28 Feb

Mortgage Monday – Stress Test

Mortgage Tips

Posted by: Tyler Cowle

This weeks industry term which is used all the time, is the Stress Test.  What is it and what does it mean for your mortgage?

The Stress Test was introduced in 2018 as a way to ensure that the Canadian Housing Market remains strong by making sure that home owners can afford their mortgage payments if mortgage lending rates were to raise.  The way this was accomplished was to have lenders qualify a borrower based on the Bank Of Canada’s Qualifying Rate (or contract rate + 2%) rather than the actual contract rate that the payments were to be based on.  The Contract Rate + 2% comes into effect if the actual mortgage rate received +2% would be higher than the BOC Qualifying Rate.

The Bank Of Canada Qualifying Rate is not a static number and changes when the BOC finds it necessary, based on the market and future trends; the most recent change was in June of 2021 when it was increased to 5.25% from 4.79%.  This Stress Test was introduced towards Insured Mortgages (less than 20% down payment); however, OSFI has followed suit and most mortgages are Stress Tested using the BOC Qualifying Rate; including re-finances on your current property!

When qualifying a client using the Stress Test we need to ensure that the resulting GDS and TDS are kept in line and do not go over the maximum allowed.


Let’s see how it works in this example:

  • 2 Clients on the file; shopping for their first home together
  • Down payment available of $100,000 from their own savings
  • Combined annual income of $140,000
  • Other debts amount to $500/month
  • Estimated Property Tax is $400/month and Heat is $120/month

Using the contract fixed mortgage rate of 2.99%:

The clients purchasing power would be roughly $950,000; or a mortgage of $850,000 after their down payment.

Using the qualifying mortgage rate of 5.25% (The Stress Test):

The clients purchasing power is drastically reduced to roughly $775,000; or a mortgage of $675,000 after their down payment.


The reason for the reduction in purchasing power in the example above is because the clients Gross Debt Service (GDS) and Total Debt Service (TDS) were calculated using the Stress Test Rate.  Looking at the above example; even a small change in mortgage rates would mean that a house that cost $950,000 would be un-affordable to these clients with all other things staying the same and they risk falling behind on payments or defaulting on their mortgage.

It should be noted that at the time of writing; fixed mortgage rates are raising and variable rates are likely to raise as well.  Should the fixed mortgage rates increase above 3.25%; the Bank Of Canada Qualifying Rate would no longer apply; since the mortgage would have to be qualified on the contract rate + 2% if is is higher.  The easy thing to do in this instance would be to offer the clients a variable rate mortgage; however, if this product is not properly suited for the specific clients it may cause issues with approval!

The calculations performed in the above scenario were done using My Mortgage ToolBox App which can be downloaded here!

Check in next week for our next topic!

Published by Tyler Cowle!

23 Feb

5 Reasons to Invest in a Home Inspection.

First Time Homebuyer

Posted by: Tyler Cowle

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

In fact, there are five reasons that a home inspection might just be the best $300-$500 you ever spend.

It provides an “out”

When buying a new house, it is always best to avoid taking chances. While a house may look great on the surface, hidden structural issues such as cracked foundation or roof damage can easily turn into expensive repairs. A home inspection can help reveal any large and/or hidden issues, which can often provide an ‘out’ for the buyer.

If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost a few thousand to replace. Perhaps the seller would split the cost with you? It’s worth asking. If the price cannot be re-negotiated if issues come to light, then it is best to just walk away on the basis that the home will cost you too much in the long run.

Confirms safety and structural integrity

Another benefit of having a home inspection is not only to find issues, but also to confirm structural integrity. During an inspection, the inspector will review everything from the attic to the furthest reaches of the basement and will look for things like mold, holes in the chimney, saggy beams or improper wiring.

Reveal illegal additions or installations

Similarly to determining any safety and structural issues, home inspections can also reveal hidden additions or DIY installations that may cause trouble down the road. If the seller wired the house improperly or used substandard materials, it not only could cost you big in the future but it could even null and void your home insurance should something happen!

Forecast future costs

A home is an ongoing expense, much like a car. Unless it is brand new, there will be regular maintenance and updates required to replace things when they become old and inefficient. For instance, water heaters typically last for 6-10 years, the life of a good roof is around 20 years, while furnaces can last up to 25 years. The home inspection report will include an estimate on the remaining life for each of these big-ticket items, which will give you a heads up on future expected costs and provide you time to save for their eventual replacement.

