Understanding The New Mortgage Stress Test Rules

new mortgage stress test rules

The new mortgage stress test rules are now in effect for Canada as of June 1, 2021. With the mortgage rates so low during the Covid-19 pandemic, the government thought it would be useful to reinforce the protocol for the stress test.

They want to ensure new homebuyers can handle payments with the increase in cost if the mortgage rates rose significantly during their next renewal. It is a way for preparing for the worst-case scenario to be sure that you won’t get caught off guard and end up losing your home and investment.

What Is A Stress Test?

A mortgage stress is used to determine whether you can actually afford your mortgage at a qualifying rate. When people sink their money into a huge investment such as a home, it can stretch budgets thin. Leaving little room for the unknown when it comes to their finances.

The stress test demonstrates a hypothetical bad scenario for the buyer before they make a considerable investment. It uses variables such as losing your job, income reduction, rising interest rates, etc. It’s a way to determine how much you could still afford to pay if any of these situations occurred.

The Stress Test Formula

understanding the stress test

It’s regardless of your down payment.  Lenders will now use the greater of, the Bank of Canada’s 5-year benchmark rate or the contract rate plus 2%.

Qualifying

In order to qualify for a mortgage in Canada, you will need to pass this stress test. However, private lenders, mortgage investment corporations, and other alternative lenders don’t need to abide by the stress test. Though, you’ll still need to prove your creditworthiness and have a stable income that shows you can afford what you’re looking to qualify for.

When & Why Was The Stress Test Implemented In Canada?

Canada implemented the stress test due to growing concerns that the mortgage industry was increasing too quickly. They didn’t want Canada’s overall economic stability to be at risk. So, in 2018 the mortgage stress test came into effect when the federal bank regulator, the Superintendent of Financial Institutions (OFSI), decided it would be wise to create regulations that would ensure Canadians would only spend within their means.

New Stress Test Rules

stress test qualifying rate

So, what are the new stress test rules, and how can you prepare for them as a new homebuyer at this time?

The stress test’s new guidelines are more challenging than before, but that is to ensure those applying for a mortgage will be able to continue making payments in this new hot market without struggle.

New Benchmark Minimum Qualifying Rate

The Bank of Canada’s new benchmark minimum qualifying rate for uninsured mortgages is at 5.25%, up from 4.79%. This means the increase in housing sales in Canada’s market will hopefully start to cool off. It takes the heat off cities in Canada where bidding wars, skyrocketing prices and a burst of sales were standard throughout the pandemic.

However, this new rate could make it much harder for new homebuyers to acquire a mortgage and get the ball rolling on a home investment. Still, they say it will help guarantee the Canadian economy stays stable.

Preparing For The Harder Rules & Your New Home Purchase

new home buyers

This increase in the qualifying rate isn’t enough to completely shut would-be homebuyers out of the market. It won’t increase costs but limit what some are allowed to borrow, which could be a strain on some folks.

For example, if the maximum mortgage you were approved for was calculated at $500,000, you’ll presently get approval for $480,000. Meaning, now you’ll need an extra $20,000 to make up the difference. So prepare to save a little more if you want to acquire the same loan.

Calculate your mortgage stress test here.

Don’t let the new rules stop you. There is still plenty you can do to get into a home of your own.

Other Things You Can Do:

  • Continue Saving & Work Hard
  • Opt for a smaller starter home that fits within the new guidelines
  • Work on increasing your credit score. The best mortgage rates go to those with the highest credit scores
  • Reach Out To One Of Our Professional Mortgage Brokers With Any Questions About Financing, Mortgages & Affordability

For any questions or concerns regarding the new mortgage stress test or anything mortgage and loan-related, contact us today at (403) 571-8142. We are ready to help you open the next chapter of your life. We will work with you to get you into a home, even with the more difficult stress test in place.

How To Take Advantage Of The Calgary Real Estate Boom With A New Mortgage

calgary real estate

If you regularly walk through your neighbourhood, you might notice a house listed for sale last week has already sold this week. With a booming Calgary real estate market, now might be the time for you to join in as a buyer. In this article, you will first read all about how the market got to where it is. Then we’ll go over a few key reasons single-family homes are in high demand. Lastly, we explain the mortgage pre-approval process so you may take advantage of the current market. 

How Did We Get Here?

So how did we get here? How and when exactly did the Calgary real estate market start booming again? Despite the pandemic, current trends show the market will remain strong throughout 2021. Three things factor in building the housing demand in Canada, including: 

 

• High Rates Of International Immigration (Excluding 2020)

• Low-Interest Rates 

• Growing Middle-Aged Millennial Population 

 

The Calgary real estate market has seen high demand for single-family homes. Many young families or couples want to take advantage of low mortgage rates. However, with demand much higher than supply, this can cause stress for potential homebuyers. Many feel the urgency to make decisions swiftly in fear of losing out on their new dream home. Moreover, the Canadian Real Estate Association states the number of newly listed properties rose by 7.5% from February to March. While the market remains hot, they forecast fewer sales for 2022.

