Canadian purchasing power hits a speed bump

Latest News & Economy DAZADA DIAMOND 29 Nov

Canadian purchasing power hits a speed bump

Canadian purchasing power hits a speed bumpThe nation’s purchasing power has been flagging, best illustrated by the results of a recent survey that found 55% of Canadians vowing to spend less this Christmas season.

According to a new report by Equifax Canada, around 46% of respondents expressed significant worries about their personal debt levels, and the length of time they will need to completely pay off their financial accountabilities – particularly credit cards.

This followed fresh figures from Statistics Canada, which showed that on average, Canadians owe roughly $1.77 in debt for every dollar of disposable income.

Fortunately, “if there’s a silver lining here, it’s the fact that most Canadians remain conscious of their debt obligations and want to avoid adding too much debt heading into the new year,” Equifax Canada director of consumer advocacy Julie Kuzmic stated, as quoted by CTV News.

Also, things might be looking up soon, if current employment trends are any indication.

The addition of almost 54,000 jobs in September and the shrinkage of the national unemployment rate to a near-record low of 5.5% bode well for Canadian consumers, CIBC World Markets Inc. chief economist Avery Shenfeld stated.

These figures far outstripped earlier projections of just 7,500 new jobs and a flat unemployment rate in September. During the first nine months of this year, Canada added 358,100 new employees, representing the largest January-September volume since 2002.

Shenfeld argued that these prove the Canadian economy’s relative imperviousness against the worst effects of the global trade turmoil.

“Canada’s labour market seems to have been vaccinated against the global economic flu going around,” he wrote in an investor note last month, as quoted by Bloomberg.


Agencies want to improve home financing for First Nations

Latest News & Economy DAZADA DIAMOND 28 Nov

Agencies want to improve home financing for First Nations

Agencies want to improve home financing for First NationsFirst Nation families are expected to benefit from two policy changes announced by CMHC and the Lands Advisory Board (LAB) this week.

The enhancements are aimed at making it easier to access home financing for First Nation or Indigenous Settled land.

They include CMHC mortgage loan insurance for home financing secured through the LAB-led A to A leasing, and the agency will also establish lower down payment requirements for insured home financing on-reserve.

“The Lands Advisory Board supports initiatives of CMHC which will make it easier for First Nation governments to support their members in improving housing on reserve lands,” said Robert Louie, Chairman of the Lands Advisory Board. “A to A leasing is an innovation first developed in my community, Westbank First Nation, and it is good to see that CMHC recognizes the potential benefit of this option for other First Nations and is now able to provide mortgage loan insurance for A to A leasing.”

CMHC says that together, these adjustments will mean easier access to homeownership without the traditional requirement of a Ministerial Loan Guarantee and provide greater access to the First-Time Homebuyer Incentive.

“These policy enhancements will provide First Nations borrowers more access to insured financing for homeownership, including through the new First Time Home Buyer Incentive,” said Romy Bowers, CMHC’s Senior Vice-President of Client Solutions. “We commend the Lands Advisory Board for championing innovative housing solutions for First Nations, such as the A to A leasing concept.”


Investors flock to purpose-built rental properties

Latest News & Economy DAZADA DIAMOND 27 Nov

Investors flock to purpose-built rental properties

Investors flock to purpose-built rental propertiesDecades of under-investment made dedicated rental buildings an afterthought for many, but the industry has been quietly gathering momentum and attracting deep-pocketed investors.

Some 72,000 rental units were under construction across the country in the last quarter according to Canada Mortgage and Housing Corporation (CMHC). That’s up by more than 12,500 from a year ago, double the level of five years ago, and almost five times the number that were being built a decade ago.

The recent growth—propelled by a combination of a rising population, increasingly out of reach home ownership and a lack of rental supply—has come about gradually enough that many haven’t noticed, according to Matthew Boukall, Altus Group vice president.

“It’s come along slowly, where I don’t think it has shown up on a lot of people’s radar,” Boukall told the Canadian Press.

The market, however, is now booming, with record investment of $8.3 billion last year according to real estate firm CBRE, while PwC said in its latest real estate outlook that the sector’s landscape is “stronger than it has been at any other time in history.”