Peace of mind

Finally and perhaps most importantly, getting a home inspection is important for your own peace of mind. A home is a huge investment, and one that you will be paying off for 20 or 30 years. It is much easier to feel good about your investment after you have gone through a home inspection and you know that the house is safe and that you won’t run into any surprise problems down the road. While a home inspection isn’t free, peace of mind is priceless and a few hundred bucks is worth it!

Published by the DLC Marketing Team

22 Feb

Mortgage Monday – TDS – Total Debt Service Ratio

Mortgage Tips

Posted by: Tyler Cowle

This weeks industry term which is used all the time, is the TDS or the Total Debt Service Ratio.  What is it and what does it mean for your mortgage?

The Total Debt Service Ratio is very similar to the GDS discussed in last week’s post; in fact, it adds to the GDS calculation.  The TDS is just as important as the GDS; sometimes even more since it takes into account other debts and responsibilities for not just the applicant; but, any co-applicants as well!  The TDS calculation can drastically change the pre-qualified amount that calculates using the GDS calculation; sometimes even rendering the application un-approvable using conventional lenders.

The current industry standard is a TDS ratio of 44%; which means that the base shelter costs (those that were included in the GDS calculations) plus, other liabilities and responsibilities must be less than 44% of the monthly income; before taxes in order to qualify for the mortgage.  There are exceptions to the rule (extended ratios); however, these are only available for un-insured mortgages (+20% down) and are specific to certain products and lenders.  It should be noted that the calculation includes the ‘qualifying’ mortgage payment; not necessarily the actual mortgage payment.  The qualifying mortgage payment is calculated using a higher interest rate (BOC Benchmark) and helps ensure that homeowners can afford higher mortgage payments should rates increase!  The calculation below uses monthly figures.


TDS = ((((Mortgage Payment (P&I) + Taxes (T) + Heat (H)) + 1/2 Condo fees) + Other liabilities) / Gross Income) x 100

Example – (((($1,500 (P&I) + $250 (T) + $120 (H) + $200 (1/2 CF) + $500) / $6,000 (GMI)) x 100

(($1,870 (PITH) + $200 + $500) / $6,000) x 100

($2,570 / $6,000) x 100

0.428 x 100 = 42.8% TDS or Total Debt Service


In the above scenario; the TDS would be acceptable to most lenders and insurers and would lead to an approval as long as all other aspects of the application were acceptable.  It should be noted that the above calculation used the same numbers from last weeks GDS calculation; which resulted in a GDS quite below the industry standard (34.5% vs 39%).  The addition of just $500 per month in other liabilities results in a TDS that is close to the threshold of 44%; $500 of other liabilities really is not a lot (car payment); if this applicant were to have just $71 more in other liabilities (credit card payment); the TDS would be over the threshold and the applicant likely would not be approved using conventional lending.  Also, the other liabilities that must be added are for all applicants on the file; even though we also add co-applicants income to help strengthen the file; we also have to account for their own responsibilities (their own shelter costs); which can sometimes hinder the file.

Even though a TDS of 44% is the industry standard; a low credit score or poor history may lead to the requirement of a lower TDS in order to be approved by some lenders and insurers.  As important as the TDS ratio is to the mortgage application; it must fall in line with all other parts of the client profile!

Check in next week for the next topic!

Published by Tyler Cowle


16 Feb

Power Up Your Finances.


Posted by: Tyler Cowle

Let’s face it, mere mention of the word “money” can make people shift in discomfort. In an era in which the veils are being lifted off many societal taboos, a shroud of shame hangs stubbornly over money talk – we’re taught to fear it, we’re taught it’s too complicated, and those are all messages meant to disempower.

It’s time to push past the taboo, and normalize talking about money. Disrupt it by talking about it – openly and frankly – with your partner, your friends, your family, and your colleagues. Speaking of partners, it’s important both parties are open with one another about their fears, feelings, and goals in regards to money. This is particularly important in opposite-gender households, where research shows that the male partner takes the financial lead in most homes.

stnce Senior Program Specialist, Sarah Zandbergen, has this to say about the hesitation to discuss finances with partners: “It can be difficult to bring up, no question, but if you’re sharing your life with someone, finances are bound to come up. A staggering statistic we came across in our research is that 90% of women will be the sole financial decision-maker in their family at some point in their lives. Knowing this, there is absolutely no excuse to defer ownership to someone else.”

Smash the stigma, and get radically transparent about your salary, your financial situation, your debts, your windfalls, and your savings goals.