Single Family Home Demand

Single-family homes are in high demand. Due to the Covid-19 pandemic, we are all spending a lot more time at home. With many working from home, the shift to investing in personal space has risen. This means single-family detached homes are in high demand. Many are also considering moving out of the downtown core. Instead, they’re looking for a more spacious, quiet neighbourhood. 

 

It’s no secret that financial strain has hit many individuals especially hard this past year. Those who are minimally affected may have found their overall spending has gone down. With no holidays abroad or other large expenses, this money may go towards a down payment.

calgary real estate

Other Ways To Enter The Market

There are other ways to take advantage of the market without having to move. For example, a second or vacation home. With low-interest rates, you could find your weekend getaway home. 

 

Buying a rental property is another way to create wealth. A minimum down payment of 20% of the purchase price is required. Our team has assisted many Calgarians with this investment strategy.

Qualifying For A Mortgage

As we mentioned, buyers are taking houses off the market at record speed. Being prepared before you go property hunting is important. Please make sure you get a mortgage pre-approval first. You’ll need to organize several documents. A pre-approval shows how much you may borrow. 

Why Get A Mortgage Pre-Approval?

Due to current Calgary real estate demand, you’ll want to do everything you can to be an attractive buyer. With low mortgage rates, competition for a home can be high. Showing you did your homework and proving you have been pre-approved for a mortgage will set you apart. 

 

Pre-approvals help to make the financing process go more efficiently and smoothly. It reduces the potential for any unnecessary stress as well.

 

A pre-approval could also make negotiations easier. When the sellers knows you’re pre-approved, they could be willing to compromise—advocate for yourself. You could get what you’re asking for with a better price and terms. 

calgary real estate

Working With A Mortgage Broker

Making the biggest financial decision of your life is no small task. The added pressure to move quickly can make things extra stressful. So why make it more stressful by trying to do it yourself? Work with a mortgage broker to secure the best mortgage rate for your situation.  

Why Choose A Mortgage Broker?

First, they have extensive insider knowledge of the fluctuating market Buyers are snatching up homes faster than before, meaning you need to come prepared.

 

They will help you through the process of qualifying for a mortgage. Our team will guide you through the process each step of the way. You don’t want to feel disappointed finding your dream home, only to be turned down. 

 

By filling out a simple online mortgage application, your broker can get right to work. This will also cut back the time you may spend trying to get everything together yourself. Meaning you can get out in the market faster. 

 

A mortgage broker also plays an important role in ensuring you get your loan. They can help negotiate with various lenders, so you don’t have to. Additionally, they can get you the rate that best fits your needs because they know the industry.

Ready to jump into Calgary’s real estate? At The Mortgage Group Calgary, we offer personal mortgage solutions. Contact us today to start working with one of our expert brokers.

Mortgage Payment Changes

mortgage changes

You’ve been making your regular mortgage payments, as always, with no real hiccups. However, one day, you notice your payments are changing. What’s causing that? Why did my mortgage payment go up? We understand this can be an alarming realization, but not to worry. Today, we will explain why and how mortgage changes happen. 

Property Tax Changes

A change in property tax could mean a change to your mortgage payment amount. Property taxes are fees that go toward funding essential services in your city. They calculate this tax depending on your home’s assessed value. Expect to see it fluctuate over the years. Property taxes are either paid directly to your municipality or through your mortgage. Check and see which option you are currently paying with. Some also prefer paying their property taxes monthly, while others prefer one yearly payment. 

First-time Homebuyer's Property Tax

Your lender may collect this tax amount through your monthly mortgage payment. For first-time homebuyers, your lender will want to do this on their behalf. This is to ensure you are making the correct payments. Another reason is that lenders often require you to have 20% equity or more. As a first-time homebuyer, your down payment will be less than 20%. 

 

The nice thing about this method is that you don’t have to think about it. They will estimate and withdraw the amount as your mortgage payment. With that said, because they make a generous estimate, the amount you pay will probably be higher than your actual taxes. This extra money will go toward future payments. Therefore, you may see fluctuations in payment amount based on property tax calculations. 

mortgage changes

Fixed Versus Variable Mortgage

The two standard mortgages are the fixed interest rate and variable interest rate. You know your interest rate or regular payment amount won’t change in a fixed interest rate mortgage. That’s because you’re locked into a fixed interest rate for the entire term of your loan. This option can be beneficial when interest rates are low. Some prefer the stability and ease this type of mortgage offers. Budgeting can be simpler because you always know how much to save for your monthly payment. 

