Canadian wallets have taken a wallop as a result of the COVID-19 pandemic. According to a recently released Financial Literacy Month survey from the Financial Planners of Canada:

• 41% of Canadians feel in a worse financial position than at the start of the pandemic;
• Only 54% feel their financial position is strong enough to withstand the second wave;
• Half of Canadians under age 35 have already borrowed money to make up for financial shortfalls.
  (Source: Coping With Covid’s Financial Impact survey, FP Canada)

Although the country’s economic recovery is underway, many Canadians may feel uncertain about their employment prospects, especially as local coronavirus flare-ups disrupt business activity.

Planning ahead can offer some peace of mind during uncertain times. Here are 5 coronavirus relief programs every homeowner should be aware of: four government programs that can help make up for financial shortfalls arising from illness, childcare responsibilities or lost wages; plus one additional option – mortgage deferral – that’s worth thinking hard about with the help of a mortgage professional.

Employment Insurance (EI)

Who qualifies: Workers who logged a minimum of 120 insurable hours during the past 52 weeks, who lost their job through no fault of their own, or who left work temporarily due to maternity or parental leave, sickness, etc.
Approximate benefit amount: At least $500 per week, $300 per week for extended parental benefits
How to apply: Get more program details on the federal government’s Employment Insurance and Leave page.

Canada Recovery Benefit (CRB)

Who qualifies: Workers who aren’t eligible for EI (including self-employed freelancers and gig-economy workers), who can’t work, or whose income has dropped by 50%, as a result of the COVID-19 pandemic. This benefit replaces the Canada Emergency Recovery Benefit (CERB), which ended in late September.
Approximate benefit amount: $500 per week for up to 26 weeks
How to apply: Learn more about CRB on the federal government’s Canada Recovery Benefit page.

Canada Recovery Sickness Benefit (CRSB)

Who qualifies: Workers who are unable to work because they caught COVID-19; or who must self-isolate due to COVID-19-related reasons; or who must stay home due to another condition or medical treatment that makes them more susceptible to COVID-19.
Approximate benefit amount: $500 per week, with a two-week maximum
How to apply: Find out if you qualify for CRSB on the federal government’s Canada Recovery Sickness Benefit page.

Canada Recovery Caregiving Benefit (CRCB)

Who qualifies: Workers who have to stop working or who must work less than 50% of the week due to caregiving a child/family member under age 12 whose school or daycare is closed due to COVID-19, or who is sick or required to quarantine for COVID-19-related medical reasons.
Approximate benefit amount: A maximum of $500 a week for up to 26 weeks per household
How to apply: Learn if you qualify for this income support program on the federal government’s Canada Recovery Caregiving Benefit page.

TIP: Don’t forget that some COVID-relief benefits are considered taxable income.

Finally, let’s take a look at one non-government COVID-relief program that was in the news a lot this last year:

Mortgage Payment Deferral Programs

Who qualifies: Homeowners experiencing financial hardship can apply for up to six months of mortgage-payment deferrals from participating lenders. Deferred payments (including principal and interest) are added to your mortgage and repaid (by you) down the road. This means that you’re likely to end up paying more over time than if you had not sought a deferral.

One alternative worth considering is mortgage refinancing .

Refinancing at today’s lower interest rates may lower your monthly payments, with or without extending your amortization period.

If you’re also carrying high-interest consumer debt , refinancing allows you to pull equity from your home to pay it off. You’re trading high-interest “bad” debt for low-interest “good” debt and eliminating a couple monthly bills that may have been causing you financial stress.

A mortgage professional can help you determine what mortgage solution is best for your situation.
Approximate savings: Varies
How to apply: Visit the 8Twelve Mortgage site for more info or to reach a Mortgage Strategist who can offer personalized advice tailored to your circumstances.

If you have concerns about your financial health and wellness this November, research your options today – you’ll feel more secure knowing what help is available should you need it.

Canadians have faced surprises and uncertainty in 2020, reinforcing the value of basic financial awareness and planning. Here are 5 things you need to know right now to get ahead in 2021.

