23 Mar

10 Spring Cleaning Tips

General

Posted by: Jennifer Koop

Homeowner Tips – 10 Spring Cleaning Tips

  1. Create a Playlist

Everything – including Spring cleaning – is more fun with a great playlist! Not only is music great therapy but it can make the cleaning process go by quicker and make it more enjoyable.

  1. Clean One Room at a Time

Most people dread Spring cleaning. Everyone likes the aftermath and seeing their home all sparkly and fresh but sometimes it can be an overwhelming process to get to that point. It is best to clean one room at a time, starting with the smaller ones or those that need the least amount of cleaning and work your way up to the larger, project rooms. Another great way to reduce stress over spring cleaning is to tackle one or two rooms each weekend for the month and by the time April comes, you’ll be ready!

  1. Declutter as You Go

Spring cleaning isn’t just about shining up the brass on the door and dusting. It is just as important to declutter your space as you go! Before you start cleaning the room, it is a good idea to pinpoint items that can be discarded, such as old magazines and papers, as well as to go through closets and cupboards for anything that you can donate (like that sweater you bought and never wore). This will clear up space for new clothing and items and will make you feel that much more accomplished!

  1. Think Green!

The idea of Spring cleaning is starting the season off on a fresh, clean note. Don’t muddy that up with harsh chemical cleaners. In today’s ecofriendly environment, there are many eco-friendly and safe alternatives to regular cleaners. Vinegar is a great substitute in the bathroom or kitchen as well as combining vinegar, baking soda and water as a deep clean alternative. You can also opt for a steam cleaner to manage tile, hardwood floors, appliances and even outdoor areas as they only use hot water and vapor. While not everything can be cleaned this way, it is best to minimize chemical cleaners as much as possible.

  1. Work From Top to Bottom

Starting from the ceiling and working your way down just makes sense! This will force debris downward and save you having to re-clean your space. Dusting first will prevent a headache later too!

  1. Save Windows for a Cloudy Day

Washing your windows after the build-up of winter grime is one of the biggest parts of Spring cleaning as you’ll want to wash them on the inside and outside. However, washing windows in direct sunlight (or using paper towel) can cause streaks. To minimize this and maximize your cleaning efforts, use a microfiber cloth and save this task for a cloudy day!

  1. Plump Up Those Pillows

Fresh linens is one of the most rewarding things about cleaning, period. There is nothing quite like your face hitting a fresh, plumped up pillow and settling into a freshly flipped mattress. Washing your pillows with ½ cup of baking soda added to the detergent cycle will really get them extra clean! You can fluff them up even more by putting them in the air cycle of your dryer with two tennis balls in socks.

  1. Master Your Closet

Most of us are guilty of hanging onto old clothes that we haven’t worn in three years or a pair of jeans that we know we will never fit again, but just can’t let go of. Now is the time to say goodbye to those worn out, ill-fitting or stained clothes! There are many opportunities to donate old clothes that are still in good shape too. Not only does that lend a helping hand to individuals who may greatly benefit from them, but it frees up space in your closet for new items that you absolutely LOVE!

  1. Don’t Forget The Fridge & Freezer

The best time to clean out your fridge and freezer is right before you do your grocery shop, so they will be at their most empty. Take everything out and dispose of anything that is past its expiration date and any almost-empty items you won’t use. Before you restock be sure to wipe down the interior of the fridge with disinfectant and a damp cloth. The same can be done for the freezer but you’ll have to defrost it first!

  1. Clean Air Reduces Allergies

Replacing furnace and HVAC filters is one of the most overlooked parts of Spring cleaning. Going as far as replacing your standard filter with a more robust one with a higher rating will help keep you even healthier (and allergy free!) this year as they catch smaller particles to ensure your home is void of allergens, chemicals and even odors.