The resurgence in dedicated rental buildings is important to note because they provide more stability for renters than individual condo rentals, which owners can take off the market with little notice. Many cities across Canada are also desperate for new rental stock to address extremely low vacancy rates.

The low vacancy rates, which are under one percent in Toronto and Vancouver, have pushed rents up in major cities, helping to attract more institutional and private equity investors who like the improving returns on rentals as well as the long-term cash flows they provide.

Rental builds also provide diversification for big developers, like RioCan and Oxford Properties, which have been looking to make better use of the sprawling footprint of their mall parking lots and retail spaces.

Oxford started to push into the rental space a decade ago, and says it now sees the increased demand for rentals as a permanent shift.

“With demographic changes, and lifestyle changes, we just think that that’s structural, that more people, or an increasing part of the population, is going to choose to rent over owning a home,” Tyler Seaman, head of multi-residential for North America at Oxford told the Canadian Press.

Oxford, the real estate investment arm of the Ontario municipal pension fund, started into rentals by buying existing stock, but steadily rising prices for buildings and general lack of supply have pushed it and others into building more of their own.

“Development is going to be an increasingly important part of our program,” said Seaman, adding that by building new properties, developers can add the amenities and build quality renters have come to expect after renting in condo developments.

To make the economics work, many developers are relying on rental rates at the higher end of the spectrum, but Seaman said Oxford also plans to build mid-market rentals as it expands rentals from about six percent of its portfolio to somewhere between 10-20%.

Developers are also seeing the value of holding on to increasingly scarce land in big cities.

At a real estate panel in early October, Dream Unlimited chief financial officer Pauline Alimchandani said the company was shifting from condo to rental developments to preserve their land base in Toronto.

“Pretty much almost all of it, we’re planning on building and owning for the long term. That is a big shift from where we were when we went public just a few years ago.”

Condo builds, however, still dominate in Toronto and Vancouver, in part because high land costs make the quick payout of condo buildings more attractive, and because condo developers already control so much of the land base, Boukall said.

In Toronto there were about 7,800 rental units under construction in September, compared with 56,000 condo units. In Vancouver, where a softer condo market has pushed some developers to shift to rentals, there were 9,300 rentals to 31,400 condos. Montreal had 14,700 rentals under development compared with 10,500 condos.

The boom in rentals could go a long way to addressing low vacancy rates in many cities, but is still far off what’s needed to offset a rising population for Toronto. A recent RBC report determined that Toronto would have to build an average of 26,800 units per year to bring vacancy rates up to a healthy three per cent over, while build rates in other cities look like they could address gaps in a couple years.


This is the most important amenity for vacation home buyers

Latest News & Economy DAZADA DIAMOND 26 Nov

This is the most important amenity for vacation home buyers

Canadians considering buying a vacation home rank one thing as the most important amenity.

And according to a new analysis from global real estate firm Savills and vacation home booking service Vrbo®, this amenity is also the most important for travellers when renting a vacation home.

The survey of more than 7,800 property owners who list their homes with Vbro across 10 major markets including Canada, US, UK, and France, found that internet access is the must-have amenity.

Among second home owners, 64% say having internet access is the amenity of highest importance when choosing a vacation home; and 46% of travellers agree. Having any access is more important than high-speeds.

Beyond that modern-life essential, owners and travellers are more traditional in their requirements with balconies/terraces, air conditioning, swimming pools, car parking, and a TV are all in demand.

Covering costs

The survey found that just under half of those who bought a second home in 2019 intend to utilize short-term rentals rather than keeping it for their own exclusive use.

Generating income and covering costs were the main reasons given by owners for offering their home for short-term rental.

A third of owners across the 10 markets analyzed reported increased booking rates in the past year with 45% reporting no change.


Most Canadians are eager to buy homes – poll

Real Estate DAZADA DIAMOND 25 Nov

Most Canadians are eager to buy homes – poll

Most Canadians are eager to buy homes – pollWhile the Canadian housing market has been characterized by consistent price growth over the past few years, a vast majority of home buyers in 2019 held positive viewpoints toward the idea of purchasing a residential property, according to a new nationwide analysis by Canada Mortgage and Housing Corporation.

In its 2019 Mortgage Consumer Survey, the Crown corporation found that 47% of those polled were “happy” about buying homes, while 39% were “excited.”

And contrary to what the rising costs of home ownership might indicate, only 10% of those surveyed said that buying a home left them feeling “frustrated.” A mere 9% were “fearful.”

The housing sector’s central importance was evident in the 87% of those polled, who expressed confidence in “the long-term financial prospects of homeownership, and their future ability to make their mortgage payments,” CMHC stated in its report.

These prospects are buoyed by robust consumer optimism, which was generally undeterred by the upward movement of mortgage rates in 2019. Nearly a third (32%) of buyers were confident that rates won’t rise next year – a marked increase from the 20% share who offered similar projections in 2018.

However, there are also troubling signs that said optimism might be misplaced.

“Consumer debt continues to be a significant challenge in nearly every part of the country. The impact of those debts also continued to spill over into the mortgage markets,” CMHC warned.

Around 23% of home buyers this year admitted that their current debt levels were higher than they could have anticipated, up from 19% in 2018. Moreover, as much as 59% were compelled to cut back on non-essential expenditures ever since their purchases, with the most common items to be stricken off the budget being entertainment (66%), vacations (55%), and food (44%).


These Homeowners Need a Private Mortgage

Down Payment & Buying DAZADA DIAMOND 22 Nov


These Homeowners Need a Private Mortgage

Most of us don’t give much thought to private mortgages. We are vaguely aware they exist, but perhaps have the impression they are mortgage solutions for financial derelicts.

But that is totally not true. More often than not, they are needed when bad things happen to good people.

And private mortgages and B-lender mortgages are the fastest-growing segment of the Canadian mortgage industry.

One reason is because it’s much harder to qualify for an A-lender mortgage now than at any time in recent memory. High home prices, in major cities particularly, result in large mortgage requirements, and the mortgage stress test can put qualification out of reach for homeowners who previously had no such concerns.

In addition, there are several situations people find themselves in that are not attractive to regular mortgage lenders. These problems require solutions, but a different type of lender needs to step forward and help the homeowner get on track. Let’s look at three such situations.

#1) This homeowner has too many debts, and his credit score is low. Notwithstanding lots of equity in his home, the banks have said no.

#2) These homeowners are in the middle of a consumer proposal. The doors to the banks are firmly closed, yet they need to finance a car purchase, and they would like to improve their monthly cashflow.

#3) This homeowner has large CRA debt. Banks and other A-lenders do not like refinancing to pay off CRA debt.

#1) Too Much Debt And Credit Score Too Low

How to use home equity to pay overdue taxesThis fellow has been living proud and mortgage-free for several years, but meanwhile has racked up credit card debt that just won’t go away. At first, people believe they can manage it down, but the crippling high interest rates of 19.99% or more make it really hard.

And when the cycle starts, they next tap into other available credit to pay off the credit cards that are giving them a problem.

When he approached us, he had a nice town home in the west end of Toronto, $115,000 of unsecured debt, and a credit score of 557. And he had no mortgage.

The minimum monthly payment on the credit card debt was not much less than his take home pay from his job!

The Solution

We could see that his credit score would zoom upwards once all the debts were cleared and no remaining balances. So, we found a private lender who was happy to lend a new first mortgage on very favourable terms. An annual mortgage interest rate of 5.99%, and a mortgage fully open after three months. This means as soon as he is ready, he can refinance to an A-lender without penalty.

And when that happens, all that ugly credit card debt will be scrunched up into a mortgage at roughly 3% interest, with a monthly payment of around $500. This is a game-changer compared to the $3,000 per month or so he was paying before.

#2) In A Consumer Proposal

measures of financial distress in canadaThese homeowners both have decent jobs and more than $200,000 equity in their detached B.C. home. Three years ago they both had to file a consumer proposal after a new business venture failed and left them with lots of consumer debt.

