Dave Sohal

Canada’s housing market is closely monitored by the government and financial institutions to ensure that it remains stable and sustainable. However, remembering what all the “major” institutions are can be  tedious (and boring, let’s be honest). So, we have compiled a list for you! 

Canada Mortgage and Housing Corporation (CMHC)

The Canada Mortgage and Housing Corporation, or CMHC for short, is like the Beyoncé of the Canadian housing market - they're everywhere, and everyone knows their name. But don't be fooled by their celebrity status - the CMHC is much more than just a pretty face.

As Canada's national housing agency, the CMHC plays a vital role in ensuring that Canadians have access to safe, affordable housing. They provide mortgage insurance to lenders, help fund the construction of affordable housing, and offer a wide range of resources and information to help Canadians make informed decisions about buying, renting, or renovating their homes.

But that's not all - the CMHC is also a trailblazer in the world of housing research and innovation. They conduct groundbreaking studies on everything from housing affordability to energy efficiency, and they work with industry leaders and government officials to develop policies and programs that benefit all Canadians.

Office of the Superintendent of Financial Institutions (OSFI)

The Office of the Superintendent of Financial Institutions, or OSFI for short, is like the superhero of the Canadian financial industry - they're always swooping in to save the day and keep our economy on track. But don't be fooled by their capes and tights (or lack thereof) - the OSFI is a serious organization that plays a crucial role in keeping our financial system safe and sound.

As an independent agency of the federal government, the OSFI is responsible for regulating and supervising financial institutions across Canada. They work to ensure that banks, insurance companies, and other financial entities are operating in a safe and sound manner, and that they are meeting the needs of their customers and shareholders.

But the OSFI is more than just a regulator - they're also a champion of financial literacy and consumer protection. They provide information and resources to help Canadians make informed decisions about their finances, and they work to prevent fraudulent and abusive practices in the financial industry.

Bank of Canada (BOC)

Ah, the Bank of Canada - the granddaddy of all Canadian banks. If Canada's economy was a royal family, the Bank of Canada would be the wise, old patriarch, dispensing wisdom and guidance to the younger members of the family.

As the central bank of Canada, the Bank of Canada plays a vital role in our economy. They're responsible for monetary policy, which means they control the supply of money in the country, set interest rates, and keep inflation in check. Basically, they're the ones pulling the strings behind the scenes, making sure our economy stays on track.

But the Bank of Canada is more than just a bunch of number-crunchers - they're a team of superheroes, working tirelessly to keep our economy safe and stable. They're like the Avengers of the Canadian economy, each one with their own superpowers. The Governor of the Bank of Canada is like the Captain America, leading the team with his unwavering sense of duty and justice. The economists are like the Tony Starks, using their brilliant minds to analyze the data and come up with the best solutions. And the support staff are like the Black Widows, working quietly behind the scenes to make sure everything runs smoothly.

But the Bank of Canada isn't just a bunch of nerdy economists and bean counters. They're also responsible for producing the coolest, most valuable pieces of paper in Canada - the banknotes. From the holograms to the security features to the fancy portraits of our greatest Canadians, the Bank of Canada banknotes are like works of art that fit in your wallet.

So the next time you're out spending your hard-earned cash, remember to thank the Bank of Canada. Without them, our economy would be like a ship without a rudder - lost at sea, with no direction or purpose. With the Bank of Canada on our side, we can all rest easy knowing that our economy is in good hands.

Canada Revenue Agency (CRA)

This is a federal agency responsible for administering tax laws and collecting taxes. The CRA provides tax credits and incentives for homebuyers and landlords, and also monitors compliance with tax laws related to real estate transactions.

Some might describe it as the "tax man" of Canada, but that wouldn't do the CRA justice. The CRA is much more than that. It's the watchdog that ensures everyone plays by the rules when it comes to taxes. It's the guardian that ensures all Canadians pay their fair share, whether they are wealthy CEOs, middle-class families, or independent contractors. It's the enforcer that makes sure businesses and individuals alike file their taxes on time, and without any funny business. In short, the CRA is the linchpin of the Canadian tax system.

