Latest changes to mortgage regulations explained

Mortgage rules eased

A few changes to mortgage regulations were announced this week by federal Finance Minister Chrystia Freeland. Here’s a recap of some of the recent changes.

The Home Buyers’ Plan

Starting April 16, the government will increase in the maximum amount first-time home buyers’ can withdraw from their Registered Retirement Savings Plans (RRSPs) to assist with their down payment. Previously set at $35,000, this limit will be raised to $60,000.

There is also a change that extends the grace period for repaying RRSPs after a withdrawal. From now until the end of 2025, first-time home buyers who use their RRSP funds towards purchasing a home will have five years to start their repayments, rather than the previous two-year requirement. This extension gives new homeowners additional breathing room to stabilize financially after acquiring their property.

Extended amortizations

Freeland, who is also the deputy prime minister, also unveiled modifications to the amortization schedule for mortgage repayments, which are set to take effect on Aug. 1. First-time home buyers opting for insured mortgages on newly-built homes will now have up to 30 years to repay their mortgages. This adjustment aims to make monthly payments more manageable, thereby making homeownership more accessible to younger Canadians, a demographic that often struggles with housing affordability.

Mortgage renewals

In an effort to further support homeowners, the federal government has introduced a mandate under the Canadian Mortgage Charter requiring banks to proactively communicate with homeowners about their mortgage renewal options. Previously, banks were required to contact homeowners four to six months in advance of their mortgage renewal date. Now, lenders must reach out up to 24 months in advance to discuss available options, giving homeowners ample time to make informed decisions regarding their mortgage arrangements.

Mortgage charter updates

Additionally, the mortgage charter has been updated to permanently include provisions for those facing financial difficulties. These measures include:

• Waiving fees and additional costs that would typically be charged for mortgage relief measures.

• Exempting insured mortgage holders from re-qualifying under the stress test when switching lenders at mortgage renewal time.

• Allowing borrowers to make lump sum payments towards their mortgage to avoid negative amortization or to sell their principal residence without facing prepayment penalties.

• Waiving interest on interest for deferred mortgage payments that do not cover the interest charges on the loan.

These enhancements to mortgage and financial regulations represent a proactive approach by the Canadian government to address the needs of first-time home buyers and financially vulnerable borrowers.

The extended amortization periods, increased RRSP withdrawal limits and improved communication and support measures are all designed to ease the burden on new homeowners and provide a clearer path to financial stability and homeownership.

As always, if you have questions about how these changes might affect your home buying journey or need guidance through the mortgage process, feel free to reach out to me at [email protected] or you can book a time for a chat here on my calendar www.calendly.com/april-dunn

It’s a great time for first-time buyers to consider their options, and as your trusted mortgage broker, I’m here to help you every step of the way.

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

Benefits of using a mortgage broker

Mortgage broker or bank?

Whether you are thinking about purchasing a new property or planning to consolidate some of your high-interest credit card debt, your first thought might be to connect directly with your bank.

Please read this column first as it could save you some time and money and explain why working with an independent mortgage professional is really in your best interests. You may also want to check out the online reviews for your current financial institution as part of your decision-making process.

Mortgage brokers are independent, trained professionals who are licensed to represent and provide you with the best advice for your mortgage needs.They deal with many different financial institutions and this allows them to offer you more choices and generally more competitive rates. It also means their advice is impartial and based on whatever is in your best interest and not what is best for your bank.

Mortgage brokers represent you and not the lender. However, they must also keep the lender’s best interests in mind and do their due diligence, of course. They are not employees of any lending institution.

Bank employees are salespeople for the bank and are not highly trained mortgage professionals. The fact is, each bank branch acts as a separate profit centre, independent of the banks head office. They are rewarded and paid based upon the profitability of their overall mortgage portfolio.

A mortgage broker can offer you the best terms and rates upfront. That doesn’t always happen at a bank. It is not in a bank's best interest to offer you (better) rates (than it offers) or direct you to another lender if it thinks the other lender has a better product.

A bank branch also has limited access to mortgage products as it can only offer what’s available in its portfolio and unfortunately, mortgage brokers often see clients who have been placed into restrictive mortgage products based solely on low rates that were promoted by banks.

Mortgage brokers can sort through dozens of lenders in the time it takes you to book an appointment at your bank. Shopping for mortgages can be time-consuming and frustrating if you do it yourself. Brokers know the quality of products offered by various lenders and can quickly shortlist the ones that best match your needs. You’ll end up with the best features and rate, all in one stop.

The entire process can be completed securely online from the comfort of your own home within hours that work for you.

Mortgage brokers deal with the same reputable, established Canadian financial institutions you deal with every day but they also have access to some innovative broker-only lenders who sometimes offer even more attractive rates and features. In addition, they also work with alternative lenders for those who don’t fit within the bank box.

The best part is there's no cost to you for allowing a broker to assist. In most cases, it’s the lender that pays a mortgage broker's fees.

Please email me at [email protected], or you can book a time here on my calendar to arrange a no obligation consultation whether you are buying a home, renewing an existing mortgage or looking for additional funds. We can review all of your options so you can make your best decision on the largest financial transaction of your life.

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

Is it time to refinance your mortgage?

Mid-mortgage refinancing

One of the questions I get frequently is, “Can I refinance or restructure my mortgage mid-term?”

The answer is yes. I can help you decide whether that makes financial sense and provide strategies for you to consider.

Here are some common reasons why you might want to refinance your mortgage.

You could decrease your overall monthly debt payments by using the equity in your home to pay off those high-interest credit cards or unsecured loans. 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 that you owe. You may have those post-holiday debts hanging over your head.

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.

There are many benefits to a refinance for debt consolidation including:

• A much lower monthly interest rate for all of your debts

• Lower monthly payments by either securing a lower mortgage rate or by extending the mortgage term

• The comfort and convenience of making only one monthly payment instead of making multiple payments on your credit cards and other loans

• Improving your credit score by reducing the amount you owe and now being able to make all of your payments on time

Finance a renovation or home improvements

If there is sufficient equity in your home, refinancing your existing mortgage could give you the funds to complete those improvements.

There are some benefits to refinancing rather than taking secondary financing such as a Home Equity Line of Credit because the interest rate is fixed and you will be able to make small, consistent payments for the duration of the term—which can be up to 30 years, to pay off the debt rather carrying it on a line of credit at typically a higher interest rate.

Invest in a revenue property or purchase a second home

Real estate can be a great investment to add to your portfolio for long term investment and to create income. Using the existing equity in your primary residence could be the way to get started building your portfolio.

Not sure if refinancing is right for you? The numbers don’t lie. Let’s run them together and then you’ll have an honest, unbiased recommendation and a plan of action.

Please email me at [email protected] for a pressure-free consultation to run the numbers or you can book a time for a chat here on my calendar.

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

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.