WHEN DEATH STRIKES SUDDENLY

Recently I was finishing up a mortgage with a young couple who had just had a beautiful baby girl. I brought up the topic of mortgage and life insurance as well as getting a will written up. The response from the husband was that it was such a morbid topic and a real downer when they were excited about their new home.

The fact is that people, even young people die from car accidents, cancer, and even accidental drownings while on vacation. It’s a topic everyone avoids but it needs to be addressed, particularly when you are taking a major financial step like buying a home. What would happen to your spouse if you died suddenly with your mortgage not paid off?

I spoke to a major Canadian mortgage company about this topic.
I asked if the surviving spouse would be kicked out of the house. “ When someone dies who was on our mortgage we want to know right away . We ask for a copy of the death certificate so that we can take them off title. We will let the mortgage run it’s term if payments are being made on time. Many surviving spouses receive a life insurance policy and can pay off the mortgage or at least keep up the payments. We will renew the mortgage if payments are up to date. However, should the surviving spouse want to refinance the mortgage they would have to re-qualify for it.”

So what can you do to make life easier for your family should you die with a mortgage on your home? The easiest option is to have sufficient life insurance to ensure that they can keep up payments or to pay off the mortgage. Dominion Lending Centres mortgage professionals all offer MPP (Mortgage Protection Plan), a life insurance policy that pays off the mortgage in full in case of the death of the policy holder. The payments never go up because the mortgage balance is going down as the insured person gets older.

Another option is term insurance or whole life insurance. Speak to your favourite insurance broker about this.
Finally, if the surviving spouse is 55 or older, and they can’t afford to maintain the mortgage, a reverse mortgage may be the solution. No payments are made on the principal unless you decide you want to. When the widow(er) moves out the sale of the home pays off the mortgage and interest.

While it can be a “downer” to talk about death and disability, a responsible home purchaser needs to have the conversation with their Dominion Lending Centres mortgage professional at the time of their purchase, refinance or renewal. The sudden death of a family member causes enough grief for the survivors, why add to their misery. As the old commercial used to say “Why wait for spring, do it now”.

FEBRUARY CANADIAN JOBS REPORT REMAINS STRONG, BUT SLUMP CONTINUES

The employment report is the lone bright spot in an economy that has slumped across the board. According to today’s jobs report from Statistics Canada, the economy added 55,900 net new jobs last month, all of them full-time positions. This is the second consecutive monthly job surge for an economy that has barely grown in the past five months (see chart below). The two-month accretion is the best start to a year since 1981. Canada’s economy has added 290,000 jobs since August, the most substantial six-month rise since the early 2000s. Moreover, there are still a half-million job vacancies which continue to attract foreign workers.

The Canadian dollar shot up on the news, bouncing back from its plunge on Wednesday when the Bank of Canada signalled that the widespread weakness would keep the Bank on the sidelines for longer than expected.

In a speech yesterday, Deputy Governor Lynn Patterson said policymakers spent “a lot of time” in policy deliberations discussing four-quarter output data that she said were weak in certain areas — citing business investment, housing and consumption. The soft data mean the economy will probably be weaker in the first half of this year than the Bank of Canada had been anticipating as recently as January, Patterson said. She characterized the data picture as “mixed” and said the economy is likely to rebound later in 2019, boosted by the robust labour market. In January, the Bank of Canada forecasts a rebound in the second quarter of this year.

The employment gains in recent months come amid an otherwise dismal performance for the economy amid stresses in the oil sector, weakening housing markets, diminishing trade prospects, volatility in global financial markets and waning consumer and business confidence. Economists were forecasting an employment gain of just 1,200 in February.

The unemployment rate in February was unchanged at 5.8% as the number of people searching for work held steady. The strength, however, was not widespread across the country. Ontario was the sole province with a notable employment rise last month while the jobless rate was unchanged as more people were looking for work. Net new jobs declined in Manitoba and were little changed in the remaining provinces.

Even the wage picture is improving. Annual average hourly wage gains accelerated to 2.3% last month from 2% in January, with pay for permanent employees up 2.2% compared to 1.8% previously.

Bottom Line: The Bank of Canada will remain on hold until the strength in the labour market filters into consumer and business spending. The headwinds of global uncertainty, energy market weakness and the housing slowdown contribute to the Bank’s cautious stance. The Canadian trade gap hit a record high in December, reported earlier this week, almost entirely due to the collapse in crude oil prices. It was a fifth straight monthly decline in Canadian exports. Also, the US tariffs on steel and aluminum exports continue to weigh on the economy. It appears there is little prospect that the renegotiated Canada-Mexico-US trade deal will be confirmed by the US Congress this year, adding to the uncertainty.

