Pam Pikkert DLC Regional Mortgage Group Oct.04.2016.
Over the past few years we have seen a large number of mortgage rule changes.
- -Maximum amortizations decreased from 40 to 25 years
- -Terms less then 5 years required a borrower to qualify at a higher interest rate
- -Refinances capped at 80% of a property’s value
- -Income for self-employed individuals had to be more verifiable
- -Increased down payment for homes over $500,000
And the list can go on and on. We have heard rumors since March of this year that another round of rule changes were coming through but we were not 100% on exactly what they would entail.
Why are they even worried about it you may ask? The reason is simple, they are heavily invested in our real estate market. CMHC stands for the Canadian Housing and Mortgage Corporation which is owned by the federal government. They are issuing insurance policies that they are potentially going to have to cover losses on from tax payer’s money if/when people stop paying.
1. Mortgage Stress Test
As of October 17th, 2016 all insured mortgages, regardless of term or type, will be required to qualify at the bank of Canada posted rate.To put that in perspective:
- Family Income $80,000
- Monthly Debts $500
- Property Taxes $3,500
- 25 year term (Qualification rate today is 2.39% and after will be 4.64%)
Today that family can buy a home worth approx. $393,000 but after the 17th that drops to $310,000. That is a large decrease to say the least.Safer Lending Mortgages with a loan to value of less than 80% were not subject to the same stringent rules as those with less than 20% equity. As of November 30th, 2016 that will change and mortgages will all be subject to the same lending criteria.
The rate you pay will not change, just the interest rate we have to use to qualify you for the loan.
2. Closing Loopholes and Managing Tax Fairness
There is a proposed change to the tax laws on the table as well. They want to make sure that the Capital Gains tax exemption on a primary residence is not abused by either residents or non-residents buying and selling a primary residence within the same year. This is in all likelihood an attempt to cool Toronto and Vancouver markets.
3. Managing Risk and Protecting Tax Payers
The final piece in the announcement is a little bit unclear as to exact ramifications. Currently CMHC and the other mortgage insurers take on all the risk associated with mortgage default. They are planning to implement a consultation process on a policy option where mortgage lenders would have to manage a portion of their loss. We will have to wait and see what exactly happens from here.
So there you have it. Getting a mortgage just got even harder and it doesn’t matter if you walk into your trusted branch or go through a mortgage broker. The rules have changed for us all.
I cannot stress enough the necessity of making sure you speak to a well-qualified mortgage professional before you make any decisions about buying or selling in case you are one of the folks affected by these changes. I will keep you up to date on any changes which come down the road.
- tax savings at the time most likely earn the most in your life, you are in high rate of tax bracket
- investing into high return opportunities, like mortgages at 12% will grow your RRSP plan fast
- profit earned with your RRSP plan is tax free as long as the profit goes back into the plan
- you can borrow from you own plan and have 15% to pay back tax free
- at the time you start drawing on your plan, most likely you will be in a low tax bracket, pay low tax
- you can borrow to contribute to the plan and write off the cost
- yearly contribution allowed up to 18% of your gross earning
- yearly contribution of $5,500 not as much as RRSP, but it accumulates fast
- you can take those funds out at any time, use it for any reason and redeposit at any time
- you pay no tax on what it generates inside the account, take your profit at any time
- you can not redeposit you profit only the allotted funds, to the ceiling
- you can fund high yield mortgages and pay no tax on the profit inside the TFSA
- you will not pay any taxes when you take it out, just like you did not get any tax break when you have deposited to the account, so no matter what level you are be taxed
You be the judge or if you can not make a decision,talk to us, we know all about the ins and outs of these investment vehicles and how to get the most out of them.
Investing your RRSP and or your TFSA funds into high yield mortgage investments will not only provides you with highly secured exceptionally great return, but also provides you with monthly income and tax free profit.What is the best way to go? Ask the experts, visit us online and than call for a FREE consultation session today, saving for your retirement can not be start early enough.
Smart investor retires early, are you one?
Paying taxes is a necessary evil, but sometimes I feel too much goes into the thin air and I am hopeless, can do nothing about it. Now, little smart and a lot of thinking, research and listening I came up with something, nothing new, to tell you.
