Today’s inflation report for September has brought a wave of positive news, suggesting that policy rates might have reached their peak. As Dr. Sherry Cooper, Chief Economist at Dominion Lending Centres, highlights, the recent data surpassed expectations, signaling a potential shift in the trajectory of inflation and monetary policy.

In the report, Dr. Sherry Cooper notes that not only did the headline inflation rate decline, but both the year-over-year and three-month moving average core measures of inflation also showed a decrease. Coupled with a weak Business Outlook Survey from the previous day, this hints at a possible peak in the overnight policy rate, currently standing at 5%. Although she does not anticipate rate cuts until the middle of the following year, Dr. Cooper believes that the most challenging phase of the tightening cycle may already be behind us.

Gasoline prices, experiencing a year-over-year increase of 7.5% in September, played a role in offsetting the overall deceleration in the Consumer Price Index (CPI). Excluding gasoline, the CPI saw a rise of 3.7% for the month, following a 4.1% increase in August. Dr. Cooper anticipates a favorable base effect for the October inflation report, as CPI surged during the same period in the previous year. Additionally, she notes a current decrease of about 7% in gasoline prices for this month.

However, Dr. Cooper underlines the uncertainty associated with geopolitical events, particularly the ongoing conflict in the Middle East, and its potential impact on future inflation rates.

In terms of monthly changes, the CPI experienced a 0.1% decrease in September, attributed mainly to lower gasoline prices. Goods inflation also fell by 0.3% from the previous month, a trend not seen since December 2022. Meanwhile, services inflation remained unchanged from August on a monthly basis, marking a notable shift.

Addressing consumer perceptions, Dr. Sherry Cooper acknowledges that current inflation perceptions remain higher than actual inflation rates. This is attributed to highly visible price increases in groceries and gasoline. She points to a notable deceleration in food inflation and a cycle-low of 2.8% in CPI excluding food and energy.

Shifting focus to durable goods, the year-over-year pace of price increases slowed in September, particularly in categories such as furniture, household appliances, and air transportation. Additionally, the purchase of new passenger vehicles exhibited a deceleration, partly due to improved inventory levels compared to the previous year.

Dr. Sherry Cooper also brings attention to other measures of core inflation, which have shown a decline, aligning with a possible shift in the economic landscape.

In summary, while underlying price pressures remain above the Bank’s 2% target, Dr. Cooper remains optimistic about inflation moving into the Bank of Canada’s target range next year, given the slowdown in the global and North American economies. However, she cautions that the full impact of rate hikes has yet to be realized, and any potential rate cuts are likely to be considered cautiously by the Bank of Canada, not expected until the middle of next year.

As a mortgage broker, I understand that one of the most challenging conversations you may have with your aging parents revolves around their financial well-being and housing needs. One option that often comes up in these discussions is a reverse mortgage. Reverse mortgages can be a valuable tool for seniors looking to access their home equity without selling their home or making mortgage payments, but it’s essential to approach this topic with sensitivity and knowledge. In this blog post, I will guide you through how to talk to your parents about reverse mortgages, helping you provide them with the information they need to make an informed decision.

1. Educate Yourself:

Before initiating the conversation with your parents, it’s crucial to educate yourself about reverse mortgages. Familiarize yourself with the basics, such as how they work, eligibility requirements, and the different types available. Being well-informed will enable you to answer your parents’ questions and address their concerns accurately.

2. Choose the Right Time and Place:

Selecting the right time and setting for this discussion is essential. Find a comfortable, quiet place where you can have a private conversation without interruptions. Make sure your parents are relaxed and receptive to discussing their financial matters.

3. Explain the Basics:

Begin with the fundamentals of reverse mortgages. Explain that a reverse mortgage is a loan that allows homeowners aged 62 or older to access a portion of their home equity without monthly mortgage payments. Describe how the loan is repaid and the potential benefits, such as additional income or financial flexibility.

4. Address Common Misconceptions:

Many people have misconceptions about reverse mortgages, such as losing ownership of the home or leaving a debt to their heirs. Clarify these misconceptions and emphasize that your goal is to provide accurate information, not to pressure them into making a decision.

