September 21, 2017

New Rules For Banks Capital Requirements

osfiOne of my passions is to educate my clients on the mortgage process, provide options and keep them informed of what is happening in the mortgage industry.  In light of this, I found this particular article important in gaining understanding in the never ending saga of “where are interest rates heading.”  OSFI (Ontario of the Superintendent of Financial Institutions) which is Canada’a banking regulator has released revised capital guidelines for mortgage lenders.

What does this mean?  We have been hearing about the crash of the housing market for years, however with the recent out of control escalation in the market, concerns may be very real.  Therefore, OSFI has had to institute controls to protect our banking system and our economy to be in a better position to withstand potential losses.

Federally regulated lenders will have to set aside more capital in certain cases to shield them from a potential market blowup.  The new rules kick in November 1 for the big banks.  “Under the proposed revised guideline, the amount of capital required to be held by the institutions is not expected to change significantly,” assured a spokesperson. “These changes aim to ensure that capital requirements continue to reflect underlying risks and developments in the financial industry.”

One interesting change is OSFI’s new “countercyclical buffer” policy. That’s where banks must put aside more capital if the market gets abnormally risky. Banks will get 6-12 months’ notice before these countercyclical buffer increases take effect.

In April, OSFI introduced a higher floor on capital requirements to “take into account periods where the value of properties pledged as collateral becomes less certain.” Those changes are meant to be “risk sensitive and therefore reflective of regional variation in risk,” it said in December.

The net effect to mortgage shoppers remains to be seen. Our money is on banks incrementally tightening lending qualifications and Banks may need to slightly increase mortgage rates to offset their cost of compliance.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Article:  http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/09/more-on-osfis-recent-capital-guidance.html

And What About Short Term Rentals?

short-term-rentals-in-vancouver2After last weeks blog on rental properties, a client called and asked about the implications of renting through Airbnb, which has become very popular for short term rentals and can be very lucrative!  You should however carefully consider your potential liabilities and your insurance coverage.  Some things to consider:

Who’s Liable for Renter Injuries?

If the renter files a lawsuit against you, claiming his broken leg was caused by your negligence in not keeping the stairway properly lit, the cost of hiring a lawyer to defend against the lawsuit will run into many thousands of dollars. And this doesn’t include the cost of any legal settlement or court judgment. So who will pay?

Does Your Hosting Platform Provide Insurance Coverage?

Some short-term hosting platforms provide liability insurance to their hosts, others don’t. Airbnb’s Host Protection Insurance program provides primary liability coverage for up to $1 million per occurrence in the event of third party claims of bodily injury or property damage.

Other hosting platforms provide no insurance coverage. For example, HomeAway does not provide liability insurance coverage to protect you against the type of renter accidents described above. Instead, HomeAway recommends that hosts obtain their own short-term rental coverage from the insurer CBIZ that has created a special combination homeowner’s and short-term rental insurance policy.

Does Your Homeowners’ or Renters’ Insurance Policy Cover Short-Term Rentals?

Your own insurance policy may provide some protection when you’re renting out your home on a short-term basis.

Homeowners’ Insurance

Homeowners’ insurance provides coverage for damage to or loss of your home and possessions and liability insurance in the event an accident occurs on your property. So, if a renter suffers an injury in your home, and you’re properly insured, you should be covered.

Before renting your home to anyone, you should read your policy carefully. Homeowners’ policies vary from insurer to insurer, but they almost always exclude coverage for homeowners who are running a business in their homes. If you earn money by frequently renting out your home to short-term paying guests, your insurer could claim you’re running a hotel or bed and breakfast business and deny coverage if one of your guests has a problem.

What should you do if your standard homeowners’ policy doesn’t provide the coverage you need?  You’ll need to obtain a landlords’ insurance policy that provides coverage for short-term guests.

 Who Pays for Property Damage Caused by Short-Term Renters?

What happens if a guest damages your home or your personal property? If the loss is covered by your homeowners’ or landlords’ policy, you’ll be reimbursed by your insurer. However, if your homeowner’s or renter’s policy doesn’t cover your short-term rental, your insurer may refuse pay you for your loss. To fill this gap, some hosting companies have begun to offer their own insurance or reimbursement plans. For example, Airbnb has a “host guarantee” in which the company promises to pay up to $1 million to a host for property damage caused by a renter. However, Airbnb makes clear on its website that the guarantee is “not insurance,” and does not cover cash and securities, collectibles, rare artwork, jewelry, pets, or personal liability.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Article:  http://www.nolo.com/legal-encyclopedia/insurance-questions-when-renting-out-your-home-short-term.html

Considerations When Renting Your Property

rental-properties-08-03-2011Are you considering purchasing a rental property?  There are many factors to take into consideration.  Landlords and property managers want to attract respectful and dependable tenants, but in order to do so, they must go beyond just listing their property and hoping for the best.

