What is it?

Although not directly tied to mortgages, the Land transfer tax is an important cost and consideration for all home buyers when purchasing a property. In Ontario, when you purchase (or acquire) land or any form of real estate, you pay what’s known as a “land transfer tax” to the province. This tax is payable upon the closing of your home and is a part of your “disbursements” which the lawyer would collect and remit on your behalf.

How much is the tax?

The amount of the tax is based on the agreed price you have paid from the real estate and is always paid by the “buyer” in the transaction. Like most taxes, the amount payable is based on the amount of the purchase price (or acquiring cost). Below are the following tax brackets depending on the applicable value consideration of the purchase:

1^st Bracket: amounts up to and including $55,000: 0.5%

2^nd Bracket: amounts exceeding $55,000, up to and including $250,000: 1.0%

3^rd Bracket: amounts exceeding $250,000, up to and including $400,000: 1.5%

4^th Bracket: amounts exceeding $400,000: 2.0%

5^th Bracket: amounts exceeding $2,000,000, where the land contains one or two single-family residences: 2.5%.

Example:

If you are buying a home with a purchase price of $400k, you would need to pay a total of $4475.00 in land transfer taxes to the province. This is calculated based on the first three applicable brackets indicated above:

$275 for the first 55k + $1950 for the next 195k + $2250 for the remaining 150k = $4475.00 for the total purchase price of 400k.

Having said that, you won’t need to do the manual calculation because, like most things, there are several online calculators you can use to quickly get to the appropriate tax amount you would need to consider.

What about First Time Home buyers?

If you are a first-time home buyer, you’re in luck. In Ontario, the government will provide an instant land transfer tax rebate of up to $4000.00 to help offset any land transfer taxes that you would otherwise need to pay. In the above example, the $4475 land transfer tax on a purchase price of 400k would be reduced to $475.00 after the rebate. This can be extremely helpful for first-time home buyers because it reduced the amount of money you would need to set aside for your closing costs.

Are there any other considerations?

Although not very common in all municipalities, there can be some that levy their land transfer taxes. This additional land transfer tax would be on top of the provincial land transfer taxes. For example, the city of Toronto is one city that does this. In the same example of purchasing a home for 400k, the total land transfer taxes that would need to be paid across the board would be $8475.00 which is an additional $4000.00 to the provincial portion of $4475.00.

For more information on land transfer taxes, feel free to visit the official provincial site for additional insights: https://www.ontario.ca/document/land-transfer-tax . Alternatively, you can give us a shout and we’d be happy to go over any questions you may have – at (905) 455-5005

All mortgages in Canada (regardless of the bank) fall into one of 2 categories: Insured or uninsured mortgages. One of the great benefits of being a first-time home buyer in Canada is the option to purchase with as little as 5% down. This would be considered an ‘insured mortgage’. Rather, if you were to buy a rental property with 20% down, this would be considered an ‘uninsured mortgage’. Let’s break down the difference between insured vs. uninsured mortgages.

What is insured mortgage in Canada?

An ‘insured mortgage’ is a mortgage backed by one of the 3 major default mortgage insurers in Canada: Canada Housing Mortgage Corporation (CMHC), Sagen (formerly Genworth), and Canada Guaranty. Due to the higher risk associated with lending beyond 80% of the property value, any home purchased in Canada with less than 20% down MUST be insured by one of the 3 insurers – this is mandatory as set out by OSFI, a government agency that supervises over 400 federally regulated financial institutions (the assumption here is that you are seeking a mortgage through any regulated bank/lender in Canada. Note: only Schedule A banks in Canada are qualified to lend insured mortgages).

With an insured mortgage (5% – 19.99% down payment) the borrower is responsible for paying an insurance premium which is added to the mortgage you are borrowing. The rate of this premium depends on how much you are putting down and decreases at each increment of 5% (for example, the highest premium is payable with 5% down, but once 10% down is achieved, the premium is reduced by a significant amount).

What is uninsured mortgage in Canada?

In Canada, mortgages don’t need to be insured if your down payment represents 20% or greater. If you already own a home, there are also reasons why your mortgage might not be insured or insurable. Here are some examples that fall into the uninsured mortgage category in Canada:

• A mortgage for any purchase over $1,000,000 is an uninsurable mortgage
• Investment properties in Canada cannot be insured
• Any mortgage with an amortization greater than 25 years is an uninsurable mortgage
• Refinances or Equity Take Outs cannot be insured
• All B lender mortgages cannot be insured
• Private mortgages cannot be insured

What is an insurable mortgage in Canada?

Don’t be confused by the term ‘insurable’. There are insured mortgages, uninsured mortgages, and ‘insurable’ mortgages.

