“New Year, new you” may be a cliché, but a new year really can get us thinking about where we are now and where we want to go. When it comes to your personal goals, a review of your finances and estate might be close to the top of your list. A little advance planning can go an incredibly long way to cover those you care about.

Your will outlines your assets and determines how they will be distributed, as well as who will oversee the process. Key components included in this document are:

• Guardians and alternates in case backups are required
• Up to date list of your significant assets and their location
• Beneficiaries and how much each receives, including charities and other organizations
• Alternates in case your named beneficiaries predecease you
• Planning to limit probate fees via insurance policies, trusts, or RRSPs for example
• Your executor who will carry out your wishes, or two or more co-executors can be named. Alternates are also listed
• Regular reviews are important as things change, births, deaths or marriages in your circle may mean your plan will need to evolve too

Another important (and often overlooked!) aspect of estate planning involves naming someone to make decisions for you should you become unable to do so due to injury or illness, whether temporary or otherwise.

If you have a mortgage, you’ll want to consider Mortgage Life and Disability Insurance alongside your will.

Manulife Mortgage Protection Plan (MPP) is portable life and disability insurance that helps protect your loved ones and your home should something unexpected happen to you.  It protects your family’s future by paying out your mortgage should one of the mortgage holders pass away. It also covers your mortgage payments while the claim is being adjudicated, so there is no added stress for a loved one at an already difficult time.

MPP also covers your mortgage payments and property taxes if you are unable to work due to an illness or accident.  Disabilities from sickness and accidents are unfortunately relatively common and will affect 1 in 3 borrowers at some point in the duration of their mortgage.

Mortgage insurance does insure a declining balance, but your payments can be reduced on request as your balance decreases as well.  Furthermore, MPP payments don’t increase as you age.

Unlike bank insurance, MPP is portable from lender to lender and property to property.  To ensure you have both coverage and the flexibility to transfer from lender to lender, a mortgage insurance product like MPP gives you that freedom to move.  Bank insurance policies are not portable across lenders, and switching insurers typically means increases to your payments.  As such, it’s best to begin with a portable insurance product, such as MPP.

Mortgage disability insurance will take care of your mortgage payments plus property taxes if you become disabled.

If you don’t already have sufficient coverage in place, reach out and I would be happy to show you how you can add MPP to your mortgage for free for the first two months of coverage while you compare other options.  There is no obligation to continue and no penalty to cancel at any time.

Coverage is subject to insurer approval, terms and conditions apply.

There are many facets planning for your future when you own property and finance it with a mortgage.  Regardless of property ownership, planning for the future ensures your estate and family will be provided for should the unexpected something happen.

As always, let me know if I can provide any further information, I’m always happy to help.

Adapted from DLC Marketing

Image Credit: Helena Lopes, Unsplash

Given it’s a leap year, the deadline to contribute to your Registered Retirement Savings Plan (RSP) for 2023 is technically extended by one day as the deadline lands on February 29^th, 2024.  For those who have both a mortgage and who contribute to Registered Retirement Savings Plans (RSPs), the two combined offer a simple strategy for retirement planning, debt management, and growing your property’s equity.

Leveraging the tax advantages of your RSP to reduce your taxable income through tax-deductible contributions is Step One. Step Two is using the resulting tax refund to make a lump-sum payment on your mortgage. Not only will this accelerate debt-free homeownership, but it can also save you thousands in interest payments over the life of your mortgage.

Aligning your RSP strategy with your mortgage payments can create a dual benefit. By consistently contributing to your RSP while making mortgage payments, you’re not only building home equity but also grows your retirement fund. Speaking with your financial planner and me on the mortgage side can help you formulate the plan that makes the most sense for you.  We are here to help you strike the best balance between debt reduction and wealth accumulation in alignment with your goals.  And if you don’t have a financial planner, I would be happy to make an introduction.

With the right RSP-mortgage strategy, you’ll be on the path to a more financially secure retirement while paying off your mortgage faster than you may have thought possible.

Feel free to reach out, I look forward to seeing how I can help.

The Bank of Canada held the overnight rate at 5% for the fourth consecutive meeting but provided an outlook suggesting that monetary easing will begin by mid-year. The Bank forecasts a soft landing for the Canadian economy, with inflation falling to 2.5% by the end of this year. While some economists predict a recession, the Bank suggests that “growth will likely remain close to zero through the first quarter of 2024” and “strengthen gradually around the middle of 2024.” This would be a soft landing.