But the CRA is more than just a tax-collecting entity. It's a wealth of information, too. The agency provides Canadians with valuable resources and tools to help them navigate the complexities of the tax system. From online calculators to publications and webinars, the CRA is there to help Canadians stay informed about their tax obligations and rights.

Statistics Canada (Stats Can)

Statistics Canada is the government agency responsible for collecting, analyzing, and disseminating all sorts of data and statistics about Canada. They are like the Canada Post of numbers, delivering facts and figures to the doorsteps of Canadians everywhere.

Need to know how many Canadians are using public transportation? Statistics Canada has got you covered. Want to find out how many people in Canada are working from home? Statistics Canada has the data. Curious about the average number of cups of coffee consumed by Canadians each day? Yep, you guessed it - Statistics Canada has the stats. Additionally, Statistics Canada provides important data on housing starts, building permits, home prices, and other indicators of the health of the housing market.

But Statistics Canada is more than just a number-crunching organization. They are the keepers of Canada's story, documenting the country's growth and evolution over time. They provide valuable insights into the social, economic, and environmental changes that shape our country, and help us understand where we've been, where we are, and where we're going.

Provincial and Territorial Governments

In addition to federal agencies, provincial and territorial governments also have a role in regulating and monitoring the housing market. They may set their own policies related to land use, zoning, building codes, and rent control, among other issues.

For any non-Canadians who may be reading this, Canada has 10 provinces and 3 territories. The 3 territories are Yukon, Northwest Territories, and Nunavut. Unlike provinces, the territories exercise delegated powers set by the Parliament of Canada; this is largely because of the small population in these regions. 

CENTUM Financial Group

How could we forget about the most important alphabet soup institution – CENTUM! Why worry about finding a needle in a haystack when you can have one of our mortgage brokers find you the best rate in a sea of options?

But seriously, if you are looking for a mortgage or just have a notepad full of questions, we are happy to help! Reach out to a member of our team today!

Did you know that 27% of Canadian mortgage-holders allow their mortgages to automatically renew without a second thought? Yeah, you heard that right! That’s a significant number of Canadians who are missing out on opportunities to maximize their financial situations.

Let’s deep dive into mortgage renewals today and talk about the areas that will benefit you, the borrower.

What is the difference between short term and long term mortgages?

Short term mortgages are terms less than 5 years. The shorter your term, the sooner you will need to renew your mortgage or refinance. Shorter-term mortgages allow you to opt for fixed or variable interest rates, and you can take advantage of a lower interest rate when you sign up. If you are expecting a major life change soon (i.e., selling your house), a short-term mortgage will be the better option to avoid paying substantial prepayment penalties.

Long term mortgages are terms greater than 5 years. They are a good option to consider if you want to keep the conditions of your current contract for an extended period. However, you are typically restricted to a fixed interest rate, but this could be a good thing if interest rates are low! Additionally, you’ll pay a substantial prepayment penalty if you sell your home within the first 5 years of the term. That is why you should consider your life events for the next 5 years.

Before choosing a mortgage term period, consider:

(1) Are you planning to pay off your mortgage early?

(2) Are interest rates expected to increase? Decrease?

(3) What are the best rates and conditions available?

(4) Do you foresee any major life changes occurring soon? Selling your house? Moving? Downsizing? Etc.

These are all factors that will determine if you should go with a long term or shorter-term mortgage.

Okay, but what are the benefits of a mortgage renewal?

Mortgage renewals are a great opportunity to negotiate the terms of your current contract without needing to reapply for financing. Conditions may include the term length, interest rates, payment frequency, additional charges or fees, etc. Some benefits include:

Lower interest rates: By negotiating, you may be able to secure a lower interest rate on your mortgage, which can lead to significant savings over the life of the loan.