Variable Interest Rate Mortgage

If you have a variable interest rate mortgage, you could see some mortgage changes. This type of mortgage is usually why you might notice fluctuations in the amount you owe. There are a few reasons people choose a variable rate mortgage. One being if you believe interest rates will stay the same or drop over the term. However, this may not always be the case, meaning it can be riskier than a fixed-rate mortgage. Variable-rate mortgages change based on the market interest rate. This is what’s called the “prime rate.” In other words, an increase to the prime rate could mean an increase in your monthly mortgage payment. However, in the long run, people generally pay less interest in a variable rate mortgage.

Mortgage Refinance

If you recently refinanced your mortgage or are considering doing so, expect to see mortgage changes. A mortgage refinance means that you stop your current mortgage in exchange for a new one. This could be either with your current lender or a new one. There are many reasons someone might choose to do so. For example, you might want a lower interest rate to save money. However, you will have to pay a penalty fee. Another benefit is the ability to access the equity in your home or changing interest rate type. As mentioned above, you may want to change your fixed rate to a variable rate mortgage or vice versa. 

 

While there are pros to refinancing, the cons may not be worth it. Make sure you do your research and think of the long-term as well. If you are considering refinancing your mortgage, contact a mortgage broker. They can provide advice and help you make a decision that is right for you. 

 

mortgage changes payment changes

Mortgage Deferral

When you cannot make your regular mortgage payments, a deferral can help. For catching up on these payments, you typically have two options. The first is a repayment plan. If you find mortgage changes, that is because they have added your missed payments to your current payment. 

 

Reinstatement and forbearance are other options. You and your lender or broker have agreed to suspend your payments temporarily. Usually, you will pay a lump-sum amount down the road to make up for it. 

Conclusion

Property tax changes, variable interest rate mortgages, mortgage deferral, and a mortgage refinance are four reasons for mortgage changes. Each come with their unique benefits and disadvantages. Whether you’ve recently made a change or are considering changing things up, know you don’t have to navigate it alone. Mortgage brokers are there to help you. From penalties to complex language, it can be difficult understanding your mortgage. Brokers know the field and have the prior experience to back it up. Let them take the stress off, so you can confidently make the best choices for you.

 

At Mortgage Group, we focus on mortgage solutions by factoring in your financial situation. Contact us today to get in touch with any of our expert brokers. Let us help you navigate your mortgage. 

Qualifying For A Mortgage

qualifying for a mortgage

Ready to open the next chapter of your life? The idea of buying a home is both exhilarating and full of unknowns. But before we get to the buying, let’s first talk about qualifying. If you have been considering applying for a mortgage, then you’re in the right place. Today we are going to give you the low-down on qualifying for a mortgage. This article will include tips and tricks to help you get it right the first time.

Where To Begin?

Let’s start by discussing where to begin. Qualifying for a mortgage depends on many factors, and the process can look different for everyone.

First, we will discuss some of the paperwork you will need to get. Next, we will outline the mortgage pre-approval process. We have also included some things you will want to avoid. Lastly, we discuss how and why a credit score is vital for qualifying for a mortgage.

Organize Those Documents

This is arguably one of the most important tips. When it comes time to apply, you will need several documents. Having this all organized in one file will make your life much easier. A mortgage broker can help make sure you have all the documents needed for qualifying for a mortgage.

First is proof of employment. A current pay stub is proof you have enough income that can go towards mortgage payments.

A letter of employment from your employer is another form of proof your lender will want. This letter is to ensure your job title, income and length of time employed are correct.

For those who are self-employed, you will need to show notices of assessment, T1 Generals and Business Financial Statements.

qualifying for a mortgage

Mortgage Pre-Approval

We recommend this step because it shows the greatest mortgage amount you could qualify for. A lender will look at the documents we mentioned above and review your credit report. This way, they can calculate the maximum amount to lend and at what interest rate. That is why we recommend organizing your documents early. Other documents you should gather include:

  • Identification
  • Proof Of Assets, For Example, Your Car
  • Information About Your Debt, Such As Student Loans Or Credit Debt

Before you shop around, getting the pre-approval will show you how much you can afford. Many realtors won’t want to show you houses without this pre-approval. Therefore, it is important to get this done early. Online mortgage qualifier calculators can help give you a general idea.

Things To Avoid

Once they have pre-approved you, avoid making any major purchases. You want your financial situation to stay the same until your loan is finalized. Changes could mean you risk loan rejection.

Another thing to avoid is changing or quitting your job. Documents on proof of employment are key to helping you attain mortgage approval. Now is not the time to change career paths.

When qualifying for a mortgage, you will also want to avoid applying for new forms of credit. You want your debt level and available credit to remain the same.

Essentially, anything to do with finances should stay the same during the mortgage pre-approval process. Once you have successfully moved into your new home, you can change things around.

Mortgage Lender Or Mortgage Broker?

