3 Aug

Adapt Your Finances

Budget

Posted by: Tyler Cowle

The latest news has been focused on rising interest rates, surging inflation, and economic uncertainty with suggestions that the Canadian economy could be tripped into recession.

With all this information circulating, now is a good time to discuss ways to adapt your finances and protect your future.

Fortunately, there are a few key things you can do to get started today!

1. Set a budget and reduce monthly expenses and overall debt by including the following:

Review your income and expenses and identify areas for reduction – such as getting a cheaper cell phone plan, reducing streaming service subscriptions, reviewing transport costs, etc.

Make a list of your current high-interest loans (such as credit card balances). If your mortgage is up for renewal, you may be able to benefit by consolidating debt into your mortgage to save on interest and free up cash flow with one payment. Refinancing your mortgage before the renewal is also an option, but a review of the penalty cost versus your debt consolidation goal should be considered. As your mortgage professional, I can assist you with this analysis.

Allot a percentage of your income towards savings such as an emergency fund. Your goal should be to have the equivalent of 3 to 6 months of earnings in this fund to provide breathing room should you lose your job or face any unexpected expenses. Another form of emergency funds could also be a line-of-credit. Once set-up, these generally have no cost to you unless you use it in the event of an emergency.

Having a healthy and realistic budget will give you peace of mind and allow you to properly allocate your monthly cash flow between debt, expenses, and savings.

2. Evaluate your investment portfolio:

While you will want to avoid making any knee-jerk reactions, it maybe a good time to diversify your portfolio to help reduce risk. Consider rerouting your investment to real estate or other areas to ensure you have various sources of income and always talk to an expert.

3. Find additional income sources!

Many people have found innovative ways to increase their income by asking the following three questions:

– Are you a fit for a potential promotion?

– Do you have a review coming up?

– Do you have transferable skills that you can apply to consulting or additional contract work?

One final reminder – don’t panic. I know the word “recession” can be stressful but understanding what is happening and making appropriate adjustments will help you stay financially secure.

If you have any additional questions, I would be happy to chat with you anytime! Please don’t hesitate to reach out if you want to discuss the impact on your mortgage, or how to make changes.

19 May

Changing Your Financial Direction!

General

Posted by: Tyler Cowle

Did You Know? The average Canadian owes $23,000 in consumer debt and has at least 2 credit cards. Source: CBC.ca

If you live paycheque to paycheque, the idea of somehow having enough money to invest and eventually have financial freedom seems about the furthest thing possible.

But experts in financial education like to point out, no matter your income and place in life, a few changes to the way you’re living life can make all the difference. It’s never too late to start learning and reverse course. If you’re still not convinced, here are a few simple ideas to get you started:

PRETEND YOU EARN LESS THAN YOU DO

Give yourself a cut in pay. The goal is to put 10% in savings from each paycheque into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every pay day.

CREATE A BUDGET

In order to stop living paycheck to paycheck, you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.

BUILD AN EMERGENCY FUND

Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.

CONSIDER DOWNSIZING

It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of that cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

PAY DOWN DEBT

If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.

DON’T FORGET YOUR FUTURE

Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.

Published by the DLC Marketing Team

8 Apr

Federal Budget 2022 – Economic Insights with Dr. Sherry Cooper

Mortgage Tips

Posted by: Tyler Cowle

 

Affordable Housing Is A Key Theme In Federal Budget 2022

Today’s budget announced a $10 billion package of proposals intended to reduce the cost of housing in Canada (see box below). The fundamental problem is insufficient supply to meet the demands of a rapidly growing population base. Thanks to the federal government’s policy to rapidly increase immigration since 2015, new household formation has risen far faster than housing completions, both for rent and purchase. This excess demand has markedly pushed home prices to levels beyond average-income Canadians’ means.

The measures announced in today’s budget to increase housing construction, though welcome, are underwhelming. The Feds can control the construction of lower-cost housing through CMHC. Still, most home building is under the auspices of the municipal governments, where the red tape, zoning restrictions and delays abound. The federal government increased funds to help local governments address these issues, but NIMBY thinking still prevents increased housing density in many neighbourhoods.

The headline policy announcement for a two-year ban on foreign residential property purchases may sound reasonable. Still, according to Phil Soper, chief executive of Royal LePage, “It will have a negligible impact on home prices. We know from the pandemic period, when home prices escalated with virtually no foreign money, that our problem is made-in-Canada.”

According to the Financial Post, Soper added that measures like the tax-free savings account for young Canadians would be encouraged to help them achieve their dreams of homeownership in a typical real estate market. However, in a low-supply environment with pandemic-fuelled price gains, these measures would only add more demand without addressing the supply issue. Only a few first-time buyers would be able to take advantage of it.

The Home Buyers’ Bill of Rights that would end blind bidding and assures the right to a home inspection and transparent historical sales prices on title searches is also long overdue.

The First-Time Home Buyer Incentive has been extended to March 2025. This program has been a bust. Buyers do not want to share the equity in their homes with CMHC. The Feds are taking another kick at the can, “exploring options to make the program more flexible and responsive to the needs of first-time homebuyers, including single-led households.” To date, the limits on the program have made them useless in high-priced markets such as the GTA and the GVA.

Budget 2022 Measures To Improve Housing Affordability

Tax-Free Home Savings Account

Introduce the Tax-Free First Home Savings Account that would give prospective first-time home buyers the ability to save up to $40,000. Like an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home—including investment income—would be non-taxable, like a TFSA.

New Housing Accelerator Fund

With the target of creating 100,000 net new housing units over five years, proposes to provide $4 billion over five years, starting in 2022-23, to launch a new Housing Accelerator Fund that is flexible to the needs and realities of cities and communities, while providing them support such as an annual per-door incentive or up-front funding for investments in municipal housing planning and delivery processes that will speed up housing development.

New Affordable Housing

To ensure that more affordable housing can be built quickly, Budget 2022 proposes to provide $1.5 billion over two years, starting in 2022-23, to extend the Rapid Housing Initiative. This new funding is expected to create at least 6,000 new affordable housing units, with at least 25% of funding going towards women-focused housing projects.

An Extended and More Flexible First-Time Home Buyer Incentive

Extension of the First-Time Home Buyer Incentive–which allows eligible first-time homebuyers to lower their borrowing costs by sharing the cost of buying a home with the government–to March 31, 2025. Explore options to make the program more flexible and responsive to the needs of first-time homebuyers, including single-led households.

A Ban on Foreign Investment in Canadian Housing

Proposes restrictions that would prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a two-year period.

 Property Flippers Pay Their Fair Share

Introduce new rules so that any person who sells a property they have held for less than 12 months would be subject to full taxation on their profits as business income, applying to residential properties sold on or after January 1, 2023. Exemptions would apply to Canadians who sell their home due to certain life circumstances, such as a death, disability, the birth of a child, a new job, or a divorce.

Rent-to-Own Projects

Provide $200 million in dedicated support under the existing Affordable Housing Innovation Fund. This will include $100 million to support non-profits, co-ops, developers, and rent-to-own companies building new rent-to-own units.

Home Buyers’ Bill of Rights

Bring forward a national plan to end blind bidding. Among other things, the Home Buyers’ Bill of Rights could also include ensuring a legal right to a home inspection and ensuring transparency on the history of sales prices on title searches.

Multigenerational Home Renovation Tax Credit

Provide up to $7,500 in support for constructing a secondary suite for a senior or an adult with a disability, starting in 2023.

Doubling the First-Time Home Buyers’ Tax Credit

Double the First-Time Home Buyers’ Tax Credit amount to $10,000, providing up to $1,500 in direct support to home buyers, applying to homes purchased on or after January 1, 2022.

Co-Operative Housing Development

Reallocate funding of $500 million to a new Co-Operative Housing Development Program to expand co-op housing in Canada. Provide an additional $1 billion in loans to be reallocated from the Rental Construction Financing Initiative to support co-op housing projects.

There is also a laundry list of other programs to create additional affordable housing for Indigenous Peoples, Northern Communities, and vulnerable Canadians. Enhanced tax credits for renovations to allow seniors or disabled family members to move in; and for seniors to improve accessibility in their homes. As well, money is provided for long-term efforts to end homelessness.

To combat money laundering, the government said it would extend anti-money laundering and anti-terrorist financing requirements to all mortgage-lending businesses within the next year.

For greener housing initiatives, the government is planning to provide $150 million over five years starting this year to drive building code reform to focus on building low-carbon construction projects and $200 million over the same timeline for building retrofits large development projects.

Bottom Line

Nothing the federal government has done in today’s budget will make much of a difference in the housing market. What does make a difference is the spike in interest rates that is already in train. Fixed mortgage rates are up to around 4%, and variable mortgage rates have begun their ascent. There is still a record gap between the two, but the Bank of Canada will likely hike the policy rate by 50 bps next week. The Bank will probably hike interest rates at every meeting for the remainder of the year and continue into the first half of next year.

It is also noteworthy what Budget 2022 did not do. It did not address REITs or investment activity by domestic non-flipping purchasers. Some were expecting a rise in minimum downpayment on investor purchases or restrictions on using HELOCs for their funding.

Budget 2022 did not raise the cap of $1 million on insurable mortgages. It did not reinstate 30-year amortization, a favourite of the NDP. And, it did not follow the BC provincial government in allowing a “cooling-off” period after a bid has been accepted, technically giving would-be buyers more time to secure financing.

Published by Dr. Sherry Cooper – Chief Economist, Dominion Lending Centres

 

22 Mar

The Credit Challenge

Credit Score

Posted by: Tyler Cowle

The Credit Challenge.

For most people, credit score isn’t something you spend much time thinking about. Especially if you are someone who is making good money and paying all your bills on time. When you are in that boat, it feels pretty good! But, when you miss a payment or you struggle to pay all those credit cards, lines of credit and even your mortgage, it can feel like a sinking ship.

This is especially true if you’re credit challenged, but are looking to get into the housing market. Improving your credit is the best first step to getting a lender to give you a chance and fortunately, it is very doable!

Why does credit score matter?

The reason your credit score is so important is because it tells lenders the basic story surrounding your credit. It essentially indicates whether or not you are a “good investment” by relaying how long you’ve had credit, your ability to pay back that credit and how much you currently owe. Your credit score is affected by how much debt you’re carrying in relation to limits, how many cards or tradelines you have and your history of repayment.

If you are considering getting your first mortgage, keep in mind that a credit score above 680 puts you in a good position to get financing, while a score below that will make it tough and improvement is needed.

CREDIT REPORTS

To ensure your credit score remains in good form, it is important to take a hard look at your credit report and review your credit score for any old or incorrect information. If you find any errors, contact Equifax to have them corrected or removed. Another big factor includes paying off any collections (such as parking tickets or overdue bills).

CONSIDER THE 2-2-2 RULE

If you’re a young person and new to the world of credit, consider the 2-2-2 rule to help build up your credit. Lenders typically like to see 2 forms of revolving credit (i.e. credit cards) with a limit of no less than $2,000 and a clean history of payment for 2 years.

It is important to note, a great credit score means keeping a balance on all those cards at any given time, below 30 percent of the overall limit. For a card with a limit of $2,000, this means having no more than $600 of it in use. It is also a good idea to check if your credit card requires an annual fee and make sure you are paying that off too.

If you’ve been advised to get a couple credit cards but have locked them in a vault where only a sorcerer’s spell can access them, you’re going down the wrong path. The goal is not just to have credit but to show potential lenders that you know how to use it responsibly!

Rock bottom credit

When things get really bad, there is a tendency for clients to consider declaring bankruptcy or a consumer proposal. Bankruptcy is a legal process where an individual or entity can seek relief from some or all of their debts when unable to repay them. A consumer proposal is a formal, legally binding process to pay creditors a percentage of what is owed to them.

The truth is, it is best to avoid these two options. Instead, there are companies out there that will perform the same function with regards to negotiating your debts – but it won’t impact your credit or carry the stigma of bankruptcy or a consumer proposal.

CONSIDER REFINANCING

If you already own a home and have some equity, but you are still drowning in credit debt, consider refinancing your mortgage. While you might not get the same great rate you have now, or might get dinged for breaking your mortgage early, using the equity in your home can be a great way to get rid of high-interest credit card payments and consolidate debt to keep more money in your pocket at the end of the day.

Keeping your score in-tact

Once you have your credit score where you want it, it is important to maintain that score. You can do this by ensuring you never use more than 30% of your available credit and that you pay your bills each month, and on time. Even if you can only pay the minimum amount due, it is important to be making those payments and recognizing the requirements.

Published by the DLC Marketing Team!

16 Feb

Power Up Your Finances.

General

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

24 Jan

Improving Your Financial Direction!

Mortgage Tips

Posted by: Tyler Cowle

Make 2022 the year of finance by improving your financial direction from the start! Even if you are living paycheck-to-paycheck, a few changes to the way you spend and look at money can make all the difference. It’s never too late to start again and reverse course! Here are a few simple ideas to get you started:

  • Create a Budget: In order to stop living paycheck-to-paycheck , you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.
  • Pretend You Earn Less Than You Do: Give yourself a cut in pay. The goal is to put 10% in savings from each paycheck into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every pay period.
  • Pay Down Debt: If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with myself or your local mortgage broker about your debt consolidation options and if your mortgage can be used to help you clean the state. They will be able to review your debt and possibly recommend a way to consolidate it into one simple payment with a single point of interest charges.
  • Build an Emergency Fund: Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.
  • Don’t Forget Your Future: Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.
  • Consider Downsizing: It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of that cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

Contact me for more great advice like this!!!