Let’s face it, the 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.
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 families 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.
Housing affordability remains a huge political issue, and with the Department of Finance working on the upcoming budget, no doubt measures to reduce home prices will be front and center. With an election coming this spring in Ontario, Premier Ford’s Housing Affordability Task Force has made recommendations to step up homebuilding. Still, Ontario’s mayors are balking at some of their proposals. The task force report from the calls for “binding provincial action” to allow buildings up to four storeys tall and up to four units on a residential lot.
Ontario’s Big City Mayors group responded, saying, “Unilateral actions, absent municipal input, may have unintended consequences that slow down development and reduce the community support needed to continue to sustainably add housing.” While overcoming Not In My Back Yard-ism is essential to success, so is respect for local decision-making and the democratic process.” This is a roadblock to the aggressive and timely response.
We desperately need dramatic increases in new housing construction, which has been woefully constrained by local zoning, red tape, and city planning issues. These are not under the auspices of the federal government. So instead, bandaid measures that do not directly address the fundamental issue of a housing shortage will likely be forthcoming in the spring federal budget.
Today the Canadian Real Estate Association (CREA) released statistics for January 2022 showing national existing-home sales rose edged higher on a month-over-month basis, constrained by limited supply. Excess demand pushed home prices up on the month by a record 2.9%, taking the year-over-year home price index up a record 28%. Cliff Stevenson, Chair of CREA said, “The question is will that supply be overwhelmed by demand as it was last spring, or will we start to see the re-emergence of some of the many would-be sellers who have been hunkered down for the last two years?
“The ideal situation between now and the summer would be that a huge surge of sellers come forward looking to sell in the spring 2022 market,” said Shaun Cathcart, CREA’s Senior Economist. “If that were to occur, similar to 2021, we’d likely see a massive number of sales take place which would get a lot of frustrated buyers into homeownership, and we’d likely see some cooling off on the price growth side if those offers are spread across more listings. Those are all things this market needs. It really comes down to how many properties come up for sale in the months ahead”.
New Listings
In January, the number of newly listed homes dropped by a whopping 11% m/m, with a pullback in the GTA accounting for more than half of the national decline (chart 1 below).
With sales up a bit and new listings down by double-digits in January, the sales-to-new listings ratio shot to 89.4% compared to 78.7% in December (chart 2 below). This was the second-highest level on record for this measure, only slightly below the record 90.2% set last January. The long-term average for the national sales-to-new listings ratio is 55%.
A record 85% of local markets were seller’s markets based on the sales-to-new listings ratio is more than one standard deviation above its long-term mean in January 2022. The other 15% of local markets were in balanced market territory.
There were only1.6 months of inventory on a national basis at the end of January 2022 — tied with December 2021 for the lowest level ever recorded. The long-term average for this measure is a little over five months.
Home Prices
In line with the tightest market conditions ever recorded, the Aggregate Composite MLS® Home Price Index (HPI) was up a record 2.9% on a month-over-month basis in January 2022. The gains were similar to those recorded in the previous three months.
The non-seasonally adjusted Aggregate Composite MLS® HPI was up by a record 28% on a year-over-year basis in January.
Looking around the country, year-over-year price growth is in line with the national figure at 28% in B.C., though it remains lower in Vancouver, close to on par with the provincial number in Victoria, and higher in most other parts of the province.
Year-over-year price gains are still in the mid-to-high single digits in Alberta and Saskatchewan, while gains are running at about 13% in Manitoba.
Ontario saw year-over-year price growth remain above 30% in January, with the GTA having now caught up with the pace of provincial gains. The rest of the province is a mixed bag, up in between 25% and 40% on a year-over-year basis, save for Ottawa where prices are running at 16% year-over-year.
Greater Montreal’s year-over-year price growth remains at a little over 20%, while Quebec City was about half that.
Price growth is running above 30% in New Brunswick (higher in Greater Moncton, lower in Fredericton and Saint John), 27% on Prince Edward Island, and Newfoundland and Labrador is now at 12% year-over-year.
Bottom Line
While most developed countries have seen excess demand for housing over the past two years pushing home prices higher, Canada has the most significant housing shortage in the G7. This began in late 2015 when the federal government decided it would target the entry of much larger numbers of economic immigrants. Canada is “underpopulated” and celebrates a growing population, unlike many other countries. There are many job vacancies to be filled, and more people means more economic growth and prosperity for Canada.
But what the federal government forgot to do was provide housing for all new residents. Simply put, governments at all levels established no plan to provide any additional housing for all of these newcomers, let alone affordable housing.
Canada’s net migration rate is 6.375 per 1,000 people, the eighth-highest in the world. Approximately 1.8 million more people were calling Canada home in 2021 than five years earlier, with four in five of these having immigrated to Canada since 2016.
This is not rocket science. The government can blame foreign buyers or investors for our housing shortage, but inadequate planning and antiquated processes and policies are the real culprits.
Article courtesy of Dr. Sherry Cooper Chief Economist, Dominion Lending Centres
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.
INTEREST RATE DIFFERENTIAL (IRD)
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.
THREE MONTHS DIFFERENCE
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 today! We can help you find the best mortgage product for you.
When it comes to the Canadian housing market, there are lots of options for where to live! From renting an apartment to owning a single-family home, it all comes down to where you see yourself living and what you can afford! The beauty is, there is no right or wrong answer when it comes to renting versus buying but let’s break down the pros and cons of both and hopefully help you to decide which is best for you!
Why do people rent?
