25 Oct

Bi-Weekly Payment Workaround


Posted by: Peter Puzzo


Bi-Weekly Payment WorkaroundMost of us know that changing your mortgage payment from monthly, or semi-monthly, to an accelerated bi-weekly payment instantly reduces your standard 25-year amortization by 2.58 years with today’s rates. (If you didn’t know that, you’re likely not working with the mortgage professionals at Dominion Lending Centres).

Sometimes, however, an accelerated bi-weekly payment option might not be available to you. Either the lender does not offer it as an option with that particular product, or they may not allow you to set it up if the accelerated payment knocks your qualifying ratios out of line. Although these situations are rare, they do come up from time to time. Here’s a workaround for those that might find themselves in this situation.

Open up a separate chequing account from which ONLY your mortgage payment will be withdrawn.

Then, from the account where your paychecks are deposited, set up an automatic transfer from this account, to your new chequing account. The automatic transfer will be every two weeks and for half of the amount of your monthly mortgage payment. This is the amount that your accelerated bi-weekly payment would equal out to.

Throughout the year you will continue to automatically transfer exactly half of your monthly payment into your new chequing account, every two weeks. Then, those two months each year where you receive your paycheck three times in one month, you will also transfer half of your mortgage payment into the new account three times this month. When your monthly payment is withdrawn by your lender, there will be a half monthly payment remaining in your new account. This will happen twice throughout the year, leaving you with one full monthly payment remaining in your new chequing account. This is the accelerated effect.

Once per year, take this remaining balance in your account and apply it as a lump sum towards your mortgage, which most mortgages allow you to do. This lump sum goes directly towards your principal balance, interest-free, thus reducing your amortization the same as an accelerated bi-weekly payment would have.

It may not seem like much, but imagine no mortgage payments for the next two and a half years. Feels good, doesn’t it?!

Jeff Ingram


Dominion Lending Centres – Accredited Mortgage Professional
Jeff is part of DLC Canadian Mortgage Experts based in Surrey, BC

21 Oct

Are You Stressed About The New Stress Test? There’s No Need To Be!


Posted by: Peter Puzzo


Are You Stressed About the New Stress Test? There’s No Need To Be!That’s right!

Sure the new mortgage rules from our Federal Government on October 17th can be a bit confusing, here are five tips to help you with your mortgage while at the same time, reducing your stress.

1. Review your Credit File:

Good credit is your ticket to informed borrowing and purchasing, great rates and, most important, approval.

Don’t be vulnerable. Understand how a good credit score happens, and how best to manage credit so that you can use it to your advantage.

Make sure all your information is true, complete and up-to-date. If there are discrepancies deal with them before you start the buying process.

2. Review your Debts:

Understand the difference between secured and unsecured debt:

Secured debt is money owed for the purchase of an asset, such as a car, boat, motorcycle or property. The asset is collateral, and if you don’t repay the loan as specified by the terms, your creditors can confiscate it.

Unsecured debt is largely due to credit cards. These typically have a higher interest rate, so you should always try to pay them off first.

Anyone can have credit difficulties if they don’t understand how and when to use it. On the other hand, credit can be a great advantage if you know how it works.

Make payments on time, and in the case of a credit cards clear the balance every month.

Establish and implement a debt repayment strategy.

3. Down Payment:

You may also need a down payment saving strategy. This will help you avoid extra fees, such as mortgage insurance premiums, and ensure that you stay within the guidelines of the percentage of debt allowed against your income.

So, save, save, SAVE!

4. Help from Mom, Dad or other Fans:

Though you may not be so sure, they actually do love you.

Suppose you have great credit, a downpayment and a good job. You want to start your family but are a little short of being approved for a loan. That could be the time to reach out to Mom, Dad or others. I usually suggest taking on debt singlehandedly, but there’s nothing wrong with asking for a little help now and then.

5. Patience:

Patience is key. To paraphrase an old adage: Patience and practice makes for a perfect outcome. So, practice patience, and make your purchase a perfect performance.

