General

6 Feb

Recession Proof Your Finances!

General

Posted by: Barry Chisholm

The latest news has been focused on rising interest rates, surging inflation, and economic uncertainty with suggestions that the Canadian economy could be tripped into recession.

With all this information circulating, now is a good time to discuss ways to adapt your finances and protect your future. Fortunately, there are a few key things you can do to get started today!

  1. Set a budget and reduce monthly expenses and overall debt by including the following:
    • Review your income and expenses and identify areas for reduction – such as getting a cheaper cell phone plan, reducing streaming service subscriptions, reviewing transport costs, etc.
    • Make a list of your current high-interest loans (such as credit card balances). If your mortgage is up for renewal, you may be able to benefit by consolidating debt into your mortgage to save on interest and free up cash flow with one payment. Refinancing your mortgage before the renewal is also an option, but a review of the penalty cost versus your debt consolidation goal should be considered. As your mortgage professional, I can assist you with this analysis.
    • Allot a percentage of your income towards savings such as an emergency fund. Your goal should be to have the equivalent of 3 to 6 months of earnings in this fund to provide breathing room should you lose your job or face any unexpected expenses. Another form of emergency funds could also be a line-of-credit. Once set-up, these generally have no cost to you unless you use it in the event of an emergency.

Having a healthy and realistic budget will give you peace of mind and allow you to properly allocate your monthly cash flow between debt, expenses, and savings.

  1. Evaluate your investment portfolio:
    1. While you will want to avoid making any knee-jerk reactions, it maybe a good time to diversify your portfolio to help reduce risk. Consider rerouting your investment to real estate or other areas to ensure you have various sources of income and always talk to an expert.
  2. Find additional income sources!
    • Many people have found innovative ways to increase their income by asking the following three questions:
      • Are you a fit for a potential promotion?
      • Do you have a review coming up?
      • Do you have transferable skills that you can apply to consulting or additional contract work?

One final reminder – don’t panic. I know the word “recession” can be stressful but understanding what is happening and making appropriate adjustments will help you stay financially secure.

If you have any additional questions, don’t hesitate to reach out to me.

21 Sep

What is going on?

General

Posted by: Barry Chisholm

This, from an associate:

Update: How Rising Rates Impact Your SMB

By Christian Richard

The current high interest rate environment is taking a toll on both consumers and small businesses alike. In March of 2020, borrowing rates in Canada were lowered to nearly zero and despite Covid restrictions, low-cost money starting flowing into SMBs. Fast forward two years later, inflation reached a 39-year high of 8.1% in June of 2022. To tame inflation, the Bank of Canada announced a series of incremental rate hikes. Coupled with rampant inflation and labor shortages, these are un-welcomed challenges for small business owners across Canada. In this blog, we will update you on the latest numbers and offer you guidance on how rising rates are likely to impact your small business.

Let’s get you up to Speed

In March of 2020, Canada’s key interest rate was lowered to 0.25% and remained the same for two years. During this time, Canadians borrowed money for practically nothing, which increased spending across various industries (i.e., online shopping, construction, health care, etc.). In early 2022, the Central Bank started hinting of changes to its monetary policy, making higher rates both a reality and inevitable. As expected, the Bank of Canada stayed true to its word and began raising interest rates as outlined in the graph below.

Interest rates in Canada.

Will Interest Rates Climb Further in 2022 & 2023?

We are now sitting at 3.25%, which is the highest policy interest rate we’ve seen since 2008. It usually takes up to two years for the impact of higher rates to be felt in the economy, which could indicate higher rates to stick around through 2023. Persisting rate hike cycles comes at a cost, they reduce spending power and could tip the Canadian economy into a deep recession. There is big debate whether the Bank of Canada should continue to hike interest rates or to take a more cautious approach. That said, the Central Bank has made it crystal clear that it’s committed to raising rates until inflation is back below 3%.

Impacts of Rising Rates on Your Small Business

Rising rates impact Canadian consumers and businesses on things like mortgages, lines of credit, savings accounts, etc. With no signs of interest rates being lowered soon, how will your small business be affected by these incremental rate hikes?

