10 Weeks Down and the Money is Running Out

Latest News David Cooke 21 May

10 Weeks Down and the Money is Running Out

We all know that you should keep 3-6 months of savings for an emergency.  Money experts encourage us to do this in case something unforeseen happens. An Ipsos Reid survey in the fall of 2019 found that 48% of respondents were $200 away from financial insolvency.  How did Canadians get into this situation. In the 1970’s and 80’s we were tied with Japan at about 10% of our yearly earnings. Now we save about 4.1% . How did this happen?  The cost of housing has gone up over the past few decades. Housing used to take up30- 35% of annual gross income. It now consumes 45-50% of Canadian’s gross annual income. Another problem is spending beyond your means. Until about 5 years ago, Canadians didn’t believe in “keeping up with the Joneses”. We bought items or took vacations when we had saved enough to afford them. Now we buy on credit to receive instant gratification.

yycmortgage Now we are 10 weeks into a pandemic. Many people have not been working or are on reduced salaries. If you found ends hard to meet before they are even harder now. Federal and provincial programs are helping but some people including seniors living on pensions are falling through the cracks.

How can a mortgage professional help? We spent the first 2 weeks guiding home owners through the mortgage payment deferral process. 500,000 homeowners took advantage of the programs offered by the banks and other lenders. Now , they need money to put food on the table , pay utilities , and other expenses.

There are a number of things that we can help you to do.

Refinance your home

If you have enough equity , we can refinance  your home and pull out a lump sum that you can use to live on and pay your bills. If you have over 20% equity in your home this is a possibility. We can also extend your amortization to 30 years from 25 which will lover our payments. Worried about having to pay your mortgage for an extra 5 years? When this is over you can just take advantage of the pre-payment privileges on your mortgage and increase your monthly payments so that you can pay it off in 25 years.

Consolidate your Debts

We can take your present mortgage and either refinance to pay off all your higher interest debts or set up a Home Equity Line of Credit (HELOC) . This is a line of credit secured against your home. Because it’s secured the interest rate is low. Presently most lenders are offering 3.45%  on helocs. Lowering your payments can help you to keep from over-extending your credit.

Lower your other Monthly Payments

If you are leasing a car or have a car loan, we have a division at Dominion Lending Centres who can take your present car loan/lease and lower the payments. An extra $300 a month during these crazy times might be all you need to keep your head above water.

Early Renewal of your Existing Mortgage

Depending on when you started your mortgage you may be able to get a more competitive rate now which will save you 1000’s of dollars over the next term. Let me see if paying a payout penalty and starting your mortgage renewal early is a good option for you.

Government Programs

You may not be aware of all the government programs that have been introduced over the past 3 months. Call me and we can look at what programs you may qualify for.

You can contact David Cooke, your Calgary mortgage broker, at 403-836-1201

How to Safely Buy a Home in Calgary and Obtain Financing

General David Cooke 13 May

How to Safely Buy a Home  in Calgary and Obtain Financing

It may be hard to understand but there are still people out there buying homes, renewing mortgages and refinancing their homes to increase cash flow. How could they and why would they want to mix with strangers in these uncertain times?

Well, until March 14th , most places in North America were starting their busy spring housing market. People had given notice in January and February that they were not going to renew their leases and had made offers on new and existing homes. Many people were also shopping for rates as their mortgages were coming up for renewal. Who knew that the world was about to come crashing down on their heads.

Modified full appraisal Modified full appraisal

The housing industry had to make accommodations in order to help these people out.  If you had an accepted offer on a house, how could you obtain a mortgage without meeting a mortgage professional ? Fortunately we had the technology to help us out. Mortgage applications can be taken online or over the telephone and have been for several years. The big change has been signing a mortgage commitment. Lenders now allow us to have mortgage documents signed using an electronic signature.

If you had not made it that far in the house buying process, realtors have also made a number of changes to limit contact. Obviously sellers are not happy with having strangers walking through their homes and touching door knobs and other items. “RECA, the real estate Council of Alberta is encouraging realtors to ask a series of health questions before realtors arrange to show homes” says Julie Pinault of Royal Lepage Solutions in Calgary. “Think of a property as a museum and don’t touch anything” she adds.

“Open Houses have been cancelled for the foreseeable future” says Rebecca Yarmoloy of ReMax First. Homes can be first viewed using websites and if you are seriously interested in a property.”

Some realtors are going even further. Lionel Sale from Frist Place Realty states that buyers meet the realtor at the property. The sellers are encouraged to turn on all the lights and leave doors and closets open so that no one will touch any surfaces that could spread the virus. Some sellers are leaving disposable gloves by the front door.