5. Discuss Their Needs and Goals:

Engage your parents in a discussion about their specific needs and financial goals. Ask them how a reverse mortgage might help them achieve these goals, whether it’s supplementing retirement income, covering healthcare expenses, or making home improvements. Tailor the conversation to their unique situation.

6. Encourage Questions:

Encourage your parents to ask questions and express any concerns they may have. Be patient and provide clear, honest answers. If you don’t know the answer to a question, offer to research it together or consult a financial advisor or reverse mortgage specialist.

8. Seek Professional Guidance:

Suggest that your parents consult with a qualified financial advisor or reverse mortgage specialist. These experts can provide personalized advice and explore the specific options available to your parents based on their financial circumstances.

9. Respect Their Decision:

Ultimately, the decision to proceed with a reverse mortgage should be entirely up to your parents. Respect their choice, whether they decide to move forward with a reverse mortgage, explore other financial options, or take no action at all.

Conclusion:

Talking to your parents about reverse mortgages can be a challenging but essential conversation to have as they plan for their retirement years. By approaching this discussion with empathy, knowledge, and a genuine desire to support their financial well-being, you can help them make an informed decision that aligns with their goals and needs. Remember that your role is to provide information and support, and ultimately, the decision rests with your parents.

If you have any questions about reverse mortgages, I’m happy to help. Reach out anytime.

Introduction:
Purchasing a home is a significant investment, and securing a mortgage is a crucial step in the process. However, unforeseen circumstances, such as job loss, can complicate your mortgage application. Understanding how job loss impacts your application and knowing the right steps to take is essential. In this blog post, we will explore the implications of job loss on your mortgage application and provide guidance on navigating this challenging situation.

Should You Proceed with Your Mortgage Application?

If you experience job loss after qualifying for a mortgage, it is crucial to inform your lender immediately. Failing to disclose changes in employment may be considered fraudulent, as it affects the accuracy of your application. However, in some situations, job loss may not completely derail your mortgage application. Consider the following scenarios:

1. Finding new employment promptly within the same field: If you secure a new job in the same industry shortly after losing your previous job, your mortgage approval may still be possible. However, keep in mind that if your new job requires a probationary period, it could affect your approval.

2. Having a co-signer with sufficient income: If you have a co-signer on the mortgage who has a stable income and meets the qualification requirements on their own, your application may proceed. Ensure that your co-signer is aware of your employment situation and understands their responsibilities.

3. Additional sources of income: If you have alternate sources of income, such as retirement funds, investments, rental income, or child support, some lenders may consider them. Discuss these options with your mortgage professional to see if they can be factored into your application.

Can Unemployment Income Be Used for a Mortgage Application?

Typically, unemployment income is not considered a suitable source of income for mortgage qualification. However, there may be exceptions for individuals with seasonal or cyclical jobs who rely on unemployment benefits for part of the year. In such cases, you would need to provide a two-year employment cycle followed by proof of Employment Insurance benefits.

What if You’re on Furlough?

If you have been furloughed or temporarily laid off but have not lost your job entirely, your lender may adopt a wait-and-see approach. You will likely be required to provide a letter from your employer stating your anticipated return-to-work date. However, if you do not return to work before the closing date, your lender may need to cancel your application, with the possibility of resubmission in the future.

Consulting with a Mortgage Professional:
Regardless of the reason behind your employment change, it is crucial to communicate with a mortgage professional. With careful planning and the guidance of a knowledgeable mortgage professional, you can still achieve your dream of homeownership even in the face of job loss.

Job loss can present challenges when applying for a mortgage, but it does not necessarily mean your homeownership dreams are shattered. By promptly notifying your lender, exploring alternative income sources, and seeking guidance from a mortgage professional, you can navigate this situation effectively. Remember, each situation is unique, and finding the right solution requires personalized advice.

Introduction:
Purchasing a home is a significant milestone for many individuals and families. However, one of the most significant financial commitments that come with homeownership is the mortgage. While the traditional mortgage term may span several decades, wouldn’t it be fantastic to pay off your mortgage faster and enjoy the freedom of owning your home outright? As a mortgage broker with years of experience, I’m here to share some valuable tips on how to accelerate your mortgage payoff and become debt-free sooner than you imagined.