They reached out to us for three reasons:

1) Their bank, which holds their first mortgage, has told them they will not offer a renewal in late 2020.

2) Their car lease is expiring in January 2020, and they want to exercise the buy-out option. They are being quoted crazy high interest rates on a car loan.

3) They are finding it tough, paying $1,300 each month towards the proposals, on top of their car payment, and also their mortgage, taxes and utilities.

The Solution

The solution here is a one-year, private second mortgage for around $60,000. Interest-only payments at a rate of 12%, and the monthly payment is only $600, which is half of what they are paying now on their consumer proposal.

This small new mortgage will pay off their proposal completely, and also allow them to buy the car when it comes off lease.

And after their proposal is paid off, we will coach them on rebuilding their personal credit histories. And we will send an investigation package to Equifax Canada requesting they clean up all the reporting errors. (Sadly, there are ALWAYS reporting errors in the credit report after filing a consumer proposal.)

And in late 2020, when their first mortgage matures, they won’t have to worry about the renewal. We will refinance both mortgages into one new mortgage with a different lender. They will be ready.

#3) CRA Debt Problem

Owing taxes to the Canada Revenue AgencySeveral months ago, we met a Mississauga homeowner who only owed $70,000 on his first mortgage, but he had neglected filing corporate taxes for a few years, and owed CRA significant money. There was a judgment against him for $49,000, which had been registered as a lien against the family home. And another one looming for $133,000. And he had also accumulated a large amount of unsecured debt.

If you are self-employed and owe a lot of money to CRA, your borrowing options are very slim in the world of conventional mortgage lenders. We talked about this in a previous article. Occasionally we encounter homeowners whose tax debt is so large it cannot be readily paid. The end result is a debt that can’t be negotiated away, with a creditor you can’t afford to ignore.

The Solution

The solution for our clients was either going to be a very large, disproportionate private second mortgage at a high interest rate (close to 12%) or to refinance the small first mortgage to a new private first mortgage at only 6.99%.

For a lengthier discussion about the costs associated with a private mortgage, you can read this article.

We took the first mortgage approach; paid off the CRA liens and all other personal debts. As a bonus, the lender allowed us to partially prepay the mortgage payments in advance, so that the monthly payment for the new mortgage would be roughly what it will be when they refinance down the road – avoiding payment shock!

Then we contacted Equifax Canada to confirm the tax liens had been cleared and waited for the client’s credit score to rocket upwards, unencumbered by a high debt load.

Sure enough, it all came to pass, and now we are refinancing the private mortgage into an A-lender, only six months later.



Payment Frequency

Down Payment & Buying DAZADA DIAMOND 21 Nov

Payment Frequency

One of the decisions you will need to make before your new mortgage is set up, is what kind of payment frequency you would like to have. For many, sticking to a monthly payment is the default, however, different frequencies may end up saving you less interest over time.

Monthly Payments

Monthly payments are exactly as they sound, one payment every month until the maturity date of you mortgage at the end of your term. Took a 3-year term? You will make 36 payments (12 payments a year) and then you will need to renegotiate your interest rate. 5-year term? You will make 60 payments.

$500,000 mortgage

3% interest rate

5-year term

$2,366.23 monthly payment


$427,372.90 remaining over 20 years

$69,346.70 paid to interest

$72,627.01 paid to principal


Semi Monthly

Semi-monthly is not bi-weekly. Semi monthly is your monthly payment divided by two. That means, you are making 24 payments every year, but each payment is slightly less than half of what the monthly payment would of been.

$500,000 mortgage

3% interest rate

5-year term

$1,182.38 semi monthly payment


$427,372.99 remaining over 20 years

$69,258.59 paid to interest

$72,627.01 paid to principal



Bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly (2 months a year you make 3 bi-weekly payments). The interest paid and balance owing are slightly less than the others, but mere cents. You will still need to make payments for another 20 years.

$500,000 mortgage

3% interest rate

5-year term

$1,091.38 bi-weekly payment


$427,372.36 remaining over 20 years

$69,251.76 paid to interest

$72,627.64 paid to principal


Accelerated Bi-Weekly

Just like regular bi-weekly, you are not making 2 payments every month. With 52 weeks in a year, you are actually making 26 payments, 2 more than semi-monthly. However because this is accelerated, the payment amount is higher.

