Recently, there have been headlines about identity theft, fraud and stealing homes. Title fraud occurs when the fraudster assumes the identity of the homeowner and then uses it to assume the title on the home, sell the property or obtain a mortgage on that property or other properties in the homeowner’s name, In this article by CMI Finacial Group discusses TITLE FRAUD AND TITLE INSURANCE and the BENEFITS FOR BORROWERS.

Protecting personal information

Borrowers can take steps to protect themselves by safeguarding their personal information:

• Keep personal information in a safe place.
• Don’t give out personal information on the phone, through the mail or online unless the borrower has initiated contact.
• Give your Social Insurance Number (SIN) only when absolutely necessary. Ask if other identification can be used.
• Check with the land registry office to ensure that the title of your home is in your name.
• Consider purchasing title insurance.

Title insurance coverage

While borrowers can take preventative measures to protect their personal information, they can also look at title insurance which protects the homeowner from a number of risks, including:

• Someone trying to acquire the home through forgery or fraud;
• Minor errors in the legal description of the property;
• Unpaid utilities, mortgages, taxes, or condo maintenance fees;
• Removal of existing structures if they violate zoning laws;
• Legal claims by someone else on the property, such as property liens or construction liens from unpaid contractor bills;
• Protection from another person having interests on the property;

Example:

If the previous owner did not pay their contractor and there are construction liens on the property, title insurance would cover this. If a structure needs to be removed because it encroaches on a neighbour’s property, title insurance will cover the removal costs.

Title insurance exclusions

The following issues are not covered by title insurance:

• Zoning bylaw violations from home renovations or additions that the title insurance policy holder is responsible for;
• Environmental hazards;
• Known title defects that we revealed before the homeowner bought the property;
• Wear and tear on the home and property, and;
• Risks and damages that would be covered by homeowner’s insurance.

While title insurance can’t protect a borrower from becoming a victim of fraud or title defect, it can protect them from many of the consequences and the resulting stress.

The Canadian economy seems to be ganging-up on the Bank of Canada as it tries to wrestle inflation back to 2.0% as the report by First National Financials mentions.

The latest employment numbers, once again, came in well above expectations.  Statistics Canada reports 35,000 jobs were created in March, nearly triple what had been forecast.  As a result of the on-going demand from workers, wage increases have also caught up to inflation.  Wages are up 5.3% from a year ago.

“A lot of employers say they’ve been having trouble finding workers, and what do you do? You bid up your offer and that tends to drive wages up,” said Pedro Antunes, chief economist with the Conference Board of Canada in an interview with the CBC.

It’s good news for workers, but it makes things harder for the central bank which has been trying to avoid outsized wage growth because it is seen as a driver of inflation.  Wages tend to be “stickie”, in that they only go up, unlike prices for commodities and services which can decline based on supply and demand.

“I don’t necessarily think that’s bad news, but … we’re in this kind of bizarre world where sometimes the good news is not so good news for the Bank of Canada,” said Antunes.

This follows stronger than expected January GDP numbers.  The economy grew 0.5% for the month, defying the BoC’s efforts to slow things down.  However, the Bank is expected to continue its rate-hike pause at this week’s setting, as it waits for last year’s rapid series of increases to work their way through the economy.

The latest numbers from Statistics Canada show the country’s economy continues to chug along despite very deliberate efforts to slow it down as mentioned by First National Financial LP.

Gross Domestic Product (GDP), which measures the total value of all goods and services produced by the economy, rose by 0.5% in January.  Early indications are it was up by another 0.3% in February.  The first quarter of this year is on track to see GDP grow at an annualized rate of 2.5%.  The Bank of Canada had forecast growth of about 0.5%.

The unexpected resilience of the Canadian economy is buoying hopes for a, so-called, “soft landing” as the BoC works to bring inflation down.  There have been numerous forecasts that say the central bank’s rate hiking policy will push Canada into recession and unemployment will rise.  Some of those predictions are softening and the fear of significant job loses is fading.  But analysts still expect there will be an economic slowdown and, perhaps, a mild recession later this year as the effects of the Bank’s rate hikes work their way through the overall economy.

The BoC has paused its rate increases, for the time being.  But it has made it clear more hikes will come if they are deemed necessary.  The Bank’s trend-setting policy rate is now 4.5% and inflation has dropped to 5.2%.  The Bank expects it to fall to 3.0% later this year.  Target is 2.0%.

If economic growth remains stronger than expected and high inflation persists the BoC could be forced into the tough position of having to raise interest rates at the risk of pushing the country into a real recession.  In others words, a “hard landing”.

