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Updates: BC Tenancy Act & 30 Year Amortizations First Time Buyers

BC Tenancy Act Changes & 30-Year Amortizations for First-Time Buyers

Recent government policy changes have significantly impacted the real estate and mortgage landscape in British Columbia. These changes, which took effect in July and August 2024, are crucial for landlords, tenants, and home buyers to understand. The amendments to the BC Tenancy Act and the new rules for First-Time Home Buyer amortizations are particularly noteworthy. Read on to learn more about these two significant updates.

BC Tenancy Act Key Changes

Effective July 18, 2024, several important changes to the BC Tenancy Act have been implemented. Here’s what you need to know:

  1. RTB Landlords WebPortal: Landlords must now register all notices to end a tenancy on an online portal and include the reason for termination.
  2. 120-Day Notice to Tenants: The notice period for tenants to vacate a property for owner occupation has increased from 2 months to 4 months.
    • Notice starts on the first day of the rental period.
    • Example: If notice is given on July 22, tenants must vacate by December 1.
  3. Increased Compensation: Tenants will receive 2 months’ free rent, up from the previous 1 month. Additionally, if the property is not used as stated for 12 months after the tenancy ends, the landlord or buyer owes the tenant 12 months’ rent.
  4. Increased Time to Dispute: Tenants now have 30 days to dispute a notice, up from the previous 2 weeks.

Considerations for Buyers:

  • Mortgage Interest Rate Holds: Rate holds currently last 90-120 days. When buying a tenanted property, work with your mortgage broker or lender to ensure your approval will hold until completion.
  • Owner-Occupied Purchase: When buying a tenanted property that will be your principal residence, be aware that the 120-day notice will postpone your move-in date.
  • Investor Impact: Selling tenanted properties will now involve additional considerations for landlords.

For more information, visit the Tenancy Act Changes.

If you’re looking to purchase a tenanted home, consult your REALTOR® and mortgage broker.

First-Time Home Buyers: 30-Year Amortization

Starting August 1, 2024, first-time homebuyers purchasing newly constructed homes priced under $1 million can benefit from 30-year amortizations. This change applies to insured mortgages, with a minimum down payment requirement of 5% on the first $500,000 and 10% on the balance. This update aims to increase buying power for eligible purchasers.

Eligibility Criteria:

To be considered a first-time homebuyer, at least one borrower on the application must meet one of the following criteria:

  • The borrower has never purchased a home before.
  • In the last 4 years, the borrower has not occupied a home as a principal residence that they or their current spouse/common-law partner owned.
  • The borrower recently experienced the breakdown of a marriage or common-law partnership.

First-time homebuyers should connect with their mortgage professional to update their application and determine how the increased amortization impacts their pre-qualification.

For more details, visit the CRA 30-Year Mortgage for First-Time Home Buyers.

Stay Updated

As mortgage regulations continue to evolve, we remain committed to keeping you informed with the latest information. For personalized advice and to discuss your specific situation, call us today at 250-753-2242.

Zoning Changes: City of Nanaimo Responds to Bill 44

Bill 44 – zoning changes

The Provincial Budget announced in April includes Bill 44-Small Scale Multi Unit Housing (SSMUH) initiative.  Municipalities in BC had to take action and announce their zoning bylaw changes by June 30, 2024.

On June 18, 2024 the City of Nanaimo’s response was announced.

What is Zoning?

Zoning refers to designations that are set out by a city or regional district that outline what is and isn’t allowed, including conditions for development and land use.  Previously, the bulk of Nanaimo’s residential zoning was R1 – this allowed for one single residential dwelling, or for two principal dwellings on certain corner lots.  R1 zoning has been changed to R5 for the most part; R5 allows for development of small scale multi family residential dwellings of up to 3-4 units.  Many homeowners can now add a secondary suite, and a carriage house.

Click here to check out this City of Nanaimo Zoning Map

Other Changes

Among the changes to zoning types, Nanaimo now recognizes suites in duplexes, row houses and townhouses.  Lot size restrictions for secondary suites are removed, and R5 zoning have decreased front yard setbacks.  Units zoned R14 Old City Low Density, allow for fourplexes, and have special density provisions if the integrity of existing homes are being retained.  For specific details and questions please contact the City of Nanaimo.

The Province’s action of SSMUH addresses the ongoing housing shortage being faced by British Columbians. With multiple programs available, homeowners should ensure they are aware of the tools and resources at their disposal.  The Secondary Suite Incentive is available for those who are building a suite in their principal residence.  This is a $40,000 forgivable loan that assists homeowners with the cost of renovations. The rental suite must be rented at below market rents for 5 years.  To find out what ‘below market rents’ means in your area, please click Here

Our May Blog Post has the basics on the Secondary Suite Initiative. 