BONUS #6 – Contact your local mortgage professional at Dominion Lending Centres so we can help you navigate these new mortgage rules!


Sandra Tisiot


Dominion Lending Centres – Accredited Mortgage Professional
Sandra is part of DLC Smart Debt based in Ottawa, ON.

17 Oct

Housing Slows In BC, But Red Hot In GTA


Posted by: Peter Puzzo


Housing Slows in BC, But Red Hot in GTAThis morning, The Canadian Real Estate Association (CREA) released its national real estate statistics for September, which showed a modest uptick in home sales nationally, as new listings ticked up and home prices increased once again. For Canada as a whole, the number of homes trading on the MLS Systems increased 0.8% month-over-month in September following a four-month downtrend. National home sales are 5.6% below the record level posted in April 2016.

Housing markets across Canada were pretty much evenly split between sales gains and losses.Continuing recent performance trends, sales increased again in the Greater Toronto Area (GTA) and fell further in and around the Lower Mainland of British Columbia. This marked the sixth consecutive monthly decline in sales in BC’s Lower Mainland, which began even before the August introduction of the new foreign buyers’ tax in Metro Vancouver.

Finance Minister Morneau announced measures to tighten qualifications for fixed rate mortgage loans and to restrict the insurability of these loans last week. In addition, foreign exemption from capital gains taxes on Canadian real estate will also be limited to primary residences. There is no doubt that these initiatives will slow mortgage lending and home sales and there is no way of knowing by how much.

According to CREA President Cliff Iverson, “The Finance Minister’s recent changes to regulations affecting mortgage lending has added to housing market uncertainty among buyers and sellers. For first-time home buyers, the stress test for those who need mortgage default insurance will cause them to rethink how much home they can afford to buy.”

“First-time home buyers, particularly in housing markets with a lack of affordable inventory of single family homes, may be priced out of the market by the new regulations that take effect on October 17th,” said Gregory Klump, CREA’s Chief Economist. “First-time home buyers support a cascade of other homes changing hands, making them the linchpin of the housing market. The federal government will no doubt want to monitor the effect of new regulations on the many varied housing markets across Canada and on the economy, particularly given the uncertain outlook for other private sector engines of economic growth.”

Housing Slows in BC, But Red Hot in GTA


Housing inventory has been in acutely short supply in the GTA. The rise in new listings last month supported a rise in sales in the GTA and nationally. The national sales-to-new listings ratio at 62.1% was little changed from August (61.9%), which is down significantly from the peak reached in May (65.3%). A ratio in the range of 40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market.

The sales-to-new-listings ratio was above 60% in almost half of all local housing markets again last month–virtually all of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. Quite importantly, the ratio moved out of sellers’ market territory since August, down to the mid-50% range in Greater Vancouver and the Fraser Valley reflecting the outsized plunge in sales, after having begun the year at a whopping 90%.


The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.7 months of inventory on a national basis at the end of September 2016. The ratio has been quite stable since April, with the fall in sales in the Lower Mainland offset by a shrinking supply of listings in and around the GTA. The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C.

The number of months of inventory is at a record low in the Greater Golden Horseshoe of Ontario, ranging between one and two months Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country.Major areas within the GTA have less than one month of inventory, a situation that has been evident for an extended period and is without precedent.


The Aggregate Composite MLS House Price Index (HPI) rose 14.4% y-o-y last month, down from 14.7% in August, which was the first deceleration since March 2015. This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next.

Greater Vancouver (+28. 2%) and the Fraser Valley (+35.0%) posted the largest y-o-y gains by a wide margin. However, single-family home prices fell in September in Greater Vancouver and the Fraser Valley. This was the first significant decline in this region since late 2012–early evidence that the new foreign tax has had an impact. 

As reported by CREA, double-digit y-o-y percentage price gains were also registered in Greater Toronto (+18.0%), Victoria (+19.4%) and Vancouver Island (+13.9%).

By contrast, prices were down -4.1% y-o-y in Calgary. Although home prices there have held steady since May, they have remained below year-ago levels since August 2015 and are down 4.6% from the peak reached in January 2015.