If a home needs an appraisal, what can you do? Appraisers need 45 minutes to examine a property from top to bottom in order to establish a proper value for the home.  Once again, adaptations have been needed. For bungalows, the appraiser will go to the windows around the home and take photos. Other appraisers are   using 3rd party technology to do their jobs. They will Facetime or WhatsApp the client and have them walk around the house they way they normally would in order to do a full inspections. This is called a Full Modified Appraisal.

Finally, we get to the end of the process and you need to sign all the mortgage documents with the lawyer or notary. At this time, “wet” signatures are still needed. E-signatures are not allowed which poses a problem for social distancing. Another solution has been found. The home buyers go to the lawyer and go into a room with a copy of the mortgage documents. The lawyer sits in the next room using video conferencing or Zoom and goes over his copy of the documents, telling the buyers where they need to sign and explaining any parts of the contract they may not understand. When the clients leave, the lawyer goes into the signing room and picks up the signed copy to be registered at the title office.

From beginning to end in the home buying , refinancing and renewal process, it’s now possible to obey social distancing rules and accomplish your home financing goals.

If you need any further information please feel free to contact me. At 403-836-1201

David Cooke has been a mortgage broker since 2005 and presently works for Jencor Mortgage Corp, situated in Calgary, Alberta

Bank of Canada Puts The Economy on Life Support

General David Cooke 7 May

Bank of Canada Puts The Economy on Life Support

Bank of Canada Stands Ready To Do Whatever It Takes

On the heels of a devastating decline in the Canadian economy, the Bank of Canada is taking unprecedented actions. With record job losses, plunging confidence and a shutdown of most businesses, this month’s newly released Monetary Policy Report (MPR) is a portrait of extreme financial stress and a sharp and sudden contraction across the globe. COVID-19 and the collapse in oil prices are having a never-before-seen economic impact and policy response.

The Bank’s MPR says, “Until the outbreak is contained, a substantial proportion of economic activity will be affected. The suddenness of these effects has created shockwaves in financial markets, leading to a general flight to safety, a sharp repricing of risky assets and a breakdown in the functioning of many markets.” It goes on to state, “While the global and Canadian economies are expected to rebound once the medical emergency ends, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it. The recovery will also depend on how households and businesses behave in response. None of these can be forecast with any degree of confidence.”

“The Canadian economy was in a solid position ahead of the COVID-19 outbreak but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April, some six million Canadians had applied for the Canada Emergency Response Benefit.”

“The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.”

Today’s MPR breaks with tradition. It does not provide a detailed economic forecast. Such forecasts are useless given the degree of uncertainty and the lack of former relevant precedents. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1%-to-3% in the first quarter of this year and will be 15%-to-30% lower in the second quarter than in Q4 of 2019. Inflation is forecast at 0%, mainly owing to the fall in gasoline prices.

“Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.”

The Bank of Canada, along with all other central banks, have taken measures to support the functioning of core financial markets and provide liquidity to financial institutions, including making large-scale asset purchases and sharply lowering interest rates. The Bank reduced overnight interest rates in three steps last month by 150 basis points to 0.25%, which the Bank considers its “effective lower bound”. It did not cut this policy rate again today, as promised, believing that negative interest rates are not the appropriate policy response. The Bank has also conducted lending operations to financial institutions and asset purchases in core funding markets, amounting to around $200 billion.

“These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank.”

The Bank of Canada, in its efforts to provide liquidity to all strained financial markets, has, in essence, become the buyer of last resort. Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market. It will increase the level of purchases as required to maintain the proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40%, effective immediately.

The Bank announced new measures to provide additional support for Canada’s financial system. It will commence a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment-grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.

The Bank will support all Canadian financial markets, with the exception of the stock market, and it “stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.”

This is exactly what the central bank needs to do to instill confidence that Canadian financial markets will remain viable. These measures are a warranted offset to panic selling. Too many investors are prone to panic in times like these, which has a snowball effect that must be avoided. As long as people are confident that the Bank of Canada is a backstop, panic can be mitigated. The Bank of Canada deserves high marks for responding effectively to this crisis and remaining on guard. Governor Poloz and the Governing Council saw it early for what it is, a Black Swan of enormous proportions.

As a result, Canada will not only weather the pandemic storm better than many other countries, but we will come out of this economic and financial tsunami in better condition.

Dr. Sherry Cooper

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres