Can I Help My Child Buy Their First Home? Sharing a Mortgage in 2021

First time homebuyers are experiencing one of the most legendary housing markets in existence right now. 

If you’re in the market to sell your home, this could very well be the best time to do so! However, if you’re trying to buy a home, the narrative changes instantly. 

The price of homeownership is no longer comparable to even a decade ago! Not only are houses going over asking, leaving anxious first time homebuyers with stacks of declined offers, but the initial asking price in itself is quite intimidating.

You can imagine how difficult this must be for our younger generation. With the financial demands of school loans and a sheer lack of savings, it’s no wonder there’s a considerable struggle for first time homebuyers. Add the peaking housing market and skyrocketing asking prices to the list and the opportunity for homeownership becomes almost nonexistent for these young people.

Is there a way for parents to help their child purchase their first home, without going into debt themselves?

What’s involved in giving your child a boost towards homeownership?

As parents, we want to see our children succeed. To reach their goals and even to reach the goals that we had at their age. And it’s only natural for us to want to support their ambitions in the best way we can. 

In order to help our children make that first step into the real estate market, there are two strategies to choose from: 

1. Gifted Down Payment – You sign a letter for the lender stating the funds are a gift and are not required to be paid back at any time. 
2. Co-signing the Mortgage – You assume a shared legal responsibility, agreeing to repay the mortgage if your child is unable to do so.

But before making the decision to give or co-sign, it’s important to consider what this financial commitment might mean for your own financial wellbeing, your family dynamic, your child’s level of commitment and the long-term effects of the agreement. 

4 Tips To Sharing a Mortgage With Your Child

Supporting your child’s homeownership dreams and giving them a leg up in the current housing market is a beautiful and compassionate objective, but is it a realistic one? 

1. Don’t Forget About Your Own Financial Responsibilities and Constraints.

The first consideration you should have when debating whether to support your child financially is to ensure that your own finances aren’t going to take a hit. After all, your first responsibility is to your own financial security. 

Consider what kind of help you can realistically afford without creating financial stress or tension in your own life. 

For example, if you loan the money and it is never repaid, will it affect your own financial security? 

Can you afford to give the money, and if so, how much?

Ensuring that you are stable in your own finances is not only necessary right now, but down the road it could potentially save your child the money it would take to support you in the future (ie. nursing home care, medical bills etc.)

2. Consider Family Dynamics.

Family dynamics are incredibly important to consider as well, if you are considering aiding in financial support. Why? Because this large gift (whether being repaid or not) could create tension, jealousy or even rivalry between other family members who did not get that same support. 

Consider these questions:

1. Are there other siblings or other family members to consider? 
2. Will there be an issue of fairness that you need to manage?

3. Ensure That Your Child Understand The Extent Of This Financial Responsibility. 

Homeownership involves more than just a monthly mortgage payment. There’s heat, hydro, insurance, cable, internet, taxes, and of course the repairs and upkeep.

Owning a house is an incredible achievement, but it is also a large responsibility. 

Before you offer your child financial support, consider whether they’re ready for the financial responsibility of owning a house. You might be able to help them pay the initial down payment or mortgage, but can they support the rest?

4. Consider Property Law If Your Child is Sharing The Home With a Partner. 

Does your child share, or plan on sharing, their home with a partner? If so, there are some protections that need to be put in place. 

For example, should your child’s relationship end, you may discover that 50% of the money you put into the house investment goes completely to your child’s partner as part of a settlement agreement. 

If this is a concern for you, be sure to get in touch with a real estate lawyer in order to discuss what protections you may be able to put in place before funding.

Get In Touch With our Mortgage Experts In Quinte and Peterborough

Your child is preparing to embark on an important financial journey and you want to do your best to help get them on the right path.

The best place to begin? With sound, expert advice! 

Does your child want to begin their first time homebuyers adventure someday? Help them now by teaching them to make healthy financial habits early on. Have them get in touch with The House Team for access to the best mortgage rates and clear-eyed, common-sense advice - the earlier the better!

Our team is here to connect you with the right lenders for your first time homebuyers mortgage needs.