Article courtesy of Dominion Lending Centres March Newsletter

19 Mar

MORTGAGE UPDATE 1: FINANCIAL EFFECTS OF COVID-19

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Posted by: Jennifer Koop

UPDATE 1:  FINANCIAL EFFECTS OF COVID-19

Since being labeled a pandemic per the World Health Organization (W.H.O.), the effects of COVID-19 have begun to ripple through the world’s economy – including Canada – and causing a number of different effects. To help keep you up to date on what is going on financially, we have compiled a list of recent announcements by the Ministry of Finance, the Bank of Canada, and OSFI:

  • Minister Morneau announced a new Business Credit Availability Program, adding $10 billion of additional support financing, through Business Development Bank of Canada and Export Development Canada, to support Canadian Businesses. Click here for more.
  • The Bank of Canada lowered the overnight rate from 125 to 75 bps, to reduce the interest cost burden for businesses and consumers alike. The bank also increased its Government of Canada bond buyback program. Click here for more.
  • OSFI reduced the Domestic Stability Buffer from 2.25% to 1%, thereby freeing up $300 Billion additional lending capacity for Domestic Systemically Important Banks (D-SIBS). Click here for more.

In addition, Dominion Lending Centres in-house Chief Economic Advisor, Dr. Sherry Cooper, has been providing in-depth information on this situation as it evolves. You can find her latest articles on the situation below:

 

If at any time you would like to discuss your mortgage needs please contact us at 705-349-0502 or start your application here HOW TO APPLY 

 

19 Mar

Fed Cuts Overnight Rate One Percentage Point But Markets Plummet – Dominion Lending Muskoka

Latest News

Posted by: Jennifer Koop

STOCK AND BOND YIELDS PLUMMET AFTER SUNDAY FED CUT

In an unprecedented Sunday afternoon meeting, the US Federal Reserve cut their key policy rate by 100 basis points (bps) to a level of 0%-to-0.25% (see chart below). Also, the Committee announced increased access to the discount window where the Fed makes loans to banks. The Fed is the lender-of-last-resort and is signalling that it will provide liquidity wherever needed. As well, with interest rates already so low, the Fed is well aware that rate cuts can only do so much. Thus, they are returning to quantitative easing–the buying of large volumes of U.S. government Treasury bills and bonds as well as mortgage-backed securities (MBS), to inject liquidity into the financial system.

The Treasury and US MBS markets are usually the deepest, most liquid markets in the world. But over the past two weeks, liquidity has dried up. Financial instability has risen sharply with the high level of volatility. Banks have experienced significant withdrawals as consumers are hoarding cash like everything else. The cost of funds to banks has risen sharply because of the enhanced perception of risk. With the collapse in oil prices, banks exposed to the oil sector are building up reserves for nonperforming loans. As businesses everywhere in nearly every sector shutdown, the risk of delinquencies rises further. Consumers who are housebound spend less money, and those who are freelancers or hourly wage earners might not get paid. Moreover, the shuttering of schools puts an added burden on parents who have no other daycare options for their kids.

All of this disruption, which according to the Center for Disease Control, could last months–the CDC recommended yesterday the shutdown of meetings of more than 50 people for eight weeks–has led to rising concern about the riskiness of banks. Bank shares have plummeted, and the yields on bank bonds have surged. Besides, banks and other mortgage lenders are fearful of being inundated with requests for refinancings, especially in the US, where penalties for breaking a mortgage are much lower than in Canada. Because of the refinancing surge in the US, the price of MBSs has fallen sharply, raising their yields and making the market highly illiquid.

The rising risk premiums, likely recession and illiquidity are causing banks in Canada and the US to raise some mortgage rates. Lenders are tightening the discount off the prime rate on variable-rate mortgage loans. Some fixed rates have edged higher as well. Such spread widening between mortgage rates and government yields happened during the financial crisis. Bank balance sheets will expand as troubled businesses and consumers extend their borrowings on their open lines of credit. Many will be unable to make timely interest payments. Loan loss reserves, already climbing, will rise further. Liquid deposits will be depleted as many are forced to live off of savings while shying away from selling stocks at markedly depressed prices.

These are not normal times. The Fed’s actions did nothing to calm markets. Indeed, stocks and bond yields plummeted in overnight trade, and the stock markets opened sharply lower in North America. The S&P 500 opened down over 8% while the TSX opened down 11%, triggering a circuit-breaker time out. This is the third time in a week the circuit breaker has hit. The TSX is down roughly 35% from its recent high (see chart below). The S&P 500 is down over 20%. The relative underperfomance of the Canadian stock market reflects our out-sized representation of the energy sector. The two weakest sectors in the TSX are the energy and financial sectors.

