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The Bank Of Canada Leaves Rates Unchanged By Barb Eglauer One Of Our Preferred Service Providers

The Bank of Canada leaves rates unchanged The Bank of Canada delivered a rate pause this morning, leaving its key lending rate unchanged at 4.50%.

This is the Bank’s second pause following eight consecutive rate increases, which raised the overnight target rate by 425 bps since March 2022.

In its statement, the Bank repeated that it “continues to assess whether monetary policy is sufficiently restrictive to relieve price pressures and remains prepared to raise the policy rate further if needed to return inflation to the 2% target.”

The Bank also released its latest economic forecasts in its April Monetary Policy Report. The Bank is expecting CPI inflation to fall from February’s 5.2% reading to around 3% by mid-2023. It is then expected to reach the Bank’s 2% target by the end of 2024. 

GDP growth is expected to be just 1.4% this year and 1.3% in 2024 before picking up to 2.5% in 2025, the Bank said. 
What happens now?


Today’s decision means there will be no change to the prime rate and no changes to existing variable-rate mortgages. This announcement also has no impact on fixed-rate mortgage holders.

The Bank’s next announcement will take place June 7. 

If you have any questions or concerns about the rise in borrowing costs over the past year, I encourage you to reach out so we can discuss your personal situation and options. 

• Read the Bank of Canada’s full statement here
• Read the Bank’s Monetary Policy Report here

The Bank of Canada Leaves Rates Unchanged By Barb Eglauer One of Our Preferred Service Providers

https://uandimortgage.com/

The Bank of Canada delivered a rate pause this morning, leaving its key lending rate unchanged at 4.50%.

This is the first pause following eight consecutive rate increases from the Bank of Canada, which have raised the overnight target rate by 425 bps since March 2022. 

In its statement, the Bank said it will “continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target.”

What happens now?

This rate pause means there will be no change to the prime rate and no changes to existing variable-rate mortgages. This announcement also has no impact on fixed-rate mortgage holders.

The Bank’s next announcement will take place April 12. 

If you have any questions or concerns about the rise in borrowing costs over the past year, I encourage you to reach out so we can discuss your personal situation and options. 

Read the Bank of Canada’s full statement here

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Is it time for a mortgage check-up? (Hint: the answer is probably yes) By Barb Eglauer – One of Our Preferred Service Providers

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Is it time for a mortgage check-up? (Hint: the answer is probably yes)

 

Once you have your mortgage secured and your payments set up, it may be tempting to ignore it until you get your renewal letter from your lender. 

But I’m going to outline some reasons why there is no better time than the present to undergo a mortgage check-up to ensure your current mortgage is still the right fit for you. 

Conducting a review of your mortgage provides an opportunity to not only check in on the status of your payments and principal reduction, but to ensure there are no surprises, particularly in times of volatile rate changes as we have seen over the past year. 

The rate environment has changed

Whether you got a mortgage a year ago or four years ago, the interest rate environment has changed drastically. 

As you have probably seen in the news headlines, the Bank of Canada has hiked its benchmark rate by 425 percentage points over the past 12 months, which means variable rates today are now significantly higher than they were a year ago. 

If you’ve got a variable-rate mortgage, a mortgage checkup is vital. Whether you have an adjustable-rate mortgage, in which monthly payments fluctuate based on changes in the prime rate, or a fixed-payment variable mortgage, in which the portion of the payment going towards interest and principal fluctuates, you should be familiar with how your payments have evolved in the face of higher rates. 

Some borrowers with static payments may be surprised to find a majority of their monthly mortgage payments are now going towards interest cost, or that their payment does not cover the total monthly interest. If this applies to you, you can proactively increase your payments to ensure continued mortgage balance reduction.

Are you leaving money on the table?

Since the rate environment has changed so much, there could be better mortgage options available to you. 

For fixed-rate mortgage holders who secured much lower rates over the past several years, chances are you’ll want to stick with your rate until renewal. But for variable-rate borrowers who have seen their interest costs rise, refinancing the mortgage to reduce monthly payments may be an option. However, you’ll need to be aware of any potential prepayment penalties that might be involved with breaking your mortgage early. 

Get ahead of potential challenges

If you’ve experienced a significant change in your financial situation since you secured your mortgage–just as a job loss, a change in income or marital status–don’t be afraid to reach out and we can explore what options may be available from your lender. 

Most lenders offer payment deferral options that can help see borrowers through temporary hard times. But these solutions are often easier to implement earlier rather than later. 

Everyone’s financial and personal situations are different and require custom solutions. If you need assistance, feel free to reach out so we can discuss the options available to you. 