Need-to-know #1: How much money you owe

FAST STAT: Canadian households owe $1.77 for every dollar of disposable income. (Source: Statistics Canada)

If the idea of tallying up your debt makes you want to bury your head in the sand, first, know that you’re not the first person to feel this way. Second, fight the urge and add it all up.

The most common forms of debt include mortgages, car loans, personal loans, lines of credit, credit cards , student loans and money owed to Canada Revenue Agency (CRA). Knowing how much you owe – and at what interest rates – allows you to prioritize debt reduction goals and strategies .

Need-to-know #2: Your bottom line

FAST STAT: The average Canadian household spent just over $86,000 on living expenses in 2017, the most recent year for which data was collected. (Source: Statistics Canada)

Subtracting your fixed and variable expenses from your income will help you determine whether or not your spending habits are sustainable and if they align with your short-, mid- and long-range goals. Check online for budget worksheets or download one to your smartphone to get started.

If you’re not doing this already, adjust your budget so you can allocate savings to a household emergency fund to cover you in the event of job loss, illness and other unforeseen circumstances. The FCAC recommends saving three to six months of income or of living expenses (whichever you prefer).

Need-to-know #3: Your credit score

FAST FACT: 29.2% of mortgage holders increased their credit score in the first quarter of 2020. (Source: Canada Mortgage and Housing Corporation)

Strong credit benefits you in a number of ways. If you’re a homeowner (current or aspiring), it’s your ticket to the best mortgage rates . If you’re a tenant, it can make or break your rental application. As a consumer, it can impact whether or not you’ll be approved for a credit card , car loan or line of credit.

According to Equifax, one of Canada’s two primary credit reporting agencies: “credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.”

Monitor your credit score regularly to ensure you’re on track with your financial goals.

Back this up by ordering your credit report annually and checking to ensure all listed creditors are legit; this can alert you to potential identity theft.

Need-to-know #4: What Covid-19 relief programs can help you

FAST STAT: Canadian employment income fell by nearly 9% in the second quarter of 2020, but household disposable income grew by 11% as a result of government support programs. (Source: Statistics Canada)

As Canada experiences the second wave of the COVID-19 pandemic , the government and many financial institutions continue to address financial concerns stemming from illness, reduced income and/or job loss.

Plan ahead by knowing what support you may be entitled to if your income is impacted by the pandemic:

• Check your bank or lender’s website to see if you qualify for deferred payments or reduced interest on your credit card, line of credit, other consumer loans or mortgage;
• Reach out to a mortgage broker if you have concerns about your debt payments or mortgage – they may be able to find solutions that can reduce your monthly debt obligations and interest charges;
• Check the federal government’s Covid-19 Economic Response Plan page for updated info on the programs you may qualify for.

Need-to-know #5: Your Plan B

FAST STAT: Canada regained 378,000 jobs in September 2020. Pandemic-related job losses are down to (a still-significant) 720,000 jobs compared to pre-pandemic February 2020. (Source: Statistics Canada)

The good news is that Canada is well on the road to economic recovery. But, as the country continues to respond to regional virus surges with actions including business restrictions, it’s good to plan for the unexpected.

This may include an honest assessment of your employment prospects: the restaurant, entertainment, hospitality and tourism sectors don’t look great right now, while tech, gaming, groceries and home decor all are booming.

Consider what skills could help you transfer to a new industry, or if now would be the time to get more training or education. Consider how you might fund more education – mortgage refinancing or a CHIP reverse mortgage are two options.

Could you build your income by taking on a side hustle like food or grocery delivery, starting an Etsy shop or starting your own business walking dogs or tutoring online?

A Plan B can provide peace of mind during uncertainty, but another side benefit is, it may just lead you to fulfilling new opportunities you hadn’t even considered.

Want to learn more about financial literacy? Visit the FCAC’s Financial Literacy Month site.

Home equity is one of those terms you hear a lot. You may have a general sense that it’s a good thing that’s tied to homeownership, but not know the nuts and bolts of it. No fear: here’s an explain-it-to-me-like-I’m-12 look at home equity.

