Happy Holidays from all of us at DebtCare Canada!
As much as this season can be about material possessions, we here at DebtCare are remembering what is truly important: love, kinship, and gifts that cannot be seen but are felt in the heart.
We hope you enjoy the break and festivities with your family and friends.
See you in 2019!
Good news for 2018: we won’t be seeing any more Bank of Canada interest rate increases this year.
On December 5, 2018, the Bank of Canada (BOC) announced that the overnight interest rate would stay at 1.75% for the month of December.
The next interest rate announcement is scheduled for January 9, 2019.
What does this mean for Canadian consumers? It’s a positive if:
What this doesn’t mean:
DebtCare Canada can help future-proof your budget against interest rate increases.
Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
The holidays can be a time of family, love, and joy, but they are also often a source of major stress — financial stress to be exact.
Have you considered consolidating your debt to manage that stress?
More than half of Canadians say that they go over their budget during the holiday season. A CIBC poll found that the average Canadian spends $643 on holiday gifts and $300 on décor and entertaining. And those figures only keep going up.
Moneris found that after the 2017 holiday season, Canadians spent an average of 4.26% more during the last three months of 2017 than they did during the same period in 2016.
A 2017 Angus Reid poll of 1,512 Canadians found that three-quarters of respondents wish they could save more money during the holidays and about 52% end up spending more than they liked.
In order to avoid any long-term damage to your credit score, it’s important that you pay your bills on time each month and (preferably) in full. Making the minimum payment every month is not enough to ensure good credit.
Plus, most credit cards come with high interest rates, so that $1,000 of debt can quickly add up to even more. If it took you five months (the average timeframe) to pay $1,000 at an interest rate of 18% you would have to make a payment of $209.09 per month and by the end of the five months would have paid $1,045.45, including interest.
That might be okay if it is your only debt and you are not accumulating any more, but for most people that is not the case.
While a certain amount of spending is likely expected during the holiday season, it can be particularly stressful if you are already carrying debt.
For instance, say that you have:
And you are hoping to pay it off by the next holiday season — in 12 months.
You would then have to make monthly payments of $1,477.03. By the end of the year, you would have spent an additional $1,724 in interest. And that’s assuming you don’t accumulate any more debt or miss any payments. This also assumes you have the ability and tools to calculate the combined monthly payments of all these debts, which most people struggle with.
It can be stressful trying to pay off holiday debt, but it helps to have a plan. That’s where consolidating your debt can come in.
With debt consolidation, you can put all of your outstanding debts together in one monthly payment. If you choose a consolidation loan with a fixed interest rate you will only have one bill to pay each month and you will always know the amount you have to pay, so you can budget for your payments.
This can allow you to enjoy your holidays without worrying about how you will pay for them.
At DebtCare Canada, we can review your options and help arrange the debt consolidation that’s right for you. You’ll be able to enter the holiday season feeling relaxed and stress-free.
Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
If you’ve been considering debt consolidation, you may have heard the terms “trustee in bankruptcy” and “debt counsellor.” But do you know the difference?
They’re far from the same thing. Here’s what you need to know.
Trustee in Bankruptcy
Also known as a Bankruptcy Trustee or Licensed Insolvency Trustee (LIT).
Debt Counsellor
If you decide to file for a consumer proposal or for bankruptcy, you will need to work with a trustee as they are the only professionals in Canada who can file for either one.
However, even if you do decide to go for one of those options, it is still to your benefit to consult a debt counsellor first, and during, the process.
A trustee is more like a referee — someone who is the middleman between you and your creditors. They are not necessarily on your creditors’ side, but they’re not on your side, either. They are obligated to follow the rules and report anything out of bounds that they discover.
As we mentioned above, a trustee is also paid based on the amount that you file in your bankruptcy or consumer proposal so often it is in their interest to try to make that amount higher so they are paid more.
A debt counsellor, on the other hand, is 100% in your corner. They will represent you and only you. You can count on them for confidential advice and to be your advocate when working with a trustee.
At DebtCare Canada, our debt counsellors offer free consultations to help decide the best debt management plan for you. We will examine every option available and if it comes to filing for a consumer proposal or for bankruptcy, we are on your side.
Contact us today. Call 1-888-890-0888 or visit www.debtcare.ca.
In a month-and-a-half, it will officially be 2019. What will the future bring for you? If you’re anything like almost 50% of Canadian homeowners, it might bring a mortgage renewal.
The Bank of Canada estimates that 47% of residential Canadian mortgages with Big 6 banks will be up for mortgage renewals in the coming year, with another 31% coming due in the next one-to-three years.
This is significant because economists are already predicting something else 2019 will bring — higher interest rates and, in turn, higher mortgage rates.