The world knows that the Fed and other central banks are running out of ammunition. Governor Powell said yesterday that he would not take the key fed funds rate into negative territory but instead would use “forward guidance” and asset purchases (quantitative easing) going forward.

The good news is that the banks are highly capitalized and much more resilient than during the financial crisis. Central banks since that time have put in place measures to monitor financial stability. Last Friday, the Canadian Office of the Superintendent of Financial Institutions (OSFI) reduced the capital requirements for Canadian banks to free up $300 billion for banks to support troubled borrowers. OSFI warned against the use of these funds to buy back stocks or raise dividends.

OSFI also suspended the proposed revision in the qualifying mortgage rate slated to begin April 6. The posted mortgage rate, published weekly by the Bank of Canada, will remain the qualifying mortgage rate. It is currently 5.19%, but it is expected to fall this week to around 4.95%.

But in these extraordinary times, there is a loss of confidence in the financial system. Some are calling for a full shutdown of the stock markets–but imagine the panic if no one could sell assets. There would truly be a run on the banks. Now is not a time to panic.

 

THE CANADIAN HOUSING MARKET

The Canadian Real Estate Association announced this morning that home sales recorded over the Canadian MLS Systems rose 5.9% in February, marking one of the more substantial month-over-month gains of the past decade. Actual (not seasonally adjusted) sales activity stood 26.9% above year-ago levels–keeping in mind that activity was quite weak one year ago. February 2019 marked a decade-low for the month, so a good part of the significant y-o-y gain reflects low levels of activity recorded at the time. February 2020 also benefited from an additional day due to the leap year.

The CREA President, Jason Stephen, said, “Home prices are accelerating in markets where listings are in increasingly short supply, specifically in Ontario, Quebec and the Maritimes which together account for about two-thirds of national sales activity. Meanwhile, ample supply across the Prairies and in Newfoundland and Labrador means increased competition among sellers.”

The number of newly listed homes jumped 7.3% in February compared to January, more than erasing the declines of late last year. New supply gains were posted in some large markets, including the Fraser Valley, Calgary, Edmonton, the GTA, Hamilton-Burlington, Kitchener-Waterloo, Windsor-Essex, Ottawa and Montreal.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.7% in February 2020 compared to January, marking its ninth consecutive monthly gain. The actual (not seasonally adjusted) national average price for homes sold in February 2020 was around $540,000, up 15.2% from the same month the previous year. See the table below for the regional move in prices.

But this is old news, particularly given all that has happened in the past two weeks. What comes next for the housing market? That depends on the course of the pandemic. Lower interest rates would typically be great news for the housing market, particularly for first-time homebuyers. But social distancing is hardly consistent with open houses and home shopping.

Moreover, volatility and instability reduce consumer confidence. Buyers that parked their downpayment savings in the stock markets have lost nearly a third of their money on paper. And how many sellers want a trail of strangers wandering through their homes during the pandemic. So the housing market, like everything else, is likely going to slow over the near term.

The Bank of Canada is hopeful that its rate cuts will stabilize the housing market from what might have otherwise been a substantial shutdown. Lower rates will filter through to lower monthly payments for floating-rate mortgage borrowers. Expect the Bank to cut rates again to near-zero levels, following in the footsteps of the Fed. So far, as of this writing, the Canadian banks have not responded to Friday’s BoC rate cut. The prime rate went down a full 50 bps on March 5 after the Bank cut its key rate by that amount on March 4. But so far, the Big-Six banks have not responded to the 75 bps cut three days ago.