Home prices also edged lower by 1.2% y-o-y in Saskatoon. Home prices in Saskatoon have also held below year-ago levels since August 2015.

Meanwhile, home prices posted additional y-o-y gains in Regina (+4.9%), Greater Moncton (+4.2%), Ottawa (+2.7%) and Greater Montreal (+2.7%).

Housing Slows in BC, But Red Hot in GTA



Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

5 Oct

Morneau Takes Out The Big Guns To Slow Housing


Posted by: Peter Puzzo


Canadian Home Sales Fell For Fourth Consecutive Month in AugustYesterday, Ottawa unveiled major initiatives to slow housing activity both by potentially discouraging foreign home purchases and, more importantly, by making it more difficult for Canadians to get mortgages. As well, the Finance Minister is limiting the degree to which mortgage lenders can buy portfolio insurance on mortgages with down payments of 20% or more. Ottawa has clearly taken out the big guns to slow housing activity, which is widely considered to be too strong in Vancouver and Toronto. Ironically, home sales have already slowed precipitously in Vancouver in recent months and the BC government introduced a new 15% land transfer tax on foreign purchases of homes effective August 6, the effects of which are yet to be fully determined.

The measures announced by Finance Minister Morneau are more far-reaching than anything considered to date and could well have quite a significant impact. Not only are these initiatives intended to close loopholes for foreign investors, which might help to make housing more affordable for domestic purchasers, but they will actually make homeownership less attainable for the marginal borrower, which is often younger Canadian first-time home buyers.

Officials at the Department of Finance have been studying the housing market and have led a working group with municipalities and provinces, as well as federal agencies such as the Office of the Superintendent of Financial Institutions (OSFI) and Canada Mortgage and Housing Corporation (CMHC). This in-depth analysis has informed today’s announcement.

 Measures Aimed At Foreign Homebuyers

  • The income tax system provides a significant income tax benefit to homeowners disposing of their principal residence, in the form of an exemption from capital gains taxation.
  • An individual who was not resident in Canada in the year the individual acquired a residence will not—on a disposition of the property after October 2, 2016—be able to claim the exemption for that year. This measure ensures that permanent non-residents are not eligible for the exemption on any part of a gain from the disposition of a residence.
  • The Canada Revenue Agency (CRA) will, for the first time, require all taxpayers to report the sale of a property for which the principal residence exemption is claimed.

Measures Affecting All Homebuyers

The Finance Department says in its press release that, “Protecting the long-term financial security of Canadians is a cornerstone of the Government of Canada’s efforts to help the middle class and those working hard to join it.” This is a “Nanny State” measure to protect people from themselves, as the Bank of Canada has long been concerned about the growing number of households with excessive debt-to-income ratios. It will make housing less attainable, at least in the short run. If it, therefore, substantially reduces housing demand, home prices could decline, ultimately improving affordability. This, of course, is not what the 70% of Canadian households that already own a home would like to see.

  • Broadened Mortgage Rate Stress Tests: To help ensure new homeowners can afford their mortgages even when interest rates begin to rise, mortgage insurance rules require in some cases that lenders “stress test” a borrower’s ability to make their mortgage payments at a higher interest rate. Currently, this requirement only applies to a subset of insured mortgages with variable interest rates (or fixed interest rates with terms less than five years). Effective October 17, 2016, this requirement will apply to all insured mortgages, including fixed-rate mortgages with terms of five years and more.
  • A buyer with less than 20% down will have to qualify at an interest rate the greater of their contract mortgage rate or the Bank of Canada’s conventional five-year fixed posted rate. The Bank of Canada’s posted rate is typically higher than the contract mortgage rate most buyers actually pay. As of September 28, 2016, the Bank of Canada posted rate was 4.64%, compared to roughly 2% or so on variable rate mortgages.