While inflation ended 2023 at 3.4%, owing mainly to high and sticky shelter costs, “the Bank expects inflation to remain close to 3% during the first half of this year before gradually easing, returning to the 2% target in 2025. While the slowdown in demand is reducing price pressures in a broader number of CPI components and corporate pricing behaviour continues to normalize, core measures of inflation are not showing sustained declines.”

The press release says that the “Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.”  The Bank now believes the economy is in excess supply, inflation expectations and corporate pricing behaviour are moving in the right direction, and wage demands, at 5.4% year-over-year in the last reading–are still too high. Wages are a lagging indicator and with job vacancies returning to pre-pandemic levels, wage pressures are likely to dissipate as the year progresses.

The tone [is now] was much more optimistic, suggesting that policymakers are increasingly confident interest rates are restrictive enough to bring inflation back to the 2% target. Still, Bank officials want to see more progress on core inflation before it begins to ease. It said, “The Bank’s preferred measures of core inflation have been around 3½-4%, with the October data coming in towards the lower end of this range.”

The central bank focuses on “the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour” and remains resolute in restoring price stability.

Bottom Line

This was a more upbeat Bank of Canada statement. There is a good chance that monetary tightening has done its job, and inflation will trend downward in the coming months. As we have seen, the road to 2% inflation is bumpy, but we are heading there probably sooner than the Bank expects. As predicted, they are staying the course for now, but multiple rate cuts are likely this year. The scheduled dates for announcing the policy rate are March 6, April 10, June 5 and July 24. The Bank of Canada will begin cutting the overnight rate somewhere in there.

For now, my bet is on the June meeting, but if I’m wrong, it will likely be sooner rather than later. Once they begin to take rates down, they will do so gradually, 25 basis points at a time, and over a series of meetings. We could well see rates fall by 100-to-150 bps this year. Risks to the outlook remain, as always.

I do not expect the overnight policy rate to fall as low as the pre-Covid level of 1.75% this cycle. Inflation averaged less than 2% in the five years before COVID-19, depressed by increasing globalization and technological advances. Those forces are now reversed.

Many Canadians consider downsizing during their retirement years. Once their children have left the nest, the choice seems obvious: relocate to a smaller residence or a more affordable town and capitalize on the price difference. For many retirees, the funds from the sale of their home can significantly impact their overall lifestyle and financial well-being.

However, there are costs of downsizing to be aware of when reviewing your options.

Downsizing in Canada: A Cost Analysis

The cost of moving is an important factor to consider when deciding whether to downsize. The following is a cost analysis for a typical downsizing scenario using an example of selling a home for $1,000,000 and buying a condo for $700,000.

The money from the sale of your home could have a meaningful impact on your retirement finances.  Theoretically, these transactions would free up $300,000 in equity while moving into a smaller home. But how much of would you get to keep? Below is an estimated list of associated downsizing costs:

The following are estimates and can vary by provider and region:

Downsizing costs could add up to between $72,175 – $94,875; and $300,000 of equity could be reduced to $205,125 after costs on the high end.

The following may also add to downsizing costs:

• Home Improvements: Before selling, homes often need upgrades, from simple fixes to major renovations like kitchens or roofs. Also, many invest in staging their homes.
• Belonging Decisions: Downsizing sometimes requires storage expenses for items that don’t fit in your new home.

An Alternative to Downsizing in Canada: The CHIP Reverse Mortgage 

The CHIP Reverse Mortgage by HomeEquity Bank offers an alternative to downsizing allowing you to potentially unlock up to 55% of your home’s equity.  These funds are tax-free and would allow you to staying in your home without leaving your community. Retirement finances can be improved, and funds can be directed to renovations or retrofitting your home for accessibility and livability as you get older. With no required monthly mortgage payments to make, the CHIP Reverse Mortgage is a popular solution.

Contact me to learn how a CHIP Reverse Mortgage can help you save on downsizing and potentially support your retirement.  I’m always happy to help.

Adapted from DLC Marketing

Image Credit: Nick Karvounis Unsplash

We Canadians are no strangers to the chill of the winter season. Double-checking your list of home-winterizing to-do’s could help you save on bills, prevent future repair costs, and be more comfortable all winter long.  Here are eight items to keep on that cold-weather list to button up each winter:

1) Inspect Your Fireplace: There is no better time to have your fireplace inspected to ensure optimal efficiency and heat output. Whether you have a wood-burning, gas, or electrical fireplace, proper maintenance can go a long way on your heating bill.