Article Courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

19 Mar

BOC CUTS AGAIN, OSFI EASES, MORE COMING – MORTGAGE MUSKOKA

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Posted by: Jennifer Koop

TOUR DE FORCE:

Extraordinary Coordinated Policy Actions To Ease the Economic Impact of Pandemic In Canada

Prime Minister Justin Trudeau said Canada would introduce a “significant” fiscal stimulus package, as part of a coordinated effort with other Group of Seven countries to counter the virus-driven global economic slowdown and calm markets. In an exceptional press conference held at 2 pm today, Finance Minister Morneau sat at the side of the Governor of the Bank of Canada, and the head of the Office of the Superintendent of Financial Institutions (OSFI) to announce measures to soothe financial markets, boost confidence and support the Canadian economy.

Only nine days after the Bank of Canada cut the overnight policy rate by 50 basis points to 1.25%, Governor Poloz announced another 50 bps reduction in the policy rate to a level of 0.75%. Here is the Bank of Canada’s official statement:

  • “The Bank of Canada today lowered its target for the overnight rate by 50 basis points to ¾%. The Bank Rate is correspondingly 1%, and the deposit rate is ½ percent. This unscheduled rate decision is a proactive measure taken in light of the negative shocks to Canada’s economy arising from the COVID-19 pandemic and the recent sharp drop in oil prices.
  • It is clear that the spread of the Coronavirus is having serious consequences for Canadian families, and for Canada’s economy. In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy-intensive regions.
  • The Bank will provide a full update of its outlook for the Canadian and global economies on April 15. As the situation evolves, Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”
  • The Bank has also taken steps to ensure that the Canadian financial system has sufficient liquidity. These additional measures were announced in separate notices on the Bank’s website. The Bank is closely monitoring economic and financial conditions, in coordination with other G7 central banks and fiscal authorities.”

At the press conference, a reporter asked Poloz whether he would take the policy rate down to negative levels. He responded that he “does not like negative interest rates” and that “there is sufficient fiscal firepower in Canada” so that, hopefully, “negative interest rates are not likely to be needed.”

He also commented: “Combined with the other measures announced today, lower interest rates will help to support confidence in businesses and households. For example, borrowing costs will be lowered both for new purchases of homes and through variable-rate mortgages and mortgage renewals.”

Today, the Bank also announced a new Bankers’ Acceptance Purchase Facility. This facility will support a key funding market for small- and medium-sized businesses at a time when they may have increased funding needs, and credit conditions are tightening. The facility will buy 1-month BAs starting the week of March 23. More details are forthcoming. This comes in addition to introducing a 6-month and 12-month bi-weekly repo operation yesterday.

Finance Minister Morneau announced he would deliver a fiscal stimulus package next week that will include an additional $10 billion in new funding to the country’s two business financing agencies — the Business Development Bank of Canada and Export Development Canada. This announcement follows $1 billion of funding for the country’s public health response outlined earlier this week, which came with some modest measures to support disrupted workers.

So significant fiscal stimulus measures are coming next week. There were no details on the size of these measures, but something on the order of 1% of GDP seems like a reasonable estimate. Mr. Morneau also noted that the government is looking at providing direct aid to individuals and families. The floodgates are about to be flung open.

The final bit of stimulus came from OSFI’s lowering capital requirements for the Big Six Canadian banks. Jeremy Rudin, head of Canada’s banking regulator, announced he would reduce the nation’s “domestic stability buffer” by 1.25 percentage points of risk-weighted assets, effective immediately. The buffer will drop to 1%, from its prior level of 2.25%. He said that the government is looking at providing direct aid to individuals and families. This action will free up about $300 bln in funds for the big banks to lend. It will also offer some solace to the stock market, where bank stock prices have plunged in the past two weeks. Concern about the Canadian banks’ balance sheets is always rife when markets are stressed.

In another move, the government announced that it is suspending consultation on the proposed change to the uninsured mortgage stress test. The insured stress test revision will start on April 6 as planned. OSFI wants to wait until markets return to more normal activity before making a final decision on the insured qualifying rate. Hopefully, banks will cut their posted mortgage rates in response to the combined 100 bp decline in the overnight rate and the plunge in 5-year bond government yields (see chart below). As of yesterday, March 12, the BoC Daily Digest held the conventional mortgage rate (5-year, aka the posted rate) steady at 5.19%.