For further details of the Suite Assistance Initiative, visit BC Housing Assistance – Suite Initiative.

Our team is here to answer any questions you have. We will help determine the options for turning equity into cashflow. Call us 250-753-2242.

 

Subprime vs Traditional Lending

 

Coming from a traditional lending background, I’ve often thought of mortgage lending as a puzzle. In order to help the client, every single piece is necessary to get them what they need.  Credit has to be solid, the income both consistent and sufficient, the security (house) had to be in a good location in a decent condition.  All this is required. Without every piece in place, the puzzle just wont work!  The thing is–people’s lives can be complicated, messy even. Puzzle pieces go missing, and some don’t QUITE fit.  

Traditional Lending

Lets explain; Banks, Credit Union’s, and Monoline Lenders (companies regulated by the bank act who offer single products, in this case mortgages) all have to adhere to specific rules set by the Government.  Within those rules, the companies themselves can work with their board, risk management and shareholders to ensure that their best practices are within those rules.  They may decide to assume more risk in one area but less in another. Offering products or programs that target specific audiences. Acting within the letter of the law and their internal policies and practices.  For the most part, doing the same puzzle, with the same pieces.  

Subprime

Subprime, or “B” Lenders, do not have to adhere to the same rules as big banks.  Privately owned, operated and regulated they offer their own unique pieces to the puzzle.  These lenders offer assistance to borrowers who aren’t a fit for the major lenders, so credit issues, self-employment or lack of sufficient income fits for them.  They have more flexibility in how they lend and who they lend to. 

Of course, guidelines are still in place, they merely have more of a landing pad for the “unbankable”.  Anytime a lender is taking on higher risk mortgages, there is a premium for that, and with subprime lenders it translates to higher interest rates than other lenders, and sometimes lender fees.  It would be easy for a person to sit back and form opinions based on the idea that they are charging what they are. Some might say that the people seeking money from these companies “shouldn’t even be borrowing”.

Self Employed

For our self-employed clients, the general rule of thumb is that lenders want to see the last two year’s income tax returns (T1 Generals).  For a self-employed individual, this may not be the most current and accurate version of their finances.  Subprime lenders offer Business for Self programs such as stated income that require the last 6 months of business bank statements to support the cash flowing into the company.

Credit Issues

If you go bankrupt or file a consumer proposal you’ll generally be waiting 2 years from your date of discharge in order to be a candidate for a mortgage at a bank or Credit Union.  With subprime lenders, they consider you right away.  Their minimum credit requirements are significantly lower.  Many people may think that once their mortgage is placed with a Subprime lender that they’re going to be with them forever. This is not true.  Often clients will work with their Mortgage Broker to make a plan to make their way back to an A lender.  This could mean a variety of things. A hyper focus on paying bills on time, to earning additional income.  Whatever it may be, you won’t be alone, our Brokers will work with you to set a plan and will continue to check in to help keep you on track.

Stigma

There tends to be a real stigma out there about the Subprime lending world. In a situation where you may lose the house because of lack of income, an illness, a bad relationship or business venture that left you in a tough spot–There are options for you.  Of course the ideal lending situation is to be able to have a mortgage through a major bank, or monoline company. The interest rates will be less and there will be less fees.  No one is disputing that. 

However, in my decade and a half in the finance world to confidently say that there are many of us who “do not make the mark” set by banks.  I feel fortunate to be able to offer people solutions that fit their situation, to meet them where they are.  In many cases the solutions will help them maintain or improve their housing situation, and help their financial situation.

Being a mortgage underwriter at a traditional financial institution for many years, my experience with lending was limited to our own products and services. Helping people to have access to the Subprime lenders gives me the ability to help people work with what they have.  Putting their puzzles together in a way that works for them! 

I am grateful and appreciative of the opportunity to offer mortgage and financing solutions for our clients.  Interested in learning more, or have questions about your own ability to qualify for a mortgage please call or email us.  If you’re buying, renewing, refinancing we would be more than happy to help work with you to figure out your options.

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HOW SOME YOUNG PEOPLE CAN AFFORD A HOME

– HOW SOME YOUNG PEOPLE CAN AFFORD A HOME –

By: Edward Trapunski

We were recently very flattered to be invited to dinner by a young couple that we know. It was the first time that we visited their home and we were overwhelmed by how beautiful it is. Home for them and their two pre-schoolers is on an attractive street in one of the most desirable enclaves in the city.

