Newsletter February 2020-1

Year 2020 has come.
Happy New Year!!!

Let’s talk about the latest news:

1. Basic Personal Amount – income to not be taxed will gradually increase to $15,000 by year 2023.
2. OHIP will no longer cover any medical expenses outside the country.
3. What will be the percentage increase in property value in Toronto? I am sure many of us are wondering.
4. Reverse Mortgage – myth vs. reality… New section on our website.
5. Prime Rate remains on the same level, but the fixed rate improved again. What to do, especially if you are at the time of your mortgage renewal?
6. RRSP, Spousal RRSP, TFSA and how to make sense of it all?

Now in more detail about everything:

1. Basic Personal Amount – income to not be taxed will gradually increase to $15,000 by year 2023.

In 2020, the maximum BPA is increased from $12,298 to $13,229 for individuals with a net income of $150,473 or less. The increase is gradually reduced for individuals with net income between $150,473 and $214,368. If your net income is above $214,368, the change does not apply to you. Your BPA will be $12,298.

In addition, the maximum BPA will be increased to $15,000 by 2023 as follows:

$13,808 for the 2021 taxation year,

$14,398 for the 2022 taxation year, and

$15,000 for the 2023 taxation year, and indexed for inflation for subsequent years.

Individuals whose net income is too high to benefit from the increased BPA will continue to claim the existing BPA. This existing amount will continue to be indexed for inflation each year.

You can find more detailed information at the link http://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/federal-government-budgets/basic-personal-amount.html/.

2. OHIP will no longer cover any medical expenses outside the country.

Starting January 1st, 2020, the Ontario Heath Program OHIP will no longer provide any coverage for Canadians abroad. Of course, OHIP did not offer much coverage before, up to $400 per day, based on the same treatment in Canada, but now this coverage will not be available either. You can find more information at the following link https://www.ontario.ca/page/ohip-coverage-while-outside-canada.
For years now, our website offers an option to buy travel insurance online when leaving the country. For people over 60 years old we recommend contact our office directly because for this age we will need to make sure that there is coverage on existing health issues, if such exist. In all other cases you can utilize the option to process travel insurance on our website at any time of day or night. Please follow the link below to find more information on how this insurance program works and right in the text you can find premiums on the coverage you need for your travel. Approximately in the middle of the text, you will find a link to the page where you can purchase your coverage.
https://www.totrov.com/en/insurance-en/travel-insurance/
If you have any questions, please, call us during business hours and we assist you.

3. What will be the percentage increase in property value in Toronto? I am sure many of us are wondering.

“2020 to see notable rise in home prices, report says” – this article was posted in “Financial Post” on February 12th. The article compares current situation to years 2016-17, when the prices on properties rose at a very rapid rate. According to recent statistics by TREB (Toronto Real Estate Board), January has seen the largest monthly increase in prices since 2017, 12.3% in comparison to last year.
It is expected that the prices will increase at the fastest rate since year 2016. Affordability index, showing ability to purchase residence, is at its lowest in recent years. Prices on single detached homes have long reached unattainable prices but even the condo market has seen a noticeable increase in recent years. According to TREB, in 2019, the average price increase on a house was 10.5% ($1,038,247 in January of 2020), condo’s prices increased by 15% from previous years ($630,047). Why is this happening? There is very little inventory in the market, number of New Listings has decreased by 17% since previous year. If this tendency continues, the prices on residence will continue to increase. If supply shrinks even further, prices could spiral upward like they did in 2016 and early 2017, the increase in price could reach double digits. In Greater Toronto Area (GTA) the prices are expected to increase by 8% in 2020 (in 2019 the increase was 4%). Prices of single homes continue to increase since the difficult 2018, and potential for further growth continues to be strong.
If the Bank of Canada reduces the overnight lending rate, this will add another push to prices in Real Estate.

4. Reverse Mortgage – myth vs. reality… New section on our website.

Reverse Mortgage is gaining popularity in Canada.
“Business booming for Reverse Mortgages” – this article was posted in “Financial post” on January 14th, 2020. Lack of larger pensions at work like before and existence of “Stress Test” forces seniors to borrow more and more money against their properties in order to cover other debts and have addition to the government pension at retirement.
In 2015, $309 million dollars has been taken using the Reverse Mortgage by Home Equity Bank, and in 2019 the number reached $820 million dollars. We have created a new section on our website, explaining this program, as many will likely find it really interesting. The website also compares Reverse Mortgage with Home Equity Line of Credit (HELOC, Equity Line, Home Line, etc.) with various banks and you can find answers to the most commonly asked questions on this topic. At the end of the paragraph I have outline the ideal scenario for retirement.
Visit our website at www.totrov.com using the following link https://www.totrov.com/en/mortgage-en/reverse-mortgage/.
We are sure that this will be an interesting section and we encourage you share this information with your friends and colleagues.

5. Prime Rate remains on the same level, but the fixed rate improved again. What to do, especially if you are at the time of your mortgage renewal?

Prime Rate = 3.95%. The rate remained unchanged for a year and a half now. While many expect the overnight lending rate to decrease, followed by decrease in Prime Rate, there are opinions that this will not happen in year 2020. The fixed rate has come down significantly since its highs in early 2019 by summer, increased again, dropped in the fall, increased in again mid December and has come down again just recently. Who can predict where the interest will go, up or down?
Life goes on and today you can use current situation to correct your existing mortgage and improve your financial situation.
If you have a variable rate mortgage with a low discount to prime or a fixed rate with over 3%, contact us and we will look into options of improving your situation.
In order to understand how beneficial it will be for you to switch to new term, you will likely need assistance and we are here to offer it. Half hour meeting or even a scheduled phone call can very likely save you money. At the early stage you can simply request to analyze your situation by e-mail.
Once we receive the request, we will do the appropriate calculations, including losses associated with penalties and administrative costs. If it turns out that you will benefit from switching to another bank, we will contact you.
Send us the information we need and your requests and wishes (increase amortization period, consolidate debts, add an equity credit line, refinance or simply improve mortgage rate) to Galina at mortgage@totrov.com.

Information that we will need to do analysis:

1 – amount of your current mortgage, balance and approximate value of the property;
2 – name of the bank your mortgage is with and remaining amortization period;
3 – current mortgage rate and whether it is fixed or variable;
4 – if you have a fixed rate mortgage with a major bank, please send us first two pages of your mortgage statement. It contains important information that we will need to calculate penalties.

A new bank will assume the legal costs as well as property appraisal costs, so you do not have to worry about it.
In the situation where you are approaching your mortgage renewal we highly recommend contacting us 4, 5 months prior to expiry of your current contract. You can read the following article https://www.totrov.com/en/mortgage-en/manage-your-mortgage/.
Yes, you would have to provide some documents during the transfer, but it is often worth it.
We await your calls and meetings.

6. RRSP, Spousal RRSP, TFSA and how to make sense of it all?

We are in the midst of the RRSP season. Many people try to reduce their taxable income by contributing to RRSP pension program. Some are not sure what is better, contribute to RRSP or TFSA. I have published an article in Russian newspapers that can be found on our website at the following link https://www.totrov.com/resources/articles/art-2020-01-1/.

We hope to hear from you or see you soon.
Our office is open 9 a.m. to 9 p.m. and Saturdays by appointment.

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

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