DEFINITION

Home equity refers to your ownership stake in your home. It’s calculated as the home’s current market value less what you owe on the property via your mortgage and any liens.

For example: If your home’s market value is $500,000 and there’s $240,000 remaining on your mortgage, your home equity is $260,000 or 52% of its value.

HOW HOME EQUITY CHANGES OVER TIME

Home equity changes over time. Examples of how this works are:  

• You gain equity as you make mortgage payments; each payment reduces your home loan a little bit;
• You gain equity as the value of your property increases due to home improvements or changes in the real estate market;

It’s also possible to lose equity, say, if housing values drop or if the home itself loses value due to disrepair or bad renovation choices .

If that $500,000 home we talked about earlier now has a market value of $450,000 and the same $240,000 mortgage, your home equity is now $210,000 or 46.6% of the property’s value.

Fortunately, home values generally tend to appreciate (increase) over time.

HOW TO USE YOUR EQUITY

Home equity can be used as collateral in a home equity loan or a home equity line of credit (HELOC), also known as a second mortgage.

Another way to use your home equity is to borrow additional funds at mortgage renewal time, or by refinancing your existing mortgage.

Canadians over age 55 can leverage their home equity with a  reverse mortgage .

Because these types of loans are secured against home equity, they are offered at interest rates well below unsecured loans such as credit cards or personal lines of credit. Many Canadians leverage their home equity to boost their overall financial health. Examples of this include:

• Paying off high-interest consumer debt;
• Funding university, college or a training program;
• Paying for home improvements;
• Freeing up money for a down payment ona second home or other investment.

Although you’re adding to what you owe on your home, it’s money well spent because, to use the examples above, you’d either be saving money outright (elimination of high-interest debt), be boosting future income (education and training) or building home equity in the mid- to longer term (the other two examples).

BOTTOM LINE

Home equity is a financial tool you can leverage if it is needed – or simply watch grow!

With today’s low-interest environment, 2020 can be a great year if you’d like to utilize some of the equity you’ve built in your home.

Got questions? Contact 8Twleve Mortgage for personal advice and product recommendations specific to your needs and lifestyle. 

For those with high-interest credit card debt, the COVID-19 pandemic has made a stressful situation even more challenging. But there is good news, too: According to Statistics Canada, Canada is making headway in job recovery . With many of us back on financial track, September is a good time to work on tackling credit card debt and improving credit. Here’s a two-step action plan that could work for you.

Step 1: Trade bad debt for good

High-interest credit card debt is hard to get out of. Once you fall into the pattern of carrying a balance, compound interest adds up fast. If you only pay the minimum each month, it can take years – or decades – to clear your debt.

This chart explains how a $1,000 credit card balance at an 18% annual percentage rate (APR) would take over five years to pay off, assuming no additional purchases are made.

But let’s say you’re in greater debt than $1,000. This Forbes article identifies some strategies for paying off a significant amount of credit card debt, such as: tackling credit cards one at a time; transferring high-interest balances onto a 0% APR credit card and chipping away at the balance before the 0% promo rate ends; or, finally, clearing them once and for all via credit card debt consolidation.

The latter is the solution we recommend, and here’s why:

If you own your own home, you can use your equity to restructure your mortgage. Let’s say you have $20,000 in credit card debt. If it’s time for your mortgage renewal (or if you consider mortgage refinancing), you could take out $20,000 in home equity and have it added to your mortgage. This allows you to clear that high-interest credit card debt immediately, replacing it with one affordable monthly mortgage payment at today’s record low mortgage rates.

You’ll end up paying less interest each month and can devote more of your income to savings or investments while paying off your mortgage sooner.

Step 2: Make more money

The second piece to this strategy is income. Don’t use your home as a piggy bank. Sure, real estate tends to appreciate over time, but you won’t make headway on your mortgage if you get into a cycle of racking up credit card debt followed by dipping into your home equity to clear it.

If you find yourself carrying a credit card balance on a regular basis, you’re spending more money than you make . This is a common problem with two solutions:

One is to spend less .

The other is to earn more. Think: side hustle. Make a few extra bucks each month and you’ll be able to pay for those extras you used to put on plastic.