2) Maintain Your Furnace: While you’re having your fireplace inspected, why not have them inspect your furnace?  When it’s time, replacements are often more efficient than those of the previous generation, which will likely help save on energy costs.  Either way, ensuring your furnace is in working order will guarantee top output and a cozy winter.

3) Clean The Gutters:  Cleaning your gutters from fall leaves and other debris will help ensure proper drainage for melting snow. To go the extra step, consider gutter guards. These can help keep out unwanted objects, and look tidier on gutters you may see from above, such as those lining decks.

4) Examine Your Roof: If you’re not snow-bound yet, while you’re prepping your gutters, examining the roof is a good idea. Shingles, flashing, and ventilation should all be checked and repaired where necessary.  Staining from water damage should especially be addressed.

5) Consider a Programmable Thermostat: According to experts, a one-degree drop in your home temperature can measure up to 1% on your heating bill. Smart thermostats are a great way to keep warm and optimize your energy savings. Ideally, you’ll want to set your thermostat to turn up in the morning, turn down when you go to work, and back up in the evening just before returning home to ensure a warm welcome.

6) Insulate Windows: Always be sure to check your windows for any gaps or water leakage and get them resealed as soon as possible. If you live in a particularly cold location, consider swapping out your windows to double-paned glass for an added layer of insulation. Another tip to keep the cold from seeping in is swapping out your curtains for a heavier, thermal-lined set which can do wonders.

7) Check Your Pipes: Checking pipe joints for leaks that could cause rot and damage will save you trouble in the future. Repair any cracks you find, especially those around electrical outlets and alarm system lines. You can also consider foam pipe insulation, which is fairly easy to install and could help prevent energy loss and potential water damage from frozen pipes.

8) Stock Up on Supplies: There are a few things you might want to consider stocking up on ahead of time for the winter season, such as flashlights and batteries, ice melt, extra pet food and canned goods, and an emergency storm kit that includes an extra flashlight, candles, portable radio, water, and snacks.

With a little preparation, you can keep your home in good shape and stay cozy all winter long.

As always, if you or someone you know needs mortgage information, feel free to reach out, I’m always happy to help.

Adapted from: DLC Marketing

Image Credit: Nachelle Nocom Unsplash

The end of your mortgage term brings opportunities you might not be aware of.  Yes, signing to renew your mortgage with your existing lender is easy, typically requiring just a signature.   And applying to switch your mortgage does entail 1) completing a new mortgage application and 2) providing all the required documents to verify your financial position.  But considering the potential benefits, it’s worth taking a look at what might be available to you and starting the conversation in advance.

Get a Better Rate

Are you aware that when you receive notice that your mortgage is coming up for renewal, this is the best time to shop around for a more favourable interest rate? At renewal time, it is easy to shop around or switch lenders for a preferable interest rate as it doesn’t break your mortgage. Interest rates are expected to come down as we move into the New Year.  Taking some time to reach out to me and shopping the market could help save you money, and help you make the most of the equity you may have in your property.

Consolidate Debt

Renewal time is also a great time to take a look at your existing debt and determine whether or not you want to consolidate it onto your mortgage. For some, this means consolidating your holiday credit card debt into your mortgage, for others it could be car loans, education, etc. Regardless of the type of debt, consolidating into your mortgage allows for one easy payment instead of juggling multiple loans. Plus, in most cases, the interest rate on your mortgage is less than you would be charged with credit card companies.

Start on that Renovation or Buy Another Property

Do you have projects around the house you’ve been thinking of completing? Renewal time is a great opportunity for you to look at utilizing some of your home equity to help with home renovations for that dream kitchen, updated bathroom, or you could even utilize it to purchase another property.

Change Your Rate Type, Add a Home Equity Line of Credit, Reduce Your Payments

Looking to change your existing mortgage ? Perhaps you’re finding that your variable-rate or adjustable-rate mortgages are fluctuating too much and you want to lock in.  Alternatively, maybe you’d like to switch to a variable rate as interest rates start to level out. You can also utilize your renewal time to take advantage of a different payment or amortization schedule to help pay off your mortgage faster, or alternatively, to reduce your payments.

Change Your Lender

Perhaps a different bank has a lower rate or a mortgage product with better terms for you. A mortgage renewal is a great time to switch to a different bank or credit union if your needs have changed.