Since July of 2017, the Bank of Canada (BOC) has increased Canadian interest rates five times going from 0.5% to 1.75%. Experts predict that interest rates could reach 2.5% by 2020.
Plus, the beginning of 2018 saw new mortgage regulations introduced, which dramatically affected the Canadian housing market, shifting supply and demand.
If you’re facing a mortgage renewal in 2019, here are the three things that you need to know:
Mortgage Professionals Canada found that 100,000 Canadians have been prevented from buying a home due to new stress test regulations. Resale activity in Canada has fallen by 12.5% compared to 2017 and is down 16.5% from 2016.
The homeownership rate in Canada is slightly down, too, from 69% in 2011 to 67.8% in 2018.
If you are up for mortgage renewal and planning to move, this could mean that selling your current home may be more difficult. It could also be harder to find another house in a similar price range to move into.
In July of 2018, mortgage renewal rates were still fairly standard. Mortgage Professionals Canada found that the average five-year fixed-rate mortgage renewed at 3.32% (vs. 3.31% in 2013). The average five-year variable-rate mortgage renewed at 2.50% to 2.75% (vs. 2.73% in 2013).
While this wasn’t much of a difference in July of 2018, the gap could grow in 2019. Canadian interest rates are continuing to increase. This could, in turn, affect mortgage renewal rates.
And some homeowners have been getting much higher rates on renewal, depending on their lender and the length of their term. For instance, one homeowner who had a seven-year mortgage term spoke with CBC News in June of 2018 and said that he had been given a significantly higher rate on renewal (2011 vs. 2018).
Plus, small fees can add up. CBC News did the math and found that on a $300,000 mortgage, even a tiny rate hike of an extra 30 basis points on a 25-year mortgage at a fixed rate of 3.74% for five years can add an extra $15,000 in interest costs over the entire life of the loan.
That’s an extra $50 per month. On larger mortgages, the increase would be even more.
Borrowers do not have to undergo the mortgage stress test on renewal if they stay with their current lender.
But if you are considering switching lenders to get a better rate, then you would find yourself being subjected to the test.
The stress test requires the borrower to prove that they could afford their mortgage at either the average of what the big banks currently offer as their five-year fixed term, or two percentage points higher than the actual loan.
For example, if you had a mortgage rate of 3.25%, you might have to prove that you could afford a mortgage rate of 5.25%.
If you cannot pass the test at a federally regulated lender, the lender cannot give you the loan, which would either force you into a smaller mortgage and a cheaper home, or even out of the market altogether.
Alternative lenders and credit unions do not have to follow the stress test rules.
If your mortgage is up for renewal in 2019, starting to plan now for these eventualities will leave you more prepared.
At DebtCare Canada, we can help you manage your debt and finances to make sure that you can pass a mortgage stress test.
Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
With rising interest rates and a changing housing market, it pays to know exactly what your home is worth.
This can help you determine your equity position, weigh your financing options, and much more.
Many home assessment tools cost money, but ours is different.
Our digital property value assessment is completely free and looks at:
No one has to come to your home – simply email mgoldenberg@debtcare.ca with your name, address, and contact information and we will generate your report and email it to you within two business days.
It’s as easy as that!
*The information included in the digital property assessment comes from a third-party source and we have no control or responsibility over its accuracy.
The Bank of Canada (BOC) has made another interest rate increase.
As of October 24, 2018, the BOC interest rate is at 1.75% — the highest it has been since 2008.
The Canadian and U.S. economies, job growth, and inflation were all taken into account. The BOC also discussed household spending as part of their justification.
“Households are adjusting their spending as expected in response to higher interest rates and housing market policies,” the BOC said.
“In this context, household credit growth continues to moderate and housing activity across Canada is stabilizing. As a result, household vulnerabilities are edging lower in a number of respects, although they remain elevated.”
Translation: the BOC believes that household debt is decreasing, and Canadians are spending less due to increased interest rates and new housing regulations, such as the mortgage stress test.
They say that Canadians are taking out less credit and are able to afford the credit they do have.
Of course, that may be true generally, but it is not always the case. Canadians may be taking out less credit, but they may also be struggling to pay off current debts.
For example, if you have a high amount of credit card debt, your credit card interest rates will take a hit with the latest increase.
If you had a credit card with a 20% interest rate before this raise, that would now be a 20.25% interest rate. A small hike, yes, but it could make a big difference.
Apply that increase to all of your debt — can you afford the extra payments?
And even if you can afford the extra payments, is that the best use of your hard-earned money?
Whether you are carrying a high amount of debt, a low amount of debt, or want to take on more credit with a plan for repayment, we can help.
At DebtCare Canada, we’ll help you build a plan for debt consolidation, credit repair, and more.
