Often when purchasing a home, purchasers will get a pre-approval on a mortgage.  Typically, these pre-approvals last for 60, 90 or even 120 days.

What is a pre-approval?

A pre-approval involves a mortgage broker collecting all of the documents required to apply for a mortgage, whether with a major bank, or an alternative lender.  The broker would then carefully choose the most appropriate lender for the client, and submit the information to request a mortgage pre-approval.  The lender would analyse the application, and decide whether or not they wish to fund the mortgage.  If it is a mortgage they want to fund, they will send a letter “pre-approving” the mortgage.  This basically means the clients are approved for the mortgage, as long as it closes by the expiry date of the pre-approval.

Why would you do this?

There are many advantages, and no disadvantages, to getting pre-approved.  Here are a few of the most important reasons:

• The purchaser knows how much large a mortgage they can qualify for. This allows them to have a solid home purchase budget.  It prevents wasting time looking at homes that do not fit into their budget.
• The purchaser can then make a confident offer to purchase knowing that they will get the financing necessary to make the deal happen.
• In times of increasing interest rates, a fixed rate pre-approval guarantees the rate offered in the pre-approval for the time period stipulated.

Some important items to remember when working with a pre-approval:

• The lender has to approve the home purchased. This is most often a formality, but the home has to show enough value to warrant the mortgage amount.
• The purchase MUST CLOSE before the expiry date of the pre-approval. If closing is delayed, the lender may not honour the pre-approval.  A signed agreement of purchase and sale does not guarantee the rate if the closing is after the expiry date of the pre-approval.

Contact me for more information…

Pre-approval costs you nothing and can bring great peace of mind.  Please contact me if you would like to discuss a mortgage pre-approval or for any other mortgage questions.

There are a few good reasons to renovate your current home.  The most common is for your own personal enjoyment and that’s a great reason.  But some people want to renovate with a future sale in mind. Even if the primary reason is personal enjoyment, it doesn’t hurt to understand how your renovations will impact a future sale, and where you get the best bang for your buck.

First of all, if you have the room to add square footage, according to a study conducted by the National Association of Realtors, you get an increase in value of approximately 30% for every 1000 square feet you add to the average sized home.  Keeping that figure in mind, if your home is worth $1 million, and you add 1000 square feet, the addition should be less than $300,000 to increase your equity in the home.

The best renovation for return on investment is a bathroom.  Bathroom styling, although based on 3-4 main fixtures, changes considerably within a relatively short period of time, and buyers don’t want to deal with a bathroom renovation on a house they just purchased.  If your bathroom is 10 years or older, maybe the time has come to consider a renovation if you are looking to get the highest value for your home.

Another big draw these days is a “special use” room.  This can be a craft room or a hobby room or perhaps a theatre room.  If you have the space, and you might enjoy it until you sell, this is generally a good addition/investment to make to your home.

Just be mindful that you do not generally want to price your house out of the neighbourhood.  In other words, don’t become the most expensive house on the block. It can be hard to get that top dollar out of your house if the neighbourhood does not support it.

If you are looking to invest in a home renovation, and need to take some equity out of your home to do so, please contact me for mortgage advice. We can work with you to best get access to your equity, whether refinancing, switching lenders, or looking at alternate arrangements to fund your dream renovations.

Canadians now have new protections when it comes to dealing with their bank thanks to the new Financial Consumer Protection Framework which came into effect June 30^th of 2022.

Among the more than 60 changes that came into effect are:

1. Banks now must deal with customer complaints within 56 days, reduced from the previous 90 days.
2. Liability for lost or stolen credit cards is now limited to $50.
3. Banks must now send electronic alerts to help customers avoid going into overdraft or spending over their credit limit, which can result in fees.
4. They must provide advance notice so customers can decide whether to renew or cancel products or services.
5. Banks are obligated to provide separate agreements for each product and service provided to ensure the customers are informed of their options.
6. Banks will now be required to create a whistleblowing program to encourage employees to come forward if they see anything happening in the bank that they feel is wrong, knowing their job will not be at risk.

The alerts required, and notices of renewal, are areas of welcome improvement, and can help save consumers money.  Alerts to avoid unintended overdraft charges, should decrease fees and charges.  Getting warned about an upcoming mortgage renewal should give consumers time to look at alternatives, perhaps reaching out to an independent mortgage broker for all of the options.  In this competitive market, with increasing interest rates, this is certainly a positive change.

Well, the end of 2023 sounds like a long way away, but it is only 16 months and time flies!  Rules are changing for two types of home equity mortgages:

HELOC

A Home Equity Line of Credit, or HELOC, is a mortgage product that contains a conventional fixed amount mortgage, and a rotating Line of Credit portion.  The Line of Credit portion is available to the lender at any time with flexible payment options, including interest only payments.  Right now, the limit of a HELOC is 80% Loan to Value (LTV).  So, for example, if you have a $100,000 home, you can have a HELOC up to $80,000.  Starting at the end of 2023, the maximum LTV for this type of product will be reduced to 65%.