1. Make Biweekly Payments:
Consider switching from monthly to biweekly mortgage payments. By dividing your monthly payment in half and making payments every two weeks, you end up making 26 half-payments throughout the year, which is equivalent to 13 full monthly payments. This extra payment each year significantly reduces your principal balance and shaves years off your mortgage term.

2. Round Up Your Payments:
Another simple but effective strategy is to round up your mortgage payments. For example, if your monthly payment is $1,275, round it up to $1,300 or even $1,500 if you can afford it. This small additional amount may seem insignificant, but over time, it can make a substantial difference in reducing your principal balance and the interest you pay.

3. Make Additional Lump Sum Payments:
Whenever you come across extra funds, whether through a bonus, tax refund, or inheritance, consider making lump sum payments towards your mortgage. Directing these windfalls towards your mortgage principal can have a profound impact on reducing your overall interest payments and accelerating your mortgage payoff.

4. Cut Back on Expenses:
Evaluate your monthly expenses and identify areas where you can make cuts. By trimming unnecessary expenditures and reallocating those funds towards your mortgage, you can expedite your mortgage payoff. Consider cutting back on dining out, entertainment subscriptions, or even downsizing your car. Small sacrifices today can lead to significant gains in the long run.

5. Refinance to a Shorter Amortization: If your financial situation allows, consider refinancing your mortgage to a shorter amortization. By refinancing from a 30-year mortgage to a 15-year mortgage, for instance, you’ll pay off your mortgage in half the time. However, it’s essential to assess your financial stability and ensure you can comfortably manage the higher monthly payments associated with a shorter amortization mortgage.

6. Maximize Prepayment Options:
Check your mortgage agreement for prepayment options. Some mortgages allow you to make extra payments without penalties. Take advantage of these options whenever possible. By consistently applying additional funds towards your principal balance, you’ll see your mortgage balance decrease more rapidly, ultimately leading to an earlier mortgage payoff.

7. Negotiate a Better Rate: Depending on whether you have a variable or a fixed mortgage, you may want to consider looking into getting a better rate to reduce your overall mortgage payments and money to interest. This is ideally done when your mortgage term is up for renewal, it could be a great opportunity to adjust your mortgage and save! This may be done with your existing lender OR moving to a new lender who is offering a lower rate (known as a switch and transfer).

8. Increase Your Income:
Finding ways to boost your income can significantly expedite your mortgage payoff. Consider taking up a side gig, freelancing, or renting out a spare room. The additional income can be directly allocated towards your mortgage payments, helping you chip away at the principal balance at a faster pace.

Conclusion:
Paying off your mortgage faster requires commitment, discipline, and strategic financial planning. By implementing these tips from an experienced mortgage broker, you can actively reduce your mortgage amortization and enjoy the freedom of a debt-free homeownership sooner than you imagined. Remember, every little bit counts, so start implementing these strategies today and take control of your mortgage to secure a brighter financial future.

If you are looking to pay off your mortgage quicker, don’t hesitate to reach out. I can help review the above options and assist in choosing the most effective course of action for your situation.

Introduction

When it comes to applying for a mortgage, there are several key factors that lenders consider before granting approval. Among these factors, debt servicing ratios play a vital role in determining your eligibility. As a mortgage broker, I understand the significance of these ratios and their impact on your borrowing capacity. In this blog, we will explore why debt servicing ratios are crucial in the mortgage application process and how they can influence your ability to secure a home loan.

Understanding Debt Servicing Ratios

Debt servicing ratios, often referred to as affordability ratios, are financial calculations used by lenders to assess an individual’s ability to manage mortgage payments alongside their existing debts and financial obligations. These ratios provide a snapshot of your current financial situation and help lenders gauge your repayment capacity.

Two primary ratios are typically analyzed:

1. Gross Debt Service Ratio (GDSR): This ratio measures the proportion of your gross monthly income that will be allocated towards housing-related expenses, including mortgage payments, property taxes, heating costs, and sometimes condo fees. Generally, lenders prefer to see a GDSR below 32% of your gross monthly income.

2. Total Debt Service Ratio (TDSR): The TDSR takes into account all your monthly debt obligations, including housing expenses (as considered in the GDSR) and other debts such as credit card payments, car loans, student loans, and other lines of credit. Lenders typically prefer a TDSR below 40% of your gross monthly income.