One of the most common answers to this question is affordability. Most people rent because they believe it is cheaper than owning a home. This can be true in some cases, but there are also times when monthly rent costs are higher than monthly mortgage payments. Of course, there are also cases where rent is far more affordable than buying, especially when you factor in the cost of a down payment and maintenance on a home you own, rather than one you rent. Affordability is fairly dependent on an individual’s situation, but it is not the only decision factor for choosing to rent.
Another reason individuals may choose to rent is that they simply aren’t sure where they want to live, or maybe they cannot find a place that fits their needs. If you are new to an area, you may want to rent in the meantime so you can get to know the neighbourhoods and determine which area is the right fit for you. In some cases, you simply may be unable to find a home that is affordable to buy in the area you want or within a reasonable commute from your work.
For individuals who travel a lot for work or like to be free-floating, renting can be the perfect option but if you simply believe buying a home to be out of the question, it is time to take a hard look at your options because it may not be so far fetched!
Pros and cons of renting:
To help you decide if renting is right for you, we have put together a little list of pros versus cons to help you see if it is the right fit.
Pros of Renting
Cons of Renting
Less maintenance
Fewer repairs
Lower upfront costs
Short-term commitment for people unsure of where they want to plant roots
Protection from potential decrease in property values
Monthly payments may increase
Potential for being evicted / lease renewal not being approved
Paying to someone else’s mortgage instead of building your own equity
Requiring permission to paint or remodel
Why do people buy?
According to the most recent data, Canada boasts an overall homeownership rate of 67.8%. Even for those Canadians aged 35 and under, more than 40% of households own their own homes. This is quite an impressive statistic! So, let’s look at why people choose to buy.
One of the main reasons that people choose to buy a home is to have the stability and peace of mind of owning the place you live. This means you are not at risk of being put in a situation where the landlord wants to move their parents into the basement suite and you have to leave or having to deal with increased costs if you go to renew a lease agreement.
For others, the benefit to buying comes in building up equity and ensuring that nest egg for your future. When you choose to rent, you are paying into someone else’s mortgage and into their future but when you work towards buying your own home, suddenly all that money you invested is going to your future instead. This is an extremely important aspect to consider in today’s age when many are having trouble with the idea of saving for retirement.
Now I get it, you may be thinking “if I can’t afford to retire, how can I afford to buy a house” but if you can afford to pay the high cost of rent in today’s market, then home ownership isn’t as far out of reach as you think. This is especially true if you buy a two-story home and rent out the basement, giving you ample living space upstairs but also additional income to pay your mortgage.
Pros and cons of buying:
To further show the benefits and costs to buying, we have broken down some pros and cons to help you to determine if this is the right path for you.
Pros of Buying
Cons of Buying
Freedom to renovate or modify your home as you wish
You are building up equity in a safe, secure investment as you pay down your mortgage
Potential for additional income if you have a rental suite
Stability and peace of mind from being in control of your investment and owning the place where you live
The risk of losing your home value when you sell
Responsibility for all ongoing costs, including mortgage principal and interest, property taxes, insurance and maintenance
Monthly payments can increase if interest rates go up at renewal time
Possibility of unexpected and potentially costly repairs
To rent or buy, that is the question!
Did you know? 4 in 10 households spend more than 30 percent of their pre-tax income on rent, which is above the commonly accepted affordability threshold.
The latest National Bank report revealed that monthly mortgage costs for median-priced condos were higher than the average monthly rent for a similar unit in Toronto, Montreal, Vancouver, Victoria, and Hamilton. At the same time, monthly mortgage payments were lower than rents in Calgary, Edmonton, Quebec City, Winnipeg, and Ottawa. While this data does not include suburbs, it shows a staggering difference between mortgage payments and rent payments.
If someone can rent for $900 a month or pay a mortgage of $1200 a month, it may seem like a no brainer but it is important to remember that paying rent does not build equity! However, if you are unsure of where you want to live or cannot find a suitable and affordable home with a close enough commute to work, renting may be your only option. This is where checking listings and discussing with a real estate agent may open doors and where a mortgage broker can come in handy to help you determine if purchasing a home is viable in your near future.
Yes, you can buy!
The reality is that in the long run, homeowners often fare financially better than renters because homeownership enables forced savings that accumulate over the years, growing into a sizeable nest egg.
If you are unhappy renting or really prefer the idea of owning your own home, you CAN. It is time to stop assuming you cannot make the leap from renting to buying – all you need is the right information and the right preparation!
To determine if you are able to purchase a home, a good place to start is the My Mortgage Toolbox app from Dominion Lending Centers. This app is perfect for seeing what you can afford. Using the app to calculate minimum down payments and monthly mortgage costs can help you to get a good picture of the financial landscape and your options. Looking at your budget and evaluating your current rent costs and other monthly expenses can also help you to determine your affordability bracket.
Some other things to consider before buying include:
Your credit score – do you have good financial standing to be approved for a mortgage?
Your savings – do you have any money put away for a downpayment? If not, do you have wiggle room in your budget to start saving?
Your time – do you have the resources to maintain a home from the yard to any necessary repairs?
If buying a home to live in is out of the question due to the availability in your area or cost of homes close to work, another option is to consider an investment opportunity. Maybe you cannot afford to buy in the area you want so you rent in order to keep your commute short and be in a neighbourhood you love. However, you can still reap the equity benefits by investing in a vacation or rental property which would give you the necessary nest egg and help you feel more secure about your future financial situation. You could keep the investment property as long as you want! If you end up finding the perfect home in your area down the line, you could always sell your investment property and take the earnings for a down payment on the right home – or keep it as an extra security blanket!
Regardless of whether you choose to continue renting or make the leap to owning your own home, the most important factor is your financial security. What works for your friend or your parents may not work for you – and that is okay! However, educating yourself and looking into all the options will ensure that, at the end of the day, you are in the best situation for yourself.
