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.

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. 

 

 

How You Can Make The Most Out Of The Economy Re-Opening

Economy re-opening

With the Canadian economy re-opening after COVID-19, and public health measures being relaxed, we are finally starting to feel semi-normal again. We have begun thinking optimistically about what summer has in store for us. Everyone is happy to be setting the country on a path back to having lunch on patios and shopping for things we don’t necessarily need, but we want. It is time to treat yourself for living in isolation this long.

As for Alberta, we weren’t hit as hard as other provinces such as Ontario and Quebec and are starting to enjoy life’s little luxuries outside of our homes. Since Stage 1 of re-opening is long underway and Stage 2 launched on June 12th, this increased mobility rate will help boost our economy greatly.

Economic Growth After COVID-19

lockdown ending

As more and more people feel safe and are allowed to open their business and venture outside the expectation is it will have a positive effect on the economy. More people will be letting loose and buying more, putting money back into the province. The longer the shock of no economic turnover, the higher risk we will have of consumer insolvencies.

With Stage 2 now underway, the Alberta Government has allowed more businesses and services to re-open. Though physical distancing requirements and some restrictions are still in place.

Stage 2 – What Can Re-Open With Restrictions?

• K-12 Schools, For Requested Diploma Exams & Summer School, Following Guidance
• Libraries
• More Surgeries
• Wellness Services; Massage, Acupuncture & Reflexology
• Personal Services (Esthetics, Cosmetics Skin And Body Treatments, Manicures, Pedicures, Waxing, Facial Treatments, Artificial Tanning)
• Movie Theatres & Theatres
• Community Halls
• Team Sports
• Indoor Recreation, Fitness & Sports, Including Gyms & Arenas
• Pools For Leisure Swimming
• VLTs In Restaurants & Bars
• Bingo Halls & Casinos (But No Table Games)
• Instrumental Concerts
• Provincial Campgrounds At Full Capacity

Stage 2 Events & Gatherings Can Be Larger

• 50 People Maximum: Indoor Social Gatherings, Including Wedding & Funeral Receptions, & Birthday Parties
• 100 People Maximum: Outdoor Events & Indoor Seated/Audience Events, Including Wedding & Funeral Ceremonies
• No Cap On The Number Of People (With Public Health Measures In Place):
• Worship Gatherings
• Restaurant, Cafes, Lounges & Bars
• Casinos
• Bingo Halls
• More Flexibility For ‘Cohort’ Groups – Small Groups Of People Whose Members Do Not Always Keep 2 Metres Apart:
• Households Can Increase Their Close Interactions With Other Households To A Maximum Of 15 People
• Performers Can Have A Cohort Of Up To 50 People (Cast Members Or Performers)
• Sports Teams Can Play In Region-Only Cohorts Of Up To 50 Players (Mini-Leagues)
• People Can Be Part Of A Sports/Performing Cohort & A Household Cohort At The Same Time

For all of this information and more, go to Alberta.ca/alberta-relaunch-strategy.

Economic Strength

economy

Our economy was strong before we entered into this pandemic, and we saw how resilient it was. However, we know the shutdown can’t last forever. Therefore, making gradual economic steps towards re-opening, as we are currently doing is crucial to the health of the Canadian economy’s financial foundation.

Though Calgary’s market will pick up quickly in the beginning, with people excited to finally leave their homes. It will take some time for society to fully stabilize.

Investment Purchases To Come

rising investements

However, once things start to stabilize, you’ll see that more people will begin investing in larger purchases, such as cars and property.

The housing market may have been tricky to navigate during the global pandemic. But with the economy re-opening, the housing market gearing up, and mortgage rates not rising, it is an excellent opportunity for people to finally get their foot in the door for owning a home. Plus, lingering home listings that weren’t being picked up during the pandemic will have a better opportunity to be purchased.