There is a way to get back at the taxman and it is legal and within the law. You must save for your retirement, but it is not the same how you arrive there and with what. RRSP is a great way to put away your hard earned money and it is even better, you will not pay tax on the portion you allotted to put into your plan. So there it is, you have rescued some of your browns from CRA and it does not stop here. As investing into private mortgages is allowed by the government, have to make your RRSP plan to be self directed and you off to huge profit, most importantly tax free as far the earnings are going back into your plan.
Your funds can earn double digit return, making your plan to grow fast and efficient way to more savings. Not yet, keep reading. Most likely when you put some mullah away you will be in the highest tax bracket, so the tax saving part will be big, much bigger than when you retired, presumably in the lowest tax bracket of your life.
Bingo, you have legally cheated on the taxman again. Added bonus, if all above makes sense to you, you will visit us and take a peek, how the process works. No racket science, just good old way to invest and make sure you get the best of it. Banks are doing this for centuries and they are quite good at it. So should you be and retire with dignity and a pot of gold enables you to follow up on YOUR bucket list, if you know what I mean. I call you if you want me, email me.
Did you know, if you cannot beat them you have to join them?
If you in Rome, do like the Romans.
You make a deposit into your bank account, meaning in reality, the bank borrows from you. Your return from them is less than the inflation, so your money’s buying power is diminishing and fast. In the other hand, you borrow the very same money from them for three times the rate you are getting, so they are making huge profit, what they do not share with you, though it is your dough. What do you think who is smart here? Not you it is damn sure.
On the other hand, you can do like the Bank (not the Romans) Borrow personal line of credit, equity line of credit, pay 3-4% to the bank and lend it out into safe, capital protected mortgages, earn double digit return (10-16%) beating them at their own game. Also do not forget if you get a line of credit you only pay interest on the portion you use at any given time.
To make it more interesting, guess what. The line of credit interest you pay to the bank is TAX deductible. Now this is what I call a double whammy, besides I will call you a smart investor.
In case I have got your attention you just visit me on our website and if you like what you see call me to discuss, I will be glad to answer all your questions.
Almost forgot, these type of investments are RRSP eligible, with added TAX savings ( don’t you just like to cheat on the tax man legally) and you will be able to retire in time to enjoy your golden age with some money in your packet. It called in dignity.
The most secure and durable investments are in real estate property. Though real estate prices fluctuate from time to time, over the long-term, real estate property appreciates in value. The security for a mortgage is the real estate property itself, making mortgages a good place to invest.
Investing in private mortgages provides a regular income stream, tangible security and a real return to the investor that is superior to bank deposits, GICs and bonds. They are an eligible RRSP investment that is tax sheltered, and you can invest the interest over and over again.
Advantages of investing in private mortgages:
No Cost to You – The borrower is required to pay the costs to have the mortgage registered against title to their property. The investor simply sits back and goes about cashing the monthly payment without incurring any further cost.
Monthly Income – A mortgage will generate cash each and every month. The amount of the monthly payment will depend on the size of the mortgage, the interest rate and amortization period.
Protected Capital – There is low risk associated with mortgage investments; they are secured by the real estate property if the borrower is unable to make payments.
An RRSP mortgage gives a minimum of 10% yield rate of return that is secured by a first or second mortgage on a property in Canada. At a rate of 10%, your RRSP portfolio should double in value every 7 years.
Private mortgages can be a great investment, as there is security with the equity on real property and the property can be used to help pay off the mortgage if the borrower reneges. The lender is fully covered by the legal documents signed at the time of the mortgage, ensuring that the investment, as well as a profit, is collected.
Keep up with the latest news on buying and selling mortgages by subscribing to the Buying and Selling Mortgages blog.
Watch our video of the opportunity and the process, you will be glad you did.
Record floods are driving up demand for homes on all levels, million dollar homes as well as started dwellings. The amount of activities are indicating a buying frenzy, no doubt about it. Not only first time home buyers, but
people effected by the floods are looking to buy. High end neighborhoods along the Elbow River were among the areas hardest hit by the flooding, forcing some homeowners, whose properties will take at least several months to repair, to purchase homes elsewhere in the meantime.
Multi million dollar homes that would ordinarily take a year to sell are being snapped up for about 10 per cent more than they normally would within a matter of weeks; reported by realtors. That’s had a ripple effect throughout the city, as buyers have been forced to look further afield to find properties in their price range. This way buyers are bumped down creating a shortage in lower and higher priced properties as well.