We will now watch what the Canadian banks do in response to these actions. Will they cut their prime rates another full 50 basis points? And will they pass that on to borrowers of variable-rate mortgage money? Monday will be an interesting day.

Bottom Line: This is an excellent start to getting ahead of what will likely be a very challenging period for the Canadian economy. However, we need to see more of the details. Look for additional fiscal stimulus to be announced in the coming days and weeks (from the federal government as well as the provinces), and expect the Bank of Canada to ease policy rates another 50 bps to a level of 0.25% for the overnight benchmark rate by April. And, if conditions deteriorate more than anticipated, there’s room for the BoC, government and OSFI to do more.

This is in direct contrast to the inept and disjointed policy response south of the border. Hopefully, the financial markets will take note that Canada is far better equipped both financially as well as from a public health perspective than our recent stock market performance has suggested.

 

Article Courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

19 Mar

Global Markets in Turmoil – Jennifer Koop Muskoka Mortgage Agent

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Posted by: Jennifer Koop

GLOBAL MARKETS IN TURMOIL AS OIL PLUNGES, PROPELLING YIELDS TO RECORD LOWS

By: Dr. Sherry Cooper, Chief Economist, Dominion Lending Centre.

Markets shuddered in the face of a price war for oil and the economic fallout from the growing outbreak of coronavirus. Frightened investors poured into haven assets sending yields to unprecedented lows. Oil prices tumbled 30% after Saudi Arabia said it would cut most of its oil prices and boost output when Russia refused to join OPEC in propping up prices (see chart below). Foreign exchange markets convulsed, as the steep drops in oil and share prices overnight sparked a flight from commodity-linked currencies into the perceived safety of the Japanese yen and the US dollar. The Canadian dollar fell to 0.7362 as of this writing. The Government of Canada 5-year bond yield was as low as 0.284% overnight but has since recovered roughly 0.535%, still well below Friday’s closing level of approximately 0.65% (second chart below).

Stock prices have fallen very sharply in the first hour of North American trading. Panic selling sent the Dow down 2,000 points, and the S&P500 sank 7% after triggering a circuit breaker that halted trade for 15 minutes. The TSX took a dizzying nosedive on the open, down more than 1400 points or nearly 9.0% led down by oil stocks and financials.

The spread of coronavirus outside of China tripled over the past week. The US State Department announced yesterday that older people should avoid travel on cruises, particularly if they have compromised immune systems. All of this amplifies recession fears as the outbreak spreads.

There is concern in the US that the government is not handling the outbreak appropriately. Mixed messaging and an inadequate supply of testing kits came as the number of coronavirus cases in the US topped 500 over the weekend. President Trump retweeted a meme of himself fiddling on Sunday, drawing a comparison to the Roman emperor Nero who fiddled as Rome burned around him. This is a time when leadership is of paramount importance.

Borrowing costs are falling sharply–a silver lining for first-time homebuyers. The best advice for investors is not to panic. This, too, shall pass, although no one knows when.

 

Article Courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres

19 Mar

COVID-19 UPDATES & WHAT HOMEOWNERS NEED TO KNOW

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Posted by: Jennifer Koop

COVID-19 UPDATES &
WHAT HOMEOWNERS NEED TO KNOW

At Dominion Lending Centres, we are deeply concerned about the Coronavirus – and we know you are too. Our thoughts and prayers go out to all the families and front line workers that are dealing with this around the world.

We recognize that many homeowners may be looking for guidance around mortgage financing. We are committed to updating you – our customers – on the current climate and how the recent COVID-19 developments may impact your mortgage, now or in the future. We know that things may seem uncertain now, but we are working hard to gather all pertinent information and help you to understand your options during this difficult time.

 

What is COVID-19?

As many of you have heard by now, the world is being gripped by COVID-19 (otherwise known as “Coronavirus”). According to the World Health Organization (W.H.O.), Coronaviruses (CoV) is a large family of viruses ranging from the common cold to more severe diseases.

Coronavirus disease (COVID-19) is a new strain that was discovered in 2019 and has not been previously identified in humans. Common signs of infection include respiratory symptoms, fever, cough, shortness of breath and breathing difficulties. In more severe cases, infection can cause pneumonia, severe acute respiratory syndrome, kidney failure and even death.