And, hey, we get it – there’s a sense of comfort, albeit a false one, that comes with avoiding fiscal responsibility, because it temporarily absolves us of having to do anything, but remaining on the sidelines gives money a leg up on you. So if you want to be truly in control, increasing your knowledge about money, and how to save it, is a critical part of the confidence-building process.

Published by the DLC Marketing Team

14 Feb

Mortgage Monday – GDS – Gross Debt Service Ratio

Credit Score

Posted by: Tyler Cowle

This weeks industry term which is used all the time, is GDS or the Gross Debt Service Ratio.  What is it and what does it mean for your mortgage?

The Gross Debt Service Ratio is another fairly simple calculation and reflects your base shelter costs (or potential base shelter costs).  This is one of the calculations that Mortgage Brokers use to pre-qualify clients and give them a purchase price they should focus on while out home shopping.

The current industry standard is a GDS ratio of 39%; which means that the base shelter costs must be less than 39% of the monthly income; before taxes in order to be qualified for the mortgage.  There are exceptions to the rule (extended ratios); however, these are only available for un-insured mortgages (+20% down) and are specific to certain products and lenders.  It should be noted that the calculation includes the ‘qualifying’ mortgage payment; not necessarily the actual mortgage payment.  The qualifying mortgage payment is calculated using a higher interest rate (BOC Benchmark) and helps to ensure that homeowners can afford higher mortgage payments should rates increase!  The calculation below uses monthly figures.


GDS = (((Mortgage Payment (P&I) + Taxes (T) + Heat (H)) + 1/2 Condo Fees) / Gross Income) x 100

Example – ((($1,500 (P&I) + $250 (T) + $120 (H)) + $200 (1/2 CF)) / $6,000 (GMI)) x 100

(($1,870 (PITH) + $200) / $6,000) x 100

($2,070 / $6,000) x 100

0.345 x 100 = 34.5% GDS or Gross Debt Service


In the above scenario; the GDS would be acceptable to most lenders and insurers and would lead to an approval as long as all other aspects of the application were acceptable.  Even though a GDS of 39% is the industry standard; a low credit score or poor history may lead to the requirement of a lower GDS in order to be approved by some lenders or insurers.  As important as the GDS ratio is to a mortgage application; it must fall in line with all other parts of the clients profile!

Check in next Monday where we will discuss TDS or Total Debt Service Ratio!

Published by Tyler Cowle


7 Feb

Mortgage Monday – L.T.V. – Loan-To-Value

Mortgage Monday

Posted by: Tyler Cowle

One of the industry terms we use is LTV or Loan-to-Value.  What is it and what does it mean for your mortgage?

The Loan-to-Value is basically a number from a simple calculation; which reflects the amount of risk that a lender is willing to take on when considering offering a mortgage to a borrower and it is critical to the mortgage being approved.


LTV = Mortgage Amount/Appraised Value

Example – $600,000 (Mortgage)/$800,000 (Appraised Value) = 75%LTV

Therefore; if this was a purchase, the down payment required would be $200,000


Lenders will set Loan-to-Value maximums based on certain aspects of the application (Insurability, Property type and age, Loan Purpose (purchase, re-finance, HELOC) etc.).  In many instance; these maximums are set to keep in line with regulations (I.e. – refinances can have a maximum of 80% LTV).

In Canada, the maximum Loan-to-Value for a purchase that a lender can go up to is 95%; which means that the minimum down payment required would be 5%.  This type of mortgage is called a High-Ratio mortgage (any mortgage over 80%) and will need to be insured in order to help alleviate the lenders risk and make the lending possible.

The Loan-to-Value is not a static number and is always changing; mortgage payments and fluctuations in the market are large factors accounting for the movement.  The hopes for all homeowners is that the number is always decreasing; however, it is possible for it to increase if the property value decreases.  This is where the mortgage amount is higher than the property value (Negative Equity aka – Underwater).

Check in next Monday for the next Mortgage Tip!

Published by Tyler Cowle

4 Feb

10 Ways to Lower Your Heating Bill!

Homeowner Tips

Posted by: Tyler Cowle

Heating bills are substantial – and can be a surprise for new homeowners who haven’t paid for utilities before.  There’s no getting around this expense, but there are ways to reduce it.  Here are just 10 ways you can lower your heating bill!

1) Improve Your Insulation

You can hire a professional to blow cellulose into wall cavities, but with protective goggle and clothing, a novice can lay bats of fibreglass in exposed ceiling joists, crawl spaces and attics.

2) Service Your Equipment

A well-running machine is an efficient machine, so extended warranties and annual check-up plans are a good investment for furnaces, boilers and hot water tanks.