Although the values of homes in flood-hit areas will likely drop we can expect prices across the city to rise and stay high for the foreseeable future.
July is usually a quiet month in real estate, except this year. Calgarians who would ordinarily be looking to rent are being pushed into buying. The rental market is a huge concern. Vacancy rate was already quite tight to begin with and now it’s literally non-existent. People have been panicking. I definitely think it’s spurred people on to make a decision quicker. Mortgage rates are still on the low side, however they are climbing. This will make first time buyers little nervous and start looking. People are eager to buy property not necessarily because they’ve been directly displaced by the flooding themselves, but because they foresee a tighter market ahead generally.
Will home values in flooded areas drop may depend on whether the city builds berms or dikes to keep the water out next time the rivers spill their banks. Lot of those locations when they have done this type of work, valuation has fully recovered.
Housing market was tight before the floods for renters and buyers. Many buyers now will look in bedroom communities in a hope to get a price break, however most likely they will be disappointed.
Some renters are going to consider ownership. Otherwise, they’re going to consider what’s available to rent outside of the town.
In preparation for the price fluctuations and interest rate increases, one must get a mortgage pre-approval in order to get a rate hold for as long as 120 days. To keep informed follow us on Facebook and get a FREE no obligation consultation to explore your options.
Most people are not familiar with private mortgages. There is nothing new, but rather a business as usual in the financial industry to turn to private individuals and or mortgage investment companies to get a mortgage when banks turned applicant down. Private mortgages fill the gaps that institutional lenders, such as the banks, are unable or unwilling to lend. They offer an alternative source of financing to borrowers and a high yield investment opportunity for investors.
Institutional lenders have their lending criteria, guidelines written and they are not able to approve some request if it does not fit the parameters of such. However private investors are able to review and make their decision on case to case bases, using their common sense and making their own decision. Due to the higher risk, these mortgages cost more by rate and fees as well so investors can usually generate a greater return on their investment in a private mortgage transaction, risk assessed rate and fee charged.
Borrowers forced to see alternative lending sources must turn to private lenders. Private Lender Inc. is a private lender firm, lending its own funds from his own investment capitals and also has many private investors lending their funds on the recommendation of Zoltan M. Padar president of Private Lender and also broker at MortgagePRO Ltd. Location, MortgagePRO is not licensed will be referred to many of our licensed co brokers and or private investors to ensure positive outcome.
Investors in private mortgages must be willing to take risks. They must be willing to become involved in the investment process and must know what their tolerance to risk is. They should not simply rely on the recommendation of a lawyer, a real estate agent, or a mortgage broker when entering into a transaction. They should fully understand what they are getting involved in before they agree to invest their money in any transaction.
Here are some issues the potential private lender must be clear with before investing:
- location is where they want to lend the property located
- property designation; residential, commercial, industrial or recreational
- position they are willing to lend: first position, second and or beyond
- the so called LTV. Loan to value is the indication of risk involved
- the amount for each mortgage
- first mortgages require large capitals, however second mortgages start at $15,000
- interest rate investor wish to earn, higher risk, higher return
- using own investment capital or RRSP
- advantages of using RRSP are: tax savings on three different ways, profit is also sheltered from tax
Yields on mortgage investments determined by risk. In today’s market you can expect a yield of 10% to 13% for a moderate level (75-80% LTV) of risk. 85% LTV will bring you 16% or even better return. Minimum investments of $15,000 are required for private mortgages.
The typical borrower who needs private financing:
- self employed individual
- someone who may have had a bad credit history in the past
- borrower does not fit the TDS GDS requirement of the bank
Private mortgages can also be held in a self-directed RRSP. Mortgages are an ideal RRSP investment because they earn interest income that can be sheltered within the RRSP. If you were to invest in a mortgage outside of your RRSP your interest income would be taxed at your full marginal tax rate, thus lessening the benefit of your investment. Find more about this opportunity here.
In summary, private mortgages can be a very rewarding form of investment but they are very much a hands on investment. You must be willing to take the responsibility to choose the investment that meets your needs and your tolerance to risk.
If you are interested in making an investment in private mortgages, or would like more information, please contact Zoltan M Padar 403-253-2022