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Bank of Canada Rate Announcement Next Week: Are You a Gambler?

Another Bank of Canada rate announcement is coming next week on January 17, 2018. It could mean another interest rate increase for Canadians — which would mean another mortgage rate increase for homeowners.

In 2017 there were four Bank of Canada rate announcements. The first came in July 2017, when the interest rate increased from 0.5% to 0.75%. In September 2017, interest rates increased again to 1%. In October 2017, the Bank of Canada announced interest rates would be staying at 1% — for now. They held the interest rate again in December 2017, but indicated more increases would be coming.

Experts are predicting the January 17 Bank of Canada rate announcement will be another pause, but that further interest rate increases will be coming later in 2018. The question to consider if you’re a homeowner, or a potential homeowner, is whether it is riskier to act now, or wait and see.

The first consideration to make is what type of mortgage you have — are you on a fixed-rate mortgage, or a variable-rate mortgage? If you have a fixed rate that is relatively low, the safest option may be to stay where you are. But if you have a variable-rate mortgage, now is the time to ask the tough questions.

You might be getting a good deal on your variable-rate mortgage now. However, if interest rates increase again (and possibly again in the future) that variable rate isn’t going to be looking so good. Can you afford your mortgage if interest rates increase more in the future? Don’t forget that interest rate increases don’t only affect your mortgage — they’ll impact all forms of debt. So, if you’re carrying large student loans or credit card bills that don’t have a fixed-rate repayment schedule, you could be in trouble.

Even if you think you can handle an interest rate increase now, have you thought about your future plans? Rising interest rates could result in you seeing a dip in the value of your property and will reduce the options you have regarding selling or refinancing. If you are thinking of moving or your mortgage is coming up for renewal, it would be a good idea to take that into consideration when you look at your financial situation.

The time is right to take good hard look at your finances to prepare for a shift in the housing market — unless you prefer to take the route of the gambler, waiting until the last second to see if he or she has a winning hand. When it comes to interest rates and mortgages, though, you don’t want to make a bet you can’t afford to lose.

At Spergel, we can help you best understand and explore the options that meet your current needs. We have the experience that translates to real results, no matter the current housing market. Want to talk to someone about dealing with debt that has become overwhelming?

We’re here to help: toll-free at 310-4321.

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New Year – New Rules: New Mortgage Rules Will Make Refinancing More Difficult

In October 2017, the Office of the Superintendent of Financial Institutions (“OFSI”) announced new mortgage rules for Canadians. The rules introduced a mortgage stress test for uninsured mortgages, and they also imposed tighter regulations for lenders.

These new mortgage rules will undoubtedly affect house hunters, but they will also have a impact on current homeowners, particularly when it comes time for mortgage refinancing.

According to ratespy.com, OSFI’s changes will tack on six to seven percentage (6-7%) points to the average borrower’s gross debt service ratio (“GDS”). Those considering refinancing to consolidate debt into a mortgage could face greater challenges.

In the past, many consumers have been concerned about their loan-to-value ratio (“LTV”): the size of the loan compared to the value of the property. However, with the new mortgage rules in place, lenders will be paying closer attention to other evaluations, such as the GDS and total debt service ratio (“TDS”).

The new mortgage rules mandate that lenders need to pay closer attention to LTVs, which means more lenders will be looking at the GDS and TDS ratio for potential borrowers. Where LTV is calculated solely on the size of the loan to value of the property ratio, GDS is calculated based on the percentage of your income needed to cover monthly housing-related expenses and TDS is calculated based on the percentage of your income needed to cover all debts.

Costs included in your GDS include mortgage payments, property taxes, heating expenses, and, where applicable, condo fees. Your TDS includes credit card payments, credit line payments, and car loans.

Under the new mortgage rules, the GDS and TDS will also be more important for qualifying for home equity lines of credit (“HELOC”) as lenders are mandated to look at HELOCs with a higher level of diligence.

If your TDS is high, you will need a plan to deal with your debt if you want to be able to qualify for a mortgage. Even if you have “good payment” habits and manage minimum payments, most lenders will not extend financing if the numbers don’t add up.

What can you do if you need to lower your GDS or TDS?

Reducing your GDS can be challenging as it is tied to your household payments.  Therefore, the only ways to reduce your GDS are to either earn more money, or reduce housing payments, either by downsizing or renegotiating your mortgage terms.

With TDS, reducing your debt load is a good first step if that is what is driving up your TDS. Decreasing the amount you owe on your credit cards, lines of credit, or car payments will lower your TDS. Increasing your credit score could also help as many lenders will look at that number and your credit history.

You could also consider increasing your down payment if you are shopping for a home, or adding rental income. If you co-own a home, GDS and TDS looks at the debt loads of both you and your partner, so make sure you are both on the same page.

Spergel can help you find the best plan to minimize debt and increase your credit rating so that you’re ready to withstand the new mortgage rules.