$500,000 mortgage

3% interest rate

5-year term

$1,183.11 accelerated bi-weekly payment


$414,521.40 remaining over 17 years 4 months

$68,325.70 paid to interest

$85,478.60 paid to principal


You have increased your yearly payment amount by $2,384.98, $11,924.90 over 5-years. That extra $11,924.90 has decreased your outstanding balance at the end of your mortgage term by $12,850.96 because more of your payments went to principal and less went to interest. Also, you will now have your mortgage paid off more than 2.5 years earlier.

The same option is available for accelerated weekly payments which will shave another month off of time required to pay back the whole loan as well. If you can afford to go accelerated, your best option is to do so! Especially in the early years where a larger portion of your payments are going towards interest, not paying down your principal.

If you have any more questions, please do not hesitate to reach out to a Dominion Lending Centres mortgage professional near you.


Principal & Interest

Credit & Debt DAZADA DIAMOND 20 Nov

Principal & Interest

Principal and interest are the two components that make up a mortgage payment. Principal is the portion of your payment that goes towards paying down the outstanding balance of your mortgage. Interest is the other portion of your payment which goes directly into the pockets of your lender and does not contribute to paying down your mortgage balance.

What some people may not realize is that a compounding interest rate (what the majority of all mortgages are) is weighted differently depending on how many years you have left on your mortgage.

If a young couple were to purchase their very first home, lets say $500,000 for example, and they had a $100,000 down payment, their mortgage would be $400,000. If they had today’s interest rates, their mortgage would be around 3%, compounded semi-annually, over 25 years with their interest rate re-negotiable every 5-years if they keep the same term. Assuming they were able to get 3% for the entire 25-years, their monthly payments would be $1,892.98 a month for the life of their mortgage.

Their first payment however is not $1,892.98, with 97% of it going to paying down the $400,000 balance and 3% going towards interest. The very first payment would actually be broken down as $993.81 of interest and $899.17 going towards paying down the principal balance of $400,000.

Now, it wont stay like this forever, the very last payment before the first 5-year term is up would be broken down as $854.62 going towards interest and $1,038.36 of the $1,892.98 going towards paying down the principal. It wouldn’t be until year 10 where the interest portion dips below $500.

If you can, any pre-payments you make each month will directly pay down the principal balance outstanding. This will also in turn, allow for less interest to be charged as interest is always calculated based on the current balance outstanding. In the later years, it may not be as advantageous, but in the first 5-10 years, it can be extremely beneficial.

If you want to see the break down of principal and interest portions inside your own mortgage, feel free to reach out to a Dominion Lending Centres mortgage professional near you.


Three Canadian cities among NA’s 10 most expensive retail streets

Real Estate DAZADA DIAMOND 19 Nov

Three Canadian cities among NA’s 10 most expensive retail streets

With retailers under increasing pressure from online competitors, crippling rents are frequently a major cause of financial issues.

For retailers in Canada, operating from stores on the top shopping streets looks relatively affordable compared to some global peers; although three Canadian cities rank among North America’s most expensive.

The annual rankings of Main Streets Across the World from Cushman & Wakefield puts Hong Kong’s Causeway Bay firmly at the top of the most expensive.

The Chinese special region’s top retail street saw rents rise 2.30% in Q2 2019 to an eyewatering $2,745 per square foot, $500 dollars more than second-placed Upper 5th Avenue, New York.

London’s New Bond Street ($1,714 psf), Avenue des Champs-Élysées in Paris ($1,478), and Milan’s Via Montenapoleone ($1,447) complete the top 5.

Canadian cities do not rank in the top 20.

But when looking at the stats for North America, led by New York’s Upper 5th Avenue; Canada has three cities inside the top 10 most expensive.

Toronto’s Bloor Street is in 6th place – behind New York, San Francisco, Chicago, and Miami – at U$206 per square foot.

