What to do When You Can’t Make Your Mortgage Payments

               My friends at Broker Plus Insurance asked me to share this with you. 

  So it is a hard reality that many people have been affected by factors well beyond their control.  Be it the economy or an illness there can be many life issues which leave you in a position where your savings are gone and you are unable to pay your mortgage or other bills.  So what should you do if you ever find yourself in this situation?

Mortgage Related Troubles?

·         Talk to your mortgage professional.

At the first sign of troubles make that difficult call to find out what options are available to you and keep in contact with them as things progress.

·         Clarify The Picture

Make a complete list of all credit obligations including any credit cards, loans and household bills.

You should also make a list of all of your assets including your current income, savings accounts, investments and RRSP’s.

·         Learn about your resources.

There is a great resource called Take Charge of Your Debts from the government of Canada.  You can use it to understand debt problems and how to budget, information on credit counselling, collection agencies, credit and credit repair.

·         Consider your options

If your mortgage was done through a mortgage insurer (CMHC, Genworth, CG) then you have a valuable ally.  They will work with you to find solutions such as:

-Converting a variable rate to a fixed rate to protect you against a sudden increase

-Offering temporary payment deferral

-Extending the original amortization

-Adding any missed payment or arrears to the balance and spreading them over the   remaining loan

-Offering a special payment arrangement until you are back on your feet

You need to stay in contact with your lender, your mortgage professional and whoever else is involved.  Avoiding the phone calls is no way to convince them you want to work to a solution

Other Credit Troubles?

·         Call the credit companies and ask for a reduction to your interest rate which will allow you to pay your debts out faster.

·         Apply for a consolidation loan which will allow you to pay one large payment as compared to many small which can be overwhelming.

·         Choosing to refinance your home to be pay out your smaller debts can be a valid choice if the penalty isn’t too high.  Again, it can be easier to manage one payment.

·         Orderly Payment of Debts – Under this government run program you allow this agency to take charge if you will.  They will negotiate with your creditors for a lower interest rate and then they will look at your overall financial picture and put you on a set repayment program until all of your debts are repaid in full.  You need to know that this program will require you to rebuild your credit carefully after the fact.

·         Bankruptcy – This is where you choose to work with a Bankruptcy Trustee.  Your assets and your liabilities are all weighed and then the trustee offers your creditors a set percentage of what you owe.  You will be required to go through the court system and there are additional costs.  This choice also requires a careful rebuild of your credit after the fact if you are to be able to borrow money down the road.

So as you can see there are options available to you when life throws you sideways.  Keep in contact with your creditors if they start calling so they know your situation and can make note of it in their systems.  Life happens my friends but there are solutions if you need them. Call me, your mortgage broker for help. My website is here. You can also email me . 

Bank of Canada Does Not Cut Rates

Dr. Sherry Cooper, Dominion Lending Centres' chief economist issued this statement today.

In an evenly divided call by market analysts, the Bank of Canada maintained its target for the overnight rate at 1/2 percent. The Bank said that inflation prospects are largely as expected and that “the dynamics of the global economy are broadly as anticipated in the Bank’s October Monetary Policy Report (MPR).”
Really?  Oil prices have plummeted to unexpected lows. Stock markets are declining sharply and the Canadian dollar has fallen more than expected and certainly, the output gap will remain wider for longer than suggested in the October MPR.
The Bank called the setback for the Canadian economy from the further decline is oil prices temporary. The Bank now expects the economy’s return to above-potential growth to be delayed until the second quarter of 2016. The Bank projects Canada’s economy will grow by about 1-1/2 percent in 2016 and 2-1/2 per cent in 2017, with the output gap closing around the end of 2017. This is the Bank’s forecast without including the positive impact of fiscal measures expected in the next federal budget.
Really? I feel like the economic forecasters at the Bank of Canada are living in a parallel universe–where things are a lot rosier than here on planet earth.
Don’t get me wrong, there are a lot of good reasons for the Bank of Canada to have refrained from cutting rates.  The Canadian dollar has already fallen sharply and a rate cut could have imprudently triggered a currency rout. With so much concern about household debt, another rate cut would run the risk of encouraging excessive borrowing. As well, with interest rates already so low, another cut is likely to have very little macroeconomic benefit and the Bank should keep some powder dry in case things deteriorate further in coming months. Moreover, the feds are going to goose the economy with infrastructure spending, so taking a wait-and-see attitude makes sense.
But to suggest that the current weakness is due to temporary factors and a rebound is in train without the fiscal stimulus lacks credibility and appears sanguine at best and irresponsible at worst. Oil prices are not falling due to temporary factors. The world is adjusting to an alternate reality where oil supply is well in excess of sustainable demand and more supply is coming on stream from Iran. Canadian oil is among the most expensive in the world to produce and prices received by Canadian oil producers (Western Canada Select (WCS) in the chart below) are well below prices elsewhere. This inevitably continues the painful restructuring in the oil patch. These are not temporary factors.
Norway–another oil giant with expensive production–recognizes its need to accelerate its economic transformation. In its October 2015 budget, the Norwegian government declared that “the economic outlook is different than we have been accustomed to over the past 10-15 years…Oil is no longer the growth engine of the economy.”  Faced with the need to restructure, the government is keen to shift Norway from its dependence on oil towards other industries. Norges Bank, the central bank of Norway, has given forward guidance that interest rates may be cut further in 2016 from record lows despite worries of a house price bubble in Oslo and elsewhere due to increasingly low rates. Norges Bank has warned that house price inflation was higher than expected and that household debt–already at record highs–would continue to outpace income growth.
The Bank of Canada has been behind the curve ever since the decline in oil prices began in 2014, revising down its forecast for the Canadian economy in each quarterly Monetary Policy Report. How long can unanticipated temporary factors be blamed?