Just like an insured mortgage in Canada, insurable mortgages can benefit from a lower rate than uninsured mortgages, without having to pay any insurance premium. The only caveat is that the amortization cannot exceed 25 years. This is often where homeowners debate whether it’s more important to have a lower monthly payment, or a lower interest rate.

Do interest rates change between insured vs. uninsured mortgages?

Yes. This confuses borrowers the most when they inquire about rates.

The best rates advertised (ads, radio, tv, etc.) are for insured mortgages in Canada. Uninsured mortgages have higher interest rates and are not often advertised to avoid confusion.

When it comes to insured vs. uninsured mortgages in Canada, there are benefits to both. It’s important to truly understand the different and how each can be used to your advantage to help accelerate your equity growth and build your net worth.

Call us today with your questions! (905) 455-5005.

First, let’s discuss why credit is important and what constitutes a good credit score in Canada from 2022/2023 onwards.

Why is a Good Credit Score Important?

Credit scores (aka FICO Scores) are very important in Canada, especially when looking to finance assets & education to help grow wealth. As an economy, we depend on borrowing money from the banks to purchase homes and cars, finance post-secondary education, start businesses, and much more.

While there are financing options for those with less desirable credit, having good credit helps with faster and lower-interest loan approvals! In the long run, it costs you far less money to have good credit.

What is a Good Credit Score?

Ranges for credit scores can differ depending on the source and credit product. In Canada, especially for mortgages, credit score ranges, as outlined by the banks, are:

Below 600: Poor        600 – 650: Fair        650 – 720: Good        720+: Excellent

A perfect credit score is generally 850. Only 1.6% of Americans currently have a perfect credit score, so it’s quite hard (but far from impossible) to achieve.

How do I Achieve a Good/Perfect Credit Score?

Again, it’s not impossible but does require some discipline. Here are both; the steps involved in building good credit, along with your credit score makeup.

1. Pay your bill on time, every time (weight = 35% of your score)

Sounds simple enough… and maybe it’s believed that one slip-up won’t impact you that much… but this standalone rule makes up for the biggest bulk of your credit score. Set reminders!

2. Minimize the balances you carry on debt (weight = 30% of your score)

This is referred to as ‘utilization’. High utilization is when you are consistently carrying balances at 75% or greater of your credit limit. Experts recommend bringing balances down to 10% of your credit limit to really boost your score to near-perfect levels.

3. Credit tenure (weight = 15% of your score)

The longer a credit trade has been active, the more impactful is it (positively) on your credit score. Avoid opening and closing new credit within a short time frame. This is less achievable for younger borrowers – but make sure to leave your longest-standing credit trade open to help build a higher score in the future.

4. Limit excessive credit trades & inquiries (weight = 10% of your score)

Opening many new credit trades, or having too many inquiries done simultaneously, is a higher credit risk. Don’t open many new trades in a small-time frame as a strategy for boosting credit. Also, limit (within reason) the number and frequency of inquiries done against your credit to preserve your score.

5. Have a variety (mix) of credit (weight = 10% of your score)

Credit mix represents a small piece of your credit score pie but still plays a part. Credit mix does not require having ALL types of credit… but a healthy mix of a few is important. (Examples of types of credit: Mortgage, finance company, credit card, retail account, installment loan, etc.)

Other frequently asked questions that we’re happy to answer. Just give us a call: (905) 455-5005

How do I check my credit score in Canada?

How do I fix my bad credit?

Can I get a mortgage with a bad credit score in Canada?

How much of a down payment do I need with bad credit?

Do I get a better mortgage rate with a good credit score?

Removing a spouse from a mortgage in Canada is the most common request we get, typically during a legal separation. However, a legal separation isn’t the only reason one might want to remove a name from a mortgage, nor is it always a spouse. Other reasons might be a split in a business partnership (investors), divorce, death, bankruptcy, or other personal circumstances that require a name to be removed.

Why should I remove my ex-spouse from the title of a home?

When relationships sour, or individuals move on, they often don’t want their credit to be jeopardized by a lack of responsibility from other parties. Sure, they might put their trust in the other person to stay current with the mortgage, but if a name isn’t removed from the mortgage, they are still held financially liable should anything happen in the future – regardless of what payment arrangements were agreed upon privately. Soured relationships are just one reason and someone may still want to be removed from a mortgage even when the relationship is healthy and amicable.

There are 2 scenarios to consider when trying to remove someone from a Mortgage in Ontario.

1. The name of the other individual is only on the mortgage, NOT on the title (guarantor)
2. The name of the other individual is both on the mortgage AND on the title (co-signer)

Guarantor: Removing a Name from a Mortgage in Ontario:

To remove someone’s name only from a mortgage in Ontario, the name must NOT be registered on the title. Under this scenario, you can refinance the mortgage, either with the same bank or a new bank, to take over the mortgage under your name only. However, qualifying with only one income might be harder than when you were first qualified (assuming the guarantor contributed income to the application the first time you were approved).  The name you are removing will have no responsibility to the new mortgage being registered against the property. Nor will that party need to participate in the refinance/transfer of the mortgage.

