COVID-19 & Your Mortgage

Many of our clients have called us with questions about how the COVID-19 outbreak will affect their mortgage, tax season, or business.

The Canadian government has released lots of information about the economic response to this challenging period. To help you find all this information, we’ve compiled some links below.


Mortgage Default Management Tools – CMHC will permit lenders to allow payment deferral beginning immediately.

Income Support for Individuals Who Need it Most – The Government is proposing to provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC) to over 12 million low- and modest-income families.

Flexibility for Taxpayers – The return filing due date will be deferred until June 1, 2020.

Role of Financial Institutions – Canada’s large banks have confirmed that this support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products.


Helping Businesses Keep Their Workers – The government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months

Flexibility for Businesses Filing Taxes – Will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020

Ensuring Businesses have Access to Credit – BDC and EDC are cooperating with private sector lenders to coordinate on credit solutions for individual businesses, including in sectors such as oil and gas, air transportation and tourism

Supporting Financial Market Liquidity – This action will provide long-term stable funding to banks and mortgage lenders, help facilitate continued lending to Canadian consumers and businesses, and add liquidity to Canada’s mortgage market.


Basement Suites: To Suite or Not To Suite

Purchasing a home with a basement rental suite can be great way to own a higher priced home with the benefit of having part of the mortgage paid for by your tenant. However, lenders take rental income into account in a variety of ways. Banks tend to be more conservative meaning you’ll qualify for a smaller mortgage, while credit unions are familiar with the local rental market so you’ll generally qualify for a larger mortgage. This is why using a Mortgage Consultant is so important. Take this example, based on an annual income of $115,000:

NO Suite

Maximum purchase price: $800,000
20% downpayment: $200,000
Maximum mortgage : $640,000
Standard condo fees & property tax

Home WITH Rental Suite

Rental income of $1,600/month
Standard property tax
Maximum purchase price $1,000,000
20% Downpayment: $200,000
Maximum mortgage amount $800,000.

Suite rental income of $1,600/month
Standard property tax
Maximum Purchase price $1,350,000
22% Downpayment: $300,000
Maximum mortgage amount $1,050,00
(no stress test; rental income is treated more favorably in application)

The Government Taketh and The Government Giveth

This week was one full of financial related news from the Federal Government. Some positive, some perhaps not.

The Taketh

  • The worst kept secret is now no longer such. Effective Jan 1, 2018 the Office of the Superintendent of Financial Institutions (OSFI), the federal crown corporation that regulates all chartered banks, will require lenders to “stress test” all mortgages, regardless of the down payment.
  • This new regulation will affect all borrowers.
  • The new rules will require buyers to demonstrate they could still afford their mortgage payments if interest rates were 2% higher than the actual rate they negotiate.This effectively reduces the amount borrowers will qualify for by 20%, a significant amount by any stretch of the imagination.
  • Potential home-buyers will either need to lower their purchase price expectations, come up with more down payment, utilize the “bank of mom and dad”, or obtain a co-signer.
  • Currently, purchasers with less than 20% down payment already face very similar rules.

As an example, a client could negotiate a 5 year fixed rate of 3.09% however the lender will need to base their approval on the client’s ability to qualify at a rate of 5.09%. On a $500,000 mortgage the client would need to “have the ability” to pay an extra $568 per month. In reality, prospective purchasers who want to borrow at the maximum threshold will need to reduce the amount they borrow so their new mortgage payments are $568 less, in this example, which is roughly equal to $100,000. For those clients who are not approaching their upper borrowing limits, the new rules will have little impact.

Many banking and real estate industry leaders speculate that this latest move by the government will slow down housing activity modestly in 2018 as consumers adjust to the new lending environment. There is no doubt that this rule is likely the most significant to be introduced in years and designed to reduce the perceived risk in the banking sector with household debt at record highs, along with the price of housing in many major cities. Only time will tell. One thing is for certain; this will not help improve affordability. Unfortunately, any rules that could help affordability would likely need to come at the expense of managing mortgage risks.

