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Mortgage-Matters

Mortgage consolidation can help reduce costs and lower payments

Consolidating debt

Now is the perfect time to take a closer look at your financial situation and explore ways to reduce your borrowing costs.

If you're juggling high-interest credit card balances, car loans or personal loans, it can feel overwhelming to stay on top of multiple payments. Fortunately, if you’re a homeowner with sufficient equity in your property, consolidating your debt into your mortgage could be a smart move.

Five key benefits of debt consolidation

Lower interest costs – Refinancing your mortgage to consolidate high-interest debts can significantly reduce the amount of interest you pay over time. By securing a lower rate, you keep more money in your pocket.

Simplified payments – Instead of managing multiple due dates and varying interest rates, debt consolidation streamlines everything into one predictable monthly payment, making budgeting easier.

Improved cash flow – Reducing your overall monthly payment frees up funds for savings, investments, or other essential expenses, helping you regain control of your financial future.

Reduced stress – Late payments and mounting debt can be a major source of anxiety. Consolidation eliminates the hassle of multiple bills and helps you stay on track.

Potential credit score improvement – Making consistent, on-time payments is one of the best ways to boost your credit score. By consolidating debt into a structured payment plan, you can work toward better financial health.

Real-life example: How debt consolidation saved a homeowner $850 per month

A homeowner with a mortgage balance of $250,000 at 3.5% interest (25-year amortization) and carrying high-interest debt:

• Credit card debt: $25,000 at 19.99% interest

• Car loan: $30,000 at 8.5% interest (five-year term)

• Personal loan: $15,000 at 12.5% interest (five-year term)

Total monthly payments: $3,150

Refinancing the mortgage to consolidate debt

After reviewing their finances, we refinanced their mortgage to include their high-interest debts and the new mortgage amount was $320,000 ($250,000 existing mortgage plus $70,000 debt consolidation)

• New interest rate: 5% (current market rate)

• New amortization period: 25 years

• New monthly mortgage payment: $1,860

Savings Breakdown

Before consolidation, the total monthly payments were:

• Mortgage: $1,250

• Credit card: $500

• Car Loan: $615

• Personal loan: $785

Total: $3,150 per month

After refinancing, the new mortgage payment was $1,860, it lead to a monthly savings of $1,290. Even factoring in a potential increase in the mortgage rate from 3.5% to 5%, the homeowner was saving $850 per month.

Choosing the right debt consolidation strategy starts with understanding your options. If you’d like a personalized, confidential assessment of your financial situation, email [email protected] or schedule a call at calendly.com/april-dunn.

Let’s find the best path to financial peace of mind together.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





New rules for mortgages in Canada

Mortgage rules change

In September the federal government announced mortgage rule changes. Here’s a look at some of them. The changes went into effect on Dec. 15, 2024.

Increased insured mortgage cap

The maximum price for insured mortgages increased from $1 million to $1.5 million, which could open the doors for some buyers, although most likely only in higher priced markets. The rules for down payments will remain the same:

• 5% on the first $500,000 of the purchase price

• 10% on the portion between $500,000 and $1.5 million

For example, someone buying a $1.5-million home now requires a $125,000 down payment—which is much less than the $300,000 needed for an uninsured mortgage under the old rules.

Expanded 30-year amortizations

Eligibility for 30-year amortization on insured mortgages has been broadened to include all first-time homebuyers and purchasers of new builds, provided the loan-to-value ratio is 80% or higher.

The same criteria for first-time homebuyers applies such as not having owned a home in the last four years or having experienced a breakdown in a marriage or common-law relationship. These changes apply to all high-ratio mortgages on owner-occupied properties or those occupied by a close relative.

There are some possible downsides to these new rules such as higher cost of borrowings with the extended amortizations and paying more interest costs. Some have concerns that our short housing supply could lead to higher housing prices with these new measures.

New refinancing rules for secondary suites (effective Jan. 15)

Homeowners now have new opportunities to refinance their mortgages to add secondary suites to their homes. This change aims to boost housing availability and affordability.

Eligibility requirements

• Homeowners must already own the property.

• The homeowner or a close relative must live in one of the existing units.

• The additional units cannot be used as short-term rentals.

Financial parameters

• The property value must be less than $2 million.

• Homeowners can refinance up to 90% of the property value.

• The maximum amortization period is 30 years.

• Insured refinancing will be allowed for the purpose of building additional unit(s).

Legal units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.

Number of units: Maximum of four dwelling units including the existing unit.

There isn’t much clarity at this time about which lenders will be supporting the program, so stay tuned.