Regardless of how you feel about your current mortgage and what changes you may want to make, if your mortgage is coming up for renewal within the next year, or if you simply have questions, please don’t hesitate to reach out.  I’d be happy to discuss your situation and review any changes that would be beneficial for you to reach your goals; from shopping for new rates or accessing the equity in your home to cover expenses or investments.  Together we can review your options now and set you on your path for future financial success.

Adapted from DLC Marketing

Image Credit: Nine Kopfer, Unsplash

It was widely expected that the Bank of Canada would maintain its key policy rate at 5% for the third consecutive time. It will continue to sell government securities (quantitative tightening) to normalize its balance sheet. Market participants weighed and measured each word of the BoC press release and assessed that the Bank took a less hawkish stance.

This time, the release said, “Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year. Exports and inventory adjustment subtracted from GDP growth in the third quarter, while government spending and new home construction provided a boost. The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly. Even so, wages are still rising by 4-5%. Overall, these data and indicators for the fourth quarter suggest the economy is no longer in excess demand.”

At the prior meeting in late October, the Bank said that the labour market remained “on the tight side” but acknowledged today that it was loosening. Indeed, the October Monetary Policy Report suggested that the inflation rate would not hit its 2% target level until late 2025.

Today, the tone was much more optimistic, suggesting that policymakers are increasingly confident interest rates are restrictive enough to bring inflation back to the 2% target. Still, Bank officials want to see more progress on core inflation before it begins to ease. It said, “The Bank’s preferred measures of core inflation have been around 3½-4%, with the October data coming in towards the lower end of this range.”

The central bank focuses on “the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour” and remains resolute in restoring price stability.

Bottom Line

Bond yields peaked in early October and have fallen by nearly 100 basis points. This has led to reductions in fixed mortgage rates; however, those cuts have been far less than historical experience would have suggested, given the rally in 5-year government bonds.

Cuts in variable mortgage rates await a reduction in the overnight policy rate, which triggers a commensurate decline in the prime rate, which is currently stuck at 7.2%. I expect the BoC to begin cutting the policy rate by the middle of next year, taking it down a full percentage point to 4% by year-end.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

Image Credit: Sasan Hezarkhani Unsplash

The current economic landscape can be challenging for young Canadians to navigate as they face great uncertainty with heightened interest rates and inflation. It can be frustrating as they are just starting to build their career, considering buying a home or starting a family. If you are a parent, you may be thinking about how you can help your child during this period. The CHIP Reverse Mortgage by HomeEquity Bank is a sound financial solution that can help you support your loved ones by providing a tax-free gift.

The Gift of Early Inheritance 

As a parent, you may want to provide an early inheritance to see your adult children use the funds to improve their lives in a time of need. By giving an early inheritance, you can avoid probate fees (estate administration tax) and save money by bringing you to a lower tax bracket*. With an early inheritance, your children can pay for their wedding, start a business, pay off student loans, make a down payment on their home, and much more. Speak to your tax specialist for more details.

How the CHIP Reverse Mortgage Works

You may have heard of using a home equity line of credit (HELOC), or liquidating investments to gift an early inheritance. There are disadvantages associated with loss of investment earnings or taxes when selling investments. The CHIP Reverse Mortgage by HomeEquity Bank allows you to unlock up to 55% of the equity in your home without any of these challenges. With the CHIP Reverse Mortgage, your investments remain intact, and no monthly mortgage payments are required. Therefore, your income is not affected, and best of all, the money you get from the CHIP Reverse Mortgage is tax-free!

If you want to provide a tax-free gift to your children, contact me for details on how the CHIP Reverse Mortgage by HomeEquity Bank might be a help you.

*HomeEquity Bank requires all clients to receive independent legal advice to review the mortgage contract and ensure they fully understand the terms and conditions.

Adapted from HomeEquity Bank’s February 16, 2023 Publication

Image Credit:  Jon Tyson, Unsplash

Today’s inflation report showed a continued improvement, mainly due to falling year-over-year (y/y) gasoline prices. The October Consumer Price Index (CPI) rose 3.1% y/y, down from the 3.8% rise in September. There were no surprises here, so markets moved little on the news. Excluding gasoline, the CPI rose 3.6% in October, compared to 3.7% the month before.

The most significant contributors to inflation remain mortgage interest costs, food purchased at stores, and rent.

Canadians continued to feel the impact of rising rent prices, which grew faster (y/y) in October (+8.2%) than in September (+7.3%). The national increase reflected acceleration across most provinces. The most significant increases in rent prices were seen in Nova Scotia (+14.6%), Alberta (+9.9%), British Columbia (+9.1%) and Quebec (+9.1%).