Contact our mortgage experts at 866-559-5016 or book your Mortgage Appointment HERE.

6 Financial Fitness Tips To Get You Back On Track In Fall 2021

Somehow, our long-awaited summer has turned into fall - Happy September!

And with the end of summer comes our back-to-regular-life routines. Although these systematic activities might look slightly different this year, it is such a relief that some of our pre-pandemic normalities are coming back!

As we head back to in-person events, offices and brick and mortar schooling, there is a definite and noticeable optimism that we may be moving towards the end of this pandemic era.

Are you a goal setter, an organizational enthusiast or simply looking to focus this school year on healthy intentions that benefit your life and budget? Fall time has always been a great time to get back into the swing of things - including your financial fitness! And 2021 might just be the most important year ever to put these healthy financial activities in motion.

Keep reading for practical finance tips from our finance experts at The House Team. We can help make sure that your finances are fit this fall - and that they stay that way! Providing you with the flexibility and intentionality you need to reach your goals.

1. Splurge...Just a Little!

You might be thinking, “why is spending money included in this list?”. Well, over the last year, many of us dealt with difficult, and unexpected, challenges and stressors. Ones that we didn’t even know could exist - including not having the freedom to see our loved ones.

Now that we are beginning to emerge from that very difficult season, we all want to live a little! To experience some of that spontaneous adventure and enjoy our lives more fully.

Essentially, we all want to live a little - and that’s okay! In fact, it’s expected. However, we encourage you to do this strategically, in order to not break the bank.

Example: Maybe have some celebratory days with a set amount that you can spend where you go out and do the things you’ve really missed (ie. going to the movie theatre!).

2. Revisit (Or Establish) Your Realistic Budget!

Having a budget is one of the most important ways to achieve a solid financial future - that goes without saying! It might not be the most thrilling task, but it’s one that will give you a clearer picture of where you stand and how much you can (or should) truly spend. You’ll also be able to determine how much money you can allocate to your “live a little” fund!

When you begin preparing your budget, it’s important to first take a new look at your monthly bills. Go through them line by line. You may have signed up for services you very rarely use or, perhaps, don’t even remember requesting.

What To Look For In Your Monthly Bills:

• Small, unexplained charges.
• Fees.
• Add-ons.
• Services that you can now live without.

3. Maintain a Good Credit Score.

Your credit score is essentially your passport to financial opportunities! It can mean the difference between getting approved or denied for any kind of credit and can prevent you from getting the lowest mortgage rate.

The good news, however, is that you have a lot of control over your credit score! That’s why it’s important to always have “good credit behaviours”.

3 Ways To Maintain a Good Credit Score:

1. Paying your bills on time.
   The biggest contributing factor to having a good credit score is a timely bill payment history. Meaning, never letting a bill go past the set due date.
    
2. Never requesting more credit unnecessarily.
   A limit increase request can hurt your credit score, especially if you don’t have a long credit history.
    
3. Keeping your credit card balance low.
   Know your credit limits and try not to use more than 30% of the available amount!

We also recommend not applying for store cards in order to save on your purchase that day. And, before you decide to cancel a credit card, always ask for expert financial advice.

4. Focus On Your High-Interest Debt.

If you find that your debt is increasing your stress, debilitating your opportunities and preventing you from reaching your goals, it’s time to make a change!

If you have enough home equity, you may be able to move that debt to your lower-rate mortgage.

Benefits Of Transferring Your Debt To Your Lower Rate Mortgage:

• You could save thousands of dollars in interest.
• You could have one lower monthly payment that greatly improves your cash flow.
• You can experience reduced financial stress.  

PRO TIP: Always keep an eye on your high interest debt and pay down your credit cards as much as possible in order to avoid further debt ensnarement in the future.

5. Spend Time, Not Money.

We can all agree that, over the past year, individuals have gained a new appreciation of being able to spend time with loved ones in person. The value of this time has drastically increased!

Focusing on spending time, instead of money, may keep you from spending what you might not have or might not want to spend.