Take dog walking – just four walks a week at $25 per walk translates into an extra $400 a month.

Not into dogs? What about house-sitting cats?

Or virtual tutoring?

The point is, a steady side hustle can bring in cold hard cash and if you dedicate those funds to your expenditures – or better yet, towards ramping up your mortgage payments – you’ll reach your goals sooner than relying on your main income alone.

Bonus: All the ideas above are social-distancing friendly, by the way!

Want to learn more about debt consolidation? Contact 8Twelve Mortgage for solutions tailored to your unique needs.

Getting ready to buy your own home? There are a lot of boxes new homeowners have to tick off, and one of the most confusing can be insurance. Certain types of insurance are mandatory and others are optional…. but highly advisable. Here are 5 types of insurance the experts want every homeowner to have.

HOME INSURANCE

While not legally required, it’s nearly impossible to get a mortgage without proof of home insurance. But why would you want to leave your biggest investment unprotected? Home insurance covers the rebuilding or replacement value of your house, detached structures such as a garage, your contents, plus personal liability if anyone gets hurt on your property.

Be sure to read the fine print and find a plan that works for you . Standard policies may not include things like earthquakes, termite damage, or certain types of flooding. If these are relevant to you, look into additional coverage.

The cost: Varies depending on coverage, home value and additional factors

CONDO INSURANCE

Many condo owners think their condo corporation’s commercial condo insurance covers their unit, too. This is not the case. It is limited to common areas like the building structure, its exterior and shared spaces like the lobby or elevators. You’ll need a personal condo policy to protect your own unit, its upgrades and contents (including those stored in your locker).

Personal condo insurance isn’t legally required, but most mortgage lenders consider it mandatory. You should too, says Steve Totani , a real estate broker with Zolo Realty in Toronto.

Totani provides the example of a small condo building that experienced massive flooding as the result of a plumbing problem. Owners’ homes were ruined as were their belongings. “Once the units were repaired, they each got an empty unit with four dry walls. Property insurance would have brought a condo owner’s unit back to how it was, for example, granite countertops and better appliances. Just relying on the condo’s [building] insurance is a big mistake. Paying $20 or $30 a month extra can save you tens of thousands of dollars in that sort of situation,” explains Totani.

The cost: Varies depending on coverage, condo value and additional factors

TITLE INSURANCE

A property’s title is the legal proof of its ownership. When you buy a home, the owner signs the deed over to you. Title insurance protects you against challenges to your ownership or issues relating to your home’s title, such unpaid liens, encroachment issues, fraud, and other issues that could prevent you from selling, leasing or mortgaging your property. ( You can read more details here .)

Toronto real estate lawyer Bob Aron writes that “most real estate lawyers today regard title insurance as a critical component of the [real estate] transaction and will usually not close a purchase without it.” Likewise, most lenders make it a requirement for financing.

The cost: A one-time premium based on the value and location of the property, generally in the $225 to $325 range[yh1] .

MORTGAGE DEFAULT INSURANCE

Mortgage default insurance (also known as “mortgage insurance”) is mandatory on all high ratio mortgages . Those are mortgages with a down payment of less than 20 percent of a home’s purchase price.

This insurance protects lenders in return for qualifying borrowers with as little as 5 percent down, making it a win for both parties. Without mortgage insurance, homeownership would be impossible without a sizeable down payment.

The cost: Between 2.8% to 4% of the mortgage[yh2]  amount. This can be rolled onto the mortgage so it’s not an out-of-pocket expense.

LIFE INSURANCE

“Life insurance is the type of insurance that’s overlooked the most often” says Totani, the Zolo Realty broker.

“People ask about mortgage rates, property tax, property insurance, and their monthly payments, but I hardly ever hear anyone asking, ‘Should I top up my life insurance policy?’ to ensure their mortgage is paid off and their family is not going to be out of their home,” in the event of a tragedy, says Totani.

Totani advises checking your policy and upgrading it if needed, to reflect your homeownership situation. The peace of mind this provides will be worth the effort. 

The cost: Varies depending on life insurance type, coverage, and personal factors.