For now, the Bank is expected to leave its rate unchanged at the next setting on April 12^th.

Instability persists in the Canadian housing market, but analysts say there are signs things may start to normalize in the coming months.

This article by First National Financial LP Indicates that the Canadian Real Estate Association reports that February home sales fell 40% compared to their peak in February of last year, just before the Bank of Canada started raising its trend-setting Policy Rate.  Prices, compared to a year earlier, dropped nearly 19%.

The national average home price now stands at a little more than $662,000.  With the busiest and most expensive markets – Toronto and Vancouver – calculated out of the equation the average price falls by almost $135,000 to about $527,000.

While that might seem gloomy, market watchers are taking encouragement from the month-over-month figures in the CREA report.

“The similarities between 2023 and the recovery year of 2019 continued to emerge in February, with sales up, the market tightening, and month-over-month price declines getting smaller,” said Shaun Cathcart, CREA’s Senior Economist.

Between January and February home sales rose by 2.3%.  Sales for the month are now, roughly, comparable to the period in the pre-pandemic years, 2018 and 2019.

The average price popped up by $50,000 between January and February, the first monthly increase in half a year.  Much of that was driven by activity in the Toronto and Vancouver areas.

The market tightening is evidenced by a nearly 8% decline in new listings for the period.

Why you need a home inspection.

Ahome inspection isn’t a legal requirement when you buy a home in Canada. Yet, it’s certainly a wise decision for the largest purchase you will likely ever make.

Here are five reasons why you should opt for a home inspection when buying a home, even if it is a brand-new build.

1. Things unseen

The home you want to buy may have a gorgeous skylight, cathedral ceilings and a huge master bedroom.  But the home’s aesthetics can hide big problems.

When you tour a house, you aren’t climbing into the crawl space or looking at the furnace. A home inspector isn’t wowed by beautiful staging. He or she will look at what’s in your walls, not what’s on them.

2. Realistic budget for home maintenance

Many home inspections include the items that will need to be replaced within the next five years.

Paying for a home inspection can help you come up with a realistic home maintenance budget. If you know that the windows and roof are nearing the end of their lifespan, you can plan for that.

3. A solid negotiation tool

Getting a home inspection gives you a huge amount of leverage. You can ask the sellers to fix some or all of the issues found during the inspection. Or you can renegotiate the sale price or ask the seller to contribute more towards closing costs.

With a home inspection, you have the upper hand in the deal. This gives you a lot of power to get a better deal on the purchase. Of course, you can also choose to back out of the sale if there are big, expensive issues that you’d rather not deal with.

4. Can be an eye-opener

A home inspection will reveal the big picture when you might be focused on the location and the open kitchen plan. You don’t want to be blind to the potentially big issues like foundation cracks or electrical problems that can lurk unseen.

5. Peace of mind

Lastly, and most importantly, a home inspection gives you peace of mind. You’ll be able to finalize the sale of a home knowing exactly what you’re getting yourself into. That way, you don’t uncover any major surprises shortly after moving in—even new builds are subject to issues

Industry Jargon Explained.

Baffled by the expressions Realtors and bankers throw at you? Here are some commonly used—but not always understood—words to describe mortgages:

Amortization Period

This is the number of years it will take to repay the entire mortgage in full and is determined when you are approved. A longer amortization period will result in lower payments but more interest overall as it will take longer to pay off. The typical amortization range is 15 to 30 years.

Closed Mortgage

This is any mortgage where you have agreed to pay the lender for a specified period of time. This means that you cannot pay it off, refinance or renegotiate before the mortgage term ends without incurring a penalty. Depending on the lender, there may be options for accelerated payments but it depends on your particular mortgage contract. While these mortgages tend to be a lot stricter, they can often provide lower interest rates.

Conventional Mortgage

In the case of a conventional mortgage, the loan covers no more than 80% of the purchase price on the property. This means, the buyer has put 20% (or more) down on the property. These mortgages do not require default insurance due to the amount down.

Default

Failure to pay your mortgage on time will result in defaulting on the loan.

Derogs

Short for ‘derogatory’, derogs refers to an overdue account or late payments on your credit report.

Down

Short for down payment. In Canada, the minimum down payment is 5% on any home purchase.

Fixed

A fixed-rate mortgage means you are locked in at the interest rate agreed for a longer length of time.

Flex Down

This refers to a borrowed down payment program, which allows homeowners to “borrow” money for the down payment from a credit card, line of credit or other loan. In this case, the repayment of the loan is included in the debt calculations.