1. It Could Become Difficult to Plan

Raising rates affect the prices of goods, services, and a lot more. As a result, dealing with fluctuating prices makes planning out your profits and expenses much more complicated. That’s why evaluating the current state of your business’s financial health is key to dealing with new economic scenarios and stresses. This can be achieved by asking yourself the following questions:

  • How much debt have I accumulated?
  • How’s my liquidity situation?
  • How’s my cash flow?

To Know thyself is the beginning of wisdom – Socrates

It’s important to run through these questions in addition to ‘’what if’’ scenarios to see if your business can remain solvent. What if rates go beyond what they are now? Would you still be able to cover your credit or loan obligations? Pressure check your business now to ensure you can withstand a more expensive and potentially slower economic period in the future. As for planning, stay open-minded during the short term, so you can adjust as changes arise.

2. Obtaining a Loan Could be Expensive

As rates continue to increase, the cost of borrowing will drive up over time. Understandably, this could deter your small business from getting a business loan. But in most cases, financing is needed to survive or to pounce on new opportunities. When it comes to small business loans, you have a variety of options to choose from, both short-term and long-term. If you need financing now, consider locking in a fixed rate before the next rate hike strikes. Plus, you may be able to access lower rates if you’re in good financial health. If you already have a loan, and it’s an adjustable rate, consider shifting to a fixed-rate product to no longer be affected by rate hikes in the future.

3. Your Financing Options Could be Limited

While banks may be a great financing option for some, it may not be for others. With rising rates, banks become more selective, making it harder for small businesses to qualify for a loan. Alternative lending can be a better solution for some small businesses and may offer you additional flexibility and higher approval rates. If you’re looking to weigh in your options, OnDeck Canada can offer you a wide variety of lending options with both flexible or fixed repayment options such as Term Loans and Flex Funds. Find out how much your small business qualifies for with our streamlined application process.

4. Your Cash Flow Could be Affected

As small business owners continue to grapple with rising costs due to growing inflation, your cash flow could be severely impacted. You may find yourself working with less cash as debt payments increase and demand slows for products and services. Sure, it’s only temporary. But in the short-term, you could find yourself in a precarious situation. To remain cash flow positive, you might have to make some difficult decisions, like operating with a leaner team. Although laying off staff, cutting down on wages or hours is never easy, it can be a viable solution when dealing with an expensive economy.

If being leaner is not an option, cut out any expenses that are non-essential to your business’s success. Look at your subscriptions or anything that you pay on a contractual basis, such as unnecessary services or features. In addition, determine if there are any projects or areas of your business that can wait and be revisited in the future. You should be thinking 2 or 3 years ahead, once issues stemming from rates and inflation have cooled.

A Welcome Change

Rising rates may be initially challenging to deal with for some small business owners. But, down the line, it will likely bring welcomed changes to the Canadian economy. By the end of 2023, inflation will hopefully settle and reach its 2% target, resulting in reduced costs for consumers and businesses. As economic conditions begin improving, and borrowing gets less expensive, you will be able to focus on building a successful business for the future.

5 Jun

Canadian household debt still at historical highs.

General

Posted by: Barry Chisholm

In the fourth quarter of 2012, the average Canadian household owed a record $164.97 in debt for every $100 of disposable, after-tax income. That’s only slightly less than US household debt levels just before that country’s real estate market collapsed. But while debt levels are still climbing in Canada, the good news is that they’re climbing slower than they were.

Thanks to recent tightening of mortgage rules and the Bank of Canada’s constant warnings about too much debt, Canadian debt levels finally seem to be stabilizing. The trouble is, debt is still much higher than it should be.

 

A few decades ago, things were very different. Debt was thought of as scary. Children were taught the value of saving and investing. Canada’s savings rate was the envy of much of the world. When we needed something, we saved our money until we could afford it.

 

But today, things are different. We’re constantly being encouraged to indulge in every possible luxury, regardless of whether we have the money. And why not? Credit’s cheap and we have lots of equity in our homes. So spend, baby, spend!