He’s on leave from his job while he pursues more education so that he can better himself. She has a good job but, as yet, she has no security. It’s scary.

It’s very hard for young people to buy a house, according to what you read and hear. Still, here’s a young couple who own a beautiful five-bedroom, four-bathroom house near a ravine for which they paid $1.2 million. It’s not out of line for Toronto.

Here’s how they managed to do it:

The house they owned previously wasn’t in a nice neighborhood. It was a fixer-upper and they spent the money to have the work done. It was a good investment because they were able to sell their modest first house for considerably more than they bought it for. It helped that housing prices were escalating and the area they were leaving had yuppified.

So it was the first house that gave them the leverage. They had saved up for it. My young friend is a family guy and the prospect of a household full of children was a stronger motivator for him than travelling. He still enjoyed his good seats watching the Blue Jays but he came straight home right after the game. The nest egg my friend and his wife accumulated by being homebodies showed the lenders enough that they were responsible and had no problem shopping for a favorable mortgage.

For that first house they also took advantage of the Home Buyers’ Plan (HBP). The Canadian government allows first-time home buyers to borrow up to $35,000 tax free from their RRSP. If you’re purchasing with someone who’s also a first-time homebuyer, you can both access the $35,000 for a total of $60,000. If you have a down payment of at least 20% of the purchase price of the home, the savings can be significant, and you won’t have to buy mortgage default insurance. Married couples and common-law partners both qualify. However, since the HBP is considered a loan, it must be repaid within 15 years at the rate of at least 1/15 of the loan every year.

My friends also accessed what is colloquially known as the Bank of Mom and Dad. They were lucky enough that both sides of the family were prepared to help them out with the down payment. This isn’t as rare as you think any more. In the 1960s, people usually lived until they were 65 or 70. When they passed away, they’d leave enough in their estate for their children—who were 30 or 35 years younger than them—to use to buy a house. Now that people are living longer, they’re giving their adult children the money while they’re still alive to help them get into the housing market.

Many parents these days are prepared to help their children settle down faster than they could do on their own. Also, with interest rates at such historically low levels, it makes sense to help your children take advantage of a situation that may never come again. Provided it doesn’t jeopardize their own finances or retirement plans, many parents feel a sense of personal satisfaction in making a difference in their adult children’s lives. They also want to ensure that they’ll see the rewards of having a stable life for their grandchildren before they’re gone.

My young friends began with a starter home, as I did. Now they plan to live in their lovely home for the rest of their lives — and they can — so they see it as an important investment for themselves and for their children. That’s why they’re glad they did it.

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

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We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Lenders hike fixed rates yet again, bringing them closer to 4.5%

-Steve Huebl of Canadian Mortgage Trends-

 

Following a jump in bond yields last week, lenders across the country once again bumped up their fixed mortgage rates.

 

Big banks like RBC, TD and BMO hiked 5-year fixed rates by 20 to 25 basis points, with all three offering uninsured rates at 4.39%.

 

The move follows a nearly 10-bps jump in the Government of Canada 5-year bond yield, which leads 5-year fixed rates. The 5-year bond yield closed at an 11-year high of 2.88% on Friday. Since the beginning of the year, bond yields are up over 165 bps.

 

 

Among national lenders, the average uninsured 5-year fixed rate is now 4.37%, up from 3.92% a month ago, according to data tracked by Rob McLister, rate analyst and editor of Mortgage Logic. The average rate for an insured 5-year fixed mortgage, meaning that with a down payment of less than 20%, is now 4.14%, up from 3.78% a month ago.

 

That means fixed rates are now up roughly 40 bps in just the span of one month. For perspective, a 50-bps rate increase translates into a roughly $25 higher monthly payment per $100,000 of debt, based on a 25-year amortization.

 

While this doesn’t impact most borrowers with fixed rates, new borrowers and those renewing a mortgage are facing significantly higher rates compared to just several months ago, and potentially double for those renewing a mortgage.

 

As fixed rates march higher, variable rates are likely to jump again following the Bank of Canada’s next rate decision meeting on June 1, when it’s expected to hike interest rates another 50 bps. That could bring prime rate—the rate upon which variable rate mortgages and lines of credit are priced—up to 3.70%.

 

How rising rates will impact mortgage borrowers…

Aside from higher monthly payments, how will mortgage borrowers be impacted by these rising rates?

 

“As interest rates march higher—we expect the overnight rate to hit 2% by October, a projection that increasingly looks conservative—borrowing costs for Canadians will also rise, leaving the average Canadian household to spend almost $2,000 more in debt payments in 2023,” say economists from RBC Economics.

