Awesome read from my colleague Mike …. check it out

No need to panic after rate increase

You may have already seen the more technical BANK OF CANADA RATE ANNOUNCEMENT on October 24th, or you may not have. The Coles Notes (the simplest version) are as such:

• Global economy remains strong, the USMCA will reduce trading uncertainty
• Canadian economy is balanced for the foreseeable 2 years
• Household spending will increase, but backed by income growth
• Housing activity across Canada is stabilizing

On October 24th the Bank of Canada did what we all expected, they increased the Overnight lending rate by 0.25% to 1.75%. This equated to a PRIME being increased by 0.25% to 3.95%. All variable rate mortgages and lines of credit utilize PRIME to calculate the current interest rate.

Now the BIG QUESTION, how do we as mortgage consumers respond? First, ask your Dominion Lending Centres mortgage broker how they plan to react in accordance to his own financing.

No need to ask me, I will tell you. Variable, with no hesitation. I will stay the course by not pushing the panic button.

WHY?

Because if I decide to move, re-finance, consolidate, leverage equity or to simply break the mortgage for any reason my penalty will only be 3 months interest. I also need to consider how much money I have saved over the term by utilizing a variable rate mortgage rather than a fixed. During my current mortgage the spread between variable and fixed is approximately 1%.

Please excuse the following ‘tongue & cheek…’To go with a fixed mortgage tells me that you can predict the future with absolute certainty.

I know I can’t, so I rely on statistics. 65% of all fixed mortgage consumers will break their mortgage in 33 months, the penalty that follows is unavoidable. For the average B.C. mortgage of $350,000 the penalty is approximately $14,000. By opting for a fixed rate mortgage, you have declared to the universe that there is a zero percent chance you will need to access equity, amend the current mortgage or consider applying for a secured line of credit.

Real estate wealth is a long game, building net worth doesn’t happen overnight. Gains are not made in the short term. Just like other markets (stocks, bonds, mutuals, GICs RRSPs), there will be highs and lows.

What does this increase mean?

Dollarize it for your own personal consumption. For an increase of 0.25% the payment will go up $13 per every $100,000 borrowed. For some variable rate borrowers, the payment hasn’t even changed as the lender only adjusts the principal and interest allocation.

Now the question becomes, what do you do? Remain with variable or lock into a fixed. I recommend staying the course.

Michael Hallett

Dominion Lending Centres – Accredited Mortgage Professional

Growing cannabis at home? Let’s weed through those mortgage issues!

As many of you already know, Canada just became the second country in the world to legalize marijuana for medical and recreational purposes. Of course, this historic moment in Canadian history has cannabis activists jumping for joy while others are not s-toked on the idea.

With legalization comes the realities of growing your own pot at home which already has Global News giving Canadians a step-by-step guide on how to do so properly and legally — sorry Manitoba and Quebec!

We always have clients contacting us for restructuring advice on their current mortgages. However, through our initial discussions, we have found out that some have started growing pot plants within their homes. Since this legislation is new to everyone, including the mortgage community, we had to do some research.

Prior to September 17, growing cannabis at home was a legal grey area. Mortgage wise, it was a red flag. Any home that has previously or is currently being used in the growing of cannabis was treated as a “grow-op” and as a result is NOT financeable.

grow-op: a concealed facility used for marijuana plantation.

Since legalization day on October 17, the federal government officially set a limit of four pot plants per household — NOT by person. This information DOES NOT have to be disclosed on a property disclosure UNLESS damage has occurred within the household because of cannabis cultivation.

Just as a FYI — ALL property owners should consult their realtor or lawyer about how to properly disclose when selling their household.
After talking to our local Canada Mortgage and Housing Corporation representative (CMHC), she notified us that mortgage insurers are currently leaving lenders to create their own policies on how to deal with marijuana plants and their effect on existing mortgages. We contacted lenders about this ‘budding’ home-grown industry but were met with no answers.

This situation is certainly a waiting game and we’re all holding our breath waiting for the first move!

Let us share our advice.
If you are looking to sell your property or refinance your mortgage — get rid of those pot plants now!
Any home appraisal company can disclose in their report that cannabis is present within your home which could place your home on a list that DOES NOT foresee future sales or refinances.
It is your safest bet to keep your cannabis plant growth up to the licensed growers located across the country.
If you have any questions, contact your local Dominion Lending Centres mortgage professional.

Chris Cabel

Dominion Lending Centres – Accredited Mortgage Professional