For borrowers to qualify for mortgage insurance, their debt-servicing ratios must be no higher than the maximum allowable levels when calculated using the greater of the contract rate and the Bank of Canada posted rate. Lenders and mortgage insurers assess two key debt-servicing ratios to determine if a homebuyer qualifies for an insured mortgage:

  • Gross Debt Service (GDS) ratio—the carrying costs of the home, including the mortgage payment and taxes and heating costs, relative to the homebuyer’s income;
  • Total Debt Service (TDS) ratio—the carrying costs of the home and all other debt payments relative to the homebuyer’s income.

To qualify for mortgage insurance, a homebuyer must have a GDS ratio no greater than 39% and a TDS ratio no greater than 44%. Qualifying for a mortgage by applying the typically higher Bank of Canada posted rate when calculating a borrower’s GDS and TDS ratios serves as a “stress test” for homebuyers, providing new homebuyers a buffer to be able to continue servicing their debts even in a higher interest rate environment, or if faced with a reduction in household income.

The announced measure will apply to new mortgage insurance applications received on October 17, 2016, or later.

  • Tighter Mortgage Insurance Rules

Lenders have the option to purchase mortgage insurance for homebuyers who make a down payment of at least 20% of the property purchase price, known as “low-ratio” insurance because the loan amounts are generally low in relation to the value of the home. There are two types of low-ratio mortgage insurance: transactional insurance on individual mortgages at the point of origination, typically paid for by the borrower, and portfolio (bulk pooled) insurance that is acquired after origination and typically paid for by the lender. The majority of low-ratio mortgage insurance is portfolio insurance.

Lender access to low-ratio insurance supports access to mortgage credit for some borrowers but primarily supports lender access to mortgage funding through government-sponsored securitization programs.

Effective November 30, 2016, mortgage loans that lenders insure using portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance must meet the eligibility criteria that previously only applied to high-ratio insured mortgages. New criteria for low-ratio mortgages to be insured will include the following requirements:

  1. A loan whose purpose includes the purchase of a property or subsequent renewal of such a loan;
  2. A maximum amortization length of 25 years;
  3. maximum property purchase price below $1,000,000 at the time the loan is approved;
  4. For variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the original amortization schedule;
  5. A minimum credit score of 600 at the time the loan is approved;
  6. A maximum Gross Debt Service ratio of 39 per cent and a maximum Total Debt Service ratio of 44 per cent at the time the loan is approved, calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate; and,
  7. property that will be owner-occupied.

These tighter mortgage insurance regulations will reduce the supply of mortgages and/or increase their cost to the borrower.

Consultation on Lender Risk Sharing

The Government announced that it would launch a public consultation process this fall to seek information and feedback on how modifying the distribution of risk in the housing finance framework by introducing a modest level of lender risk sharing for government-backed insured mortgages could enhance the current system.

Canada’s system of 100% government-backed mortgage default insurance is unique compared to approaches in other countries. A lender risk sharing policy would aim to rebalance risk in the housing finance system so that lenders retain a meaningful, but manageable, level of exposure to mortgage default risk.

This proposal by CMHC has been floated for some time and, needless to say, the Canadian Bankers’ Association, is against it. The measure would certainly increase the risk associated with funding mortgages and therefore likely increase the capital required to be set aside against this additional risk. Therefore, in essence, it increases the cost to the lenders to finance mortgages. The lenders will undoubtedly attempt to pass off this increased cost to the borrower or reduce its supply of credit. Right now, the cost of mortgage insurance is borne by the taxpayer.

Bottom Line: These are very meaningful initiatives to slow housing demand, making it more difficult for Canadians to borrow. Finance Minister Morneau has taken out the big guns. I have no doubt that the pace of mortgage lending will slow from what it would otherwise be as a result of these government actions. However, these actions do nothing to address the shortage of housing supply in Vancouver and Toronto.

Housing has been a very important pillar for the Canadian economy, especially at a time when oil price declines have decimated the oil sector and manufacturing continues to struggle. This is a case of being very careful what we wish for– I’m concerned that we might see more of a slowdown in housing than the government was counting on, which will certainly affect jobs and growth and reduce tax revenues at a time when budget deficits are mounting and fiscal stimulus has yet to do its job.


Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.