Call us today for a free consultation: 310-4321.

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Why You Should Be Paying Attention to the Canadian Real Estate Market

Do you pay attention to the Canadian real estate market? If you already own a home, it may not seem necessary to stay on top of housing trends across the country. But for those who are considering moving in the future, want to ensure their mortgage is paid off as quickly as possible, or want to get out of debt, keeping track of the Canadian real estate market is vital.

In 2017, Canada saw much change in its real estate market. The Bank of Canada introduced two interest rate increases, taking the national interest rate from 0.5% to 1% — the hike was the first increase in seven years. The interest rate increases affect all forms of debt — student loans, lines of credit, and mortgage rates. For those who opted for a variable-rate mortgage, the interest rate increase could mean larger payments. Those with a fixed-rate mortgage won’t see any increases right now, but they could see changes when it comes time to renew.

For anyone with a mortgage renewal coming up, the interest rate increases could mean renewing at a higher rate. If an existing home equity line of credit has been taken out, increased rates could also affect those payments. Recently announcements suggest that interest rates are expected to continue to rise in 2018.

Rate increases weren’t the only change the Canadian real estate market saw in 2017. New mortgage rules were also implemented nationally. The Office of the Superintendent of Financial Institutions announced a new mortgage stress test in October 2017. The new rules mean that uninsured mortgages with a down payment of more than 20% must be stress tested. The effect is that homebuyers will be able to afford less house for the same amount of money. The new mortgage rules also put stricter limitations on lenders. Federal lenders, such as banks, will now have to look closer at the loan-to-value ratio (LTV) when considering mortgage renewals, meaning more emphasis may be put on other factors, such as your credit score, history, and your gross total debt services and total debt services ratios.

Experts predict the OSFI limitations will slow down demand in the housing market, but they’re not sure by how much. The new mortgage rules may also make it more difficult to qualify for a home equity line of credit as, like with mortgage renewals, lenders are encouraged to look at more than just the LTV.

Housing trends from 2017 showed sales of traditional-style housing, such as single-detached and single-attached homes, are dropping while non-traditional, but less expensive, dwelling types, such as condos, are increasing in certain areas.

Between the new mortgage rules and the interest rate increases, Canadians are likely to have less equity available in their homes, which means if you were hoping to rely on your house or a home equity line of credit to pay down debt or fund a major purchase, there may be less money available.

Spergel can help you get out of debt, whether it’s influenced by the Canadian real estate market or otherwise.

Call us for a free consultation today at 310-4321.

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Sears Canada Bankruptcy – The Good, The Bad, and The Ugly

In October 2017, Canadians learned they were losing a retail titan as the Sears Canada bankruptcy was announced and along with it the plan to lay off 12,000 employees across the country.

The company has been losing money for some time and has been closing stores for the past several years, but the announcement of total liquidation came as a shock to many. Seventy-four full-line stores, 49 Hometown dealer stores, and eight Sears Home Stores are set to close by the end of 2017.

Since the Sears Canada bankruptcy announcement, analysts have looked into what caused it. While there are many factors, competition, lack of forward movement, and poor fiscal management are cited as the main reasons.

Whatever the cause, the implications are clear: 12,000 people across Canada are laid off work and the country is losing a retail icon.

Additional implications are:

  • Mall retailers will have to find replacement stores to fill the empty spaces Sears occupied.
  • Other apparel stores, such as Winners, Hudson’s Bay, Marshall’s, and Reitman’s, could pick up more business. Home improvement stores, such as Home Depot, Home Hardware, and Lowe’s Canada could see an uptick in sales too.

If you are facing being laid off work, in the retail sector or otherwise, there are several things you can do to prepare.

  1. Make sure your finances are in order.

Do you have a monthly budget? How much debt do you owe? If you’re faced with a job loss, it’s important that you have a plan to keep paying your debts. A poor credit score could affect your job search and digging yourself deeper into unsustainable debt will only hurt you in the long run.

  1. Assess your options.

Where else might be hiring in your field? Are there other streams of income you can access, such as self-employment? What types of severances or government benefits are you entitled to and for how long? Knowing this information can help you plan ahead.

  1. Begin your job search now.

If you’re worried about your job security, don’t delay in starting your search or setting up another form of income. Update your resumé and think about places you could apply. If you’re in the retail industry, for example, are other stores hiring in your area? If not, how could your skills be transferrable to another industry?

  1. Have a plan to deal with debt.

If you owe debt, it’s best to have a plan before you’re laid off work. A Licensed Insolvency Trustee can provide you options to manage your debt so you don’t dig yourself deeper into the hole.

At Spergel, we can help you you understand your options for debt relief and better financial stability if you are facing being laid off work.

Call us today for a free consultation: 310-4321.

 

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How to Have a Magical Holiday on a Budget

The holidays are fast approaching, and for many that means a struggle to pull off the most magical season without breaking the bank. We’re all about celebrating, but we’re also aware that doing so on a budget is crucial to avoid the worry and stress afterwards. This week, we’ve got some great tips for the perfect holiday on a budget!

