Welcome to the May issue of my monthly newsletter!

With Spring at our doorstep, now is a great time to do some Spring cleaning in the form of tidying up your monthly budget! Renovations are another popular activity this time of year, so I have included some tips for you on that below! Lastly, if you are new to the country or know someone who is and seeking their first mortgage in Canada, check out my article on what you need to know.

Thanks again for your continued support and introductions! Have a great month!

Determine Your Monthly Budget

It’s easy to get overwhelmed when thinking about your finances, especially if you are saddled with debt. The best way to determine your monthly budget is to start by recording your total monthly income for the family and your total monthly expenses. To make these easier to review, it is ideal to break out your expenses into two categories: fixed and flexible.

Fixed Expenses: Fixed expenses are bills that stay relatively the same each month and will typically even come out on the same date. Some examples of fixed expenses, which are generally non-negotiable, include mortgage or rent payments, car/household insurance, car loans, other loan payments, credit card payments, cell phone bill, household utilities, child support (if applicable) and any medical bills such as medication, orthodontic payments, etc.

Flexible Expenses: Once you calculate your fixed expenses, you will want to take a look at your flexible expenses or payments. Flexible expenses may change from month to-month and are typically the things households look at when trying to reduce spending or free up monthly funds. These types of expenses include groceries, cable/streaming services, internet, gas, entertainment and dining out, etc.

The goal of determining your monthly budget is to see how much of your monthly income goes to bills, and what is leftover for spending and entertainment. It is important to check up on your expenses and spending habits on a regular basis to ensure that you are continuing to live within your means, and are not stretching your budget to the point of extra debt. It can be easy to run up a credit card thinking “I’ll pay it off later”, but unless it is an emergency situation (vet bill, car repairs, etc.) it is best to avoid that mentality and only spend what you have on-hand.

If you do happen to find yourself struggling to make your bills each month, it might be time to look around for some places to save some extra money. Some great options for saving money include:

• Reducing or eliminating your cable package
• Lowering your energy usage (turn down that thermostat and bundle up in colder months!)
• Reducing water usage (taking shorter showers, doing less loads of laundry)
• Going out to eat less frequently or entirely. It is amazing how much you can save by skipping the drive thru and making your own coffee at home!
• Learn to say NO (to gift exchanges at work, nights out with friends, special events whenever possible, etc.)
• Attempt to negotiate lower bills with any company you deal with
• Reduce grocery spending (or get cash back when you do shop)
• Use coupons! Shop on sale, collect customer loyalty points to buy bigger ticket items
• Buy used when you can! There are great resources for buying used such as Facebook Marketplace, Craigslist or Kijiji. This is also a great place to make some money! Purge your house and sell anything you don’t love or need anymore.

Things to Know Before you Renovate

Renovating your space can be a big project! Before you get started, we have put together a list of the 5 most important things you need to know before you renovate:

1. Know Your End Goal

Before starting your renovation, it is important to know what your end goal will be for the project. How extensively are you renovating? Are you doing so to improve the resale value of your home, or are you doing it to improve your own daily environment? Knowing the reason for the renovation can help you determine a plan for how to proceed and how in depth you want to go.

2. Set a Budget – and Stick to it!

Once you determine the scope of your renovation project, you need to determine your budget. Determining your budget – and sticking to it – is one of the most important parts of any renovation. Renovations can easily spiral out of control or become much bigger than anticipated, if proper budgets and goals are not in place. However, even with the strictest budget there could be unexpected costs, so be sure to add in a contingency fund. While it is easy to want a top of the line renovation, it is important to looking at alternative products or substitutes that may be just as sturdy but save you some money upfront.

3. Obtain Permits

Many homeowners forget about this one, but it is extremely vital to your renovation project – especially those that are on a larger scale. While you may consider obtaining a building permit to be an unnecessary headache, it is necessary and will ensure the changes you make today won’t come back to haunt you tomorrow. These permits are necessary to ensure your house remodel meets structural and fire safety requirements. If you ever do put your house up for sale, code inspectors in most jurisdictions can enforce the removal of any non-conforming work if not up to snuff – creating a further (and more expensive headache) down the road.

4. Ask for References

It is important to be sure that the work you are having done to your house will be done in a manner that ensures it remains safe and structurally sound. This is what makes asking for references so important! Don’t rely solely on client testimonials, seek out customers that can give you a firsthand account and answer any questions you may have. It is also important to see before and after images of a contractor’s prior work. Take the time to gather the information and determine which questions to ask!

5. Consider Your Routine

My mom was always a DIYer when it came to home renovations. She painted herself, re-tiled entire rooms and had my dad help her put up drywall to split up big spaces! So, when it came to considering our routine this was a non-issue. However, for those of you like me (absolutely not a DIYer) who are planning on hiring a contractor, be clear about your daily routine! Work with the contractor to come up with start and end times that cause the least disruption to your daily schedule and help everyone remain comfortable.

What to Know if You’re New to Canada

Canada has seen a surge of international migration over the last few years. With all these new faces in town wanting to plant roots in this great country, we wanted to touch base on some of the details surrounding mortgages and how new immigrants can qualify to be homeowners.