If you are looking into purchasing a home, The Mortgage Group Calgary is committed to providing you with the best home buying experience. We know buying a home is a big deal, especially after a global pandemic. After all that, getting a home loan shouldn’t be a hassle. At The Mortgage Group, our Calgary mortgage brokers are here to help you get your foot in the door to your brand new home.

How To Tell If You’re Ready For A Mortgage

how to tell if you're ready for a home mortgage

You may be at a stage in your life that buying a home looks like a good idea. According to recent realty statistics, 78% of Albertans own their own homes. The fact that your peers and the majority of the province have committed to a buying a home may not be the best way to determine if you are ready for a home mortgage loan.

How To Know If I Am Ready For A Home Mortgage Loan?

Make a list of financial factors to give yourself a good snapshot of your financial readiness for a mortgage. The New Year is an excellent time to assess your finances. This is when people begin collecting their yearly financial data to complete income tax.

Look At Your Gross & Net Income

Lenders want to know that as they base how much of a mortgage they will lend you on your yearly income. They like you to have a steady income but will factor in your average income based on your tax return record. You can book an appointment with a bank manager or mortgage broker to determine how much they will lend out based on that yearly income. You can also do a quick evaluation is using an online mortgage calculator

Assess your savings before applying for a mortgage
It is important to assess your savings before applying for a mortgage

Look At Any Savings You Have

Lenders require a down payment on the mortgage loan. Most lenders require at least 5% of the home price for a down payment and up to 20% on higher-value homes. The legal and realty costs are also extra costs related to the buying process. The lenders may figure those costs into the amount of the mortgage they lend you.

How Much Debt Are You Carrying?

Lenders look at debt along with what you currently spend on monthly on housing and utilities. These factors help the lender ensure you can afford the mortgage payments of the new loan. Those two costs shouldn’t exceed 25% to 36% of your gross monthly income. You can get a credit rating report that banks use to look at your debt by following the instructions from the federal government site under ordering your credit report and score. Make sure to go through it to be sure it is correct. Sometimes companies don’t clear debts you may have paid, or you might appeal scores and mediate a better rating.

Take A Look At Your Current Monthly Budget

Do you have room to include the extra things that come with homeownership? You may need to factor in more money for increased utility costs, home and mortgage insurance, taxes, HOA fees, home development, and maintenance costs.

Other Factors To Consider

Finances are not the only thing to consider in being ready to commit to a home mortgage loan. You want that financial commitment to give you the quality of life you will enjoy.

Do You Know What Kind Of Home You Want To Buy?

There are a lot of choices out there. There are condos, apartments, townhouses, duplexes, single-family homes, acreages, and farms. If you list the features of where you are currently living and note the things you dislike, those points can help you evaluate what type of home would suit you best.

Where Do You Want To Live?

Is it an area closer to your work? Maybe you want to move your family to a community with good schools and lots of other children. You may have certain values that play into your choices. You may want a sustainable living situation with community planning and lots of green space. Cultural factors and entertainment may also be important to your lifestyle. Can you afford the house prices in your ideal spot? Some areas are going to be more expensive than others depending on the availability of housing in those areas. You may have to adjust your ideals to meet your lifestyle goals.

Will You Need To Move Repeatedly Or Can You Settle In One Place?

It takes five years to start to begin to get any equity in your home purchase. If you need to move and sell, you may not gain a profit from homeownership. Some people keep their homes and rent them out when they have to move. If this is the case, rework your budget to ensure you have enough to meet the mortgage and your new living accommodations. Renters can bring a higher maintenance cost than expected as tenants may damage the home.

What Are Your Life Goals?

Some people want to downsize to spend more time traveling. Maybe you want a larger home to raise a family. Perhaps you are buying several properties for investment gains, or you want an additional vacation home. You should examine if the mortgage you are considering fits into those life goals. Again, a good mortgage banker or mortgage broker will be able to help you forecast some factors and present options in achieving those goals, so you can determine if you are ready for the mortgage type that supports your life goals.