Importance of Debt Servicing Ratios

1. Assessing Repayment Capacity: Debt servicing ratios provide lenders with a reliable measure of your ability to make mortgage payments consistently over the long term. By analyzing your income and existing debts, lenders can determine whether your financial situation can support the additional burden of a mortgage.

2. Mitigating Risk: Lenders use debt servicing ratios as risk management tools to ensure that borrowers do not overextend themselves financially. By setting guidelines on acceptable GDSR and TDSR levels, lenders aim to minimize the likelihood of default and protect both the borrower and themselves from entering into an unsustainable mortgage agreement.

3. Responsible Borrowing: Debt servicing ratios promote responsible borrowing practices. They discourage potential homeowners from taking on more debt than they can comfortably handle, helping to prevent financial stress and potential foreclosure down the line.

4. Negotiating Power: Having a favorable debt servicing ratio increases your negotiating power as a borrower. By demonstrating a low GDSR and TDSR, you are seen as a lower-risk borrower, making you more attractive to lenders. This can potentially result in better interest rates and loan terms.

Tips for Improving Your Debt Servicing Ratios

1. Reduce Existing Debts: Prioritize paying off high-interest debts or consider consolidating them into a single, more manageable loan. By decreasing your overall debt burden, you can improve your TDSR.

2. Increase Your Income: If possible, explore avenues to boost your income, such as taking on a part-time job or freelancing. A higher income will improve your GDSR and demonstrate greater financial stability.

3. Consider a Smaller Mortgage: Lowering the amount you borrow can positively impact your GDSR and TDSR. Consider adjusting your housing expectations to fit within your financial means.

Conclusion

As a mortgage broker, I emphasize the importance of debt servicing ratios in the mortgage application process. These ratios provide lenders with an understanding of your ability to manage your mortgage payments alongside existing debts. By maintaining healthy debt servicing ratios, you not only increase your chances of mortgage approval but also demonstrate responsible financial management. Remember, it’s crucial to evaluate your financial situation, work towards reducing debts, and ensure that you can comfortably afford the mortgage before diving in.

Bridge financing is a short-term solution that can help you access equity from your existing property to put towards the down payment of your new home. This type of financing is especially useful when you need to bridge the financial gap between the firm sale of your current home and the firm commitment to purchasing your new home.

Bridge loans typically range from 30 days to 1 year, with an average of six months in length. To be eligible for a bridge loan, you must have a firm sale agreement in place on your existing home, meaning all subjects have been removed. You will also require a purchase agreement for the new home to verify the amount required.

It is important to note that if you have not yet sold your home, you will not be eligible for bridge financing, as the lender needs that to accurately calculate how much equity you have available and if you can afford your new home. If you are currently looking to sell, or are in the midst of selling your home and considering bridge financing, it is important to understand that unless you can qualify and pay for two mortgages, you should always sell your existing home before purchasing a new one.

If you have sold your existing home but the closing date comes after the closing date of the new property you just purchased, then bridge financing will likely be your best option. However, it is important to consider whether or not you think you need bridge financing, as not all lenders provide this option. I can help you find a lender that provides the options you need.

It is also important to mention that bridge financing typically costs more than your traditional mortgage. Expect the Prime Rate plus 2, 3, or 4 percent, as well as an administration fee. In some cases, if you require a loan over $200,000 or a loan for more than 120 days, your lender may register a lien on the property until the loan is repaid. To remove this lien, you will need to consider the added costs of paying for a real estate lawyer.

If you have purchased your new home and are closing the deal, but your existing home has not yet sold, you would not qualify for bridge financing and would therefore need to consider a private loan. Private financing is expensive, but it is generally a more affordable option versus lowering the asking price of your existing home and losing out on tens of thousands just to sell quickly.

Private loans are dependent on having enough equity in your current property to qualify and are more expensive than traditional mortgages, with interest rates averaging anywhere from 7-15 percent. The costs associated with a higher interest rate are in addition to an up-front lender fee and potential broker fee. These amounts will vary based on your specific situation with consideration to: time required for the loan, the loan amount, loan-to-value ratio, credit bureau, property location, etc.

In conclusion, when it comes to bridge financing and selling and buying your home, seeking out a specialized mortgage broker (ahem me!) who can help you navigate the process and find the best options available to you can save you time and money. Remember, bridge financing is a short-term solution, so it is important to have a clear understanding of the costs and requirements associated with this type of financing before making any decisions.