Call me today!

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What should you focus on this tax season: your mortgage or your RRSP? By Barb Eglauer one of our preferred service providers

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Now that the holidays are behind us, we’re quickly approaching the next period that brings our finances into focus—tax season. 

A common question I receive from homeowners is, should I put money in my RRSP (Registered Retirement Savings Plan) or use it to pay down my mortgage?

Because everyone’s situation is so unique, there’s really no one-size-fits-all answer. With all the changes in the economy, cash flow may be tighter these days and this may not be on your radar at all, but if you do have some additional funds, here are some considerations and benefits of each strategy to help make your decision. 

Paying down your mortgage, either by making a lump-sum payment or by increasing your regularly scheduled payments, will reduce your overall interest and shorten your amortization period, meaning you’ll be mortgage-free sooner. 

Contributing to your RRSP will increase your nest egg, which can grow tax-free to generate income in retirement, plus, depending on your personal situation, may reduce your tax bill or result in a tax rebate. 

So, where should you put any additional funds? Here are some considerations:

  • Interest rates: One of the key considerations is the rate of interest you’re paying on your mortgage compared to the expected rate of return on your RRSP investments. Mortgage rates are currently at multi-year-highs, and many with variable-rate mortgages have already had to increase payments. If you’ve currently got a lower fixed rate from 18 months ago, for example, it may make sense to put those excess funds somewhere with a greater rate of return than your interest rate. That said, if you’re concerned about interest rates being higher when you renew and payments jumping, then reducing the amount you owe with a lump sum may help reduce the possible payment increase at renewal. 
  • Tax considerations: Aside from building your retirement savings, RRSP contributions are beneficial in lowering your taxable income, especially if you’re in a higher tax bracket. While these added savings can help grow your retirement nest egg over the long term, it’s important to review with me or your financial advisor in advance as RRSPs are not easily withdrawn, and there may be implications if they are.
  • Additional debt: If you’re carrying higher-interest debt, such as credit card balances, a better option may be to eliminate those debts before considering either mortgage or RRSP contributions.
     
  • Your age: If you’re at the age where you’re approaching retirement, it may make sense to speed up your mortgage repayment so you can eliminate that monthly expense before retiring. If you’re younger, it may make more sense to maximize your RRSP contributions to take advantage of a longer investment timeframe where your savings can grow tax-free.  

If you want the best of both worlds, you can also maximize your RRSP contribution and if you’re fortunate enough to get a tax refund you can put the resulting tax refund towards paying down your mortgage. 

As I’m sure you gathered, there is no one size fits all approach. It is incredibly important to review these decisions with me and your financial and wealth management team. We can provide you with all the options and any implications they may have to your personal situation. If this is something you’d like to review, please call or email and I’ll be happy to conduct a full review of your financial situation so we can discuss the options that are available. 

The Government’s Tax-Free First Home Savings Account Program is Set to Launch in Mid-2023

Following the recent Fall Economic Statement, the Government of Canada reconfirmed its commitment to introducing a new Tax-Free First Home Savings Account (FHSA), anticipated to launch in mid-2023. Under this new plan, prospective first-time home buyers will have the ability to save $40,000 on a tax-free basis. Similar to a Registered Retirement Savings Plan (RRSP), any contributions will be tax deductible. When a client makes a withdrawal from the plan to purchase their first home, that withdrawal would be non-taxable, just like a TFSA. This plan will include an $8,000 annual contribution limit and a $40,000 lifetime contribution limit.
 Key Highlights:§  Applicant must be a resident of Canada and between the age of 18 and 71
years old.§  Must be a first-time home buyer, defined as someone who has not owned a home in which they have lived at any time during the calendar year before the account is opened, or at anytime in the preceding four years.§  Owner of the plan would have the ability to hold a broad range of investments, just like an RRSP or TFSA.§  Unlike an RRSP, contributions made in the first 60 days of a calendar year cannot be applied to the previous tax year.§  Home buyer has up to 15 years from their first contribution or until their 71st birthday, whichever comes first, to use the funds to purchase a home.§  Home buyer can carry forward unused contributions to subsequent years, as long as they do not exceed the lifetime limit of $40,000.§  Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or RRIF on a tax-free basis.§  Non-qualified withdrawals from the plan are permitted but will be subject to a withholding tax, just as they apply to taxable RRSP withdrawals.§  The FHSA and HBP (Home Buyers’ Plan – RRSP down payment program for First Time Buyers) cannot be combined on the same qualifying purchase. The home buyer should consult with both a tax and mortgage professional to decide which program better supports their unique situation. Additional details regarding the Tax-Free First Home Savings Plan are available through the Government of Canada website.  For more information about the home buying journey, please consider downloading Canada Guaranty’s First-Time Home Buyer’s Workbook, a comprehensive, step-by-step guide available in nine languages! Should you or any of your clients have additional questions, please don’t hesitate to contact me.
 