For a mortgage pre-approval, you will either go to a mortgage lender or mortgage broker. Both have different steps and methods.

A mortgage lender will lend the money directly to you. Mortgage lenders commonly include banks, credit unions, loan companies, or mortgage companies.

Mortgage brokers will find a lender for you, they do not lend money to you. With so many options, brokers have access to more information than the average person. You will have more choices at more competitive rates. Not only that, but brokers can get special deals and add-ons at no cost to you. Overall, they help make the process much easier for you.

Improve Your Credit Score

Lastly, let’s talk about credit score and why it’s important. A credit score summarizes the credits you use and whether you make your payments on time. This includes credit cards, loans, and financing plans. Building good credit history means making your payments on time.

Bad credit history, or no credit history at all, means it’ll be harder to borrow money. You can see your credit score through Borrowell, or Credit Karma.

A lender will check your credit history through a credit-reporting agency. Another way a lender sees you have a good credit rating is by looking at your loans. Having different types of loans shows them you are reliable and responsible. For example, you may have credit cards, a car loan, and a student loan. Building a good credit score takes time. This is because you must build trust through regular payments.

To Sum It Up

Qualifying for a mortgage can be a relatively simple process when done correctly. Mortgage brokers have the expertise and experience to help get you there. They will work with you so that qualifying for a mortgage isn’t a daunting process. With an online mortgage application form, simply fill out the information and let a broker do the rest.

In conclusion, paperwork is key. After organizing your documents:

  • Get A Mortgage Pre-Approval
  • While Waiting For Approval, Avoid Any Changes To Your Job Or Financial Situation
  • Check Up On Your Credit Score To See Where You Stand

For expert advice on qualifying for a mortgage, our team at The Mortgage Group Inc. is here to help. We will be with you every step of the way and help get you the best rates in Calgary. Contact us today for a consultation.  

Lump-sum Mortgage Payments

lump-sum payment

As a homeowner, paying off your mortgage as quickly as possible might be one of your top priorities, and for a good reason. There are many benefits to paying off your mortgage faster. One way people achieve this is through lump-sum payments. However, there are a few things to think about before making a lump-sum mortgage payment.

What is it? Is it right for me? The following will provide a few factors to consider on whether it’s right for you.

What Does Lump-sum Mean?

As the word suggests, a lump-sum means a large amount of money. You pay this money in a single payment rather than in instalments. A lump-sum payment is often paid more than once. This means you could pay it once or twice a year. Everyone’s financial needs and situations are different. Thus, speaking to a mortgage broker will help you create a personal plan.

How To Pay In A Lump-sum

We understand that life is full of unexpected moments. This may include cash flow from an inheritance, selling property, or a salary increase. With this new money, you may want to consider putting it towards your mortgage in a lump-sum. Doing so will help you pay off your mortgage faster and reduce the total amount of interest.

lump-sum payments

Advantages

Next, we will highlight some advantages to paying off your mortgage sooner with a lump-sum. If you’re not sure where to start, ask yourself some questions. Start by asking:

  • Why Am I Interested In A Lump-sum Payment?
  • What Are My Priorities?
  • How Much Can I Afford?
  • How Much Can I Put Towards A Lump-sum?
  • Where Will This Money Come From?

Financial Freedom

This one is a prime concern for many. Paying off your mortgage sooner provides greater financial freedom. Once you pay off your mortgage, you can use that money towards other things. Financial independence also allows you to prioritize your money in new ways. Think retirement or other investments. If financial freedom is your main priority, then a lump-sum mortgage payment will help you get there sooner.

Pay Less In Interest

As mentioned above, lump-sum payments mean paying less interest. Unlike regular payments, where you pay the interest, this is one way to save big over time. Online mortgage calculators can help give you an idea of how much you can save in the long term based on lump-sums.

Things To Consider

Putting all your eggs in a basket can be risky. Make sure you aren’t dipping into other forms of savings. Even if you make a lump-sum payment, ensure you still have emergency funds. If you don’t have a clear idea of how much to pay, take time to first think about it. Each year will also look different, so don’t sweat it. You may have extra means to put towards a lump-sum some years, while others you might not. Remember that you can only put a limited amount of money toward your mortgage. You can find this total in your contract.

lump sum payments

Timing

Make sure you know when you can make lump-sum payments. Usually, they will be on certain dates during the term, and either before or at the end of your term. Unlike your current monthly or biweekly payments, lump-sum payments aren’t obligatory. Check your contract to see specific dates.

Lump-sum payments will look different depending on how far along you are. In other words, the amount may vary depending on how long you’ve had your mortgage. Some years you may want to put more money towards your payments, while other years it could be less.

Self-employed

Are you self-employed or run a home business? If that’s the case, you might want to consider otherwise. When you are self-employed, a part of your mortgage interest may become tax-deductible. To put it another way, you may be able to subtract part of your mortgage interest to help reduce your taxable income.