 

“This will erode spending power, especially for the lowest earning fifth of households which spend 22% of their after-tax income on debt servicing (including mortgage principal and interest payments),” they add.

 

On the other hand, RBC notes that the pandemic helped boost savings among Canadian households.

 

“The pandemic may have boosted debt, but it also left Canadian households sitting on $300 billion in savings,” the RBC economists wrote. “That’s a huge backstop—enough to cover about a year and a half of total Canadian household debt payments.”

 

How will rising rates impact home prices?

While the latest housing data showed home sales plummeting in April, house prices have so far held steady throughout most of the country outside of Ontario. In the Greater Toronto Area, average prices are so far down roughly 6%, but by as much as 22% depending on the housing type and specific region. Benchmark prices are often a lagging indicator, so further price declines are likely in the months ahead.

 

“…tomorrow’s homebuyers are going to have a much harder time paying today’s prices if they’re paying 5% on their mortgage compared to the low 2% range just a few months ago, and the high 1% range a year ago,” wrote real estate analyst John Pasalis, president of Realosophy Realty, in a recent post on move smartly.

 

Pasalis noted some have argued that this isn’t a concern, since many borrowers have been qualifying at a stress test rate of at least 5.25%, but he suggests that’s an oversimplification of the situation.

 

The mortgage stress test is currently used to qualify borrowers at the greater of the buyer’s actual mortgage rate plus 2% or the benchmark rate, which is currently 5.25%.

 

“As these are dynamic measures that will change as rates do, the stress test will also increase, which will reduce the amount of debt a buyer can take on,” Pasalis writes, adding that the contract rate influences how much mortgage debt the borrower is willing to take on.

 

“A buyer who qualifies for a $1M mortgage may be willing to take on that much debt when interest rates are 1.75%, but less so when rates are 4%, because under the higher rate their actual mortgage payment would be roughly $1,100 per month higher,” he wrote.

 

As a result, if interest rates continue to trend higher, Pasalis says he “would not be surprised if we see some downward pressure on home prices over the next 9 to 18 months due to homebuyers being unwilling or unable to pay today’s prices at tomorrow’s higher interest rates.”

 

Although, he adds that any price decline would “likely be a temporary one due to long-term fundamental factors that have been contributing to rising home prices in the Toronto area.”

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Supporting Ukraine…

Mortgage Professionals Canada | 2022

 

Mortgage Professionals Canada and the Mortgage Professionals Canada Foundation have partnered to raise and distribute humanitarian relief funds to Ukraine.

 

The MPC and MPC Foundation Boards of Directors have carefully selected two established charitable organizations for their outstanding efforts to provide much needed medicine, supplies, and shelter to vulnerable individuals coping with hardship in Ukraine.

 

With the urgency facing the people of Ukraine, we ask that mortgage professionals donate generously to this joint initiative to provide humanitarian relief through: The Canadian Red Cross, and Doctors Without Borders/ Médecins Sans Frontières (MSF). Funds will be collected by the MPC Foundation and distributed evenly between these two very capable organizations, each of which will provide support directly to those most impacted.

 

Mortgage Professionals Canada has already donated $10,000 to support this initiative.

 

Please join us. Any amount helps. Click here to donate… https://mpcfoundation.ca/donate/ukraine/

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Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Many BC homeowners reportedly planning to leave province soon – CMP – REMAX

-Many BC homeowners reportedly planning to leave province soon-

Pandemic impacts and affordability concerns rank high among the reasons for moving out…

A significant share of British Columbian homeowners are planning to leave the province within the next five years, raising the possibility of even more supply entering the red-hot market during that period, according to RE/MAX.

Citing data from Insights West, RE/MAX said that 17% of the province’s homeowners are thinking of selling their home in the next two years, while 29% are considering doing so in the next five years.

Of those planning to sell their homes, 10% are considering downsizing, 11% want to relocate somewhere else in BC, and 9% are planning to move to another province altogether in search of more affordable housing.

“The relentless climb of real-estate prices in BC, and in Metro Vancouver in particular, has resulted in many homeowners weighing their options for cashing out,” said Steve Mossop, president of Insights West. “The option to downsize or move to a different location… in order to take advantage of the equity in their existing home has many weighing the alternatives.”

For 36% of BC’s homeowners, a major driver of the decision to move out was the financial impact of the pandemic. Affordability concerns ranked high on the list as well, with 72% of respondents saying that housing prices will likely continue rising over the next 12 months and lasting well into the next two to five years.

Anxiety surrounding “the likelihood of higher interest rates is also prevalent among BC residents,” RE/MAX said.