6. Help Others.

Although this pandemic allowed the world to pause, reflect and re-evaluate - all healthy things - it also caused mass panic, fear, stress and unexpected financial loss.

There are many that weren’t very fortunate during the pandemic. Consider committing some money to help give back, support and encourage  – ie. donate to charities, support local shops, tip restaurant workers etc.

The House Team Can Help You Maximize Your Financial Fitness This Fall

Are you ready to start this year off strong? It’s time to get back in control of your finances! The House Team can help you maximize your financial fitness, build wealth and reach your goals.

Get in touch with your knowledgeable mortgage broker from The House Team today and learn how you can start working out your finances and attaining your financial goals. Call us today at (866) 559-5016!

In Canada, there are two main types of mortgage rates - a fixed rate and a variable rate - and  both have their own pros and cons. Understanding the difference between these two types of mortgage rates can be daunting - especially when you aren’t very familiar with the terms - however it is extremely important for homebuyers and homeowners to understand their mortgage rate options BEFORE making a financial commitment.

How do you know which mortgage rate is best for you, your budget and your goals?

The House Team in Belleville, Ontario, is focused on making the mortgage process as simple and straightforward as possible. This season, we’re seeing aggressive pricing for variable rate mortgages, while fixed mortgage rates continue to be at historically low levels. We frequently conduct research on which type of mortgage is best for today’s uncertain environment in order to properly advise and direct each of our clients.

Which is best for today’s uncertain environment? Let’s find out!

What is a Fixed Rate Mortgage?

If you choose a fixed-rate mortgage, you will know with absolute certainty what your interest rate and mortgage payment will be each month for the entire term of your mortgage. This often offers stability and peace of mind - especially for first time home buyers, those on a tight budget or those who haven’t owned a home in quite some time.

Since a fixed rate mortgage is not affected by fluctuating interest rates, you can essentially "set it and forget it".

What is a Variable Rate Mortgage?

If you choose a variable rate mortgage,  your interest rate will fluctuate with your lender’s Prime Rate, which in turn tracks the Bank of Canada’s overnight rate - expressed as “prime minus x percent.” 

If the Bank of Canada increases or decreases its rate, you will likely see this change reflected in your monthly mortgage payment. Since it can be difficult to predict what kind of increases and decreases are ahead of us, a variable-rate mortgage is best suited to people who have a flexible budget and can tolerate a higher risk.

What Is Prime Rate?

Haven’t heard this term before? Don’t worry!

Prime rate refers to the ‘reference rate’ that banks use as the lowest commercial interest rate charged at that time. Yesterday the prime rate was 2.45%.

It’s important to note here that the prime rate is actually used to calculate the variable rate mortgage, as it acts as the base percentage amount.

The prime rate is reviewed 4 times per year and has not changed in 2 years...however the possibility of it fluctuating still exists.

Which is Better in 2021 - Fixed Rate or Variable Rate?

It’s important to consider the many “what if” scenarios that could happen over the term of your mortgage. Right now, and in today’s intense housing market, variable rate offers are very compelling - causing the housing demand to be at some of the highest levels ever seen.

Benefits of Fixed Rate Mortgages:

• “Set it and forget it”
• Releases budget stress 
• Provides financial stability 

Benefits of Variable Rate Mortgages:

• Historically speaking, variable rates are usually less expensive over the term (approximately 5 years).
• Variable rate is usually lower than the fixed rate.

But it’s not just about the rate…

If you decide to break off your mortgage prior to the end of your term, you will be charged. This charge is called a prepayment penalty. If you are in a fixed rate mortgage, this penalty is the greater of three months interest OR interest rate differential (IRD), the greater of the two. If you are in a variable rate mortgage, the penalty is only three months interest.

If your circumstances change (whether you are accessing equity or refinancing at a lower interest rate) and you need to get out of your mortgage, you will appreciate the much lower penalty to get out of a variable rate vs. a fixed rate mortgage.

Note: Approximately 2/3 people with fixed mortgages do actually end up breaking their mortgage prior to the end of the term.