Co-Owner: Removing a name from House Title in Ontario:

Likewise, refinancing is also a solution to remove a name from the Mortgage AND House Title in Ontario. The only difference under this scenario is that their name is both on the mortgage and the title (deed) of the home. You cannot remove a co-signer from a mortgage, without also removing them from the title (and vice versa). The person being removed must be agreeable to coming off the title of the home and must participate in signing with a lawyer to do so. This can be problematic if the person being removed from the title feels entitled to equity in the home.

How to remove someone from a Mortgage in Ontario, without refinancing:

To remove a name from a Mortgage in Ontario, without refinancing, the borrower can request something called an ‘assumption’ or ‘loan modification’ from the bank that holds their mortgage. This assumption is not offered by every bank/lender, and in the case that it isn’t, refinancing the mortgage will be the only viable option.

Do I have to buy out the person being removed from the mortgage?

It depends. If the person is on the title and therefore has a stake (% share) of the property, they might not agree to be removed from the mortgage UNLESS they are bought out (or compensated their fair share). A mortgage buyout would require you to refinance the mortgage at an amount enough to buy out the individual’s share.

Do you need to remove a name from a Mortgage in Ontario? Do you need to remove a name from a House Title in Ontario? Do you need to buy out an ex-spouse’s mortgage share? Call us at (905) 455-5005 and get expert guidance and the next steps on refinancing your mortgage.

Mortgage Broker vs. The Bank – Why the Mortgage Broker is winning in 2023

Mortgage broker, or bank? It’s the great debate. While we share a bias, there are stats to confirm that 55%-64% of respondents from different surveys agreed that they would be using a Mortgage Broker for their next mortgage transaction.

With growing popularity, the Mortgage Broker (or mortgage agent) delivers a level of service unmatched by the banks in the post-pandemic world. And why post-pandemic? What’s the correlation? While we can’t say for certain, we believe the big banks are focused merely on pushing volume while running low on workers. Perhaps good talent has moved on, or employee retention is low due to unrealistic work capacity.

Either way, Mortgage Brokers have risen to the occasion, and we are carrying out our duty to mortgage seekers as we always have in the past.

In the post-pandemic world, where processes are very different and more convenient, here is how we as mortgage brokers are beating the banks:

• Apply online, from the comforts of home
• Unbiased solutions (as we don’t work for the banks)
• Options (we work with over 20 banks)
• Multiple solutions presented
• A dedicated mortgage professional – around the clock
• We do this full time – this isn’t a side hustle or just one line of business. It’s our bread and butter!

True Story:

Obviously, as Mortgage Brokers, we work with big banks to arrange to finance for clients. Rather than you go from bank to bank, we act on your behalf so you can take it easy. Well, we recently funded a mortgage where our conditions were ‘broker complete’ 5.5 weeks before closing (that’s well ahead of schedule in case that wasn’t clear). Well, this major Bank (let’s call them ABC) did not sign off on conditions until 6 days before closing. This caused huge delays between the funding department and the lawyer receiving funds in a timely manner. Even with persistent follow-ups, this bank’s representatives were nonresponsive and unavailable.

Thankfully, with our representation, we took on the responsibility of communicating with all parties, reaching out to hire-ups, escalating between departments, etc. The purchase closed on time! Now, imagine having to do that by yourself without the representation of a mortgage broker. Sadly, many people are facing these nightmares with some of the big banks, which is a problem that is getting seemingly worse as time passes.

So why would you ever choose to work with the bank, over a mortgage broker, when mortgage brokers are available, responsive, and timely? For good representation, call us today (905) 455-5005.

You might be surprised to learn just how common “bad credit Mortgages” are. If you were to consider the entire pool of homeowners out there today, chances are that many of them have less than stellar credit, and yet they’re still homeowners.

Let’s begin with the fact that, most people, at some point in their lives, will face some sort of financial stress. Why? Because life happens, that’s why. Whether you lose your job, tend to your health, or divert your finances to help a loved one, it happens to all of us at some point! Sometimes this financial burden forces us to make certain sacrifices when it comes to meeting our debt obligations.  The key thing here is that the intention is often not to avoid making payments on a debt, but rather, to prioritize where your limited cash flow will go during a period.

Having said that, not all lenders understand this, or rather a more accurate statement would be, not all lenders would have a risk appetite for borrowers who demonstrate a recent history of hardships. These are the typical bank-type lenders, who maintain low-risk lending decisions. Thankfully, there are other options.