The Giveth

The federal government announced plans to honor its election promise of reducing the small business tax rate. Furthermore, after ongoing pressure from small businesses, medical professionals and other incorporated professionals, the government has now softened its approach to taxing passive income held in a corporation. This is welcomed news for many self-employed Canadians who were concerned about the adversarial and arbitrary taxation announcements from Ottawa. Some highlights:

  • All past investments and the income earned from those investments will be protected
  • Businesses can continue to save for contingencies or future investments in growth
  • A $50,000 threshold on passive income in a year (equivalent to $1 million in savings, based on a nominal 5-per-cent rate of return) – an amount that is exceeded by only about 3 per cent of corporations – is available to provide more flexibility for business owners to hold savings for multiple purposes, including savings that can later be used for personal benefits such as sick-leave, maternity or parental leave, or retirement.

So, while mortgages are increasingly harder to qualify for, perhaps business owners can now come up with a larger down payment to afford their dream home.

We work with many lenders who will not be affected by these upcoming changes. If I can help answer any questions please do not hesitate to contact me.

Bank Of Canada Raises Interest Rates For The 2nd Time In Less Than 2 Months

Another Day, Another Rate Hike

The Bank of Canada has raised interest rates for the second time in less than two months. The central bank’s benchmark rate was raised twice by 0.25% since July and now stands at 1.00%. For consumers, this means the Prime Rate now stands at 3.20%. It was as low as 2.70% just a few months ago. With these increases Canada joins the U.S. as the only two G7 nations raising interest rates in an effort to help moderate our strong economic growth that surprisingly topped 4% last quarter.

Canada is in the middle of one of its strongest growth cycles since the 2008 recession, with economic expansion accelerating to an average of 3% over the past four quarters. According to the Bank’s press release, robust consumer spending, solid job and income growth, cooling housing markets, as well as more widespread strength in exports and business investment were all factors leading to this decision.

The rate increase works out to an extra $13 per $100,000 borrowed per month, approximately.

As Rates Rise, Clients Qualify For Less

What many people don’t realize is that as interest rates go up, qualifying for a mortgage becomes more difficult as lenders are required to qualify consumers based on a rate that is correlated to the Bank of Canada rate. As rates rise, clients qualify for less.

On top of rising rates, the Office of the Superintendent of Financial Institutions (OSFI) announced that it is considering requiring lenders to ‘stress test’ mortgage applications for buyers who have a 20% down payment or more. This would have a significant impact on a large segment of home buyers who would suddenly find themselves qualifying for approximately 20% less financing. For those living in areas with already record high housing prices, more people than ever will find it difficult to own a home.

Now, more than ever, it is imperative that clients engage the services of an experienced Mortgage Consultant to review their options before trying to purchase, sell, or refinance or renew.

Guest Post – Emotional Homebuyers Can Lose Out On the Best Deals

This post is brought to you by Marc Shendale at Genworth Canada, originally appearing on Dominion Lending Centeres’ website here.

Buying a home is financial decision, but also an emotional experience.

Before we’ve explored every room, we often start imagining our new lives there. Where our furniture will go. The parties we’ll host in the open-concept living-dining space. The mornings we’ll spend at the breakfast bar overlooking the garden or skyline… When a home speaks to us emotionally, the fear of missing out on it can set in fast.

That’s especially true in a real estate market where multiple offers and bidding wars are common, where a financing condition can put you at a disadvantage, and where prices are at all-time highs.

According to the 2017 Genworth Canada Homeownership Study, 60% of first-time buyers were worried they might miss out on the “perfect” house. That can lead emotional homebuyers to act against their own best interests by, for example, forgoing important conditions, or paying more than they had budgeted.

There’s no need to lose the dream — you will host those parties — but you’ve got to take emotion out of the deal, and these strategies will help.

Assemble your entire team before looking at any property.