Ashtyn Huscroft ,CSC I Mortgage Specialist ITD Canada Trust

Mailing Address | 234-10816 Macleod Trail SE Calgary AB T2J 5N8

T: 587-229-9570 F: 1-833-941-7732

https://mms.tdcanadatrust.com/ashtyn.huscroft/

The Importance of Choosing the Right Mortgage Features by Barb Eglauer One Of Our Preferred Service Providers

The importance of choosing the right mortgage features
 
A common mistake some mortgage shoppers make is focusing entirely on getting the lowest rate. 

Don’t get me wrong, a low rate is important, of course, and that’s my goal too. But there are also other considerations to keep top of mind when looking at a mortgage product: its features.   

Think of shopping for a mortgage like shopping for a new appliance. Ultimately, you want to balance the best price you can find with the features that make the most sense based on your personal needs. 

Similarly, finding the ‘best’ mortgage typically involves securing the most competitive interest rate for the product that offers features that are most important to you. 

Those features could provide crucial flexibility when you need it most. In some cases, they may even end up saving you a lot more money.

Let’s take a look at some of the key mortgage features you should watch for:

Prepayment privileges
It’s the ability to increase your monthly payments or make lump-sum payments throughout the year. If you want the flexibility to become mortgage-free more quickly, look for a product with generous prepayment privileges. 

Rate hold
Some of the lowest rates on the market are advertised as “quick close” specials since they’re only guaranteed for as little as 30 days from the time you start your application, and only if it’s a live deal. If you need the flexibility of more time, opt for a mortgage with a 90- or 120-day rate hold. 

Portability
This allows you to “port,” or move, your existing mortgage from one property to another should you need to sell and buy a new home during your mortgage term. Porting the mortgage could save you the cost of paying a prepayment penalty if you otherwise had to break your mortgage.

Secured line of credit
For some, having a secured line of credit, or Home Equity Line of Credit (HELOC), included in your mortgage is important as it gives you access to up to 65% of your home equity. It’s also generally much cheaper than an unsecured line of credit. If you have potential renovations or investment opportunities on the horizon, a line of credit could prove incredibly valuable. 

Skip-a-payment
This option can give you some additional flexibility should you experience an unexpected life event and need to skip the occasional mortgage payment. Products vary by lender, but many generally allow up to one skipped payment per calendar year. 

Cash-back
Do you need some extra cash right after your purchase closes? This feature gives you back a percentage of the total mortgage amount as cash, which can be used to furnish your new home, complete a needed renovation, cover legal fees, etc. The amount is amortized into the mortgage, so just be aware that you’ll be paying interest on that cash.
 
These are just some of the many mortgage features to consider and some of their nuances. For a more detailed discussion about your specific needs and how some of these features could benefit you, give me a call today! 
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Bank Of Canada Raises Rate by 50 bps by Barb Eglauer one of our preferred service providers

https://uandimortgage.com/

The Bank of Canada raised its key lending rate by 50 basis points this morning, bringing it to 3.75%.

In its statement, the Bank said interest rates will need to rise further to control inflation, but that future increases, “will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding.”

What happens now?

In the coming days, banks and other financial institutions are expected to follow the Bank of Canada’s lead and hike their prime lending rate, which is used to price variable-rate mortgages and personal and home equity lines of credit (HELOCs). 

This announcement will have no impact on fixed-rate mortgage holders.

This is the sixth consecutive rate increase from the Bank of Canada, which has now increased the overnight target rate by 350 basis points since March. If you have any concerns about this rise in borrowing costs, I encourage you to reach out so we can discuss your personal situation and options. 

Things to consider when buying a rental property By Barb Eglauer One of Our Preferred Service Providers

https://uandimortgage.com/

With interest rates on the rise and given the current economic climate, not everyone is rushing to invest in a rental property just yet. 

But that doesn’t mean there aren’t great investment opportunities in this market or that the right opportunity isn’t just around the corner. So, it’s best to be prepared and have a clear idea of what you’re looking for—and what to avoid. 

For anyone planning to purchase a rental unit to generate income, the following are some tips to keep in mind during the planning stages. 