Standard recommendations to prevent infection spread include regular hand washing, covering mouth and nose when coughing and sneezing, thoroughly cooking meat and eggs. Avoid close contact with anyone showing symptoms of respiratory illness such as coughing and sneezing.

 

If at any time you would like to discuss your mortgage needs please contact us at 705-349-0502 or start your application here HOW TO APPLY

16 Mar

REFINANCING YOUR MORTGAGE

Mortgage Tips

Posted by: Jennifer Koop

Refinancing Your Mortgage

Jennifer Koop, Dominion Lending Centres Huntsville, ON

Spring is a great time for cleaning out your home and your finances. A part of this for many people includes refinancing your mortgage. There are a variety of reasons to refinance, which can range from wanting to leverage large increases in property value or get equity out of the home for renovations. In some cases it could be due to life events such as divorce, a new relationship, kids going off to college or simply consolidating debt.

Before you refinance, it is important to understand that if you do this during your term you will be breaking your mortgage agreement and there are penalties that come with that. If at all possible, it is best to wait until the end of the mortgage term before refinancing.

There are a few points to consider before refinancing:

  • You can tap into 80 per cent of the value of your home
  • You cannot qualify for default insurance which can limit your lender choice
  • You would have to re-qualify under the current rates and rules

Talking to a mortgage broker about refinancing can provide you access to even greater rates and mortgage products to best suit your needs and what you are trying to accomplish through your refinancing strategy.

Regardless of why you are looking to refinance, it can come with a host of great benefits when done properly!

  1. Getting a lower interest rate: Depending on where you are in your mortgage term, you could refinance to get a better rate – especially when done through a mortgage broker. A mortgage broker has access to hundreds of lenders and is able to find you the best rate versus traditional banks which only have access to their own rate.
  2. Consolidating your debt: When it comes to debt, there are many different types from credit cards to lines of credit to school loans to mortgages. However, many types of consumer debt have much higher interest rates than those you would pay on a mortgage. Refinancing can free up cash to help you pay out these debts. While it may increase your mortgage, your overall payments could be far lower and would be a single payment versus multiple sources. Keep in mind, you need at least 20 percent equity in your home to qualify.
  3. Change your term or get a different mortgage: The beauty of life is that it is ever-changing and sometimes you need to pay off your mortgage faster or change your mortgage type. Maybe you came into some extra money and want to put it towards your mortgage or maybe you are weary of the market and want to lock in at a fixed-rate for security.
  4. Tap into your home equity: One of the biggest reasons to buy in the first place is to build up equity in your home. Consider your home equity as the difference between your property’s market value and the balance of your mortgage. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value in cash!

Always remember – it is best to refinance when your mortgage term is up to avoid penalties. Talking to a mortgage broker can help clear up any concerns and they can walk you through the process depending on your needs.

Article courtesy of Dominion Lending Centres March Newsletter

9 Mar

What You Need to Know Before You Buy

General

Posted by: Jennifer Koop

What You Need to Know Before You Buy

Spring is one of the busiest seasons for retail activity as the good weather gives people lots of time for decluttering, showing the home, garage sales, packing and moving into your new space! Buying a home is an extremely exciting and fulfilling adventure, but before you get started let’s go through some of the most important things you need to know before you buy a home.

First Things First, Are You Ready to Own a Home?

This is likely the largest financial decision you will ever make and there are a few questions you can ask yourself to ensure you are ready:
• Are you financially stable?
• Do you have the financial management skills and discipline to handle this large of a purchase?
• Are you ready to devote the time to regular home maintenance?
• Are you aware of all the costs and responsibilities that come with being a homeowner?
If you answered ‘yes’ to the above questions, congrats! You’re on the right track. Let’s look at some of the most important things to know:

Securing Your Down Payment

A down payment is the largest, upfront cost that comes with purchasing a home. The minimum on any mortgage in Canada is 5 percent but putting down more whenever possible will lower the amount being borrowed. Note: If you are putting down less than 20 percent, default insurance will be mandatory to protect the investment.