Reduced monthly payments: A lower interest rate can also result in lower monthly payments, giving you more money to put towards other expenses.

Better terms and conditions: Negotiating your mortgage renewal can also give you the opportunity to negotiate better terms and conditions, such as a shorter amortization period or the inclusion of a prepayment option.

Flexibility: Negotiating your mortgage renewal can also give you more flexibility with your mortgage, such as the option to break your mortgage early without penalty or to change the type of mortgage you have.

Building Relationships: Negotiating with your lender can also help you build a relationship with them, which can be beneficial if you ever need to renegotiate or refinance in the future.

If your mortgage renews automatically with your current lender, you may not get the best interest rate and contract conditions. For example, lower interest rates = more money in your pocket!

Borrowers are given a 120-day window to renew their mortgage

Typically, your current mortgage lender will send you a renewal slip 30 days before your mortgage term’s maturity date (expiration). However, you can start negotiating as early as 120 days before the maturity date. Beginning the process early will allow you and your mortgage agent to shop around and ensure you have all the paperwork ready, so you’re not left scrambling at the last minute.

At minimum, allocate at least 3 weeks to complete the mortgage renewal process. This will ensure all the paperwork is in place for your next mortgage term. However, beginning the process early will allow your mortgage agent/broker to shop around for the best rate and/or negotiate conditions with your current lender. Ideally, you do not want to be stuck with your current lender with a less than optimal rate for your next term.

What happens if I forget to renew my mortgage?

Some mortgages may have an option for automatic renewal, but it's not a common feature. In most cases, mortgages will not renew automatically, and the borrower will need to actively renew their mortgage by either agreeing to new terms and conditions with their current lender or by applying for a new mortgage with a different lender.

If a mortgage has an automatic renewal option, it typically means that the lender will automatically renew the mortgage at the end of the term, with the same interest rate and terms as the original mortgage, unless the borrower chooses to opt-out.

In the event your mortgage is not automatically renewed for another term, you would be faced with a couple options:

(1) Pay off the entire mortgage principal in cash

(2) Refinance with another lender

(3) Sell your home to pay off the mortgage principal

Should this occur, applying for a new mortgage or talking with your current lender to renew for another term would need to occur as soon as possible.

Conclusion

Just because it's easier and quicker to renew with your current lender, it doesn't mean it's always the best option. It's always a good idea to shop around and compare rates and terms from multiple lenders to ensure that you are getting the best deal possible.

Reach out to us today! At CENTUM, we’re here to help maximize your financial goals and mortgage needs.

We get it. Extra fees, premiums, varying interest rates are annoying. What do they even mean? What is their role in a mortgage? Today let’s break down the concept of insured mortgages, a.k.a. CMHC premiums.

What is a CMHC insured mortgage?

An insured mortgage is a mortgage that is protected by CMHC insurance. The insurance protects the lender, not the borrower, in the off chance there is (1) a default on the loan, (2) payments are no longer being made, and/or (3) there is a shortfall once the property has been sold.

In Canada, mortgage insurance is provided through the Canada Mortgage and Housing Corporation – a federal government crown corporation. So, when you see “CMHC insurance” or “insured mortgage,” just know they are both the same concept through the same organization.

The goal of the CMHC is to make housing more affordable for Canadians by providing funding, knowledge, research, and expertise. One method they utilize to make housing mor affordable is by offering a required 5% minimum down payment on properties less than $500k.

When is an insured mortgage required?

CMHC insured mortgages are required on all properties with a down payment of less than 20%. Why? Because you are borrowing a larger sum of money to finance the property, it helps protect the lender in the case where you are no longer to continue paying the mortgage. However, the minimum down payment required varies depending on the value of the property.

• If the property costs less than $500,000, you need a minimum down payment of 5%
• If the property costs more than $500,000, you need a minimum down payment of 5% on the first $500,000 and 10% on the remainder
• If the property costs more than $1M, CMHC insurance is not available. This means that you will need a down payment of at least 20% on these properties.

