Newsletter June 2020

Latest News.

1. Prime Rate remained unchanged in June. How are the mortgage rates changing?
2. CMHC Insurance Company tightens the rules for those buying with smaller down payment.
3. “CERB” ends July 6th. What is next?
4. Critical Illness Insurance, no one gets rejected. There are two companies that will issue Critical Illness Insurance policy with practically any existing health problems.
5. Same can be said about Life Insurance. Regardless of prior refusal or prior rated contract, now you can obtain an insurance policy.

Now in more details:

1. Prime Rate remains unchanged in June. How are the mortgage rates changing?

Many of you know that the Prime Rate did not change in June, as predicted by experts. In the foreseeable future, changes to the overnight lending rate, and Prime Rate as result, are not expected.
As I have previously mentioned, in March, banks have all changed the formula for calculating variable rate from minus to plus. However, I would like to let you know, that we are seeing a major progress now. We are again seeing offers with Prime Rate minus formulas on variable rates.
Fixed rate decreased so much that it is now interesting to consider that option instead of variable.
We are back to the same situation, when is it important to review your current mortgage contract, will it be beneficial to switch to a new, lower rate, contract?
If you have an interest of over 3%, call us, we will provide you with necessary calculations.

2. CMHC Insurance Company tightens the rules for those buying with smaller down payment.

As of July 1st, CMHC insurance company has tightened the rules for those buying property with lower down payment.
Government insurance company CMHC (Canada Mortgage and Housing Corporation) has released a report at the end of May, in which it outlined the future outlook of the Real Estate market.
Main points have been published in the “Housing Rebound Year Away” article in “Financial Post” on May 28th, 2020.
Realtors association did not agree with the forecast, it is believed to be too pessimistic.
Based on these reports, CMHC has moved to mitigate risk by tightening requirements on purchases.
In Canada, the mortgages are issued based on two formulas: GDS (Gross Debt Service ratio) and TDS (Total Debt Service ratio).
GDS indicates that all costs associated with owning a home cannot exceed 39% of income, if a person has a good credit history and his/her credit score is above 680 points.
TDS considers all debt obligations of a person. Payments on mortgage(s), car loans, credit cards and lines-of-credit cannot exceed 44% of person’s income.
If a person’s credit score is between 600 and 679, the GDS and TDS ratios cannot exceed 35% and 42% respectively.
What is happening starting July 1st? CMHC is looking to decrease the GDS and TDS threshold to 35% and 42% even for those with credit score of over 680 points as well as adding another restriction. If a family does not have a good credit score (no one has score over 680), the family would not be able to obtain a mortgage with CMHC insurance.
Of course, this decision could have an impact on the Real Estate market.
But there are two more insurance companies in Canada, that work just like CMHC, and they do not always follow the same approach as CMHC.
In this case both, Genworth and Canada Guarantee, didn’t place the same restrictions as CMHC.
And it’s really good, because will be no any effect for real estate market.

3. “CERB” ends July 6th. What is next?

On June 9th, 2020, “Financial Post” published an article “Ottawa plans exit for CERB”. It mentions that starting in July, qualifying period for CERB will be decreased from 4 weeks to 2 weeks and the payments per two weeks will be reduced from $1,000 to $500.
The article mentions that a one third of recipients of CERB had minimum wage, that was less than $2,000 per month after taxes.
Message is clear, if you are able to work and can find job, it is time to do so.
The CERB will end on July 6th, but many may realize that they do not have a job anymore. The government is considering various options on how to resolve this situation.

4. Critical Illness Insurance, no one gets rejected. There are two companies that will issue Critical Illness Insurance policy with practically any existing health problems.

I like Critical Illness Insurance because it protects people while they are alive. You can find more information on this insurance program at the following link https://www.totrov.com/en/insurance-en/critical-illness-insurance/.
But obtaining this plan is of course harder as there is a higher chance of getting sick than dying. Many people, for a variety of reasons, were not able to obtain such contract but today it is possible to process such insurance program and our application will not be denied.
Insurance companies always pay claim if there is no lying at the time of applying for coverage. But this contract has no questions, so nothing has to be hidden. Therefore, everything will be paid out. Of course it is best not to get sick. I totally agree, but money will really help, should you be unfortunate and get sick.
Also, all premiums paid to the insurance can be taken back, if the insured did not get sick. Another interesting option.
Such plan can be processed for little children, in addition to the education savings plan: insure a small child, all savings can then be taken back for child’s needs later.
Call, every situation has alternatives.

5. Same can be said about Life Insurance. Regardless of prior refusal or prior rated contract, now you can obtain an insurance policy.

Global pandemic has clearly shown us that not everything is under our control and events often unfold in an undesirable manner…
Life Insurance is an absolutely necessary contract, especially when there are debts, mortgages, children, dependents.
Plans can be very different, inexpensive and not so much. Please check options on our website https://www.totrov.com/en/insurance-en/life-insurance/.
Majority have various insurance programs, but unfortunately, many are unable to obtain insurance for different reasons: family history, personal health issues, a lot of traveling, etc.
But I am a broker, represent many companies and can certainly offer you an insurance contract in different situations. The choice is yours, call and check.
For those with mortgages, I would like to ask you: Would you like your mortgage to have a condition where if one of the spouses passes, the debt is annulled?
Sounds great and many would consider this option necessary.
But many of us do not accept this option when it is offered by our bank.
Bank offers but we do not take it. Why? There can be several reasons but typically it is the question of payment.
We can always offer you a plan that works better than the bank’s.
– You mention family as a beneficiary in your contract and not your bank!
– Two insurance policies on spouses are cheaper than one offered by the bank and…
– You own the contract, not the bank.
More information can be found on our website https://www.totrov.com/en/mortgage-en/mortgage-insurance/.

We wait for your calls.

We wish you financial wellbeing and good health!!!

Сергей Тотров
Financial Advisor, CFP, CLU, EPC
Mortgage Broker, AMP
TOP – 75 Mortgage Brokers in Canada
in 2015, 2016, 2017, 2018, 2019
416-222-0533
www.totrov.com

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