Mortgage Brokers Are Here For You

While nobody can predict the future, talking to a mortgage broker will help you navigate what to do. Paying in a lump-sum has many benefits and works for many. However, it might not be right for everyone. Everyone has a unique financial situation. If a lump-sum doesn’t sound right to you, but you still want to pay off your mortgage faster, they can provide options. Increasing monthly payments, for example, could be one place to start. If you are currently making monthly mortgage payments, switching to biweekly could also be an option. A personalized plan is a great way to see it all on paper. Instead of imagining it, having it in front of you will give you the confidence to navigate your mortgage.

Ready to take charge of your financial future? Our team at the Mortgage Group Calgary will help with all your housing and mortgage needs. Our brokers are experts in their field and are here to help you get on track. Contact us today for a consultation.  

First Time Home Buyer Incentives

buying your first home

There are many firsts in life that you will never forget, and buying a home is one of them. While you know the result will be rewarding, getting there can be scary. With the right plan, it doesn’t have to be. Whether you’re newly married or recently graduated, know what is available in terms of first time home buyer incentive programs. 

 

Those looking to make the leap from renting to buying should also pay attention to these incentives and take advantage of them. As a first-time home buyer in Alberta, many incentive programs are available. Knowing what is out there will help take off some financial stress and help you purchase your first home.

Creating A Plan

Saving for your future mortgage is one of the first steps in purchasing a home. But how much is enough? This is where a mortgage specialist comes in. They can make sure you are saving enough without throwing out your current lifestyle. Creating a savings plan is one of the first things you’ll want to do. For example, paying off credit card debt and changing bad spending habits are good places to start.

Home Buyers’ Plan

The Home Buyers’ Plan (HBP) is a program made by the Canada Revenue Agency for first time home buyers. It allows you to withdraw funds from your Registered Retirement Savings Plans (RRSP). In addition, you are given 15 years to pay back the funds.

 

Funds can come from over one RRSP as long as it does not exceed $35,000 in a calendar year. This means you and your partner could both contribute from your respective RRSPs. To be eligible for the HBP you must be a first-time homebuyer who is a resident of Canada. You must also have a written agreement to buy or build a qualifying home for either you or a related person with a disability.

First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive is a Government of Canada program. It aims to help qualified first-time homebuyers purchase their first home. The program offers five or ten percent of the home’s purchase price to put towards a down payment. Therefore, reducing monthly mortgage payments to help more Canadians become a homeowner.

 

Eligibility requirements for the incentive include:

• Having Less Than $120,000 Total Annual Qualifying Income 

• Your Total Borrowing Does Not Exceed Over Four Times Your Qualifying Income 

• Being A Canadian Citizen

• Alternatively, Being A Permanent Resident Or Non-Permanent Resident Allowed To Work In Canada 

• Meeting The Minimum Down Payment Requirements From Savings, RRSP, Or A Non-Repayable Financial Gift From A Relative/Immediate Family Member

first time home buyer

Alberta Resident First Time Home Buyer Programs

There are several Alberta specific programs also worth looking in to.

Attainable Homes Calgary Program

The Attainable Homes Calgary Program is specific to Calgarians who seek affordable homeownership options. The program works by providing down payment help. Individuals, couples, and families can be eligible. Since 2009, the program has helped 1000 Calgarians meet their homeownership dreams.

RAMP

The second program is the Residential Access Modification Program (RAMP). RAMP helps low-income Albertans with mobility challenges. You can apply for this grant if you need to make renovations. However, renovations must include ways to make the home safer or more accessible. The program offers a grant of up to $7,500 per person each benefit year. Eligibility includes those living with progressive neurodegenerative disease or uses a wheelchair. Income thresholds are also considered.

PEAK

Public Essential And Key Workforce (PEAK) helps middle-income people buy a home. PEAK is divided into two categories, those with dependent children and those without. For those with no dependent children, you must have a household income of up to $80,000. However, for singles or couples with dependent children, the income threshold is $90,000. Moreover, PEAK is a down payment help program for those who don’t have resources for a 5% down payment.

Mortgage Specialists Are Here For You

Above all, the biggest thing to remember is to take your time. Don’t rush into decisions either. If you are purchasing a home with a partner, clear communication is important. Make sure both people agree on the house being purchased, the plan to save and purchase, and have realistic wants and needs. Be patient with yourself and your partner. Rushing the process could lead to regret later on.

 

Know that being a first-time homebuyer doesn’t have to be done alone. Federal, provincial, and municipal incentive programs are available and worth looking into. While there are many incentive programs out there, they can be hard to understand. Working with an experienced mortgage broker will save a lot of time and confusion.

first time home buyer

In conclusion, write all your questions before meeting with a mortgage specialist. Ask how incentive programs could benefit you. They will be with you every step of the way. Being a first-time homebuyer should be an exciting and rewarding process.