Top 8 Questions About Reverse Mortgages.

Written by Mich Sneddon, CPA, CA – Reverse Mortgage Pros

Having completed dozens of reverse mortgage deals, there are some questions that I find I get over and over again.
So today I thought I’d write a piece on the 8 most common reverse mortgage questions that people in Canada have regarding reverse mortgages.

1. if i have an existing mortgage on the property, can i get a reverse mortgage?

Not only is this the most common question regarding reverse mortgages, it is actually one of the most common uses for a reverse mortgage – to pay off the current mortgage and eliminate that payment and help with monthly cash flow. However, it is important to realize that you would need to qualify for enough to pay that existing mortgage in full.

For example: If you have $70,000 remaining on the mortgage, you would need to qualify for at least $70,000 to be eligible for a reverse mortgage. If you owe $70,000 and qualify for $100,000 in reverse mortgage funds, the $70,000 would be paid first and you would be left with the remaining $30,000.

The good news is that the reverse mortgage funds can also be used to pay any penalties or charges for paying out your mortgage as well. However, the existing mortgage must always be paid off using the reverse mortgage funds and you get to keep whatever is left. Essentially, you are swapping your mortgage with a reverse mortgage and keeping the excess cash.

2. can i pay the interest or make payments on the amount i receive?

Yes, you can make monthly interest payment if you choose and you can also pay up to 10% of the amount borrowed (1 payment per year) if you wish.

However, you also have the option to pay nothing at all until you sell the property or until you pass away. Most people choose this option but it is nice to know that you can pay the interest every month (essentially turn the reverse mortgage into the same thing as a Home Equity Line Of Credit).

3. how do you determine how much i qualify for? i thought i could get 55% of my home value?

This is a common question that we get. It is important to note that you can qualify for up to 55% of the value of the property and not everyone will get this amount. The words ‘up to’ are very important in this statement.

To determine how much you qualify for, four different factors are used: The ages of all applicants, the property value, the property location (postal code) and the property type.

Here is a quick example for all 4 factors: Someone aged 80 will qualify for more than someone aged 60; someone in a city will qualify for more than someone in the countryside; someone with a property value of $500,000 will qualify for more than someone whose value is $200,000 and someone who lives in a detached house will usually qualify for more than someone who lives in a Condo.

4. i’m 60 but my wife is 53, can we still qualify?

Unfortunately, no. Both applicants need to be 55 or over to qualify. Even if just one of you is on the title, because it is deemed a ‘matrimonial home’ (meaning that the husband and wife both have a legal right to the home, by nature of being married) both of you need to be 55 or over.

5. what is involved in the application?

Reverse mortgages aren’t as difficult a process to go through as a traditional mortgage. However, you aren’t going to simply be given the money either – remember you are still talking about large amounts of money here and the lender is a Schedule A bank.

Your credit score and income are not usually significant factors in the application – but the lender will still check these. In addition to this, proof of identity and other such paperwork is required.

An appraisal is always required and is the first step – so the lender can identify the market value of your home and therefore how much they can lend. However, it is possible to get a ‘quote’ before this.

6. what if i want to sell my home?

You can sell your house at any time if you have a reverse mortgage. The mortgage amount (plus any accrued interest and prepayment penalties, if any) would then be paid from the proceeds of the sale. The process would be exactly the same as if you had any other kind of mortgage or HELOC on the property.

7. will i still own my home?

Yes, you will remain on the title for as long as you or your spouse live in the property and you can never be forced out of your home because of a reverse mortgage. In fact, from this point of view a reverse mortgage is ‘safer’ than a traditional mortgage. Under a traditional mortgage, you could lose your home for not paying your monthly mortgage payments. Since no such payments exist for a reverse mortgage, there is no such risk.

8. if i sell my house, can i re-apply for another reverse mortgage on my new property?

Absolutely! As long as the property is your primary residence – but just remember that you would need to qualify for enough to pay any mortgage on the new property. Reverse mortgages can be used for purchases in this way.

If you have any questions, please contact your local Dominion Lending Centres mortgage expert.