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

BUYERS ARE WINNING NOW, BUT FOR HOW LONG?

Homebuyers are starting to see relief and the pendulum swing their way for the first time in years.
It’s no surprise, as we’ve have had a collision of circumstances that have both slowed the local real estate market and dropped prices down as much as 30 per cent.
We have the stress test forcing borrowers to qualify at two per cent higher, a speculation tax in B.C. and raised interest rates from record lows.
We had a seller’s market with less than four months of supply on the market, then four to six months of a balanced market and now a buyer’s market, where we have over nine months of product on the market.
With all of the supply available, sellers are having to set their price below the last sale if they are serious about selling.
Buyers are winning now, but for how long?
On March 20, we will see if there will be any changes in the federal budget. There have been rumours of a modification to the stress test by a percentage point and perhaps a 30-year mortgage option back for insured mortgages. Now with spring here and bank profits down from the normal increases due to less lending, we’ve seen a decrease in both the fixed and variable rates.
Watch the numbers once the housing supply drops to four months, and remember every neighbourhood is different.
If you have any questions, contact your local Dominion Lending Centres mortgage professional today.

ANGELA CALLA

Dominion Lending Centres – Accredited Mortgage Professional

WHY I CHOSE A MORTGAGE BROKER? OUR HOUSE MAGAZINE – WINTER

Amanda Moss and her husband Robert have had a mortgage on various properties for almost 10 years. The Chilliwack B.C. couple was a few years into their mortgage term, but looking to pay off some extra bills and clear up some financing. They hadn’t considered the option of refinancing until Amanda got some advice of a friend. The friend recommended a mortgage broker to help them through the refinancing process. The couple is now back on sold financial footing thanks to the help of their Dominion Lending Centres mortgage broker.

Why did you choose a mortgage broker?

I happened to be on a girl’s trip to Seattle and I mentioned to a friend, because my husband and I both make decent income, we wanted to refinance. She said she had the perfect broker for me. When I got back to Seattle I called him right away.

How was your experience working with a mortgage broker?

I had a really great experience with Dominion Lending Centres and with my mortgage broker. He was very professional and went out of his way to reassure us through the process. Refinancing can be stressful, with so much paperwork and questions along the way, but our broker was always willing to provide advice and even dropped by our house to pick up documents. Overall it was a great experience!

What advice would you give someone in your situation?

Managing your finances can be very stressful. Our mortgage broker was able to lower our monthly payments which has allowed us to focus on our family and worry less about money. My husband and I found that dealing with a mortgage broker was easy, and also and provided us with multiple lending options, so that we could get the best rate possible. This was a nice change from just dealing with one bank. My advice to you is to be open to using a mortgage broker as they fight for you and your best interest.

JEREMY DEUTSCH

Communications Advisor

RENOVATING? CONSIDER A REFINANCE PLUS IMPROVEMENTS

Let’s take a closer look at how a Refinance Plus Improvements mortgage can get you the extra cash you need to get your renovations completed.

The Standard Refinance

An everyday refinance allows the home owner to access up to 80% of the fair market value of the home. The value is typically determined by a Market Appraisal on the home. Here is how it would look:

• Current Appraised Value of the home: $250,000.00
• Max New Mortgage Amount: $200,000.00 ß 80% of present value
• Your current Mortgage Balance: $190,000
• Equity Available to you for the renovations: $10,000.00

*Note: some of the equity will cover closing costs (it is a new mortgage after all, so a new registration and fund advance needs to happen. If you are breaking a current mortgage, there could be a pre-payment penalty as well)

The remaining equity can be used towards your improvements. But what happens if it’s not enough to cover the improvement costs? You’re now stuck with either making sacrifices to your dream reno, covering the additional costs out of pockets, use a higher interest line of credit or not doing the renovations at all. None of which are a great options.

The Refinance Plus Improvements Mortgage

Here is how the Refinance Plus Improvements mortgage can make all the difference.

For argument sake, let’s assume for a moment that the home owner is thinking about renovating their kitchen and main bathroom. These are in no way a small improvement. They are quite significant improvements…new flooring, cabinets, counter tops and paint in the kitchen along with a full gut and renovation in the main bathroom.