Replace furnace filters every few months (more if you own pets or have done extensive renovations).  Examine your ductwork for gaps: 20-40% of heating energy can be lost through holes here.

If an equipment upgrade is in your future, Natural Resources Canada has a searchable list of Energy Star certified heating appliances that will help reduce heating costs.

3) Deal with Doors and Windows

Grab a caulking gun and go around windows from the inside and outside filling gaps.  Add storm windows on the outside, as well as cellophane window film inside.

External wood doors have no insulating value.  Fibreglass versions are energy efficient, but a less expensive option is to apply weather stripping and a ‘door sweep’: self-adhesive or screw-in pieces that, when placed along the bottom of the door, prevent drafts.

4) Check the Chimney

If the flue and damper aren’t working, that’s a huge hole bringing cold air into the house and stealing cash out of your pocket.

5) Manage Your Water

If you stave off winter chill with a long steam or soak, it’ll cost you.  Heating water can account for more than 10% of the utility bills so make sure your tank is hyper-efficient.

If you’re in the market for a new one, a ‘water on-demand’ version costs more upfront, but won’t heat stored water, which means lower heating bills.

For standing tanks, buy a tank blanket (available at most hardware stores).  It takes minutes to apply and could save 4-9% on heating costs.

Many water pipes in the basement are exposed – wrap them in pre-cut foam insulation strips to trap heat.

6) Install a Programmable Thermostat

They allow you to set different temperatures for different times.  Keeping it lower while your at the office or out of the house will help reduce your heating bill.

7) Add Vents to Radiators

Vents allow you to control the heat coming out of each radiator so you can keep some spaces cooler than others.

8) Seal Access Points

Ductwork, plumbing for garden hoses and hole for cable wires all let cold air into your home.  Find them and fill them with spray foam.

Electrical outlets on outside walls let cold air in too.  Wallplate insulators are cheap, widely available and easy to install.  (Remove the wallplate, insert the pre-cut foam insulator backer, and replace the wallplate.  Done)

9) Rearrange Your Furniture

Watch out for vents and radiators when placing bookcases, sofas and chairs.  That might seem obvious, but you need clearance around these heat sources to maximize their efficiency.  Don’t butt furniture up close to them.

10) Choose Window Coverings Carefully

Hang thick ones – many off-the-shelf panels come with an insulating layer – and keep them closed after dusk.

Extra Tip – Use Ceiling Fans

They’re not just for summer.  Most come with a reverse setting that pushes hot air down, warming up the room!

Published by Sagen



3 Feb

Understanding Insurance!


Posted by: Tyler Cowle

Not all insurance products are created equal. One of the most common mistakes homeowners and potential homeowners make is that they hear the word “insurance” and just assume they have it! Well, you might have one kind of insurance, but you might be missing coverage elsewhere.

It is important to understand all the different insurance products to ensure you have proper coverage.

To help you get a better understanding of the insurance, below are the four main insurance product options you will encounter and what they mean:

Default Insurance: This insurance is mandatory for homes where the buyer puts less than 20% down. In fact, default insurance is the reason that lenders accept lower down payments, such as 5% minimum, and actually helps these buyers access comparable interest rates typically offered with larger down payments.

Default insurance typically requires a premium, which is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). This premium can be paid in a single lump sum, or it can be added to your mortgage and included in your monthly payments.

In Canada, most homeowners know of the Canada Mortgage and Housing Corporation (CMHC), which is run by the federal government, and have used them in the past. But did you know? We also have two private companies, Sagen Financial and Canada Guaranty, who can also provide this insurance.

Home (Property & Fire) Insurance: Next, we have another mandatory insurance option, property and fire coverage (or, home insurance, as most people know it by). This is number two on our list as it MUST be in place before you close the mortgage! It is especially important to note that not all homes or properties are insurable, so you will want to review this sooner rather than later.

In addition to protecting against fire damage, home insurance can also cover the contents of your home (depending on your policy). This is important for anyone looking at purchasing condos or townhouses as the strata insurance typically protects the building itself and common areas, as well as your suit “as is”, but it will not account for your personal belongings or any upgrades you made. Be sure to cross-check your strata insurance policy and take out an individual one on your unit to cover the difference.

One final thing to consider is that you may not be covered in the event of a flood or earthquake. You may need to purchase additional coverage to be protected from a natural disaster, depending on your location.

Title Insurance: Another insurance policy that potential homeowners may encounter is known as “title insurance”. When it comes to lenders, this insurance is mandatory with every single lender in Canada requiring you to purchase title insurance on their behalf.