The next BOC rate announcement is scheduled for December 5, 2018. The BOC said that more increases are on the horizon in 2019, and possibly sooner.
Get in touch before then. Call 1-888-890-0888 or visit www.debtcare.ca.
With Halloween around the corner, we’re thinking about all of the scary financial situations that Canadians might face. And one of those that tends to spook people the most is a Canada Revenue Agency (CRA) wage garnishment.
The CRA has broad garnishment powers. They can issue garnishments on your employment income, your bank account, and even other forms of income, like pensions. If you are self-employed, they can send requirements to pay to your clients. And unlike other creditors, the CRA doesn’t need a court order to garnish you.
There are four ways you can stop a CRA wage garnishment:
If you don’t have a sizable sum to offer or the ability to pay the CRA through a loan or home equity, then filing for a consumer proposal or bankruptcy will immediately stop a wage garnishment.
So, what is the difference between a consumer proposal and a bankruptcy?
Consumer proposals:
Bankruptcies:
These options may seem extreme, but if you are faced with a CRA wage garnishment, they can be the better choice. The CRA will be aggressive with their garnishments and will not stop until they have recouped the full amount — plus any interest or penalties you have accumulated. This could mean thousands of dollars (or more) in garnishments by the time all is said and done.
In turn, that could leave you struggling financially for months, or even years, on end. You need your employment income to pay your other day-to-day expenses, so having up to 20% to 50% of it (or more) go to the CRA could mean going even deeper into debt to other creditors.
At DebtCare Canada, we can help you explore your options for stopping a CRA wage garnishment in its tracks. We will look at your credit rating, financial standing, and debt management choices to make the best plan of action.
Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
Refinancing your mortgage can be a great way to consolidate debt and ease your financial standing, but there is one important consideration to make: the timing.
If you’re thinking of refinancing your mortgage before your five-year term comes to an end to access home equity, you need to consider the pros and cons.
Pros:
Accessing home equity through a mortgage refinancing can allow you to put your debts into one payment. You can pay off your outstanding, higher-interest debts with your home equity, and then pay off your mortgage loan through one, monthly payment — likely with a lower fixed-interest rate.
Cons:
If you are breaking your current mortgage before the current term is up, it may not be cost-effective.
When thinking about using home equity to consolidate debt, you have to consider:
Let’s look more at these.
A. The rate your mortgage is currently at vs. the current mortgage rates.
Is the current lending rate higher than what you are paying on your mortgage? If it is, then it may cost more in dollars and cents to increase your entire existing mortgage by 1-2% to pay down debt.
Mortgages are usually much higher than what most people carry in personal debt. If you already have a good mortgage rate, then refinancing for a higher rate may not be the wisest decision. You could be paying more in the long run.
B. Prepayment penalties.
These can get quickly get expensive if you are refinancing before your mortgage renewal.
These penalties could include:
Be sure to look at your current mortgage contract to see what the terms are and consider what the penalties may be if you were to refinance early.
C. The amount you owe on your current mortgage in proportion to your debt.
Consider this example: you have a $300,000 mortgage at 3% interest and 15 years of amortization left on your mortgage. You also have $40,000 in credit card debt at 14% interest. You’re considering refinancing to a new mortgage rate of 5% over a 30-year amortization.
On the plus side, you’ll be getting rid of your high-interest credit card debt quickly, but on the negative side, you will be making mortgage payments for far longer than you otherwise would have if the amortization schedule hadn’t been extended.
If you refinance your mortgage and have to make higher payments each month, you also risk the danger of defaulting on your mortgage if you can’t afford the monthly payments.
D. The amount of equity you have and your credit standing.
Do you even qualify for mortgage refinancing?
New mortgage regulations and changes in the housing market may mean that refinancing is going to be more difficult than you may think.
All Canadians now have to pass a stress test to make sure they can afford their mortgage. If you are refinancing your mortgage, you may have to qualify at the higher stress-test rates rather than your existing contractual mortgage rate.
And, if your credit is bruised, you may not be eligible for refinancing, or you may not have enough equity available in your home.
Solutions
If you have home equity but don’t want to refinance your mortgage, a secondary financing product may make more sense. It would carry the same benefits — one payment and lower interest than credit cards — but it wouldn’t impact your first mortgage.
If you think you can’t refinance because you don’t have enough equity in your home, you can still likely consolidate debt using other financial avenues. A good financial consultant can educate and arrange these for you.
At DebtCare Canada we can help you weigh your debt consolidation options, whether you are refinancing your mortgage, considering a secondary financing product, or otherwise.
Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.
Happy Thanksgiving weekend from all of us at DebtCare!
We are thankful this year for the opportunity to help Canadians with all types of credit and income.
What are you grateful for in 2018?
We hope you enjoy the weekend with family, friends, and a big dinner!