 

At the Mortgage Group Calgary, we have a team of some of the best mortgage brokers in Calgary. We provide mortgage solutions based on expertise and experience to best fit your financial situation. Contact us today for a consultation on how you can get on track to becoming a homeowner. 

Spousal Buyouts

Negotiating spousal buyout

When The Relationship Ends, But You Still Have A Mortgage

According to the Vanier Institute of the Family, the average marriage lasts about 13.7 years before a divorce. Going through a separation or divorce can be challenging legally and emotionally. There’s no easy way to say goodbye, especially when you share a home with the person you are saying goodbye to. 

 

Many separating couples don’t know about spousal buyouts and how it can help make the process easier. Whether you’re divorcing or separating from your partner, or just thinking about it, these buyouts let one partner “buy out” the other person on the mortgage.  

 

Most buyouts are between spouses or common-law partners, but some can be between friends or family who have bought a house together. This is why spousal buyouts are also referred to as “co-borrower buyouts.” Whatever your situation looks like, both parties must have the right information to move forward. 

What Is A Spousal Or Co-Borrower Buyout?

The buyout works by primarily refinancing your home up to 95% to buy out the other owner’s equity share and pay off joint debt. The stress of carrying debt can impact your mental health. The buyout allows both parties to alleviate any stress that their joint debt may be causing and start fresh. A buyout can also come in handy in situations where selling the property isn’t optimal.

Meeting With A Mortgage Broker

For a spousal or co-borrower buyout to work, several qualifications need to be completed. When you’re ready to separate, it’s essential to speak with a mortgage broker right away about your options. A broker can help you to determine if you qualify for a buyout, and if not, what might work instead.  

spousal buyouts

Considerations

The first thing that needs to be done is for both parties to decide who will keep the property. This is a decision that can only be made by the two parties. If both partners can’t come to an agreement, a buyout won’t be possible. Other options, like selling the property, might work best in this situation. 

 

The person buying out the other must make sure that they can afford to own the home. Both parties contribute income to shared expenses in many situations, but after a buyout, the buyer will need to pay for expenses such as mortgage payments by themselves.  

 

If you have talked it over with your partner and amicably decided on who wants to keep the home and is financially able to do so, you’re ready for the next step: meeting buyout qualifications.  

Qualifications

One thing to know is that all parties must be current registered owners on the title to qualify for a buyout. Another vital requirement to be eligible for a buyout is to have a finalized separation agreement. The agreement includes crucial information, like spousal or child support payments. The lender needs to see this agreement and make sure all net assets are allocated. 

 

A buyout is like a private sale, and as such, it is necessary to have a full property appraisal. This appraisal is ordered at the time of the buyout approval, so don’t worry about getting it done ahead of time. If done ahead of time, it likely won’t be usable because your lender often has specific requirements and appraisers they want during this process.  

 

The End Result

In the end, the buyer will have the home, and the other owner can take the equity from the buyout to find a new place to call home. 

 

If you are a divorcing or separating from a partner and are interested in learning more about options, including buyouts, reach out to our team at the Mortgage Group Inc. Our Calgary mortgage brokers are always happy to help you find the best solution. 

 

Newcomers To Canada

newcomers mortgage

Canada welcomes thousands of temporary and permanent residents from across the world every year. According to the Canadian government’s Immigration Refugees and Citizenship Canada (IRCC) department, in 2019, Alberta saw 43,690 people become permanent residents of Canada. Out of that number, 19,625 were living in Calgary.

Whether permanent or temporary, newcomers to Canada face a variety of challenging opportunities. One of these is becoming a homeowner. As a newcomer to Canada, buying your first home can seem complicated, but the process becomes easier to manage with the right knowledge and preparation.

Getting Started

The first consideration newcomers should make is what kind of home they are looking for. Now is the time to pinpoint which neighbourhoods you would like to live in. Do you want to be close to the office to save time on your morning commute? Are you looking to be near schools? Do you want to be near restaurants and businesses or live in a more residential area?

Also, consider what features you’re looking for in your home. What size of home are you looking for? Do you want yard space? What number of bedrooms and bathrooms do you need?

These considerations will help you understand where you should be house hunting and what you’re looking for in your future home.

The Canada Mortgage and Housing Corporation’s (CMHC) website has helpful information, checklists, and worksheets available in eight languages (English, French, Mandarin/Simplified Chinese, Punjabi, Urdu, Tagalog, Arabic and Spanish) to help newcomers on their homebuying journeys.

newcomers mortgage

Determine How Much Can You Afford

You need to determine how much money you have saved for a down payment and closing costs. You also need to consider how much you can afford per month on mortgage payments and property taxes. This is where a local mortgage broker can help you. You should connect with them and complete a mortgage application before meeting with a realtor. The application tells the mortgage broker important information like your arrival date in Canada and what credit you have built here.