After sitting down with a Mortgage Broker to determine mortgage affordability, the home owners next step is getting estimates for the renovations. After having multiple contractors quote on the work, the home owner settles on a contractor that has quoted $20,000.00 for the job (Labour and materials costs, all in, turn key project). Let’s also assume for a moment that the renovations are going to increase the value of the home by $30,000.00 (side note: Kitchen and Main Bathroom Renovations can have the biggest impact on the value of a home). Here is how it would look:

Refinance Plus improvements:

• Current Home Value: $250,000.00
• Post Renovation Home Value: $280,000.00
• New Max Mortgage Amount: $224,000.00
• Your Current Mortgage Balance: $190,000.00
• Equity Available for the renovations: $34,000.00

See the difference? The refinance plus improvements in this scenario can get the home owner access to an additional $24,000, far exceeding the improvements planned for home. No sacrifices required. No unsecured higher interest financing required. No need to tap into personal savings. Just a nice new mortgage with a low interest rate and one simple payment.

If you have questions about how a refinance plus improvements mortgage can make all of the difference with your renovations plans, please feel free to connect with a Dominion Lending Centres mortgage professional near you. We are always happy to chat mortgage strategy with you while at the same time shopping the market and rates on your behalf!

Happy Renovating!

NATHAN LAWRENCE

Dominion Lending Centres – Accredited Mortgage Professional

CANADIAN ECONOMY HITS A MAJOR POTHOLE IN Q4

This morning, Stats Canada released disappointing figures showing that the economy barely grew in the final quarter of last year. Weakness in the oil sector was expected, but the downturn went well beyond the energy sector and bodes ill for a return to healthy growth this year.

The country’s economy grew by just 0.1% in the fourth quarter, for an annualized growth rate of 0.4%–the weakest performance since the second quarter of 2016, down from an annualized 2% pace in the third quarter and well below economist’s expectation of a 1% annualized gain.

For the year as a whole, real gross domestic product (GDP) grew at a 1.8% pace in 2018, down substantially from the 3% growth recorded in 2017. In comparison, the U.S. economy grew 2.9% last year with Q4 growth at 2.6%.

Canada’s economy was battered by lower export prices for crude oil and crude bitumen walloping Alberta. Housing activity in the province slowed from already weak levels as unsold inventories rose and prices edged downward. As well, business investment dropped sharply in the final three months of the year, and household spending slowed for the second consecutive quarter.

Consumer spending on durable goods, especially motor vehicles, hit the skids as overall household outlays for products and services weakened. Consumption spending grew at the slowest pace in almost four years.

Housing fell by the most in a decade, business investment dropped sharply for a second straight quarter, and domestic demand posted its most significant decline since 2015. Housing investment plummeted, falling at a 3.9% quarterly rate as the housing market continued to soften, with the most substantial decrease in new construction (-5.5% quarterly), followed by renovations (-2.7%) and ownership transfer costs (-2.6%). (*see note below)

Business investment in plant and equipment fell 2.9%, the sharpest drop since the fourth quarter of 2016.

The only thing that kept the nation’s economy from contracting was a build-up in inventories as companies stockpiled goods. Without a doubt, much of the inventory accumulation was unintended, as the slowdown in demand caught businesses by surprise.

Implications for the Bank of Canada

Canada’s economy has been plagued by trade uncertainties, reduced oil demand by the U.S., rising interest rates, and tighter mortgage credit conditions. Consumer and business confidence has declined, and inflation remains muted. Despite a relatively robust labour market, wage growth has slowed. The Bank of Canada is widely expected to stay on the sidelines next week when the Governing Council meets once again on Wednesday. The central bank’s latest forecast, from January, was for annualized growth of 1.3% in the fourth quarter, more than three times stronger than today’s reported pace of 0.4%. The Bank expects growth to decelerate further to 0.8% in the current quarter, before rebounding back to above 2% growth by next year.

The latest data puts the economy’s ability to rebound to more normal levels in question. Monthly data released today show the economy ended the year contracting, with December gross domestic product down 0.1%. Most economists now expect the Bank of Canada will refrain from raising interest rates for the remainder of this year.

*Note:

*Housing investment in the GDP accounts is technically called “Gross fixed capital formation in residential structures”. It includes three major elements:
• new residential construction;
• renovations; and
• ownership transfer costs.
New residential construction is the most significant component. Renovations to existing residential structures are the second largest element of housing investment. Ownership transfer costs include all costs associated with the transfer of a residential asset from one owner to another. These costs are as follows:
• real estate commissions;
• land transfer taxes;
• legal costs (fees paid to notaries, surveyors, experts, etc.); and
• file review costs (inspection and surveying).