The downside of this new mindset is that we’re living well beyond our means, going deep into debt and paying huge interest charges. But there IS a way out. Here are some practical steps:

  • Keep a written record of what you’re spending, on what and why.
  • Identify which purchases are “needs” (food, housing, transportation) and which are just “wants” (eating out, new gadgets, the latest fashion) and see which ones you can do without.
  • Once you know how much you actually need to spend each month, make a budget that allocates every dollar and stick to it.
  • Avoid going into debt for “wants” and pay off all debt as quickly as possible.
  • Talk to me about mortgage strategies that can help you reduce the total interest you’re paying on existing debts. Call today! 604-961-2734
15 Feb

Stop Paying RENT!

General

Posted by: Barry Chisholm

7 Ways To Stop Paying Rent and

OWN YOUR OWN HOME …

 

… and what you need to know to make

buying your first home easier!

People fear what they don’t understand. A good example is the purchase of a home. The average consumer knows very little about the home buying process. Between finding the right house, making sure it won’t fall apart the day after you buy, and finding the best financing, it’s no wonder so many people are afraid to buy homes. 

Purchasing a home is one of the most important financial decisions you’ll ever make. For a first-time homebuyer, the decision to purchase can be daunting. It represents a major step since you and your family will potentially be assuming your largest responsibility. As with any major decision, it’s important that everyone—especially first-time homebuyers—take full advantage of the information that’s available to more clearly understand the home buying process.

To prepare, do some research before beginning the search for your dream home. Here are 7 steps to get started:

STEP 1: Before you start your house search, think carefully about what it will be like to be a homeowner. For most people, homeownership can be one of the most significant financial turning points in their lives. The advantages (tax benefits, pride of ownership, financial investment) far outweigh any drawbacks.

STEP 2: Your credit history is one of the first things a lender will look at in making a decision on your loan. Request a copy of your credit report from Equifax and/or TransUnion, and review it carefully to be sure all the information is correct. If you find discrepancies, work with the credit agencies to resolve them.

STEP 3: Saving for a down payment can be one of the biggest barriers to homeownership. Mortgage lenders recognize this dilemma, and many now offer loans with down payments as low as 5% OR will allow it to be a gift or loan. Then, they can give it back to you after you purchase.

STEP 4: Keep in mind that most real estate agents represent the seller, not the buyer. But it’s possible to work with a Realtor who is dedicated to YOUR interests as a homebuyer. By using a “buyer’s agent”, you have a real estate professional in your corner who can disclose things to you about the seller (or the home) that you’d never learn if you dealt only with the seller’s agent. Best of all, even though a buyer’s agent works for you (not the seller), you don’t pay their commission (the seller does)! If a Realtor won’t offer you a buyer agent agreement, look for another agent.

STEP 5: Before you begin working with a Realtor, find a mortgage broker you can trust and ask to be pre-approved for a mortgage. Pre-approval is different from pre-qualification. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come via fax or email. Getting a “pre-qual” from a website is just as easy. Enter some information, click “submit” and voilà.

A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification, but the additional due diligence is exactly why the pre-approval carries more weight.

Most lenders will provide this service free of charge. Pre-approval will let you know exactly how much you can spend on a home BEFORE you start your search. A pre-approval in hand also makes you a more attractive buyer when you’re ready to make an offer on a home. Home sellers are more likely to accept an offer from a buyer who can demonstrate the ability to secure financing.

STEP 6: Many mortgage lenders, nonprofits, and even Realtors offer homebuyer education classes to prepare you for homeownership. Classes normally run about four hours and cover the basics of home buying. Some of the topics covered are how to apply for a loan, finding the right Realtor, making an offer on a home, and the advantages and responsibilities of homeownership.

STEP 7: A mortgage broker vs. financial institutions. Mortgage brokers have many different banks and mortgage lenders that they “broker” their loans to, similar to stockbrokers or independent insurance agents. Since mortgage brokers do business with lots of financial institutions throughout Canada, they can:

  • Send the loan to many different underwriters   
  • Shop for the best rates and programs
  • Save you money by not charging loan origination fees

 

So, what’s in it for you?

 

Obviously, there are real advantages to getting yourself out of the “trap” of paying rent. Now that you’ve seen some of the steps involved in achieving that goal, what’s the best way to proceed?

