, and compounding frequency. The actual savings and payoff times may vary based on the specific terms of your mortgage agreement. It's always a good idea to consult with your lender or a financial advisor to understand how making rounded-up payments could benefit your unique situation. Rates are subject to change without notice. The purposes of this article is for illustrative purposes only. This is not a commitment to lend, pre-approval or approval.&nbsp;

Unlocking the Power of Mortgage Pre-Payment Privileges:  A Path to Early Mortgage FreedomNew post

Are you contemplating the purchase of your inaugural home in the near future? As the housing market enters a phase of stability with rising prices, the timing may be ideal for you to take the plunge. The good news is that the Canadian government has unveiled a novel program designed to assist first-time homebuyers in their pursuit of homeownership: the First Home Savings Account (FHSA).What Exactly Is the FHSA?
The FHSA is a registered savings plan that permits you to set aside up to $40,000 in a tax-free account dedicated to your first home acquisition. You have the flexibility to contribute up to $8,000 annually and deduct these contributions from your taxable income, similar to the way you would with an RRSP (Registered Retirement Savings Plan). Moreover, any interest accrued within the plan remains tax-free. When you are ready to embark on your first home purchase, you can withdraw your savings tax-free, akin to a TFSA (Tax-Free Savings Account).FHSA vs. RRSP
The FHSA bears similarities to an RRSP in terms of allowing you to deduct contributions from your taxable income. Nevertheless, there are some crucial distinctions to consider. Withdrawals from the FHSA for your initial home acquisition are exempt from taxation, whereas RRSP withdrawals are subject to taxation (unless you use the Home Buyers' Plan, as described below). RRSPs lack a lifetime contribution cap but adhere to an annual contribution ceiling of 18% of income or $30,780 (as of 2023). In contrast, the FHSA imposes an annual limit of $8,000 and a lifetime ceiling of $40,000.FHSA and HB
The FHSA can also complement the existing Home Buyers' Plan (HBP), which empowers you to withdraw up to $35,000 from your RRSPs for the purpose of purchasing or constructing a qualifying home. The HBP necessitates repayment over 15 years, whereas the FHSA does not mandate repayment. By harnessing both programs concurrently, you can augment your savings and curtail your tax obligations.Eligibility
To qualify for the FHSA, you must meet the ensuing conditions:<ol><li>Residency: You must be a Canadian resident who is at least 18 years old.</li><li>Homeownership History: You must not have owned a home or resided in a home owned by your spouse or common-law partner within the past four years.</li><li>Purchase Agreement: You must possess a written agreement to acquire or construct a qualifying home, either for yourself or for a related individual with a disability.</li><li>Principal Residence: Your intention must be to occupy the qualifying home as your primary residence within one year of its acquisition.</li><li>Additional conditions may apply.</li></ol>In Conclusion
If you're a first-time homebuyer aiming to build a financial foundation for your dream home, the FHSA presents an attractive option. With a more generous contribution limit compared to an RRSP and the benefit of tax-free withdrawals, the FHSA facilitates higher savings and reduced tax liabilities. Furthermore, by combining the FHSA with the HBP, you can further fortify your savings and mitigate your tax burden.Remember, the FHSA is just one of the available avenues for first-time homebuyers. It's prudent to conduct thorough research and seek guidance from a financial advisor to ascertain the most suitable savings strategy for your circumstances.

Introducing the First Home Savings Account: A Fresh Initiative to Aid First-Time Homebuyers in Saving