What are some parameters of a CMHC insured mortgage?

The CMHC mortgage insurance premium you pay depends on the down payment. As of 2022, here is the premium based on the property’s loan-to-value:

• Up to and including 65% – 0.6% standard CMHC purchase premium
• Up to and including 75% – 1.7% standard CMHC purchase premium
• Up to and including 80% – 2.4% standard CMHC purchase premium
• Up to and including 85% – 2.8% standard CMHC purchase premium
• Up to and including 90% – 3.1% standard CMHC purchase premium
• Up to and including 95% – 4% standard CMHC purchase premium

Additionally, if your mortgage is insured through CMHC, the maximum amortization period allocated is 25 years. However, if you go with an uninsured mortgage, you can have an amortization period of up to 30 years.

To qualify for CMHC mortgage insurance, your total monthly housing costs cannot exceed 32% of your gross (before-tax) household income. Meaning, if your combined household income is $100k, housing costs cannot exceed $32k; roughly $2666 per month.

Finally, for residential mortgages in Canada, you can only have one homeowner CMHC-insured mortgage at a time. This means that you cannot get a second CMHC-insured mortgage for a second property – like a rental or vacation home.

Conclusion

The idea of paying a premium on your mortgage can be scary. However, mortgage insurance is great for individuals and households looking to enter homeownership with a smaller budget. With CMHC insurance, you only need to save up 5% for a down payment if the value of the property is less than $500k. Or it’s great for those looking to begin homeownership sooner than they thought!

CENTUM is here for you! Reach out to us today and let’s get chatting about your mortgage options.

Benefits of a Mortgage Pre-Approval

A mortgage pre-approval is the process of confirming an individual’s creditworthiness prior to having a mortgage purchase contract in place. It is the initial process that qualifies an individual for a loan based on the information they have provided – i.e., credit, debt, employment history, and income. It indicates to sellers that you are eligible to obtain financing and acts as a financial security blanket when home shopping.

A pre-approval is your secret weapon if you are house shopping. A pre-approval indicates to the seller your intentions, financial stability, and creditworthiness to purchase the property. It gives you a competitive advantage! It’s like entering the job market with a degree. While not necessary, it does give you the upper hand in some instances.

Documents Required for a Pre-Approval

Getting prepped for your mortgage pre-approval can be a time-sensitive process, that’s why it is best to start early! Once you’re done, you’ve completed most of the heavy lifting required on your part. Here’s what you need to prep:

• Identification
• Proof of employment
• Proof of financing for the down payment and closing costs
• Information about other assets such as vehicles, rental properties, vacation homes, etc.
• Information about personal debts and financial obligations (i.e., level of debt)

Once your pre-approval has been approved by a lender, you will be provided a pre-approval letter. Pre-approval letters are valid for 60, 90, or even sometimes 120 days depending on the lender, and are subject to continued good credit. This is because an individual’s financial profile can change substantially within this period, and many lenders aren’t willing to risk a prospective borrower dropping off beyond this point.

Once you have been approved, here is what you should be looking for in the pre-approval letter:

• Pre-approved mortgage amount
• Home price – the maximum price you can afford
• Pre-approval expiry date
• Mortgage type – amortization, term, LTV ratio

A mortgage pre-approval does not guarantee interest rates. In your pre-approval letter, the quoted interest rate provided is known as a ‘floating rate.’ Meaning, the rate is variable and will move with the market. You are eligible to lock in an interest rate once your mortgage has been finalized with the lender. This can be beneficial because once you move towards securing a traditional mortgage, you’ll still have time to negotiate interest rates and switch lenders if needed.

Give Me the Pre-Approval Tips…

Getting multiple pre-approvals can damage your credit score. Why? Lenders run a hard credit check prior to approving an applicant. Resultingly, hard inquiries can decrease an individual’s credit score by several points as it indicates a person’s need to obtain financing for debt. This can be a red flag for potential future lenders.