Seek Outside Advice

Once you have answers to some of these questions and have factored in your finances, you should have some concrete facts to weigh the pros and cons of taking out a home mortgage loan. You can ask for advice, but it is best to get several opinions from people who know you best, other homeowners, and professional mortgage specialists. 

Ultimately, it comes down to you to decide. If the answers point to the negative, but you still have a goal to purchase a home or investment property, talk to your mortgage banker or broker. They have many suggestions that can improve your ability to qualify for a home mortgage loan in the future.

For any questions or information you need, the brokers at The Mortgage Group will be happy to help. Give us a call anytime, or fill out our online application. 

How The Bank Of Canada Interest Rates Affect You

Bank Of Canada Interest Rates

What Overnight Interest Rates Mean To Mortgage Holders

Often on the news, you will hear the announcement that the Bank of Canada raised, lowered, or held its overnight interest rate. Many people don’t pay much attention to these. However, monitoring the changes will protect your finances in the long term.

Does The Bank Of Canada Overnight Rate Affect Your Mortgage?

The answer to that question is yes and no. The Bank of Canada is the place Canadian banks go to for mortgage lending money that they, in turn, lend to Canadians.

The announcements of overnight interest rate changes mean your bank will look at the rates they are charged. The rate changes will impact how they divert them onto what you are paying on your home mortgage interest rates. 

Most mortgages state prime plus a certain percentage in the contract for the money borrowed. Similarly, home equity credit lines taken on your home will also state credit line interest rates of prime plus rates.

Announcements of a .25% change do not seem significant. Still, if you look at that quarter percent change over a 25-year amortization, it can add or subtract thousands of dollars to the overall mortgage. 

It can also mean an increase or decrease to your home mortgage payment of about $300. Most of the time, a rise in the overnight rate of .25%, means there will be several more quarter percent raises in the future.

Home mortgage types have a different impact on changes to the overnight rates. If you have a variable mortgage or open homeowner’s mortgage, your interest rate floats. It can also frequently change with rate changes. If you have a closed, fixed homeowner’s mortgage rate, the rate changes will not affect you as much. Which means you don’t need to worry until your mortgage renewal rate is up. If the interest rates have increased significantly, homeowners may have trouble qualifying unless they plan for unanticipated changes to their mortgage.

Protect Yourself From Mortgage Rate Increases

Here are some ways to protect your home and family should interest rates climb:

  • Pay attention to Bank of Canada announcements
  • Talk with your private mortgage broker or bank lender about options should rates increase
  • Make a balanced budget that includes a buffer for rising expenses
  • Create a savings plan
  • Keep credit purchases low and pay them off each month
  • Re-evaluate your spending habits and find ways to increase income
  • Lock into a fixed mortgage should interest rates jump significantly 

The Bank of Canada reviews interest rates eight times a year. If there is a rate change each time, that could mean a change of two percent each year. A two percent increase will have a significant impact on your mortgage payments. With each review, the Bank of Canada Board issues statements to keep Canadians informed. This allows them to watch trends develop over the year.

How The Bank Of Canada Sets Overnight Rates

Most of us don’t know much about the process the Bank of Canada uses to decide how much rates change. It is run by an independent board of directors appointed by the Minister of Finance. There is a Governor, a Senior Deputy Governor and 12 directors on the board. 

The goal of the board is to promote the financial and economic welfare of  Canadians. The Bank Of Canada makes all decisions by monitoring the international and Canadian markets. Additionally, they watch the monetary transfers that occur in the world daily. They consider the productivity of Canadians and job employment rates, the cost of living index, and Canadians debt load figures. 

The exchange rates of the Canadian dollar compared to other countries are also monitored. Canada’s primary trading partner is the United States. Therefore, the value of money is often linked with their bank rates and money value. There may also be changes in the future when global trading partners from Europe and Asia increase.

The statement released with the announcement of an overnight change reflects the directors’ perspective on Canadian finances.