REVERSE MORTGAGES

Reverse mortgages are financial products offered to people over the age of 55. There are no income requirements to qualify.  The home owner can draw funds at any time, or sometimes it is set up to have an amount added to the mortgage each month with a payment of that amount to the home owner.  No payments are required, and any interest accumulated is simply added to the principal of the mortgage.  So with time, the principal increases.  These are relatively new products in Canada, and traditional LTV maximums have been creeping up over the past few years.  They currently sit around 60%.  Government regulations will cap these types of products at 65% LTV as well to keep it in line with HELOCs.

It seems in the mortgage world, the rules are constantly changing, and knowing what’s coming down the pipe is helpful when making decisions about buying or refinancing. Reach out anytime for a no-obligation review of your situation, and some thoughts on the best approach for you.

We hear it on the news daily right now, the Bank of Canada is raising interest rates in an effort to reduce inflation. What does this mean, and what is the relationship between interest rates and inflation? This involves some very complicated and high-level economic theory, but I will try to explain a simplified explanation.

INFLATION

During times of spending, or what the economists would call “excess spending”, consumers have extra cash and a feeling of comfort with spending more money. As we live in a supply and demand economy, the demand goes up, and supply goes down. This puts pressure on prices as suppliers see opportunity to raise prices and scarcity also leads to higher prices due to competition in the marketplace. Due to COVID, we are also experiencing an unprecedented time of undersupply of many types of goods. This causes inflation, or an increase in prices. As costs spiral up, the concern is they may go up too quickly, and people will eventually not be able to afford basic necessities of life, and then we enter into a period of recession.

HOW DOES INCREASING INTEREST RATES AFFECT INFLATION…

As the governments see prices rising, and demand rising, they need to slow down the process, and by reducing buying power, the system slows down. By increasing interest rates, the cost of credit goes up, and consumers feel less comfortable borrowing money. As well, they may decide to invest in interest bearing accounts instead of spending their money. This slows down consumer demand, increasing supply, and thus slowing the process of inflation. This has an effect of stabilizing the economy – sort of cooling off an economy that is a bit overheated, so to speak.

The latest 1% interest hike by the Bank of Canada is an attempt to be one step ahead of inflation. There will be more increases, but we are unlikely to see another one of this magnitude. For more information about how to weather these latest interest rate trends, feel free to contact me for a no obligation consult.

We are definitely in a period of rising interest rates, due mostly to the government wanting to curb or control inflation.  What does that mean to average consumers.

Credit Card Debt

The first thing to think about is your short-term debt – like credit cards.  These have very high interest rates to begin with, so an increase to an already high rate can cut deep into your pocket book.  If you are carrying high interest debt from month to month, it may be time to look at eliminating that debt.  One strategy might be to refinance your house to use equity built up to pay off the high interest debt with lower interest debt.  This will significantly improve your monthly cash flow situation and reduce the stress involved with these high interest payments.  It is then very important to not allow that high interest debt to develop again.  Think about reducing your credit card limits.  Or even better, get rid of as many as you can altogether.

Mortgage

Now the big one – your mortgage.  As mortgages become due to renew, you will most likely be facing a significantly higher interest rate than you currently have, and this will increase your interest payment each month.  If you were just able to qualify for your initial mortgage, it may be tight this time around, and in fact some people may not qualify to renew their mortgage with their current lender.  Some may need to look elsewhere for alternative lenders to help them achieve a mortgage that works for them.  That is where a mortgage agent can be very helpful.  We have a lot of options that your bank does not offer.  That does not mean that your bank isn’t the best option again, and we may go that route.  But we can look at all the possibilities for you, and work with you to determine the very best solution.

Don’t Panic…

The main message is don’t panic.  Be prudent.  Reduce unnecessary debt and payments.  Perhaps think about whether you really need that new car right now, or delay that much needed vacation (or just scale it back a bit).  And remember, interest rates were around 4% just before the pandemic hit.  Life is full of ebbs and flows.  These types of changes are bound to happen and just part of the normal economic cycle.  We are here to help you roll with it.

So the long anticipated moving day is here.  It can be an extremely stressful day for all involved.  But if you have pets, it will be stressful for them as well.  Unlike with children, you can not explain to pets what is happening to help reduce their stress.

The Old House

One way to help reduce a pet’s stress is to keep them as far away from the crazy moving process as possible.  Maybe leave them with friends or family, or in a familiar kennel for the day?  If that is not possible, isolate them from the excitement.  You could empty a room in an area of the house away from the activity and close the door.  A less desirable option may be to put them in a carrier or portable kennel in the garage or basement away from the action.  In any case, make sure fresh water and food is available at all times, and check on them frequently.  Even a small amount of normal routine will help them, so take time for short walks or tossing a ball in the yard.

The New House

When you arrive at the new house, ensure you have some dedicated time for them.  Introduce them slowly, and make sure they are secured.  A stressed animal may run away to try to find their home.  It is even a good idea to try to set up, to some degree, a room where the animal will recognize the furniture and fixtures to give them a sense of being home before letting them roam the new surroundings.

It can take several days for a pet to realize they have a new home, so be vigilant and help them adapt.  It is also a good idea to get advice from your local veterinarian before the move.

Our pets are like family, and we always want them to feel safe and secure.  I hope some of these tips and suggestions will help your pet settle in to its new home.