Property taxes and other special charges, priced annually in October, rose 4.9% yearly, compared with a 3.6% increase in October 2022. The national increase in October 2023 was the largest since October 1992, with homeowners paying more in all but one province, as municipalities required larger budgets to cover rising costs. Property taxes in Manitoba (-0.3%) declined for the third consecutive year, mainly due to reduced provincial education tax.

While goods prices decelerated by -1.6% as prices at the pump fell, prices for services rose 4.6% last month, primarily driven by higher prices for travel tours, rent and property taxes.

While grocery prices remained elevated, they also continued their trend of slower year-over-year growth, with a 5.4% increase in October following a 5.8% gain in September. While deceleration continued to be broad-based, fresh vegetables (+5.0%) contributed the most to the slowdown.

Excluding food and energy, inflation fell to 2.7% in October, down a tick from the September reading. Two other inflation measures closely tracked by the Bank of Canada–the so-called trim and median core rates–also eased, averaging 3.6% from an upwardly revised 3.8% a month earlier.

Bottom Line

According to Bloomberg calculations, another critical measure, a three-month moving average of underlying price pressures, fell to an annualized pace of 2.96% from 3.67% a month earlier. It’s an important metric because Bank of Canada Governor Tiff Macklem has said policymakers are tracking it closely to understand inflation trends.

Today’s news shows that tighter monetary policy is working to bring down the inflation rate. In its Monetary Policy Report last month, the Bank of Canada expected the CPI to average 3.5% through mid-2024. Cutting its economic forecast, the Bank forecasted it would hit its 2% inflation target in the second half of 2025.

Given today’s data and the likely significant slowdown in Q3 GDP growth, released on November 30, and the Labour Force Survey for November the following day, policy rates have peaked. Governor Tiff Macklem will give a speech on the cost of high inflation in New Brunswick tomorrow, and the subsequent decision date for the Governing Council is December 6th. The Bank’s inflation-chopping rhetoric may be relatively hawkish, but the expectation of rate cuts could spur the spring housing market.

The economists at BMO have pointed out that “three provinces now have an inflation rate below 2%, while only three are above 3%, so much of the country is already seeing serious signs of stabilization. (Unfortunately, the two largest provinces have the fastest inflation rates—Quebec at 4.2% and Ontario at 3.3%).” There is no need for the Bank to raise rates again, and they could begin to cut interest rates in the second quarter of next year.  

Your mortgage renewal is an opportunity to optimize long term interest savings and address current cash flow.  Some of the items to explore as you evaluate your options include:

Fixed vs. Variable Rates:

• Assessing your risk tolerance: Fixed rates can provide stability, while variable rates fluctuate. However, fixed rates can come with their own inherent risk: penalties. Depending on the lender and the direction rates are trending, the penalty on fixed rate mortgages can vary widely.
• Reviewing the current economic climate: Rates are forecasted to come down, making variable rates more attractive again to those with a comfort with relying on those forecasts in making rate decisions.
• Variable rate payment options: Not all variable rate mortgages work the same way. Some have fixed payments, and some have payments fluctuating with the prime rate.  Both have implications as rates move and each should be considered against interest rate forecasts and personal perspectives when making a selection.
• Consider Term Length: Forecasts may influence how long of a term you select at renewal as well.

Adjusting Payments:

• Exploring flexible payment options: The ability to adjust your payment frequency or making lump sum payments should align with your financial goals, future opportunities and potential rate climate as it evolves.
• Considering budget changes: If your financial situation has evolved or will be in the future, adjusting your payments accordingly can be a strategic move. From adjusting payment frequency to changes in amortization, you may have multiple options to choose from to address your budget and future plans.

Consolidating Other Debt:

• Evaluating high-interest debt: Use the renewal as an opportunity to consolidate high-interest debts into your mortgage. This can simplify payments and potentially save on interest.

Selecting a New Lender or Staying With Your Current One:

• Weighing your options: Never settle for your lender’s first offer without exploring your options with me first ensuring you’ve received personalized advice tailored to your unique situation as interest rate forecasts shift.

Your mortgage renewal is not just an exercise in paperwork; it’s a chance to align your mortgage now with your financial goals. Considering these factors, interest rate forecasts, and your future plans can pay off both in the short and long term.  Reach out today with any questions you may have, I’m always happy to help.

Image: Joshua Hibbert on Unsplash