Renegotiating your mortgage at renewal time is an excellent way to save money and ensure that you have the best mortgage product for your financial situation. “51% of Canadian homeowners don’t plan on changing lenders when their mortgage comes up for renewal — and 9% weren't even aware that they could switch lenders to get a better rate.” says Shaistha Khan from Rates.ca. Here are five reasons why you should explore your options for mortgage renewal instead of staying with the same lender's offer: Get a Better Interest RateOne of the most significant benefits of exploring your options for mortgage renewal is the chance to get a better interest rate. Interest rates can fluctuate significantly over the term of a mortgage, and you may be able to find a better rate at the time of renewal. Even a small decrease in your interest rate can save you thousands of dollars over the life of your mortgage.<figure id="figure-2xm01bj9gblix6vu84"><img id="2xm01bj9gblix6vu84" class="object-cover bg-gray-100 " style="aspect-ratio: 16/9; object-position: undefined undefined;" src="https://durable.sfo3.cdn.digitaloceanspaces.com/blocks/1fejVvX7pBFCnytJmEmR0eHI8gspBj3WBCPLyDEaWzZvQhe2CFmeiU3JoySoW7va.jpg" alt="Lender comparison" data-corners="no-rounded" data-aspect="16:9" data-caption="The above illustrates the difference approximate interest rates currently offered by 4 lenders in todays market. When comparing Lender 1 and Lender 4, there is a financial difference of $343.68 per month ($20,620.80 over your 5 year term), not to mention that you will end up paying approximately $28,863 more in interest with Lender 1 over your term." data-positionx="undefined" data-positiony="undefined" data-mce-src="https://durable.sfo3.cdn.digitaloceanspaces.com/blocks/1fejVvX7pBFCnytJmEmR0eHI8gspBj3WBCPLyDEaWzZvQhe2CFmeiU3JoySoW7va.jpg" data-mce-style="aspect-ratio: 16/9; object-position: undefined undefined;"><figcaption class="body-normal text-gray-500 mt-2">The above illustrates the difference approximate interest rates currently offered by 4 lenders in todays market. When comparing Lender 1 and Lender 4, there is a financial difference of $343.68 per month ($20,620.80 over your 5 year term), not to mention that you will end up paying approximately $28,863 more in interest with Lender 1 over your term. Save Money on FeesIn addition to interest rates, mortgage products can vary in terms of fees and penalties. By exploring your options for mortgage renewal, you may be able to find a mortgage product with lower fees or more favourable penalties. This can save you money if you need to break your mortgage early or make changes to your mortgage terms. Also, the majority of lenders will cover the costs for you to switch your mortgage to their institution.&nbsp; Improve Your Financial SituationYour financial situation can change significantly over the term of your mortgage. If you've experienced a change in income, lifestyle, or financial goals, exploring your options for mortgage renewal can help you find a product that better suits your current needs. For example, you may be able to switch from a fixed-rate to a variable-rate mortgage if your income has increased, or you may want to switch to a shorter term if you're planning to retire soon. Another option for those struggling with cashflow is to extend their amortization out to 30 years. <figure id="figure-sbewxqp22dlix6y7ok"><img id="sbewxqp22dlix6y7ok" src="https://durable.sfo3.cdn.digitaloceanspaces.com/blocks/20a3HRfiGII59O7jDsfnqoOMFOW4LnYvPHdojqjD6TF9RJ9pMO50FkJoZT7UwXpQ.png" alt="" class="object-cover bg-gray-100 " style="aspect-ratio: 16/9; object-position: undefined 50%;" data-corners="no-rounded" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="50%" data-mce-src="https://durable.sfo3.cdn.digitaloceanspaces.com/blocks/20a3HRfiGII59O7jDsfnqoOMFOW4LnYvPHdojqjD6TF9RJ9pMO50FkJoZT7UwXpQ.png" data-mce-style="aspect-ratio: 16/9; object-position: undefined 50%;"></figure>Access Equity in Your HomeIf you've built up equity in your home over the term of your mortgage, exploring your options for renewal can help you access that equity. You may be able to refinance your mortgage and take out a larger loan, using the extra funds to pay off debt, make renovations, or invest in other assets. This can be a great way to leverage your home's value and improve your overall financial situation. Don’t be fooled by low interest ratesThe lowest mortgage rate doesn’t always mean the best deal. Here are some things to consider when researching, lenders, mortgage terms &amp; interest rates.<ul><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Not all mortgages are the same, even if they have similar rates</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Beware of "Restricted Mortgage Products" that may have hidden terms and conditions</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Read the fine print to ensure you're not committing to a bonafide sales clause (the need to sell your home in order to break the contract/term) or other unfavorable terms</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Look for flexible mortgage options with reasonable prepayment privileges and penalty calculations</li><li style="font-weight: 400;" aria-level="1" data-mce-style="font-weight: 400;">Don't be lured by rates that seem too good to be true – they probably are</li></ul> In conclusion, exploring your options for mortgage renewal is a smart financial move that can help you save money, access equity, and improve your overall financial situation. By taking the time to research different mortgage products and negotiate with lenders, you can find a product that meets your current needs and provides the best value over the long term. Before you sign on the dotted line, make sure you do your research and understand all the terms and conditions of your mortgage agreement. Your financial future may depend on it. </figcaption></figure>

Blog

What is the Canadian Mortgage Charter?

Bank of Canada Rate Announcement

Co-Applicant vs Co-Signer vs Guarantor

Unlocking the Power of Mortgage Pre-Payment Privileges: ...

Introducing the First Home Savings Account: A Fresh Initi...

Why Exploring your options for mortgage renewal can save ...