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

Annual reality check for your mortgage

Most of us tend to think of our mortgage as the ultimate “buy and hold” purchase. After all, who wants to spend any more time in the “borrower” chair than is absolutely necessary? You get a 5-year term, and then go on automatic pilot until it comes due again. You might wring your hands over your other finances, but your mortgage is set in stone, right?

Well, not exactly. In fact, it’s a great idea to have an annual mortgage review to see if it’s really working for you – especially in the context of the rest of your financial picture.  After all, a lot can happen in a year – especially during our “mortgage years”, when we tend to be juggling many commitments in our busy lives! Think of all the financial commitments we carry during these years: care of our children, tuition or school expenses, one or more cars, vacations, home renovations, travel… the list seems to go on and on.

Chances are that something in your financial life has changed since you took out your mortgage. Life doesn’t stand still, after all. The mortgage planners at Dominion Lending Centres  – an elite firm of Canadian mortgage brokers – have identified a list of the most common reasons why a mortgage may need some adjustment:

• You’re considering a move to a new home in the next year or two;
• You wonder if you can tap into some of your equity for a special renovation project to upgrade your home;
• You’re wondering if you can afford a vacation property;
• You’re considering the benefits of investment property ownership;
• You’re a bit concerned about a large expense looming in your future:  like university tuition, a wedding, a leave from work, a new career or business, a big vacation or a new vehicle, for example;
• You’re making more money – or less money – than you were when you began your mortgage;
• You’re carrying some credit card or other high-interest debt that is eating away at your monthly cash flow;
• You’re worried that you’re not saving enough for your retirement years, and you’ve heard there’s a way to convert your non-deductible mortgage debt into deductible investment loans using a re-advanceable mortgage.  You’re interested in collecting annual tax refunds, paying off your mortgage faster, and having an investment portfolio for the future.

If any of these sound familiar to you – and if you have held your mortgage for a year or more – then it’s worthwhile to contact a qualified mortgage planner to give your mortgage a reality check.

At Dominion Lending Centres , the company’s mortgage planners provide this service free of charge and with no obligation.  They tailor each mortgage to their client’s current needs and long-term goals, with an overall focus on mortgage planning, Mortgage Planners believe that a mortgage is not just a single transaction done in isolation of your goals and overall financial situation, but that a mortgage can accomplish so much more when property structured and integrated into your overall financial plan.

Mortgage Planners look at the mortgage as a financial keystone - the right mortgage can build your wealth, protect you from a financial downturn, and save you thousands of dollars. That’s why an annual mortgage review is part of their overall service offering.  It’s also a smart financial move for Canadian homeowners. Don't wait for your mortgage renewal date to contact your mortgage planner. You can reach me at http://davidcooke.ca or by phoning 403-836-1201.

The U.S. Fed Finally Did It - Hiked Rates

Dr. Sherry Cooper, chief economist at Dominion Lending Centres published this article today.

For the first time in nine years, the U.S. Federal Reserve hiked their key policy rate--the overnight federal funds rate--by one-quarter percentage point (25 basis points) to a range of 1/4 to 1/2 percent. The policy-making Federal Open Market Committee (FOMC) said that the stance of monetary policy remains accommodative, thereby supporting further improvement in the labor market and a return to 2 percent inflation. The U.S. labor market has improved considerably this year taking the unemployment rate down to 5%, while inflation has been depressed by falling commodity prices and the strength in the U.S. dollar. Importantly, the Fed suggests that they expect economic conditions to warrant only gradual increases in the federal funds rate and that the funds rate will remain below levels that are expected to prevail in the longer run for some time. Having said this, the Committee's interest rate forecasts signaled four quarter-point increases in 2016, a stance that has been interpreted by the markets as relatively hawkish. This, of course, will be data dependent, and many economists expect fewer than four rate hikes next year. The Canadian dollar, which has weakened sharply in recent weeks on further declines in oil prices, edged downward with the release of the Fed decision, but bounced back shortly thereafter. U.S. Treasuries tumbled on the news pushing market rates higher. U.S. stocks, on the other hand, extended today's gains and the yield on two-year Treasury notes topped 1 percent for the first time in five years after the Fed ended seven years of near-zero interest rates and reaffirmed gradual tightening over the next year. The yield on the ten-year Treasury bond edged up slightly to 2.29 percent. Bank of Canada Will Remain On the Sidelines The Canadian economy has been hard hit by the continuing decline in oil prices and other commodity prices. Not only has West Texas Intermediate crude oil, the price received in the U.S., fallen to roughly $36 a barrel, but the price received in Canada for heavy oil is substantially lower. Economists expect that Governor Poloz will keep his benchmark overnight rate at 0.5 percent unchanged until at least 2017. Nevertheless, mortgage rates in Canada have likely bottomed as five-year market rates, to which mortgage rates are linked, are edging higher and lenders are pressured by very narrow interest rate spreads.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Changes to down payment requirements coming February 15, 2016

Today Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.

Homes priced at more than $1 million by law require a minimum down payment of 20 per cent. Today's announcement therefore focuses on homes priced between $500,000 and $1 million.

In the Mortgage Professionals Canada (MPC) Fall Report, Chief Economist, Will Dunning discusses why raising the down payment could cause problems for the housing market, including this cautionary observation: “Rising prices have made it increasingly difficult for first-time home buyers to accumulate down payments. Increasing down payment requirements would, most likely, severely dampen housing demands from people who are financially well-qualified to make their monthly mortgage payments.”

MPC notes that the 10% requirement does represent a graduated approach while the Ministry of Finance commented that they believe this will only impact 1% of home purchasers.

Click here for the government’s official news release.

Handy chart below - click to enlarge.

Toronto 2015 - Bikes for Kids event

Building a Custom Home with less than 20% downpayment