Down Payment Considerations

Showing that you have the money to put a downpayment on the house is an essential part of the process. Having three months of bank statements from a Canadian bank or institution is vital for lenders to see. If the money for your down payment is coming from another country, your mortgage broker can help you get documents you need to show where that money came from. If you have a bank account in another country, you can get bank statements from there. You will also need to have documents that show how that money was transferred to you in Canada and what the conversion rates are.

Proving Creditworthiness

Residents, both temporary and permanent, will need to meet certain requirements to purchase a home. The following criteria must be completed to prove your creditworthiness and are related to putting 5% down on your new home.

  • You need to show at least three months of employment history. This can be done with a letter of employment and pay stubs. There must also be at least 12 months of consistent utility payments and 12 months of consistent payments to other things like a cellphone or cable bill. There shouldn’t be any late payments or debts for these payments.
  • You also need to supply a letter from your landlord and supporting documents that at least 12 months of rent was paid on time. Depending on your residence status and how much your downpayment is, additional requirements need to be met.

If there are requirements that you don’t meet fully, your mortgage broker can help assess them and plan your next steps. For example, if you have 12 months of credit in another country, you can obtain documentation proving this credit. The document proving credit from another country is commonly referred to as a credit bureau. Your credit bureau can potentially be used to establish creditworthiness.

newcomers mortgage

Determine What Mortgage Is Right For You

In Canada, there are many kinds of mortgages and many different lenders. How long should your mortgage term be? Should you go with a variable or fixed rate? It can be confusing to determine which option is best for you when there are so many available. Your mortgage broker can help you out with this by explaining different types of mortgages, terms, and rates and helping you determine which one is right for you.

Getting pre-approved for a mortgage will tell you how much you can afford to spend on a home before you start looking.

When You’re Ready To Start Looking

When you’ve made all the preparations and have obtained a pre-approval, it is time to connect with a realtor and start looking for your future home. After finding your perfect home, make sure to get an appraisal and home inspection. Talk to your mortgage broker to find out the next steps to finalize your mortgage. You should also plan to obtain property insurance after the sale goes through.

If you are a newcomer to Canada and are interested in learning more about mortgage requirements and options, reach out to our team at the Mortgage Group Inc. Our brokers are always happy to help you find the best solution.

COVID-19 Low Interest Rates

low interest rates

COVID-19 had caused a global financial upset and has introduced complex economic changes. Interest rates are currently relatively low and are predicted to stay that way for a while

 

The Bank of Canada reported that lowering the policy interest rate to its lower bound of 0.25%, bond purchases, and easing global financial conditions have contributed to Canada’s low domestic interest rate. The Bank of Canada also reported that lower interest rates have made it easier for businesses and households to borrow. This rate ties April 2009 for Canada’s all-time lowest rate. The highest rate Canada has seen was 16.00% in February 1991. What does this mean for Canadians who are looking to buy? 

Is This A Good Time To Buy?

Mike Boyle, mortgage broker and president of The Mortgage Group Inc Calgary, says there’s never been a better time than right now. He says this is based on a combination of low-interest rates and low property prices in Calgary. The lower interest rate means people can qualify for higher amounts than they would otherwise be able to.  

 

You could potentially get a better deal if you buy now because certain areas have fewer people buying. You might benefit from many people staying close to home and travelling less. There could be opportunities to snatch up short-term rental properties that investors may not be able to afford anymore due to dwindling bookings.   

 

What if you have been thinking about purchasing but wanted to wait a year or two, would now be a good time to move forward anyway? As interest rates are predicted to stay low over the next year, it will likely still a good time to buy. The CMHC predicts a 9% to 18% decrease in housing prices in the next 12 months.  

low interest rates

Considerations

It’s important to ask yourself a few questions, including: 

 

· Do I Qualify? 

· How Much Do I Qualify For? 

 

In June, the CMHC announced changes to the qualifications people must meet to be approved for a mortgage. These changes, effective as of July 1st, include: 

 

· Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to our standard requirements of 35/42. 

· Establishing that at least one of the borrowers have a minimum credit score of 680.

· Non-traditional down payment sources that increase indebtedness will no longer be treated as equity for insurance purposes. 

 

The CMHC announced they would be suspending refinancing on multi-unit mortgage insurance unless the funds are used for repairs or reinvestment. 

 

To put this into simpler terms, according to MoneySense: “The new rules will lower the amount of debt an applicant for an insured mortgage can carry, set a higher credit score to qualify for CMHC insurance, and will require a homebuyer to use their own, and not borrowed, funds for their down payment.” 

 

These changes mean you might not qualify any more, or you may be eligible for less. If you have questions or concerns about these changes or about qualifying for a mortgage, your mortgage broker can help.  