Most variable rate mortgages will allow you to exercise an option to “lock in” a fixed rate with zero penalties when the time is right to switch over to a fixed-rate mortgage. At this point, you can also set up your mortgage payments at what they would be if you took the higher fixed rate, which helps you pay down your mortgage faster and creates a financial buffer for you if interest rates rise later.

With inflation concerns on the horizon, the Bank of Canada may raise the overnight rate sooner than expected, which will affect those in variable mortgages. While most economists agree that no one can predict what will happen with inflation as the economy continues to reopen, it is a continual unknown.

Refinancing Your Mortgage With a Fixed or Variable Mortgage Rate

As mentioned above, it is possible to refinance with a fixed or variable rate mortgage, however both have their penalties.

Refinancing With Fixed Rate Mortgage:  3 Months Interest OR Interest Rate Differential (IRD), the greater of the two

Refinancing With Variable Rate Mortgage: 3 months interest

Bottom line is to always get advice; the best choice depends on your specific situation.

You Can Trust The House Team in Belleville, Ontario With Your Mortgage Needs

If you are looking to purchase, renew, or refinance your mortgage in order to get today’s low rates, or for debt consolidation, get in touch with The House Team! We will discuss your specific situation and help determine the best mortgage option for you moving forward.

Recent Mortgage Rule Changes In Ontario 

Keeping up to date with the new mortgage rules in Ontario can be challenging, but thankfully our mortgage experts in The House Team share everything you need to know regarding your mortgage needs.  

There had been speculation that the government would act to cool the hot housing market, however the industry saw only modest measures in the April 19th federal budget. A national annual tax on foreign-owned properties that are left vacant or under-occupied was announced, which will take effect in 2022. This will only apply to "non-residents" to discourage offshore buyers.

New Stress Test

The budget referenced the recent announcement by the Office of the Superintendent of Financial Institutions (OSFI), which is proposing a new stress test rate for uninsured mortgages of 5.25%, effective June 1st. 

This is higher than the current 4.79% and, going forward, will no longer be based on bank posted rates. It will be set a minimum of once per year by OSFI.

What is the stress test?

When getting a new mortgage, lenders must ensure that you pass a stress test, which means that you can handle payments at a certain qualifying rate. This is not the same rate as your actual contract rate, it's for mortgage qualifying only.

Why June 1st Matters

Uninsured mortgages (i.e. when you have more than 20% equity) approved before June 1st are not subject to this tougher stress test, so qualifying will be slightly easier. 

This applies to purchases that close after June 1st with a signed purchase and sale agreement. As a result, if you are thinking of refinancing in order to get a lower rate, for debt consolidation or a purchase with more than 20% down, it's a good idea to get in touch with our mortgage team so we can discuss your situation in depth. 

What about high-ratio mortgages (i.e. less than 20% down)?

This stress test has not changed but it is certainly possible that it may also become slightly tougher at some point. If you are looking to purchase, get a pre-approval so you are house shopping within your budget and have rate protection. 

It's important to purchase when you are financially ready and not be driven by market conditions.

 The House Team is here to help! If you have questions about your mortgage, whether existent or upcoming, please let me know!

Contact Our Office at (866) 559-5016!

8 Tips You Won't Get From Your Bank

If you’ve got a mortgage – or plan to get one this year – you probably know that it’s more complicated than it used to be just a few short years ago. That said, I have many tips and strategies that can help you get the mortgage you need, tweak the one you have, or help you plan for renewal. Here are my top eight:

ONE: To get the best deal, you need options. When you go to your bank, you’re talking to one lender. Their best deal might not be THE best deal. It’s also difficult to qualify at a bank if you are self-employed, have past credit issues or finding the stress test a challenge. Credit unions, alternative and private lenders are increasingly helping people get into new homes or refinance their mortgage.

TWO: Best-rate quotes are often meaningless. Mortgage rule changes have thrown mortgage pricing up in the air. Your actual rate depends on a whole slate of factors, which is why you can only get an accurate rate quote after an in-depth assessment of your personal situation.