“Economic forecasts have been marked down further in most countries, largely as a consequence of the escalation of trade actions and uncertainty around what may be next,” said Bank of Canada Governor Stephen Poloz in his Oct. 30, 2019 rate announcement

In that announcement, the rate stayed the same at 1.75%. 

If you want to know more about how interest rates affect mortgages, give us a call. Our team of professional mortgage brokers at The Mortgage Group Calgary can help. We will explain in a way you can understand how to get the best interest rates for your home mortgage and home equity credit line. 

The Difference Between Mortgage Specialists

Mortgage broker

Navigating how to apply for a home or commercial mortgage can be confusing and overwhelming. It’s why you need useful information to pick a trustworthy person to lead you through the process of acquiring your financing.

When you buy a home, you have the choice of applying for a mortgage through a Canadian banking institution or mortgage broker. But what is the difference between the two?

Bank Mortgage Manager

The bank mortgage manager works for the bank. Given they are a bank employee, they will be representing the bank’s interests first when extending you a mortgage contract. They may require you to be a customer of their bank. The bank’s mortgage manager only accesses products and mortgage funds available from that bank for your mortgage application. They can offer a range of interest rates and terms under the parameters dictated by the bank. 

Having a mortgage with a regular banking institution may make it easier to refinance to one of their products or change terms of the loan in the future. The bank’s rates and penalties for a bank mortgage may be higher than other lenders. Bank mortgage managers may deny residential and commercial mortgages if the applicant doesn’t meet criteria under their lending terms. For example, bad credit scores or unusual payment arrangements.

Various banks have different terms and interest rates. So, it is up to the customers applying for mortgages to get information to make an informed decision. 

Your bank mortgage manager will rarely refer you to another lender unless you don’t meet any of their conditions.

The majority of Canadians are still using banks as their primary mortgage lenders. The reason may be that they have already established a working relationship with their bank. Sometimes the process can be smoother, as the bank has access to all the financial data for the applicant.

Some people who have built a relationship with their bank may opt to go that route. They feel confident because the main banks have a long-standing history of lending, backed by government assurances.

Mortgage broker

A mortgage broker is a licensed professional who works with many banks and other lenders to obtain the best mortgage for you. They can get you into a mortgage agreement with a bank, but also have other lending options available. Because of the options to choose from, they may get you approved even if other lenders deny you. 

Mortgage brokers usually take a 1 or 2% commission on the mortgage from the lender on finalized contracts. This payment generally comes from the lender and is not an out of pocket fee for an applicant. If fees in the contract are too pricey, terms can often be negotiated to lower them. 

The mortgage broker’s search scope includes a wide range of financial institutions and lenders, like credit unions and independent lenders. They collect information from you and try to find the lender that best fits your mortgage needs and terms.

Looking outside the traditional lenders can be very helpful to people with poor credit, or other reasons banks declined their application. Mortgage brokers do the legwork of sifting through various lenders’ terms and interest rates and present options to you. 

They may include established banks in the line-up of lender choices. A mortgage broker will go over all the information so that you can make an informed choice. Often a broker will work flexible hours and adjust schedules after banking hours to meet client needs. 

They will negotiate the terms of your final choice with the lender, possibly saving you money. A mortgage broker’s expertise in the field helps them help you with terminology and negotiating tactics. 

Be aware that the final mortgage contract is just between you and the lender.

Helpful resources

As with all legal documents, clients should read the final negotiated contracts carefully before they sign.

Anyone dealing with mortgages, whether it is your bank or mortgage broker, has to be licensed with the Real Estate Council of Alberta. It is important to check into this before you retain their services. Some fraudulent mortgages have left people with a severe financial loss. Financial lenders are also regulated and monitored by the federal government. 

The Alberta government licenses financial lenders and a list of licensed lenders can be obtained at your local registry office, or checked on the Alberta government website.

 

If you would like a free consultation with a Calgary mortgage broker, our licensed and professional staff at The Mortgage Group will be happy to answer any questions.