If you have a nest egg of savings that you can apply towards the down payment, then you are ready to move on! If not, RRSPs can be a great resource towards a down payment for a first-time home buyer (up to $35,000). Another option is a gift from a family member, which requires a Gift Letter stating that the money does not have to be repaid and a snapshot showing that the gifted funds have been transferred.

If these are not options for you, then you can still work on ensuring you have a good credit score and determining your budget while saving for a down payment in the meantime.

Getting Your Credit in Order

Ensuring your finances and credit is in order will make it easier to qualify for a mortgage and can be done while you’re saving for your down payment. Ensuring good credit simply involves paying your bills on time (rent, utilities, car payments) and ensuring your credit cards are paid monthly as well as keeping the balance below 75 per cent of the available limit. If you’re new to the world of credit, consider the 2-2-2 rule. Lenders want to see two forms of resolving credit (ie: credit cards) with limits no less than $2,000 and a clean payment history for two years. Another important note is to avoid making any credit mistakes or other major purchases (such as a new car) until after you have mortgage approval and have closed the deal on your new home.

Don’t Use Your Maximum Budget

Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

Get Pre-Approved

A mortgage pre-approval determines the actual home price you can afford and is different from the pre-qualification in that it requires submission and verification of your financial history. A pre-approval can determine the maximum you can afford to spend, the monthly mortgage payment associated with your purchase price range and the mortgage rate for your first term. Getting pre-approved also guarantees the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping.

Article courtesy of Dominion Lending Centres March Newsletter

4 Mar

INTEREST RATES NOSEDIVE AS BANK OF CANADA CUTS RATES 50 BPS

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Posted by: Jennifer Koop

The Bank of Canada Brings Out The Big Guns

Following yesterday’s surprise emergency 50 basis point (bp) rate cut by the Fed, the Bank of Canada followed suit today and signalled it is poised to do more if necessary. The BoC lowered its target for the overnight rate by 50 bps to 1.25%, suggesting that “the COVID-19 virus is a material negative shock to the Canadian and global outlooks.” This is the first time the Bank has eased monetary policy in four years.

According to the BoC’s press release, “COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply, and supply chains have been disrupted. This has pulled down commodity prices, and the Canadian dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.” The press release went on to promise that “as the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target.”

Moving the full 50 basis points is a powerful message from the Bank of Canada. Particularly given that Governor Poloz has long been bucking the tide of monetary easing by more than 30 central banks around the world, concerned about adding fuel to a red hot housing market, especially in Toronto. Other central banks will no doubt follow, although already-negative interest rates hamper the euro-area and Japan.

Canadian interest rates, which have been falling rapidly since mid-February, nosedived in response to the Bank’s announcement. The 5-year Government of Canada bond yield plunged to a mere 0.82% (see chart below), about half its level at the start of the year.

Fixed-rate mortgage rates have fallen as well, although not as much as government bond yields. The prime rate, which has been stuck at 3.95% since October 2018 when the Bank of Canada last changed (hiked) its overnight rate, is going to fall, but not by the full 50 bps as the cost of funds for banks has risen with the surge in credit spreads. A cut in the prime rate will lower variable-rate mortgage rates.

Many expect the Fed to cut rates again when it meets later this month at its regularly scheduled policy meeting, and the Canadian central bank is now expected to cut interest rates again in April. Of course, monetary easing does not address supply-chain disruptions or travel cancellations. Easing is meant to flood the system with liquidity and improve consumer and business confidence–just as happened in response to the financial crisis. Expect fiscal stimulus as well in the upcoming federal budget.

All of this will boost housing demand even though reduced travel from China might crimp sales in Vancouver. A potential recession is not good for housing, but lower interest rates certainly fuel what was already a hot spring sales market. Data released today by the Toronto Real Estate Board show that Toronto home prices soared in February, and sales jumped despite low inventories. The number of transactions jumped 46% from February 2019, which was a 10-year sales low as the market struggled with tougher mortgage rules and higher interest rates. February sales were up by about 15% compared to January.

 

Article courtesy of Dr. Sherry Cooper, Chief Economist, Dominion Lending Centres