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Mortgage-Matters

Dealing with outstanding tax debt

Paying past taxes

For self-employed individuals, dealing with tax debt can pose a significant challenge, especially when there are no tax deductions from regular paychecks or provisions made to cover the amount owed at year-end. Recognizing the seriousness of tax debt, it is crucial to address the issue promptly. The Canada Revenue Agency (CRA) possesses extensive powers to collect outstanding taxes, charging penalties and interest. Let’s shed some light on the implications of tax debt and offer potential solutions to alleviate the burden.

Consequences of unpaid taxes

When you owe money to the CRA, they possess the authority to take action to recover the debt. They can impose penalties and interest on overdue taxes, as well as withhold your Child Tax Credit and GST rebate. If left unresolved, they can seize funds from your bank account or garnish your wages. Moreover, if you own real estate, the CRA can register a lien against your property, hindering refinancing or property sale until the outstanding debt is settled.

Impact on mortgage financing

It is essential to recognize that if you are self-employed and have unresolved income tax issues, obtaining mortgage financing for purchasing a home, vacation property, mortgage transfer, or accessing equity in your property can become challenging. Even alternative and private lenders require full payment of any CRA tax arrears before advancing a mortgage. Banks and credit unions typically do not provide unsecured loans for tax debt payments and are generally unable to refinance existing mortgages to cover the outstanding amount.

Dealing with tax debt

When facing difficulties in paying your tax debt in full, it is crucial to proactively contact the CRA immediately. While negotiating a payment schedule might be possible, the agency typically expects the debt to be settled within a few months. It's important to note interest and penalties will continue to accrue on the past due amount. It's also worth highlighting that filing for bankruptcy or a consumer proposal does not discharge a lien against your property. In fact, the lien remains and continues to accrue interest, remaining even after discharge from bankruptcy until the eventual sale of your home.

Solutions with a mortgage broker

If you are a homeowner struggling to repay your tax debt to the CRA, consulting an experienced mortgage broker can prove invaluable in saving both time and money. Refinancing your mortgage and utilizing the equity in your home or considering a consolidation loan that includes tax arrears and other debts could offer a viable solution. Mortgage brokers have access to lenders willing to refinance existing mortgages or explore second mortgage options to settle outstanding CRA debt.

Managing tax debt as a self-employed individual requires swift action and careful consideration of available options. By promptly addressing the issue and exploring solutions such as refinancing or consolidation loans, homeowners can take steps towards resolving their tax debt and regaining financial stability.

If you are experiencing challenges in paying off your CRA debt this year and are a homeowner, I would be happy to discuss potential solutions tailored to your specific situation. Please contact me at 1-888-561-2679 or email [email protected] you can also book a phone call here on my calendar. calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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The benefits of reverse mortgages for Canadian retirees

Unlocking financial freedom

Are you perhaps seeking a little extra financial breathing room during retirement?

If you find yourself in this position, you may be exploring various avenues to supplement your income without taking on additional debt. As a mortgage broker, I understand the importance of finding tailored financial solutions for individuals like yourself, especially if you're retired and may no longer qualify for mortgage financing.

A reverse mortgage is a unique financial tool designed specifically for homeowners 55+ in your situation. This long-term solution allows you to unlock the equity in your home, providing you with increased monthly cash flow without the burden of monthly payments. Let's delve into the benefits of this innovative product:

1. Ultimate deferral plan: With a reverse mortgage, you're not required to make regular monthly payments. Instead, you can defer payments, allowing you to enjoy your retirement without the stress of budgeting for mortgage instalments.

2. No negative equity guarantee: Some of the reverse mortgage lenders ensure that you'll never owe more than the value of your home. This guarantee provides peace of mind, knowing that you're protected against market fluctuations.

3. Flexible withdrawal options: Whether you prefer a lump sum payment or monthly installments, a reverse mortgage offers flexibility in how you access your funds. This adaptability allows you to tailor your financial strategy to meet your specific needs and goals.

4. Debt consolidation: If you have existing debt that requires monthly payments, a reverse mortgage enables you to consolidate these obligations into a single, no-payment mortgage. This streamlined approach can help simplify your finances and reduce financial strain during retirement.

Are you adequately prepared for retirement? According to recent research, millions of Canadian households are expected to enter retirement in the next decade, emphasizing the importance of addressing financial readiness. Unfortunately, the findings reveal concerning figures:

• Only a small percentage of near-retiree households have saved enough to maintain their desired lifestyle throughout retirement.

• A significant portion of retirees may need to adjust their lifestyle to ensure financial security.

• Many Canadians risk exhausting their retirement savings without significant lifestyle changes.

• A considerable number of retirees will rely on public income streams for support.

Surprisingly, despite the potential benefits, only a fraction of near-retiree households plan on leveraging their home equity to supplement retirement income. This is where a reverse mortgage can assist.

A reverse mortgage offers a tax-efficient way for Canadians aged 55 and above to unlock up to 55% of their home equity in tax-free cash, without the burden of monthly mortgage payments. By providing consistent cash flow through monthly or quarterly instalments, this mortgage product can assist retirees to sustain their standard of living throughout their golden years.

Mortgage brokers can assist homeowners that are 55+ clients in securing their financial future. This can empower you to live retirement with confidence and independence.

So, if you're a retiree or a near-retiree in need of additional financial support you should consider the benefits of a reverse mortgage. With flexible terms, no monthly payments, and the potential to unlock tax-free cash, these innovative financial products can help you enjoy a more comfortable and financially secure retirement.