That means: interview experienced real estate agents with expertise on your desired neighbourhoods; consult a financial advisor to help determine how homeownership fits into your other goals (a wedding, saving for a child’s education, retirement planning, etc.) and establish a budget including “what-if” scenarios, such as a layoff or maternity leave; find a DLC mortgage broker to help you secure a pre-approval, explain your options, and answer your questions here. You may be able to achieve homeownership sooner than you think. Find out how

Get the names of 3 home inspectors. Call and introduce yourself now.

Many emotional homebuyers forego the inspection process in an effort to make their bid more competitive. That’s a risk. With 3 recommended inspectors on speed dial, you should be able to get a qualified professional to visit a property the day you want to make an offer. Your real estate agent is one source of referrals, or check with the Canadian Association of Home and Property Inspectors.

Don’t visit properties outside your price range.

Best-case scenario, you’ll walk away deflated. Worst-case scenario? You’ll bid on something you can’t comfortably afford. Stick to your homeowner budget (likely to be higher than renting, since it includes property taxes/maintenance fees, utilities, etc.) and practice living on it for a few months before you decide to make a purchase.

Focus on the things you can’t see.

The efficiency of the heating and cooling systems, the age of the roof, the state of the electrical… these matter most when it comes to deciding if a home is a good financial deal. Hardwood floors, quartz counter tops, and stainless steel appliances can be seductive, but they shouldn’t be a priority.

Surprise repairs and upgrades to fundamentals — like a furnace on its last legs, plumbing that isn’t to code, or uninsurable knob-and-tube wiring — could sink your budget. And if problems have been covered up, you might just have to rip out those magazine-worthy finishes and details.

There is no disputing that buying a home is a massive financial decision as well as an emotional experience. But minimizing emotions throughout your homebuying experience is a heads-up move that will ultimately benefit you.

For more tips on what you should know before you purchase a home visit

Spring 2017 Market Update

Spring is definitely here in full force, minus the sun.  Multiple offers on condos and houses continue to keep us busy and lenders on their toes. 4Front has expanded again adding a new full time in house underwriter to assist with our files.  We have a total of 16 brokers working with our clients to ensure financing is never a challenge.  Please ask us how our pre-approval process can benefit your clients who need to enter into a quick closing, or no subject offer. We can help in all types of situations, from bridge financing, refinancing, private financing, and all financing in between.

Rates Trending Sideways And Down

On Wednesday, the Bank of Canada left its prime rate unchanged as most economists predicted.  The bank is optimistic on the Canadian economy, expecting it to grow at a rate of roughly 2.5 percent, compared to 1.4 percent last year and 0.9 percent the year before. Bright spots in the economy include revised activity in the oil sands, small and medium size business investment and of course housing.  Notwithstanding this, there are still significant uncertainties ahead including the unknown U.S. economic policies with respect to NAFTA, and potentially overheated housing markets in Ontario.

At best, rates should remain unchanged until there is a clearer picture of the effects of these headline topics.  At some point the bank will increase prime rate, however this is likely at least a year away. In the meantime borrowers can still enjoy low fixed and variable rates, both of which have decreased over the last few weeks.  Please ask us for details on current rates anytime.

BC Home Equity Partnership Loan

We have seen significant numbers of applications for this program.  Buyers and Realtors should be aware that there is a fee of $560 charged by the provincial government to set up these loans which is payable by the borrower. With the extra legal fees involved to register the loan on title as well as higher mortgage insurance premiums, the merits of the program are still somewhat questionable.

Guest Post – More Complex Mortgage Rules Boost the Value of Mortgage Brokers

This post is brought to you by our friends at CLMS, highlighting the complicated nature of the mortgage market and the greater needs of homebuyers and homeowners alike to lean on the expert advice of a professional mortgage experts.

The last quarter of 2016 brought considerable change to Canada’s residential mortgage business. In October, the Department of Finance Canada announced new mortgage rules that have had a tempering effect on the market. Then, in late December, the Office of the Superintendent of Financial Institutions (OSFI) mandated a new capital framework for our three mortgage insurers. In the space of three months, our government has changed the rules of lending and borrowing, further complicating the residential mortgage world for Canadian homeowners.