Before they begin screening tenants or even setting up their listing, there are several steps you must take to avoid legal issues or nightmare tenants.

1. Get proper insurance :  After deciding to rent out your property, notify your insurance company and receive proper insurance. Landlord’s insurance will protect you against damage to your property or any liabilities.

2. Be competitive about your pricing:  Research the average pricing of rental properties in the market and set a competitive price. Avoid listing your property at the lowest rental price to attract more tenants; it will likely backfire because it will attract tenants who are only focused on price.

3. Understand landlord’s rights:  It’s important that landlords know their rights and their tenants’ rights to avoid any lawsuits or legal issues. Canada Mortgage and Housing Corp. lists extensive information for each province on what landlords can and cannot do, including information on rent, pets and when a landlord can enter a unit when occupied by a tenant.

4. Photography goes a long way:  The photos you select to post with your property’s listing can make a huge difference. Poorly lit photographs, whether they are too dark or over-exposed, can make a space look unappealing and unwelcoming. Photos that are blurry, grainy or low resolution can be difficult to make out and fail to properly showcase your space.

5. Maintain the rental property:  If the rental property requires any repairs or is in need of a touch-up, be sure that they are conducted before viewings start.  They also won’t be pleased if they rent out your property only to discover the heating is broken or the pipes need replacing. Create a space that is clean and comfortable; if you’re not comfortable living there, tenants won’t be either. After a tenant has moved in, be responsive and timely when they contact you should an issue arise.

6. Understand tax laws:  Canada Revenue Agency requires that rental income is reported on your annual tax return, so it is important to know what can and cannot be deducted. Any reasonable expense – repairs or renovations, for example – incurred to earn your rental income can be deducted, but you cannot deduct the value of your own labour if you do the repairs or renovations yourself. If you’re unsure, the CRA provides a full list of expenses you can deduct, both current and capital, and what you cannot deduct.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Article:  http://www.remonline.com/6-things-to-consider-when-renting-property/?utm_source=REM+Inbox+Update&utm_campaign=98dc0323e8-27_May_20165_26_2016&utm_medium=email&utm_term=0_3f4c7c7b65-98dc0323e8-61046477

Are You Too Busy To Take Care Of Your Finances?

bankingOver the past 6 months, I have had a number of clients referred that are just too busy or overwhelmed with taking care of their day to day finances.  Generally speaking, they don’t understand the banking system or how to set up systems to take care of their bill payments.  The end result is this effects their credit score and costs them more money to arrange their mortgage financing.

A big part of the problem is they just don’t have the time to learn how to make the systems work for them, other priorities take precedent over having to learn something new, again.  We are continually having to learn new computer systems and we are overwhelmed by having to digest something else!

Here are some simple suggestions:

  • Make time twice a month to sit down with your banking to pay your bills and reconcile what monies are coming in and what is going out
  • Have your deposits (i.e. pensions) put on automatic deposits and it will save you time instead of having to personally deposit these cheques
  • Put your utilities and other payments on automatic withdrawal and this will ensure that these bills are paid on time
  • Go to your bank and ask them to explain what it is that you don’t understand about the banking system
  • Take a hard look at what it is costing you in bank charges (i.e. NSF fees) by not being in control of your banking balances.

If I can clarify anything for you, please call me and take advantage of my many years working within the banking system!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Myths On Pulling A Credit Bureau

Understanding-the-Three-Major-Business-Credit-BureausI hear people say all the time “you can’t pull a credit bureau because it will ruin my credit score”.  I’m not sure where this fear instilled statement originated but I can tell you, this is not necessarily the case.  Recently Equifax upgraded it’s credit scoring platform to “Beacon 9”.  Here are some of the updates and some tips on how to ensure you obtain the maximum credit score possible.

  1. Mortgages are now included in your credit rating.  This is huge because there is no explaining away late payments if you are looking for a new mortgage
  2. Telecommunications are now included in your credit rating.  This will be especially helpful for people that don’t have any credit cards and therefore no credit rating
  3. The system looks at lines of credit differently.  Previously, your score would be penalized if the balance didn’t fluctuate and if the L/C was fully utilized.  Now it takes into account different lending modalities and weights them accordingly
  4. The number of enquiries are treated more rationally.  If you are looking for a mortgage, for example, it now counts the number of enquiries within a 45 day period as 1 enquiry
  5. Clients with the occasional late payment will not be penalized so strongly.  If it is an isolated incident, it is not as critical.  The new system is looking for delinquency on multiple or all accounts and then the penalty is very steep
  6. Gives high marks for people who use their credit sporadically and don’t fully utilize their credit
  7. Deducts and is very critical of people who fully utilize their credit even if payments are made on time

The long and the short of the upgraded credit rating system is you receive a higher score for less utilization of your available credit than your actual repayment history.  This benefits someone with an occasional late payment but penalizes people that fully utilize their credit, even if they always make their payments on time

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406