 

Yes, you could wander out into the mortgage market on your own and start shopping, comparing and negotiating directly with banks. Even if you’re working with a trusted real estate agent, you’re still pretty much on your own when it comes to financing since most Realtors don’t fully understand mortgages.

 

Keep in mind that that once you’ve signed a purchase agreement, you have to apply for a mortgage almost immediately. Is a day or two long enough for you to make a decision all by yourself that could affect you and your family for the next 30 years?

 

Dealing directly with a financial institution can add even more stress. Most banks like to “cherry pick” the easy clients that fit into standard off-the-shelf mortgage products. If your needs are slightly different, you may be turned down or end up paying a higher rate.

 

Why complicate and struggle through what should be one of life’s greatest pleasures? As your local mortgage broker, I’d be happy to help you realize your dreams of homeownership and take care of everything for you, for FREE. By working with a true professional—someone who has specialized knowledge of home financing—you can get the best available mortgage and rate from a huge range of lenders, and be confident you’ve made the right decision for today and the foreseeable future. The result: you’ll save thousands of dollars and take a big step toward future financial security!

 

Let me help you get started

on the road to homeownership today.

 

Well, I hope I got you thinking. You probably still have some questions, and I’d be happy to answer them. In fact, I’d be pleased to sit down with you and do a detailed no-charge analysis of how much you’ll save by owning instead of renting.

 

Please give me a call while this is fresh in your mind and you’re still excited about all the possibilities. Even if you’re a little skeptical—which is only natural—a phone call can’t hurt. The worst that can happen is you’ll spend a few minutes learning (I’ll keep it brief because I know your time is precious). The best that can happen is you’ll get some peace of mind and end up saving yourself lots of money!

 

If you’d like to get started right away, I can email you a Pre-Approval Kit, so you can have all your information ready before we sit down together. Just let me know and I’ll get a kit out to you right away.

 

Take care and I look forward to hearing from you soon.

 

Regards,

 

Barry Chisholm

DLC Casa Mortgage Inc.

1495 Kingsway St. Vancouver

V5N 2R6

604-961-2734

bchisholm@dominionlending.ca

 

P.S. Think about it. Now’s the time to escape from endless rent payments. I’d be happy to send you a Pre-Approval Kit to get you started on the road to homeownership today!

P.P.S. More people who are renters are now qualifying to become homeowners. Don’t let fear or lack of knowledge stand in your way. My job is to educate and advise you. Call me today to take one step closer toward your dream of homeownership!

7 Oct

THE Report…

General

Posted by: Barry Chisholm

FREE CANADIAN MORTGAGE REPORT: WHAT YOU NEED TO KNOW ABOUT GETTING A MORTGAGE

Many people believe that if they work hard, make a decent income, save money for a down payment and pay their bills on time they should be able to get a mortgage and purchase a home.

This is NOT always the case and some people do all of these things except they can’t save enough for a down payment, OR they find out that even though they pay their bills on time, their credit isn’t good enough to get a mortgage!

Here are some tips on how to prepare yourself to qualify for a mortgage AND I’ll explain some alternatives available if you need a mortgage NOW and don’t qualify with a regular bank.

THE MYTHS ABOUT DOWN PAYMENTS:

First, saving for a down payment can sometimes be a challenge, especially when you have rent, kids, and car payments. A lot of people find that there is more month than money and end up with nothing left to save at the end of the month.

PAY yourself first– many successful people live by this; they put 10% of everything they earn straight into a savings plan before they do anything else with their money. Most find that they don’t even miss it! You automatically adjust your lifestyle just a little bit to account for it.

USE your RRSP as your down payment; the government will allow you to use up to $25,000 EACH from your RRSP for a down payment on a home IF you’re either a first time buyer, or you haven’t owned a home for the previous 4 years. Called the Homebuyer’s Plan, it requires only that you put the funds back in your RRSP over a 15 year period to avoid paying tax on it.

CASH BACK programs from some mortgage companies allow THEM to actually LOAN you the down payment, or a significant portion of it; there are lenders who will advance you between 3% and 5.5% of the purchase price which you can use as your down payment! This requires that you have above average credit (680 or better, and we’ll talk about improve your score later) and of course, you must have been working in the same industry for at least 2 years (not the same JOB, but the same industry).