THREE: The devil is in the details. People tend to focus on rate, but you can save thousands by making sure you get a mortgage that has fair penalties, allows you to prepay, and ensures you will also be treated fairly at renewal. Don’t end up paying exorbitant fees, or be forced to take a high rate at renewal.

FOUR: An insured mortgage might be a smart move. If your mortgage is “uninsured” and you want to switch to a new lender for a better rate at renewal, that lender will qualify you using a “stress test”, which may affect your ability to move your mortgage, and giving your lender no incentive to offer you the best rates. It’s possible that you can switch your mortgage to a lower-rate insurable mortgage that has more flexibility.

FIVE: A 30-year amortization can give you wiggle room on cash flow. A longer amortization (20% or more in equity required) allows you to minimize your mortgage payments and free up cash flow for uses like investing, business needs, postsecondary education, maternity leave, home maintenance, or other life situations. You can keep your payments at a shorter amortization and only use this flexibility if the need arises.

SIX: Monitor your credit score. The best rates go to borrowers with the best credit scores. Lenders are also paying closer attention to any warning signals that clients may have trouble paying their mortgage. If your credit slips and your lender feels your risk has increased, you may be offered a higher rate at renewal.

SEVEN: A rental suite can be a sweet mortgage helper. A home with a rental suite could help you buy a single-family home instead of a condo, get you into that neighbourhood you love, or help you offset mortgage payments in the house you’re in so you can become mortgage free sooner or have the freedom to channel money into other areas.

EIGHT: Plug your biggest money leak. If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to your lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties!

Make sure your mortgage strategy is working for you and helping you build wealth. Get in touch for a review of your situation. 

Book Your Mortgage Appointment Today

Simply put, it’s become a lot more complicated to renew a mortgage in Canada.

Some clients are surprised to discover they don’t qualify for the best rates with their current lender, or that they can’t switch their mortgage to a new lender for a better rate. Our advice? Start preparing early. Here’s why:

New accounting rules called IFRS 9 (IFRS stands for International Financial Reporting Standard) will cause lenders to pay closer attention to any warning signals that clients may have trouble paying their mortgage. As a result, if your lender feels your risk has increased i.e. perhaps your credit score has slipped, they may then offer you a higher rate at renewal, even if you have never missed a payment. Good news – download my MOPOLO app to monitor your credit score monthly!

Do you have an “uninsured mortgage”? If you want to switch to a new lender for a better rate, that new lender will need to qualify you using the new .”stress test”, which may affect your ability to move your mortgage, and giving your lender no incentive to offer you the best rates at renewal. I can help you understand your options. One of the things we’ll look at is whether we can switch your mortgage to a lower-rate insurable mortgage: a move that could offer huge savings over the long term. Not sure if your mortgage is insured or not? I can find that out for you.

Mortgage rate trends. While fixed rates are higher today than they were a year ago, many lenders are offering exceptionally low rates on their variable rate mortgages. In addition to offering the ability to save on interest, a variable mortgage can be significantly less expensive to get out of should you need to.

It’s critical that you work with a mortgage expert who has access to more than 50 different lending options, including credit unions that aren’t subject many of the same rules. So as soon as you hear from your lender about your mortgage renewal, get in touch! Or let’s have a conversation about credit improvement tips or discuss the potential impact of changes in your personal situation like reduced household income.

The Bank of Canada announced today that it is keeping the overnight rate unchanged as they monitor the evolution of NAFTA negotiations and the outlook for inflation.

Household debt levels are improving, the housing market is stabilizing, and business investment and exports are “growing solidly”. The Bank noted that higher rates will be warranted but they “will continue to take a gradual approach.” The next rate-setting day is October 24th.

Get in touch if you have questions about your mortgage plan, or if you need a new mortgage, are renewing, or are looking to refinance for debt consolidation, renovations or other large expenditures. It’s very important to work with an experienced professional who knows the right questions to ask to assess your situation and provide the direction you need to achieve your homeownership goals and save money over the long term. Good advice early saves time and stress!

We regularly receive short-term rate promotions that are not posted online, which means our rates change frequently. Please contact us for these unpublished rate specials.

View current Ontario mortgage rates here: Mortgage Rates