Buying a rental property

  • Location: As with all real estate, location is crucial. Is the property in a desirable area that will make it easy to rent out? Is it in a stable rental environment with a low vacancy rate?
  • Rules and restrictions: It’s important to know your jurisdiction’s rules and bylaws for renting, as well as your legal obligations as a landlord. Do you plan to use the property as a long-term rental or short-term unit (i.e., Airbnb)? If it’s the latter, ensure short-term rental use is permitted. You should also be familiar with the rules and regulations surrounding evictions, taxes, renovations and rent increases.
  • Type of property: Are you looking to purchase a pre-construction unit or re-sale? Keep in mind the pros and cons in both cases. If it’s your first foray into rental unit ownership, you may also want to stay clear of fixer-uppers unless you have a professional background in renovations.
  • Do you have the time or experience to manage a rental property? If not, you may want to consider working with a property management company. They can take care of tasks like collecting rent, addressing maintenance concerns and marketing your unit, but they also take a cut of your rental income. 

Financing considerations

Securing financing for a rental unit can be quite different compared to financing for owner-occupied properties. 

  • Qualification: To qualify for a mortgage on an investment property, you’ll need good credit history, be able to prove enough non-rental income to meet the obligations of the mortgage, and demonstrate sufficient rental income (either through existing tenancy or based on market rental data) to cover the principal, interest, strata fees and taxes, and ensure a bit of a buffer based on the lender’s qualification rules.
  • Number of units: This will impact the type of mortgage you can obtain. For example, a property with five or more units will be considered commercial zoning and be harder to qualify for financing.
  • Short-term rentals: Condo hotels in resort communities, Airbnb and other short-term rental arrangements are incredibly desirable because of their income potential, but they can also pose financing challenges. Lenders are particularly sensitive to zoning that will allow for short-term rentals or anything that looks and feel like a hotel. Also, while short-term rentals can sometimes be more lucrative, many lenders will not recognize that type of rental income.
  • Down payment: Since this is a rental property, you will need to put down a minimum of 20% of the purchase price. 

How to reduce payment shock at renewal time By Barb Eglauer – one of our preferred service providers

https://uandimortgage.com/
How to reduce payment shock at renewal time     By now, “trigger points” should be in the vocabulary of nearly every variable rate mortgage holder. 

There’s been a great deal of coverage lately about trigger points due to the rise in interest rates so far this year. 

Put simply, it’s the point where variable-rate mortgage borrowers with fixed mortgage payments are no longer paying down the principal, as 100% of their payment is going towards interest. 

In most cases, the lender will reach out to affected borrowers to arrange an increase in their monthly payments.

And in the meantime, as rates have been rising, so too have amortization periods for borrowers with variable rate mortgages with fixed payments, since the mortgage balance is being paid down at an increasingly slower pace. That is, until renewal time, when the mortgage may renew at a higher rate with higher payments to bring the mortgage amortization back to the maximum number of years permitted. 

The benefits of making mortgage prepayments

Rather than waiting for your mortgage to renew, impacted borrowers can take pre-emptive action and increase their mortgage payments in advance to soften the impact at renewal time. 

If you’ve currently got a variable-rate mortgage with fixed regular payments, consider reaching out so we can review your options available.

Just as compounding interest can work wonders for growing savings, making additional payments to your mortgage–which always go directly towards paying down the outstanding balance–can have a surprising long-term impact and potentially shave years off your amortization. 

Even if you have a fixed-rate mortgage, it’s an option that should also be considered to help mitigate any higher payments at renewal time.  

Give me a call

If you’d like to know more about the benefits of making prepayments or increasing your monthly payment amount–and if it’s the right decision for you–please don’t hesitate to call me. I’ll be happy to walk you through the math and show you the long-term impact on your mortgage. 
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Bank of Canada Raises Rate by 75 bps By Barb Eglauer One of Our Preferred Service Providers.

The Bank of Canada raised its key lending rate by 75 basis points this morning, bringing it to 3.25%.

In its statement, the Bank said, “short-term inflation expectations remain high” and that inflation risks becoming “entrenched” the longer it remains elevated. As a result, the Bank says interest rates “will need to rise further.”

“As the effects of tighter monetary policy work through the economy, we will be assessing how much higher interest rates need to go to return inflation to target,” it added.

What happens now?

In the coming days, banks and other financial institutions are expected to follow the Bank of Canada’s lead and hike their prime lending rate, which is used to price variable-rate mortgages and personal and home equity lines of credit (HELOCs). 

Fixed-rate mortgage holders will see no change to their rates. 

This is the fifth consecutive rate increase from the Bank of Canada. If you have any concerns about this rise in borrowing costs, I encourage you to reach out so we can discuss your personal situation and options. https://uandimortgage.com/

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