But here’s a tip moving forward. If you apply for financing through multiple mortgage lenders within 14 days or less, it will only show up as one singular hard inquiry on your credit report. Don’t wait multiple weeks to compare financing options, do it all at once!

What is a Mortgage Pre-Qualification?

A mortgage pre-qualification is a step below a pre-approval. A pre-qualification is an estimate of the dollar amount an individual can potentially be approved for by a lender. It is not the most accurate representation, as it does not account for an individual’s credit report. However, a pre-qualification is a good indicator if you are casually shopping around and/or planning to purchase in the future. It gives you the ballpark estimate you could be approved for, and you’ll have peace of mind knowing you can afford a home at a given price.

A mortgage pre-qualification is less tedious than a pre-approval or typical mortgage. You’ll need to supply your Mortgage Broker with information regarding:

• Income
• Debt
• Tax Records
• Proof of Assets
• Basic details about your bank accounts

Okay, But What is the Main Difference?

Let’s simplify it… a mortgage pre-qualification gives you a ballpark dollar amount estimate for what you can afford. It doesn’t really mean much to the seller, it is more beneficial to you, the buyer. A pre-approval is the more prominent option and is the “shiny, flashy” document that sellers are looking for.

Basically, let’s assume pre-approvals and pre-qualifications are like Facebook Marketplace. Assume you are shopping for a dresser. In your mind, you have a general budget in mind for the dollar amount you are willing to spend – this is like your pre-qualification. You browse Facebook Marketplace and barter with a couple of sellers before securing a dresser with the best seller. This is like the pre-approval process – you go back and forth with lenders before deciding on which lender to partner with. P.S. – a Mortgage Broker can make this process easier.

Obtaining a mortgage in Canada is relatively easy for foreigners and newcomers to the country because there are very few restrictions that limit foreigners from purchasing a property. In fact, the homebuying process is like the one that Canadian citizens follow! Let’s take a look…

You do not need to be a Canadian citizen to purchase property in Canada

If you are a permanent resident of Canada, or a foreign student or worker working towards permanent residency, you are eligible to buy and own property in Canada. You will need to comply with immigration requirements if you are extending your stay or becoming a permanent resident.

Note: To ease the hot housing market in Canada, Justin Trudeau’s liberal administration has placed a ban on foreign homebuyers in Canadian markets. Currently, the ban is in effect from 2022-2024. Only foreigners with permanent Canadian residency, or foreign students or workers working towards permanent residency are exempt from the ban.

Canada is one of the few countries where non-citizens can qualify for a Canadian mortgage

If you are a newcomer looking to purchase a home in Canada, you can qualify for a Canadian mortgage – often at the same interest rates as Canadian citizens. No need to seek international lending approval from your home country or other countries. In fact, you actually cannot seek mortgage financing through an international lender, it will need to be completed within Canada.

What types of properties can you purchase as a non-Canadian citizen in Canada?

There are very few limits to foreign homebuyers in Canada. You are eligible to purchase condos, townhomes, houses, commercial properties, acreages, farms, etc. However, you are exempt from purchasing multi-unit residential properties (properties with 6+ units).

What documents are required to secure a mortgage in Canada?

If you are a newcomer to Canada looking to purchase a home, you will need to provide these documents to secure a mortgage:

• Permanent resident status
• Proof of income
• Employment history
• Down payment
• Credit check
• Bank reference letter

Employment History: Some lenders may require a two-year Canadian employment history record. This provides proof that you can obtain and hold a steady job in Canada. Plus, it provides a window to build a Canadian credit history. However, some banks (A lenders) may waive this requirement if a larger down payment is made.

Down Payment: The minimum down payment requirement in Canada is 5%. However, for newcomers to Canada the down payment requirement may be raised to 20% of the homes purchase price. For newcomers without two-years of Canadian work experience, the down payment may increase to 35% of the property purchase price.