When it comes to Bad credit mortgages, there are many lenders out there that lend strictly to those borrowers who have “blemishes” or “bruised” credit. (By the way, notice the difference in how these lenders describe Bruised vs the typical “bad” credit.) These alternative “B” lenders seek to understand the history and story that lead to the credit challenges to assess whether they think you will make your future mortgage payments. The story is key here!

Since B Lenders take on greater risk tolerance, they do not have access to insured/insurable products. This means that for legal reasons, they cannot extend a mortgage loan to their borrowers that represent more than 80% of the value (or purchase price) of the home. In other words, the borrowers will need to come to the table with a 20% down payment or in the case of refinances, have 20% equity in the home. Here are some more general flexibilities that B lenders have:

• Credit scores of borrowers can be as low as 500
• Previous Bankruptcies or consumer proposals are not a closed door
• Debt servicing Ratio’s up to 50%/50% (GDS/TDS)
• Non-Traditional income sources accepted
• Use of greater rental income for qualifying purposes

It’s also worth pointing out that B lenders are aware that the goal of every homeowner is to pay off their mortgage while paying the least amount of interest during that process. These lenders don’t expect you to take the typical 5-year terms that you would opt for on the banking side. Most B mortgages are taken for a period of 1-3 years which happens to coincide with the amount of time, someone with “bruised” credit, would need to repair/rebuild their credit so that they can migrate their mortgage back to where they would want to be. This is why, B lenders that offer Bad credit mortgages are not life sentences, but rather stepping stones that offer immediate solutions for your home financings needs, while you work towards meeting the rigid guidelines that exist at your bank.

Another benefit, to these types of mortgage solutions, is that they offer extended amortizations that are either not available or preferred by the banks. Extended amortizations, about the mortgage payment, reduce the amount of the payment during the scheduled period. This can offset the higher payments you might expect from the higher rates that are offered by B lenders. For example, if the bank offers you a 500k mortgage at 5% with a maximum amortization of 25 years, your mortgage payment would be approx. $2,908 per month. On the B side, they can allow for amortizations to extend to 35 years, which would make the same scenario reflect payment of approx. $2,507 per month. Notice anything from a cash flow perspective? That’s right… it’s not horrible. If you are in a situation where you have had some credit difficulties, you might find that you are more interested in cash flow (pun intended).

Once again, we’re not denying that you would pay higher interest in these types of mortgages, but with the right strategy and guidance, you could get right back on track, and from a bird’s eye view, without feeling the interest blow over the lifetime of the mortgage.

If you feel that a Bad credit mortgage might be a solution you would like to explore, or simply want to learn more about the topic, feel free to reach out to us today – at (905) 455-5005

Refinancing your mortgage to consolidate debts is one of the best ways to get a handle on those debts. There are various reasons why this approach is suitable for many people but the most obvious one is that it’s always best to park your high-interest debt at the lowest interest rate possible.

What does that mean? Simply put, it’s about taking all your high-interest debts and shifting them over to a creditor that offers a lower rate. By doing this, less of your scheduled payment will go towards servicing the interest, and thereby, more of the principal amount is paid off. A Mortgage typically offers the lowest interest rates because they offer the creditor collateral against the overall debt. In other words, they have your home as a safety net. In fact, one of the reasons unsecured debts have a higher interest rate attached to them is because they do not have collateral to protect against their losses, other than the threat of “bad credit” to the borrower.

Another reason to consolidate your debts by refinancing your mortgage is that it makes it easier to keep up with the debts by virtue of having only one payment to worry about. For example, if you have 5 separate bills, with different payment amounts (and schedules), it could be easy for payments to be missed or just plain exhausting to keep up with. By having those 5 debts consolidated into your mortgage, you only must make that one scheduled payment which ultimately services all those combined debts.

Furthermore, by combining all the debts into your mortgage, you would essentially clean and preserve your credit strength. If you have already experienced blemishes on your credit report, then this would help in the “rebuilding” process which helps you in the future with your borrowing needs with favorable offers.

Lastly, one of the top reasons homeowners refinance their debts is to increase their monthly cash flow. High-interest debts can siphon away your hard-earned money on just interest alone. This leads to many homeowners living “paycheck to paycheck” while relying on their credit cards to finance their lives (in between those paychecks). Therefore, it’s very appealing for most homeowners to refinance their homes for the purpose of consolidating their high-interest debts. Ultimately, it can bring down their payment obligations by hundreds or thousands of dollars per month. Any decrease in this payment pressure only increases the amount of disposable income you and your family can have each month.

Are you juggling multiple debts and think you could benefit from this approach? Give us a call and let’s figure out how much more of your money, you can keep for yourself. (905) 455-5005.