Royal Bank Cautions Against Budget Measures to Increase Millennial Homeownership Demand

A new report hit my inbox yesterday written by Robert Hogue, a senior economist at the Royal Bank urging the federal government to withhold the expected support for millennial home purchases in the March 19th budget. Mr. Hogue writes that “Federal Finance Minister Bill Morneau is reportedly poised to unveil new budget measures to help more Canadian millennials become homeowners. While that generation does face housing-related challenges, especially in some larger and more expensive Canadian cities, we urge him to tread carefully. On the surface, ideas like relaxing the mortgage stress test, extending the maximum amortization period for insured mortgages, or increasing the amount of RRSP take-out for a first home down payment might bring short-term relief to buyers. But they do nothing to address what we believe is the root of Canada’s housing woes: gaps in the mix of housing options in some of Canada’s larger markets. Meanwhile, the measures won’t address the issue of high household debt, and may actually inflate home prices.”

The bank economist takes “issue with the notion that Canada has a home ownership problem in the first place. On average, more than 40% of Canadian households under 35 years of age own their own homes. And the proportion of all Canadian households who own a home is one of the highest among advanced economies. Even Toronto and Vancouver—the least affordable markets in the country—rank near the top of global cities on home ownership and have home ownership rates that are about double cities like Paris and Berlin. And despite a notable decline in the past decade, the ownership rate among younger households (Canada’s millennials) remains not only high historically in Canada but also compared to other countries, including the U.S.”

I urge you to read the report. The data provided in the charts are compelling. The real problem is the dearth of supply of “starter” homes in Canada’s most expensive cities. The measures likely to be introduced in the budget will not address the housing supply gaps and could well further inflate prices. “What millennials in Vancouver and Toronto really need is more inventory of homes they can afford, and a better mix of housing options—be it to own or rent…. At the very least, the collective goal should be to remove barriers (regulatory, administrative or otherwise) inhibiting home developers and builders to respond quickly to the demand for new housing—especially when that demand is rising rapidly.”

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres

BROKERS MAKE A DIFFERENCE

While many people will go to their bank to obtain a mortgage or line of credit, they often feel betrayed by their favourite bank if their application is rejected. One big advantage that we have over banks is that we can send underwriter notes along with the application. Our questions and speaking at length with the borrower give us insight that the underwriter will never get from the facts and figures on the application.
A while ago, I had an application at a lender for a young man who wanted to buy his first home.

He worked in the construction trades and his income history was up and down over the past 3 years. He needed overtime to support his application and the two year average wasn’t there.

I went back with 3 years of Notices of Assessments, his recent pay stubs and pleaded the case for my client. The underwriter finally asked for an exception based on my confidence in the client. She trusted my judgement and the mortgage was approved.
This leads me to the idea that underwriter notes are very important and can mean the difference between an approval and a decline. If you have a chance, ask your underwriter how they like their notes; in point form or in paragraphs. Do they prefer emails or phone calls?

When a successful mortgage broker writes notes they start by stating what product they are asking for and giving their contact information. I put my contact info at the top of the notes and at the bottom so they don’t have to go searching for it if they have a question or need clarification. I then state what my client is trying to do; purchase their first home, refinance, a renewal or if it’s’ a switch, that they want to benefit from lower interest rates.
I then list the areas I want to highlight: Income, credit, property, down payment and start with their weakest link first and explain their situation. I had a client who had her down payment in a joint account with her father in Japan. I started with that knowing that a paper trail would be important. If the credit score is low, is it due to a past illness, divorce or job loss? I tell the underwriter right away. As a result, underwriters trust me and have given my clients a second look or asked for an exception. Finally, I finish up by summarizing the strong points in the file and thanking them for their consideration of my file.

I never yell or give my underwriters a blast if they decline a file. I will, however, ask why the file was declined so that I can better prepare my client for the disappointment and plan on how we can remedy the situation. Just as a FYI, a manager at a major bank told me that at one bank he worked for after hitting the send key he received a simple message back – either APPROVED or DECLINED with no explanation. Now who do you think mortgage clients should deal with? A bank or a broker?

DAVID COOKE

Dominion Lending Centres – Accredited Mortgage Professional