Credit Check: When you come to Canada, building your Canadian credit is important to secure a mortgage. The sooner you begin building Canadian credit, the higher chance you have at being approved by a lender. Notably, your credit score is not immune to international debts. While it is costly for lenders to pursue international debts, it is possible.

Bank Reference Letter: Newcomers without two-years of Canadian employment may need to reach out to their previous international bank to obtain a reference letter to secure a mortgage in Canada. This allows lenders to examine the individual’s financial history, should they have a limited credit history in Canada.

If you leave Canada, you do not need to sell your property

Should you leave Canada, you are not required to sell the property you purchased here. You buy it, you own it for as long as you wish. If you leave, you could consider turning the property into a rental property for passive income!

Follow the typical home buying process!

The Canadian Mortgage and Housing Corporation (CMHC) is a Crown Corporation owned by the Government of Canada that strives to improve Canadian’s access to housing. The CMHC released a fantastic step-by-step guide on purchasing your first home in Canada as a newcomer. You can access it here: //assets.cmhc-schl.gc.ca/sf/project/cmhc/pubsandreports/pdf/66144.pdf?rev=ca92f6ab-a98d-487b-9a36-4f7381b9d727

Conclusion

As a newcomer to Canada, you follow a similar process as Canadian citizen to obtaining mortgage financing. The only difference? You need to establish Canadian specific employment and credit history (not just international) to secure a mortgage; or put up a larger down payment.

Note: In some countries, owning property can help speed up the immigration status. Unfortunately, this is not the case in Canada. You will still need to follow all immigration processes and policies to obtain permanent residency and/or Canadian citizenship.

If you are a foreigner or newcomer wishing to purchase a home in Canada, reach out to our team today! We can help you begin your mortgage process and answer any question along the way.

In times of high interest rates, don't discount Rent-To-Own

What is Rent-to-Own? Rent-to-Own (RTO) is an agreement between a landlord and tenant in which the tenant agrees to rent the property for a certain period and has an option to buy before the lease expires. It’s essentially a hybrid approach to owning a property. You get to experience the property for a period before committing to a purchase.

In an RTO agreement, the buyer pays the seller a one-time upfront fee, known as an option fee, option consideration, or option money. The fee is the factor that gives the buyer the option to purchase the property in the future. Option fees usually range between 1% - 5% of the property purchase price.

In some cases, a percentage of the rent may be put towards the purchase price of the property. It is important to ask this question prior to signing the agreement. Additionally, with some rent-to-own contracts, the potential buyer may be responsible for maintenance and repairs.

Rent-to-Own Comparison

Remember the days of Blockbuster or movie rental stores? Wow, I miss those. Anyway, rent-to-own agreements are kind of like move rental stores. Here’s how:

1. You go to Blockbuster to rent a movie. The movie represents a property in this scenario.
2. You liked the movie so much that you kept it past the agreed upon duration, resulting in you paying a late fee. The late fee would represent the RTO option fee.
3. You continued to watch the movie and didn’t want to return it. Blockbuster may offer you the option to purchase so that you own the movie. You agree. This would be like the final transaction in an RTO agreement.

The only difference is that in an RTO agreement, the option fee and option to purchase are typically discussed upfront prior to rental lease beginning.

Benefits of Rent-to-Own Agreements

RTOs are a great option to build up a person’s income, credit score, and down payment before committing to a mortgage. Additionally, you get to fully experience the property before purchasing. During the rental period you may discover significant maintenance costs, renovations, upkeep items, etc. that could deter you from purchasing.

When is Rent-to-Own a Viable Option?

When interest rates are high, rental leases aren’t affected by interest rate fluctuations and payments remain consistent. During the rental period, the potential buyer can budget accordingly and continue saving for a down payment and mortgage.

Conclusion

Rent-to-own agreements aren’t for everyone, but they are a great option for individuals looking to purchase a property in the future. An RTO agreement would help secure a property, which would be a great thing when the market is hot, and properties are selling above asking.

If you have any questions about RTO agreements, contact your local CENTUM office today!