Vancouver’s Robson Street ranks 7th with rent for retail space of $153 psf; and Montreal’s Saint-Catherine West is 10th at $134 psf.

Canada also boasts the most affordable retail rent in North America though; Calgary’s 17th Avenue SW at $29 psf.


When it comes to mortgage break penalties, big banks are often the worst

Banks & Bank of Canada DAZADA DIAMOND 18 Nov

Committing to a mortgage for five long years exposes people to the most insidious aspect of residential financing: prepayment charges.

And when it comes to such charges – the penalties you pay come when you back out of your mortgage early – some lenders take a greater toll on your bank balance than others.

Big banks are usually the worst. Mortgage finance companies are often the best.

And these bank competitors want you to know it. More and more, smaller lenders are using their preferential penalty calculations as a selling point, as well they should.

This year I’ve seen lenders such as Equitable Bank, Manulife Bank of Canada, XMC Mortgage Corp., Merix Financial, CMLS Financial Ltd., RFA Mortgage Corp., First National Financial LP, and MCAP all go out of their way to step up marketing and educate consumers on how bad penalties from major banks can be. (Mind you, a few of these lenders also have “no-frills” mortgages with high penalties – for example, 3 per cent of principal. So watch out for those.

What is a ‘fair-penalty lender?’

A fair-penalty lender calculates its standard prepayment charges, for lack of a better word, “fairly.”

It does so by comparing your actual mortgage rate to a rate equal to (or close to) what it charges new customers for a time frame similar to your remaining term.

Unlike Big Six banks, fair-penalty lenders don’t use arbitrarily inflated rates (“posted rates”) in their calculations. That only serves to drive up penalties.

So why doesn’t everyone get a mortgage with a fair penalty lender?

Well, because most people are conditioned to pay more for big bank financing. Among other things, they trust the brand, like the convenience or like knowing they can walk into a branch to talk to someone if there’s ever a problem (although, for most people, mortgage problems after closing aren’t too common). And the cost of that convenience is steep.

A simple example

Suppose you’re a major bank customer with a regular 3.19 per cent $300,000 five-year fixed mortgage that you got one year ago.

Now imagine you:

  • Need to consolidate debt into your mortgage;
  • Just found a new job in a different city and must sell and rent;
  • Want to break and renegotiate to a lower rate;
  • Have to break the loan early for some other reason – maybe because of a loss of income, divorce, inability to get a fair rate from your bank on a “port and increase” (that’s where you move your mortgage to a new property and increase the loan size), or inability to qualify for a port.

In these scenarios, one popular bank would charge you an interest rate differential (IRD) penalty of roughly $16,800 to exit your existing mortgage.

Compare that with just three months’ interest (about $2,400) at a “fair penalty lender.”

To put that another way, the extra $14,400 you’d fork over to the “less fair” lender would be like paying an 8.19-per-cent interest rate versus the 3.19 per cent. That’s astronomical. These days, determined mortgage shoppers do backflips to save even a 10th of a percentage point off their rate, let alone five whole points.

Ways around penalties

Some big banks are kinder than others when it comes to helping you avoid prepayment pain. The better ones let you add money to your mortgage without penalty, offer early renewal options and have flexible portability rules.

But more often than not, you can find a similar mortgage from a fair-penalty lender for a comparable price or better – without the penalty shackles.

If you’re dead-set on a big-bank mortgage and want to lower your exposure to heinous fixed-rate penalties, consider a short-term fixed or variable rate instead – if it’s suitable for you. By suitable, I mean you have a tolerance for potentially higher rates sooner than five years and you have no problems getting approved for a mortgage.

These days, with so many people taking fixed rates because they’re cheaper than variable rates, banks stand to make a killing on prepayment charges. That’ll be especially true if recession hits and rates fall further. We come across people almost every week who’d love to refinance at today’s lower rates, but they can’t because their bank penalty is too harsh.

The time has come to heed this lesson as borrowers. Big-bank IRD penalties clearly overcompensate banks for the legitimate expenses they incur when a customer backs out of a mortgage early. The more that people demand fair penalties, the more pressure it’ll put on Canada’s six biggest lenders to change their method