Now borrowers must have their borrowing capacity stress-tested, not against the lender’s current mortgage rate offerings, but against a new qualifying rate, currently posted at 4.64% for insured high-ratio mortgages. This has reduced every homebuyer’s buying power. Some homebuyers who may once have qualified for a mortgage will now not qualify at all.

In addition, traditional lender funding mechanisms have changed, and low-ratio portfolio insurance premiums have increased. These changes have driven up interest rates for Canadian mortgage borrowers, some more than others. Since October, mortgage rates have gone up around 30-60 basis points with many lenders. This has created a double-whammy for the borrower – their purchasing power has gone down while interest rates have gone up.

For consumers, the recent changes represent a major step back, due to the new and far more complex mortgage pricing structures, product surcharges, risk and LTV-based surcharges and new qualification methodology. With these additional layers of complexity, it is doubtful that web-based direct-to-consumer or self-serve residential mortgage sites will be growing any time soon.

But all of these changes work to the benefit of professional mortgage brokers. Why? Because the more complicated the mortgage market gets, the greater the need for homebuyers and homeowners alike to lean on the expert advice of a professional mortgage expert.

Full-service mortgage brokers – the people who live mortgages every day as a sole source of income and are on top of the latest regulatory changes — can help homeowners navigate these increasingly complex waters. They understand the ins and outs of all the regulations; the strengths and weaknesses of the different financial institutions, from bank to non-bank lenders, trust companies to credit unions; and they look for a mortgage to suit the homebuyer, not the other way around. Mortgage brokers don’t work for lenders; they work for the homebuyer. So their advice is informed, unbiased and honest.

That’s why mortgage brokers have been getting a bigger share of the action over the last few years. As revealed in the 2016 CMHC Mortgage Consumer survey, “mortgage broker share of the market is trending upwards for renewers and refinancers, increasing from 21% in 2015 to 26% in 2016 for renewers, and from 33% in 2015 to 38% in 2016 for refinancers…. Market share is even higher among first-time buyers at 51%.”

Homebuyers and homeowners can trust a pro to explain what the new mortgage regulations mean to them, and what their options are so that they can make the most informed decision. A home is typically the biggest purchase people will make in their life. To buy a home without the insight of a professional, full-time mortgage broker just doesn’t add up. I’m proud to say that at CMLS Financial, we originate our business exclusively through the mortgage broker channel and we expect to see this channel continue to grow as a result of these most recent changes.

There was a time when car owners with some mechanical aptitude could perform general maintenance on their cars and only needed to visit their mechanic as a last resort. Then car engines became more computerized, and car owners no longer had the specialized tools and skills. Mechanics became more sophisticated and knowledgeable, and demand for their skills increased.

Today, the inner-workings of a mortgage in Canada is much like the inner-workings of a car engine. Better off in the hands of an expert.

Author: Dan Putnam, AMP
Senior Vice President, Business Development, Residential Mortgages, CMLS Financial Ltd

Knowing the Lingo – Key Terms for Your First Mortgage

The mortgage process can be overwhelming. Knowing the key terms that are part of it can help reduce confusion and help guide your first conversation with your mortgage broker.


Length of time over which the mortgage will be repaid.

Mortgage Term

Length of time that the mortgage contract conditions and interest rate is fixed.

Closing Costs

Costs in addition to the purchase price of the home that are payable on closing day. See the Process & Costs worksheets for more details.

Down Payment

The portion of the home price that is not financed by the mortgage loan. It must come from the buyer’s own funds or other eligible sources before securing a mortgage.


The difference between the price for which a home could be sold and the total debts registered against it.

Fixed / Variable Mortgage Interest Rate

A fixed rate is a locked-in rate that will not increase for the term of the mortgage. A variable mortgage interest rate can fluctuate based on market conditions, but the mortgage payment remains unchanged.

High-ratio mortgage / Conventional Mortgage

A high ratio mortgage is a mortgage loan higher than 80% of the lending value of the property. A conventional mortgage is a mortgage loan up to a maximum of 80% of the lending value of the property.