If you would like to discuss please reach out to me at [email protected] or you can book a time to chat here on my calendar. www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Questions to ask when renewing your mortgage

Renewing your mortgage

Approximately half of all mortgages in Canada are set to renew in 2025 or 2026, due in part to the real estate frenzy that transpired over the course of the COVID-19 pandemic when there were record low interest rates.

Analysts estimate $251 billion in mortgages will come up for renewal in 2024 and another $352 billion the following year.

Most of those mortgage holders will face higher interest rates, with increased mortgage payments. It’s smart to have a plan for managing your mortgage going forward.

When your current mortgage is getting close to its maturity date, you will need re-negotiate your mortgage. That is the opportunity to decide on the new term length, negotiate the new mortgage interest rate and even move your mortgage to a new lender.

Most lenders (federally regulated) are required to provide you with a new mortgage offer at least three weeks before your maturity date if they are interested in renewing your mortgage. They are not obligated to offer you a renewal should there be a change in your circumstances or a late payment history.

Statistics show more than 50% of homeowners renew their mortgage with the current lender without negotiating the terms. That doesn’t give the lenders much incentive to offer the best rates at renewal time. They are betting on the factyou won’t shop around or won’t want to go through the hassle of applying for a mortgage with a new lender.

Signing the mortgage renewal offer without exploring other options is not in your best interest. Yes, it’s easier to remain with your current lender as you don’t have to go through the hassle of providing new documents etc. but you could find better rates and terms with another lender perhaps saving you thousands of dollars in interest costs.

Here are a few questions to ask yourself before you sign that mortgage renewal offer.

• Have you explored all your options? A mortgage broker can look for opportunities that could better meet your needs right now.

• Do you need cash flow for other things? Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

• Can you handle fluctuating rates? Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. I can help you decide whether to opt for fixed or variable rates.

• Will you sell soon? If so, you might want to consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due. Not all mortgages can be moved to a new property.

• Are you thinking about a major renovation? Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renovations.

• When do you want to be “mortgage-free”? If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later or re-structure your current mortgage so you have access to your home equity once you retire as you may not qualify for mortgage financing at that time.

• Could you use your home equity to fulfill other goals? Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.

• Are you getting the best rates and terms? In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. A mortgage broker analyzes mortgage markets daily to ensure you don’t miss any money-saving opportunities.

By working with a mortgage broker, you gain access to a wide range of mortgage options from various lenders. I can help you shop around for the best rates and guide you in understanding the different terms and conditions associated with each mortgage product. This ensures that you can make an informed decision, aligning your mortgage choice with both your short-term and long-term financial goals.

If you would like to discuss your upcoming mortgage renewal and explore the possible options available to you, please feel free to book a convenient time on my calendar for a quick chat. You can find my calendar here: www.calendly.com/april-dunn or you can email me at [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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Are the benefits of debt consolidation right for you?

Consolidating debt

Now, more than ever, is the time to take a review of your current debt picture along with your budget to see where you can cut back your cost of borrowing and potentially lower your overall monthly payments.

If you are carrying high interest credit card debt, car loans or other personal loans you know it can be challenging to pay off everything you owe.

If you are a homeowner and there is sufficient equity in your property, consolidating all of your debt and including it in your mortgage payment might be the right solution for you.

Here are five potential benefits of a debt consolidation:

1. Consolidate for savings—Save time and money by combining your high-interest debts into one lower monthly payment through home refinancing. This strategy not only simplifies your finances but may also reduce the total interest paid over time.

2. Manageable payment schedule—Refinancing could create a more manageable payment schedule. This tailored approach ensures that your financial plan aligns with your lifestyle and income, making debt payments more manageable.

3. Peace of mind—A refinancing solutions bring all of your debts into one payment, providing clarity and control over your financial obligations.

4. Stress reduction—Late payments can be a serious cause of stress. By consolidating your debts, you can reduce the anxiety associated with managing multiple due dates, varied interest rates, and late payments.

5. Credit score - Consistent, on-time payments are key to improving credit scores. Through debt consolidation via home refinancing, you can potentially see an increase in your credit score, opening doors to better financial opportunities in the future.

A debt consolidation mortgage is not a quick fix and a full financial review should be completed with your mortgage broker. There could be costs to break your current mortgage to include those higher interest debts with your mortgage payment.

You may be lowering your current monthly payments but now the debt is going to be repaid over a longer period of time. Is that really going to be financially beneficial?

It all comes down to the math as the overall cost of borrowing could be higher or lower than what you are currently paying. Crunching all the numbers is the only way to know for sure.

There are several possible options to consider for a debt consolidation mortgage, including breaking your current mortgage to include the debt owed, a second mortgage for the consolidation or a home equity line of credit. A small unsecured personal loan may be sufficient. In an extreme situation it may be necessary to sell your home to clear off all debts.

You may have heard about “interest free” debt consolidation programs, where a company will negotiate on your behalf to reduce the debt and arrange a single monthly payment. With very careful consideration this may be a last resort option but be aware, this type of solution will ruin your credit rating for a long time. Get all of the facts before entering into this type of arrangement.

Now, all that’s left is to figure out precisely which solution is best for you to wipe out all those high interest payments.

If you would like a complete confidential assessment and discussion of all the possible options, please email [email protected] or if you are ready to chat you can book a time here on my calendar www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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