Foreclosure

This refers to the possession of a mortgaged property by the bank or lender if a borrower fails to keep up their mortgage payments.

High-Ratio Mortgage

A high-ratio mortgage is where the buyer has provided a down payment of less than 20% of the purchase price and needs to pay Canada Mortgage and Housing Corp. (CMHC) to insure the mortgage against default.

MIC

Short for a Mortgage Investment Corporation, this is a group of investors who will lend you the money for a mortgage if a traditional lender will not due to unusual circumstances.

Open Mortgage

An open mortgage means you can pay out the balance at any time, without incurring a penalty.

PIT

Principal, interest and taxes— a calculation representing the amount you can afford to pay monthly on your home. Heating costs are often included in this calculation (PITH).

Pull

Also known as a ‘credit check’ or ‘credit inquiry’ a ‘credit pull’ refers to the act of checking a credit report to determine if the borrower is a viable investment prior to approval of the mortgage.

Term

Term is the length of time that a mortgage agreement exists between you and the lender. Rates and payments vary with the length of the term. The most common term is a 5-year, but they can be anywhere from 1 to 10 years. Generally a longer term will come at a higher rate due to the added security.

Trade Lines

This refers to any credit cards, loans, wireless phone accounts, or mortgages that appear on your credit report.

Underwriting

This refers to the process of determining any risks relating to a particular loan and establishing suitable terms and conditions for that loan.

Variable

A variable-rate refers to an interest rate that is adjusted periodically to reflect market conditions.

20/20

A condition that refers to repaying 20% of the mortgage balance OR increasing your payment by 20%, without incurring a penalty.

If you are looking into getting a mortgage don’t be afraid to ask questions! At the end of the day, the mortgage contract has your signature on it and it is important to understand any contract you are signing. Contact a DLC Mortgage Broker today and they would be happy to discuss your situation and answer any questions surrounding mortgage conditions or jargon to ensure the best result for YOU!

Investment Properties.

So, you are looking to purchase a second property! Congratulations! This is a great opportunity for you to expand your financial portfolio and ensure stability for the future. However, before you launch into this purchase there are a few things you should know, depending on which type of second property you are looking to purchase.

SECOND PROPERTY WITH INTENTION TO RENT

Buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases. Before you look at purchasing a rental property, there are a few things to consider:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.
2. Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
3. Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

Rental income from the property can be used to debt service the mortgage application, but do bear in mind that some lenders will have a minimum liquid net worth requirement outside of the property. Also, if you do eventually want to sell this property it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

VACATION PROPERTY

While vacation properties are not always the perfect investment, they are popular options for people who want to get away from it all and build memories in! If you’re motivated to head down that road, buying a vacation property is essentially like purchasing a second home.

If you are considering buying a unit within a hotel as a vacation spot (known as “fractional ownership”), it is important to note that if there is any mention of using your vacation home to provide rental income it will be treated like an investment property.

SECONDARY PROPERTY

Most people are trained to stay out of debt and don’t tend to consider using the equity in their home to buy an investment property, but they haven’t realized the art of leveraging. If you’re using equity from your primary residence to buy a secondary property, keep in mind that the interest you’re using is tax deductible. Consider that you’re buying an appreciating asset, and if you put a real estate portfolio and a stock portfolio side-by-side, they don’t compare.

WHO IS A GOOD CANDIDATE?

You might be surprised to learn that you don’t need to make six figures to get in the game. Essentially, you just have to be someone who wants to be a little smarter with their down payment. Before taking on a secondary property remember that the minimum down payment is 5% of the purchase price – unless you are intending to rent, in which case it is 20% down.

When it comes to purchasing a secondary property, whether for investment or rental or vacation, it can be a great opportunity! As your mortgage broker I can work with to find the best solution for your unique needs.

AIR BNB ON YOUR MIND?

More and More Canadians are hopping on the short-term rental train as Air bnb’s popularity has sky-rocketed over the last few years. It’s not a bad way to earn extra money, but don’t forget there are a few things to consider:

• Check strata/city bylaws
• Contact your insurance provider to get correct coverage
• Talk to your mortgage broker to see if a short-term income property can affect your approval
• Consider tax implications, and talk to an accountant.

The more services you provide as a host, the greater the chance that your rental operation will be considered a business.

Short-term financing – credit or loans that are designed to be paid off in a short period of time – can be a useful financial tool in a variety of different situations, such as:

• Bridge financing

If you’re planning on moving and have found a new home before selling your existing one, you may need a short-term loan to make a down payment on the new place.