GIFTS from immediate family members; if you have average or better than average credit (650+) and an immediate family member (sibling or parent) is willing to ‘gift’ you all, or part of the down payment, you could qualify for a mortgage.

Borrowed; if you have average or better than average credit, you can borrow all or part of the down payment from a line of credit, loan, or other sources.

Of course, these options can be used in combination as well. So, if you have some money in RRSP’s but it’s not enough, you could be gifted the rest, or use a cash back program from the lender to add to it or other combinations.

DON’T BE CONFUSED BY YOUR CREDIT RATING:

This is another important area that some people find surprising.

Credit ratings and how they are calculated is a very mystifying process. I have had clients who ALWAYS made their payments ON TIME, and still had BELOW AVERAGE CREDIT!

How can this be? Well, while paying on time is an obvious benefit to building good credit there are several other things you NEED TO KNOW about credit:

  • Lenders want to see at least TWO trade lines on a credit bureau, that is, two credit cards (with limits of at least $1000 each); OR one credit card and one line of credit or personal loan/car loan
  • Visiting several banks or having your credit checked several times over a couple of months will BRING DOWN YOUR CREDIT SCORE! I’ve seen clients who started with EXCELLENT credit and went shopping for a mortgage or a vehicle and had their credit checked several times, only to find they now have average or below average credit JUST BECAUSE OF THAT!( This is one of the many benefits of using a mortgage broker, as we check your credit ONCE, and can show it to EVERY lender without them checking it again)

 

Bob was one of these unfortunate clients. He came to me with a credit rating of 664 (a bit above average) and I pre-approved him for a mortgage to purchase the home that he and his wife Marlena wanted. While they were house shopping, he also went looking for a new car. Months later, they found the home they loved and came back to me for final approval. Lo and behold, when I checked Bob’s credit again, it had dropped to 624!  One car dealer had tried 36 different lenders over 2 months to finance his car loan, EACH of them pulled his credit and caused it to drop 40 points! I had to tell Bob and Marlena that they could no longer qualify for the home they loved….

 

  • KEEP your balance below 90%! This is another key way to keep your credit from going down; If you have a credit card or line of credit with a credit limit of say $10,000, and your balance is OVER $9000 for more than a month, your credit score will start to go DOWN! Keep your balances under 90% at all times. If you can’t manage that right away, one way to do this without coming up with more money is to borrow or get a cash advance from one of the lines of credit or credit cards, and put that down as a payment on the once that’s already over 90%! Keeping it below 50% is even better.
    • USE YOUR CREDIT FREQUENTLY: People often make the mistake of thinking that a credit card used for emergency only is a good thing. ONE card for this is a good idea but using your credit accounts regularly is an important part of building healthy credit. Lenders will be able to better evaluate your creditworthiness if there is more data about your payment and spending behaviour on your credit report. Using a credit card to make a few purchases each month may help improve your credit score.

 

  • There are too many consumer finance company accounts on your credit report. Having too much available credit can sometimes harm your credit score. Lenders may feel that you have the ability to spend more than you could potentially pay back. You might want to consider closing a few accounts or asking to have your credit limits reduced. Avoid closing too many accounts – especially the oldest accounts on your credit profile – because it could harm your credit score.

 

These are just a few simple tricks to help you improve your credit and find a down payment so that you can purchase the home of your dreams. As a mortgage professional with Dominion Lending Centres, I have counselled many clients on how to qualify for a mortgage, or refinance their existing mortgage. Best of all, my service is free! Lenders pay me to bring them your business, and it’s my job not only to find you the best rate and terms to suit you and have the banks compete for your business; it’s also my job to keep up to date on trends and news in the mortgage industry and KEEP YOU INFORMED about what’s best for YOU.

I have learned many ways to use various resources and over 100 banks, credit unions, trust companies, and alternative lenders to help you get a mortgage.

Please, don’t hesitate to contact me for assistance, advice, or just to ask a simple question about mortgages, and I’ll be more than happy to help. I work for my clients, NOT THE BANKS!

Kindest regards,

Barry Chisholm, Mortgage Expert

DOMINION LENDING CENTRES CASA MORTGAGE INC.

Independently owned and operated.