In addition, you have the option of purchasing this for yourself as a homeowner. The benefit of title insurance is that it can protect you from existing liens on the property’s title, but the most common benefit is protection against title fraud. Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property.

Mortgage Protection Plan: Lastly, we have our mortgage protection plan coverage. This is optional coverage, but one that any agent can tell you is extremely important. The purpose of the mortgage protection plan is to protect you, and your family, should something happen. It acts as a disability and a life insurance policy in regards to your mortgage.

Typically, when you get approval for a mortgage, it is based on family income. If one of the partners in the mortgage is no longer able to contribute due to disability or death, a mortgage protection plan gives you protection for your mortgage payments. However, most homeowners don’t realize that if they buy one of these policies through their financial advisor, life insurance agent or bank, the policy will not be able to move with them to a new lender.

As your mortgage professional, I have an exclusive opportunity with this product through Manulife. This means that, if you purchase a Manulife Mortgage Protection Plan with me, you are protected for the life of your mortgage. You do not have to stay with the same lender! If you move, your protection ports with you instead of other similar products where the plan is specific to that lender. In those cases, should you want to switch lenders, you would need to requalify for your mortgage protection plan – possibly at higher rates!

If you have any questions about mortgage insurance or what are the best options for you, please do not hesitate to reach out to me! I would be happy to take a look at your existing plan and discuss your needs to help you find the perfect coverage to suit you and your family.

1 Feb

Staying Out of the Penalty Box!


Posted by: Tyler Cowle

When it comes to mortgages, it is easy to focus on the rates and your current situation, but the reality is that life happens and when it does, rates won’t be the only thing that matters.

First and foremost, the most important thing to remember is that a mortgage is a contract. That means that there is a penalty involved if the contract is ever broken. This is something that every homeowner agrees to when you sign mortgage paperwork, but it can be easy to forget – until you’re paying the price.

Why break your mortgage?

You’re probably wondering why you would ever break your mortgage contract? Well, you might be surprised to find out that 6 out of 10 mortgages in Canada are broken within 3 years and there are typically nine common reasons that this happens:

  • Sale and purchase of a new home
  • To utilize equity
  • To pay off debt
  • Cohabitation, marriage and/or children
  • Divorce or separation
  • Major life events (illness, unemployment, death of a partner)
  • Removing someone from title
  • To get a lower interest rate
  • To pay off the mortgage

It is always important to think ahead when signing a mortgage agreement, but not everything can be planned for. In that event, it is important to understand the next steps if you do indeed need to break your mortgage.

Calculating penalties

Typically, the penalty for breaking a mortgage is calculated in two different ways. Lenders generally use an Interest Rate Differential calculation or the sum of three months interest to determine the penalty. You will typically be assessed the greater of the two penalties, unless your contract states otherwise.


In Canada there is no one-size-fits-all rule for how the Interest Rate Differential (IRD) is calculated and it can vary greatly from lender to lender. This is due to the various comparison rates that are used.

However, typically the IRD is based on the following:

  • The amount remaining on the loan
  • The difference between the original mortgage interest rate you signed at and the current interest rate a lender can charge today

In this case, these penalties vary greatly as they are based on the borrower’s specific mortgage and the specific rates on the agreement, and in the market today. However, let’s assume you have a balance of $200,000 on your mortgage, an annual interest rate of 6%, 36 months remaining in your 5-year term and the current rate is 4%. This would mean an IRD penalty of $12,000 if you break the contract.

Ideally, you will want to be aware of what your IRD penalty would be before you decide to break your mortgage as it is not always the most viable option.


In some cases, the penalty for breaking your mortgage is simply equivalent to three months of interest. Using the same example as above – balance of $200,000 on your mortgage, an annual interest rate of 6% – then three months interest would be a $3,000 penalty. A variable-rate mortgage is typically accompanied by only the three-month interest penalty.

Paying the penalty

When it comes to making the payment, some lenders may allow you to add this penalty to your new mortgage balance (meaning you would pay interest on it). You can also pay your penalty up front.

Whenever possible, if you can wait out your current mortgage term before making a change to your mortgage, it is the best way to avoid being stuck in the penalty box. If you cannot avoid a penalty, do note that, while only calculators can be great tools for estimates, it is best to call your lender or mortgage broker directly for the accurate number in the case of determining penalties.

If you are unsure about getting the best penalty terms, reach out to a me today! I can help you find the best mortgage product for you and your family!