• Seizing an investment opportunity

If an opportunity arises, a quick injection of cash will enable you to take advantage of it.

• Consolidating debt

If you have multiple different loans, you can consolidate them into one single loan if you find one with a lower interest rate.

• Covering unexpected expenses

Accessing some short-term cash will let you cover unplanned expenses, such as paying off medical bills or helping out an adult child during a period of unemployment.

But what are the different types of short-term financing options? And how do you know which are right for your situation?

Short-term financing options

Home Equity Line of Credit (HELOC)

A HELOC is a revolving line of credit secured against your home, typically allowing you to borrow up to 80% of your home’s value.

Pros:

• Interest rates are typically low.
• You have flexibility over when you pay it off.
• You can access portions of the approved sum at different times.
• You therefore only pay off and pay interest on the amount you access.

Cons:

• Retirees can find it hard to qualify, particularly if they don’t have a regular income or a strong credit score.

Private Loan or Mortgage

These are loans which typically have a period of one year.

Pros:

• They’re usually fairly easy to qualify for if your home has enough equity.

Cons:

• Set-up fees and interest rates are typically high.

Short-Term Installment Loan

These are loans in which set amounts are repaid at regular intervals for the term of the loan.

Pros:

• You pay it off in installments rather than all at once.

Cons:

• Unlike a credit card or line of credit, you can’t access portions of the approved sum at different times.
• They can include hidden prepayment fees.

Payday Loan

A payday loan is a short-term loan characterized by very high interest.

Pros:

• Usually easy to qualify for.
• You can often access them even if you have a bad credit score.

Cons:

• Interest rates are extremely high – often exceeding 300% over a year.

Convertible Mortgage

These are short-term mortgages, typically six months, with a fixed interest rate.

Pros:

• They can be switched to a long-term mortgage if you choose.

Cons:

• They usually have a higher interest rate than adjustable rate loans.

Cross Collateralization

This is when the collateral of one loan, such as a car, is used to secure another loan you have with the same lender.

Pros:

• Interest rates can be lower.

Cons:

• The lender may keep you from selling the asset being used as collateral, even if you have paid it off.

A New Short-Term Financing Option

CHIP Open is a new, short-term financing product offered by HomeEquity Bank. It’s a reverse mortgage which allows you to access up to 55% of the value of your home in tax-free cash. However, unlike a traditional reverse mortgage, there are no prepayment fees, meaning you can pay off the full amount whenever you like.

Pros:

• Easier to qualify for than other short-term products since its not based on income or credit rating.
• No monthly repayments.
• Interest rate and fees are highly competitive in the short-term lending space.
• If you decide you need a longer-term solution, you can switch to the CHIP Reverse Mortgage at a lower interest rate.

Cons:

• Only available for Canadians 55+.
• You must own your home.
• Interest rates are higher than the regular CHIP Reverse Mortgage, allowing us to completely waive any prepayment penalties.

If you’d like to find out more about how CHIP Open can help you with your short-term financing needs, contact me today!

Many Canadians will spend their entire lives without proper financial education. Money. It’s virtually impossible to get by in life without it, and everyone wants more of it. But many people struggle to manage their money and make it work for them. And all the stats are going in the wrong direction. More and more Canadians are struggling with debt and get by living paycheque-to-paycheque with no idea or strategy on how to turn it around.

Luckily there are many resources out there to help guide you in the right direction. How you use the information to form a strategy will determine your financial future. most people don’t even get started on a healthy financial journey because of some basic money myths like, you need money to make money or it’s too complicated to understand.

there are two key metrics people need to be aware of: their net worth and how much is needed to save every month to reach financial freedom.

Net worth is a valuation of your assets minus your liabilities or what you own and subtracting what you owe. While a general rule of thumb is putting away 10 percent of your pre-tax income a month, the number may not be enough to meet your financial goal. You’ll need to create a proper budget to determine that number you really need to put away to reach your goals. by getting a handle on those two aspects and tracking them on a regular basis, chances of getting to financial freedom are dramatically higher.

It’s actually a lot easier than people think, The “biggest hurdle for most people is suppressing the instant gratification of spending in the moment”.

“People spend their entire lives trying to make money, why? They want a nice lifestyle and get to a point where they can enjoy the best things in life, but if you don’t have a plan, you probably won’t get there. If you’re really serious about getting to a place where you make more money from passive income than all the hours you put in, you have to start learning it. If you get clear on some of your goals, you’ll get there.”