Open / Closed Mortgage

An open mortgage is a flexible mortgage that allows you to pay off your mortgage in part or in full before the end of the term. A closed mortgage, in some cases, cannot be paid off in whole or in part before the end of the term. In other cases, the lender may allow for partial prepayment of a closed mortgage in the form of an increased mortgage payment or a lump sum prepayment.

Break Penalty

If you break your mortgage contract early, likely if you choose to sell your home or refinance it, you will have to pay the lender a penalty called a break penalty (also called a prepayment penalty). The amount will depend on a variety of factors including whether you chose a fixed or variable rate mortgage, the terms of your contract, and how much time is remaining on your term.

New CMHC Premiums: 2 Steps Forward, 1 Step Back?

CMHC raised their insurance premium rates on January 17th, 2017. These new CMHC premiums are seen as a direct consequence of the regulatory changes that OSFI (Office of the Superintendent of Financial Institutions) implemented in October 2016. Those changes already had immediate impact to non-bank lenders in the industry:  from tougher lender requirements, higher rates for certain Canadians and for some lenders, or they just stopped lending resulting in fewer choices for Canadians.

The new capital requirements set out by OSFI were seen as a move to slow down hot markets within the county, mostly targeting Vancouver and Toronto. In simple terms the changes made lenders hold more capital to support the loans they give Canadians. If you are holding onto more money as a company, you can’t make money off it, so the ‘cost’ of doing business gets more expensive. One result to remedy this for the company is to raise rates.

Let’s focus on the Vancouver market.  In the last few months, the BC government has done a few things to improve affordability in the real estate market, particularly for first time buyers or the average home owner. This included raising the BC Homeowner Grant to $1.6MM from $1.2MM and the recently launched BC HOME Loan Program. Although some opinions differ on the effectiveness of these programs, most would generally agree that its two steps forward.

Back to the new CMHC premiums. As most agree that those were two steps forward, the same majority would agree that this is one step back for the affordability of home ownership. In their press release, CMHC advises that it should only increase the monthly payments by $5 a month. However, that’s based on an average mortgage of $245,000. In Vancouver, not many first time buyers or people look to move up the property ladder have a mortgage of $245,000.

Let’s use the example to couple together the two steps forward and one step back. Let’s say a first-time buyer is buying their first condo for $700,000 and will be using the BC Government’s HOME program. They’ve saved their 2.5% which the government will match, so they have a 5% “non-traditional down payment” who’s premium has jumped from 3.85% to 4.5%. You may be wondering what “non-traditional” means, well if you use the BC HOME program and your total down payment with the government’s money is only 5%, you pay an even higher insurance premium!

Purchase Price: $700,000
5% Down-Payment: $35,000 (remember BC HOME program loaned $17,500 of that)
Mortgage Required: $665,000
New CMHC Premium: $29,925
Total Mortgage: $694,925

Your total mortgage of $694,925 is pretty close to the purchase price! And these numbers don’t include your property transfer tax of $12,000 which will have to be paid for outside of the mortgage.

Oh, and don’t forget, you still owe the BC HOME loan repayment starting in five years’ time. Let’s factor that in: Your equity (purchase price less mortgage) is $5,075 on day one of your purchase (despite your $35,000 down payment) …. But in five years you’ll owe $17,500 to the BC HOME program.  If we include that in the equity calculation, well bad news for your equity …. It’s now a negative $12,425.

This is one view of the changes. Everyone’s goals and finances are different and the changes impact everyone differently. Working with a Mortgage Consultant takes the stress out of the process as they keep up to date with the changes and can access the majority of lending options in Canada. Let us make sure your two steps forward are bigger than any one step back.

Author: David Goodison

Holiday Hours

Our office will close for the holiday season Friday December 23rd at 12pm and will re-open for regular business hours Tuesday January 3rd. We look forward to seeing our clients, BDMs, and other business partners in 2017!