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New mortgage rules and how to cope

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:

  1. Family Income $80,000
  2. Monthly Debts     $500
  3. Property Taxes  $3,500
  4.  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.
    The rate you pay will not change, just the interest rate we have to use to qualify you for the loan.
    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.

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.

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Categories: Uncategorized

TFSA or RRSP that is the question

RRSP offers:

  • 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

TFSA offers;

  • 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?

Investing with huge tax savings!

bigstockphoto_Couples_In_Love__3910036Paying 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.