If you are already a Permanent Resident or have received confirmation of Permanent Resident Status, you are eligible for a typical mortgage with a 5% down payment – assuming you have good credit.

For Permanent Residents with limited credit, or individuals who have not yet qualified for Permanent Residency, there are still options! In fact, there are several ‘New to Canada’ mortgage programs through CMHC, Genworth Financial and Canada Guaranty Mortgage Insurance, which cater to this group of homebuyers.

To qualify for these New to Canada programs, you must have immigrated or relocated to Canada within the last 60 months and have had three months minimum full-time employment in Canada. Individuals seeking credit of 90.01-95% need to produce an international credit report (Equifax or Transunion) demonstrating a strong credit profile OR two alternative sources of credit demonstrating timely payments (no arrears) for the past 12 months. The alternative sources must include rental payment history and another altnernative, such as hydro/utilities, telephone, cable, cell phone or auto insurance. For individuals looking for 90% credit, a letter of reference from a recognized financial institution OR six (6) months of bank statements from a primary account will be required.

Utilizing a mortgage broker will help to ensure you understand your options and they can help determine the best program and mortgage choice for you. Before you talk with a mortgage broker, there are a few things you need to know when it comes to submitting an application – and getting approved – for your first mortgage in Canada:

1. Supporting Documents: If you’re new to the country but have a weak credit, supporting documents will come in handy. These may include proof of income, 12 months worth of rental payments or letter from landlord, documented savings, bank statements and/or letter of reference from recognized financial institution. These documents all paint the picture of whether you are a safe investment for a lender.
2. Build your Credit Rating: This is one of the most important aspects to getting a mortgage as credit rating determines your reliability as a borrower and will determine your down payment rate. One of the best ways to build your credit is by getting a credit card that you use and pay off each month. Paying other bills such as utilities, cell phones and rent can also contribute to your credit score and reliability.
3. Start Saving: One of the most expensive aspects of home ownership is the down payment; an upfront cost vital to securing your future. The down payment can either be 5% or 10% depending on your status. It is important to note that if you’re paying $500,000 or more for your home, the minimum down payment will be 5% for the first $500,000 and 10% of any amount over $500,000 – regardless of your residency status.
4. Choose a Mortgage Provider: Once you are ready to get your mortgage, you need to decide where you want to borrow from. There are three key lenders: Bank, Credit Unions and Monolines, as well as the option to purchase direct or go through a mortgage broker which may be able to offer you some extra savings.

Buying a house is an exciting step for anyone, but it is especially so for individuals who are new to the country. As daunting as it may seem, purchasing a home is completely possible with a little knowledge and preparation!

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

Chief Economist, Dominion Lending Centres

If you find yourself facing financial difficulties as a result of job loss or income reduction during this time, it can be overwhelming and may leave you feeling stressed and unsure of what the next steps are.

To make it easy, we have put together five simple steps you can do to help resolve your financial difficulties and ensure you can focus on more important things such as your family and your health.

1. Cut Down on Costs
   For anyone that is currently out of work due to COVID-19 or has found themselves at reduced hours, it is a good idea to look at your finances for ways to cut down on non-essential costs. Some ideas for reducing your monthly expenses include taking a look at streaming services, your phone data plan and gym memberships which can add up.
2. Talk to Your Mortgage Professional
   Your Dominion Lending Centres mortgage brokers are working hard to stay on top of all information surrounding the development of COVID-19 as well as the responses from Bank of Canada and the Ministry of Finance to ensure the most up-to-date and accurate information to assist you. They can help explain the options available to you and provide further understanding as to how this situation may affect your interest rates and mortgage payments.In order to benefit from your mortgage professional, you will need to provide detailed financial accounts so they can review your situation and all potential options. Preparing a detailed budget breakdown – including credit cards, loans and household bills as well as savings accounts and investments – will help your broker get a better sense of your current financial position and what assistance you may qualify for.
3. Contact Your Credit Card Companies and Lenders
   Many families and individuals cannot afford to lose their income, or even see it decrease. If you are in debt or living paycheck to paycheck, you may already find it difficult to make bill payments. Unfortunately, missing these payments can have long-term negative effects. Before it gets to this point, it is a good idea to contact your lenders, banks or credit card companies to see if there are options..
4. Find alternatives
   Whether you are temporarily laid off, let go of your company or do not have enough sick days to cover your time at home during COVID-19, there are steps you can take to help supplement your income.
   • You can try these alternatives if you are out of work due to COVID-19 and in need of financial assistance.
   • Employment Insurance (EI) might be an option. Services Canada has reduced the wait period and is currently offering EI assistance to individuals affected by the virus. Click here to learn more.
   • Have skills you can utilize online? While you’re off work or in quarantine, consider freelancing. Websites such as UpWork and Freelancer.com have jobs from across the globe from accounting to website development.
5. Stay Informed
   Information is power and the more information you have at your disposal as this situation develops, the better prepared you will be to manage your household and finances. We will be providing updated information right here on our website as this situation develops.