If you have any questions please email me at [email protected] or you can book a time here on my calendar

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Separating fact from fiction when it comes to reverse mortgages

Reverse mortgage myths

A reverse mortgage is a financial tool that empowers homeowners aged 55 or older to unlock up to 55% of their home's value as tax-free cash.

Unlike traditional home equity lines of credit or conventional mortgages, it offers the unique advantage of not requiring monthly mortgage payments as long as you reside in your home. With its growing popularity, it's crucial to separate fact from fiction and address common misconceptions surrounding reverse mortgages.

Myth: The bank owns your home

Fact: Retain control and title ownership of your home. You have the freedom to decide if and when you want to move or sell, granting you complete autonomy over your property.

Myth: You'll owe more than your home is worth

Fact: Clients can qualify for up to 55% of the appraised value of their home, with an average of 33%. Lenders adhere to conservative lending practices, ensuring that equity remains in the home when the loan is eventually repaid. Over 99% of reverse mortgage clients still have equity remaining in their homes after the loan is paid out.

Myth: Reverse mortgages are a last-resort solution

Fact: Many financial professionals now recommend reverse mortgages as a vital component of a comprehensive retirement plan. It offers unparalleled financial flexibility, enabling tax-free funds to extend the lifespan of retirement savings.

Myth: Existing mortgages hinder eligibility for reverse mortgages

Fact: Reverse mortgages can be used to pay off existing mortgages and other debts, freeing up valuable cash flow. Imagine the relief of eliminating regular mortgage payments and having more financial freedom.

In addition, it's important to understand two key points:

1. Homeownership: You maintain full ownership of your home as long as you fulfill your obligations of paying property taxes, home insurance, and keeping the property well maintained. You will never be forced to move or sell your home.

2. Government benefits: A reverse mortgage will not impact any government benefits you may receive, such as Old Age Security (OAS), Canada Pension Plan (CPP), or Guaranteed Income Supplement (GIS).

To determine if a reverse mortgage is a suitable option for you, take advantage of a no-obligation assessment. As a certified reverse mortgage expert and impartial mortgage broker, I can confidentially review all available mortgage options tailored to your unique circumstances. The assessment takes only 90 seconds, so please don't hesitate to email [email protected] or you can book a time for a chat here on my calendar.

By dispelling myths and gaining accurate information, you can make an informed decision about whether a reverse mortgage is the right choice for your retirement goals. Secure your financial future and enjoy the benefits of this valuable financial tool.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





Benefits of first-time home buyer programs

Help buying a first home

If you are a first-time home buyer, buying your first home is a very exciting time but it can also be stressful and you’ll have lots of questions.

You might be wondering about what programs are available to assist you with your home purchase.

Affordability remains a key challenge for first-time homebuyers but a variety of programs are available to provide support. Here is an updated overview of these initiatives:

First Home Savings Account (FHSA)

Launched in April 2023 following its announcement in the 2022 federal budget, the FHSA is a registered savings account designed to help Canadians save for their first home. With annual contributions capped at $8,000 and a lifetime limit of $40,000, this account offers significant tax advantages—contributions and investment income are tax-deductible and withdrawals for a home purchase are tax-free.

Home Buyers' Plan (HBP)

Since its introduction in 1992, the HBP has been a cornerstone program for first-time buyers. It allows individuals to withdraw funds tax-free from their RRSPs to put toward a home down payment. Initially capped at $20,000, the withdrawal limit has been periodically increased, with this year’s federal budget it rose to $60,000 per individual (or $120,000 for a couple). Repayments must be completed within 15 years, making the HBP a versatile tool for building home equity.

Land transfer tax rebates

First-time buyers in B.C. can benefit from rebates on land transfer taxes. These savings help reduce the upfront costs associated with purchasing a home, making it more attainable for new buyers.

First-Time Home Buyers' Tax Credit (HBTC)

Introduced in 2009, the HBTC provides relief from the expenses related to buying a home. In December 2022, the federal government doubled this credit, allowing eligible buyers to claim a non-refundable tax credit of up to $10,000. This equates to a $1,500 reduction in income tax payable.

GST/HST New Housing Rebate

This rebate offers savings on GST or HST paid for new-build homes, pre-construction purchases, or major renovations. The rebate amount varies based on the home’s purchase price, providing support for buyers pursuing new housing options.

With these programs, first-time buyers have access to a robust suite of tools to make homeownership more attainable. Whether saving for a down payment, reducing upfront costs, or receiving tax credits, these initiatives provide crucial support in navigating the housing market.

This will most likely be the largest financial transaction you will have in your life time so if you have questions please feel free to reach to me at [email protected] or you can book a time for a chat here on my calendar www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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