 

Potential buyers who qualify should also ask themselves if buying is the best option for them. Just because rates are low, and it seems like a good time to buy, it doesn’t mean that you should. Buying a home is a significant financial investment. It should be taken as seriously as it was before the pandemic.  

When The Rates Do Increase, How Can I Be Sure I'll Be Able To Pay?

This is the great unknown, and nobody has a crystal ball. The mortgage stress-test requirements are put in place to ensure people can afford their homes down the road when rates start to increase. Stress testing is meant to ensure that homeowners don’t borrow more than they can afford and avoid financial trouble. Rate increases will make a difference to the amount you pay on your monthly payments. Boyle recommends trying to pay down your mortgage while the rate is still low, and hopefully, when it does rise, you have an equity position in the property.  

 

 

If you are considering buying a home or having questions about how Canada’s low-interest rates will affect you, reach out to our team at the Mortgage Group Inc. Our Calgary mortgage brokers are always happy to help you find the best solution.  

Buying During A Pandemic

buying during a pandemic

Many new uncertainties have come from the COVID-19 pandemic, and becoming a homeowner is one of them. When buying a home, you want to be sure that you’re aware of potential challenges and have a good idea of your future. Unfortunately, buyers during a pandemic are left with unexpected considerations and challenges. 

 

There were concerns a few months ago about how housing prices would be affected by the pandemic. Despite this, The Toronto Regional Real Estate Board reported rising housing prices in June. This shows that despite uncertainties, the market is responding. 

Should You Buy During A Pandemic?

As some Canadians continue to work from home, and restrictions lift on travel, vacation properties have seen increased interest. Getting out of the city and relaxing on a more spacious and remote property sounds nicer than spending your summer working in a downtown apartment. 

 

If you’re looking to buy a home for the first time or looking for a new vacation property, a big question to ask yourself right now is: do you qualify? Many people have experienced financial setbacks due to COVID-19. Is buying a home right now the best option for you? Can you afford the mortgage payments? 

 

In normal circumstances, lenders use your financial information to calculate your costs and debt. This helps them to determine an amount that you can afford. This amount will determine which properties you are qualified to buy. 

 

Although more people are getting back to work now, having an uncertain employment future due to the pandemic puts homebuyers in a tricky spot. It’s hard to be certain about what your income will look like down the road, which could affect how much your lender can qualify you for.  

 

Your mortgage broker can help you figure out what you need to show lenders and help you navigate any new requests or concerns your lender may have.  

buying during a pandemic

Benefits Of Buying Now

In areas where there are many properties on the market and less interest, homebuyers may get a better deal. Fewer people may be looking to buy and qualified to do so right now. This means fewer potential buyers to compete with. 

 

People staying close to home and travelling less may work to your benefit. There could be opportunities to snatch up short-term rental properties. Investors may not be able to afford these anymore due to dwindling bookings.  

Potential Issues

The pandemic has made going to look at properties more difficult. If you want to look at a property, check with your realtor about availabilities and health procedures. This could include using hand sanitizer before entering the home, maintaining a physical distance between you and your realtor when on tour, and wearing a mask. In some cases, digital home tours may be a good fit. 

 

With the uncertainties in the market, people may be hesitant to list their homes and decide to put it off. This means there could be fewer options on the market for you to choose from. 

 

With current financial pressures, some homeowners have been deferring their mortgage payments. The CMHC is considering new options to help existing homeowners avoid delinquent mortgages. You don’t want to put yourself in a position where you need to defer payments on your new mortgage. However, if you qualify for a mortgage and pass stress testing, you should be okay to handle mortgage rate fluctuations. Mortgage rates are one of the many unpredictable circumstances of COVID-19. Your mortgage broker will offer professional guidance and advice for any concerns you may have about future rate uncertainties.  

 

buying a house during the pandemic

Should I Go Variable Or Fixed?

Should you be considering a variable or fixed mortgage? Mike Boyle, mortgage broker and president of The Mortgage Group Calgary, has some advice. 

 

Fixed-rate mortgages will protect you from rate fluctuations, but lenders may charge punitive pay-out penalties to get out of them. If you know you can commit to living in a house for the entire term of a fixed mortgage, do it.  

 

If you think you might move or sell in a couple of years, take a variable rate mortgage. Variable-rate mortgages have less severe pay-out penalties. 

 

Boyle also recommends potential buyers do the things that lenders are looking for right now. This includes keeping your credit clean, keeping a job, paying off your debt, and saving your money for a down payment. 

 

 

If you are considering buying a home during COVID-19 and wondering what options are available to you, talking with a local mortgage broker is an excellent place to start. If you need a mortgage broker in Calgary to assist you with mortgage options and advice, reach out to our team at the Mortgage Group Inc. We are always happy to help you find the best solution.