Published by DLC Marketing Team

Alternative lending in Canada refers to lending solutions that are not offered by traditional financial institutions like banks, credit unions, or trust companies. Instead, alternative lenders include private lenders, mortgage investment corporations (MICs), and other specialized lenders who offer non-traditional lending products.

These lenders typically provide financing options to individuals or businesses who may not qualify for loans from traditional lenders due to factors like low credit scores, high debt ratios, self-employment income, or unique property situations. Alternative lending can also be a useful option for those who need financing quickly or require more flexible lending terms than what traditional lenders can offer.

Alternative lending solutions come in various forms, including first and second mortgages, equity take-outs, construction loans, and bridge financing. While alternative lending options often come with higher interest rates than traditional loans, they can be a valuable resource for those who need financing quickly or require more flexibility.

Working with an experienced mortgage broker can help borrowers find the right alternative lending solution for their unique needs. Brokers can help assess a borrower’s financial situation, determine which lenders are a good fit, and negotiate terms on their behalf.

It’s important to note that alternative lending can also come with higher risks, including the potential for default or foreclosure. Borrowers should carefully consider the terms and conditions of any loan they are considering and work with a reputable lender and broker.

Overall, alternative lending can be a valuable tool for those who need financing quickly or who may not qualify for traditional loans. As with any financial decision, it’s essential to carefully consider all options, work with trusted professionals, and make informed decisions.

As a mortgage broker in Canada, I often get asked about second mortgages and how they work. Second mortgages can be a valuable tool for homeowners looking to access the equity in their homes for a variety of reasons. In this blog, I will explain what a second mortgage is, how it works, and some of the advantages and disadvantages of taking out a second mortgage.

What is a Second Mortgage?

A second mortgage is a loan that is taken out on top of your existing mortgage. This means that you will have two mortgages on your property, hence the name “second mortgage.” Second mortgages are typically used to access the equity in your home, which is the difference between the value of your home and the outstanding balance on your mortgage.

How Does a Second Mortgage Work?

When you take out a second mortgage, you will have two separate loans on your property. Your first mortgage will be your primary loan, and your second mortgage will be a secondary loan. The second mortgage is often at a higher interest rate than the first mortgage since it is considered to be a riskier loan.

The amount of money you can borrow with a second mortgage will depend on the equity in your home. Typically, lenders will allow you to borrow up to 80% of your home’s appraised value, minus the outstanding balance on your first mortgage. For example, if your home is worth $500,000 and you have a first mortgage of $300,000, you could potentially qualify for a second mortgage of up to $100,000 (80% of $500,000 is $400,000, minus the $300,000 first mortgage).

Advantages of a Second Mortgage

There are several advantages to taking out a second mortgage, including:

• Access to funds: A second mortgage can provide you with access to the equity in your home, which can be used for things like home renovations, debt consolidation, or to cover unexpected expenses.
• Lower interest rates than other types of loans: While the interest rate on a second mortgage is typically higher than the interest rate on your first mortgage, it is often lower than the interest rates on other types of loans, such as personal loans or credit cards.
• Flexible repayment terms: Second mortgages often come with more flexible repayment terms than other types of loans. This can include longer repayment periods, interest-only payments, or the ability to make lump-sum payments without penalty.

Disadvantages of a Second Mortgage

There are also some disadvantages to taking out a second mortgage, including:

• Higher interest rates than your first mortgage: As mentioned earlier, second mortgages typically come with higher interest rates than your first mortgage, which means you will be paying more in interest over the life of the loan.
• Increased risk of default: Since a second mortgage is a secondary loan, it is considered to be riskier than your first mortgage. This means that if you default on your payments, your second mortgage lender will be paid after your first mortgage lender, which could put your home at risk of foreclosure.
• Fees and charges: There may be fees and charges associated with taking out a second mortgage, such as appraisal fees, legal fees, and closing costs. These fees can add up quickly and increase the overall cost of the loan.

Is a Second Mortgage Right for You?

Whether or not a second mortgage is right for you will depend on your specific financial situation and goals. If you need access to funds and have significant equity in your home, a second mortgage may be a good option. However, it is important to weigh the advantages and disadvantages of a second mortgage before making a decision.

If you are considering a second mortgage, it is important to work with a reputable mortgage broker who can help you understand your options and find the best loan for your needs.