  1. The most important thing to do is start with a budget. Even if it is the only thing you do to help curb overspending during the holidays, a realistic budget – one that you stick to – can help you save a ton! First, figure out what you can actually afford to spend. Then, make a list, considering everything you will need to purchase during the holiday season, and give yourself a reasonable amount to spend on each item. Once that budget is set, stick to it like glue!
  2. Talk with family and friends about the budget for exchanging gifts. Perhaps this year you choose to only do presents for the kids, or perhaps instead of buying for all the adults, you just buy one gift for one person and do a fun game. Just make sure to set limits on these too.
  3. Use your talents in the kitchen, woodshop or craft room to make gifts rather than buying them. These gifts are often far more personal anyway. Just make sure that the things you choose to make don’t actually cost more than what you would be purchasing.
  4. Skip the expensive decorations – they can be really costly – and make your own. Head to Pinterest for a wealth of inexpensive ideas for all kinds of decorations. This is a great way to get the kids involved too as there are many that little hands can handle.
  5. If you’re hosting a dinner, make it a potluck. Instead of trying to cover everything – the appetizers, the main course, the desserts – get everyone to bring their favourite holiday dish. This not only saves money, it can also help eliminate the stress and headache that comes with all that preparation.

The holidays are supposed to be filled with joy and laughter, not sleepless nights worrying about how much everything is going to cost or how you’re going to be able to cover it all. Celebrating the holiday on a budget is much easier than you might think! This year, instead of going all out only to regret such a decision when those January bills start to arrive, make a few careful decisions at the beginning and your bank account will thank you.

Will even careful spending still leave you strapped and concerned about your debt? At Spergel, we can help you get ready for the New Year and a fresh financial start.

Call us today, toll free, for a free consultation: 310-4321.

 

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Credit Cards for Bad Credit History Applicants… Many Strings Attached

When you have good credit, applying for financing or various credit products probably isn’t accompanied by much concern or stress; heading to the bank or submitting an application for a credit card usually yields favourable results. However, if you’re on the other side of the fence, and your credit history is less than stellar, you may be considering financing through credit cards for bad credit.

Sure, the idea of obtaining a credit card when you have bad credit and have fewer options may sound great, but things are not always what they seem. While many may be swayed by the lure of credit cards for bad credit, it is important to recognize that there are usually many strings attached, strings that you may quickly become tangled in.

Higher interest. Credit cards for bad credit often come with much higher interest rates than those not targeted to bad credit. While most credit cards charge high interest, those companies offering credit cards for bad credit are banking on (literally) your credit history and charging more because you are high risk. This means that, if you’re struggling financially, unless you can actually pay in full each month, you’re actually paying far more than you could be paying.

Fees. Most credit cards come with monthly fees, but just beware that those designed for bad credit may have higher fees, or fees that are determined by credit score.

A smart alternative is a secured credit card. A secured credit card is one that you ‘load’ with money (your money) to use for whatever you want. This money is considered your credit limit on the card. Each month, you make regular payments on the card just as you would with a regular credit card. You also get the added benefit of rebuilding your credit when you display good credit behaviour (staying well under the limit, paying more than the monthly minimum each month, etc.).

Whatever you end up choosing for a card, here are some tips that should help you improve your credit as you go:

  • Pay on time, every month. This is a no-brainer, but is really important, especially when you’re trying to rebuild credit.
  • Keep balances low. When you keep your balance high, this can negatively impact your credit score. A good rule of thumb is around 50% of your total credit limit. Try to stick within that.
  • Pay more than the minimum. Since the minimum payment is primarily interest, try to pay more than that amount each month to get the balance down.
  • Don’t apply for more. Applying left, right and centre for new cards makes you look like a credit-seeker, someone who is not living within their means. This will also negatively impact your score, so avoid it.

If you’re concerned about your ability to acquire new credit, even by way of credit cards for bad credit, you may want to think about how you can get your debt under control and regain financially stability. At Spergel, our goal is to get you there.

Call us today, toll free, for a free consultation: 310-4321.

 

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How to Get Out of Debt? The Question of the Hour

Over the last 2 years, Canadian mortgage rules have changed significantly, making refinancing harder, and with interest rates going up this could shift supply and demand, thereby impacting housing values. We often have clients come to us wondering how to get out of debt amidst these changes. This week we’re covering two of the most popular options: a consumer proposal and bankruptcy.

When you’re overwhelmed by your financial situation and concerned about how to get out of debt when it seems to have taken over your life, know that you’re not alone. Thousands of Canadians struggle with such concerns on a daily basis. Both a consumer proposal and bankruptcy offer significant relief from debt that has become unmanageable, giving you a chance to start fresh.

A consumer proposal is a legally binding agreement between you and your creditors. It is an arrangement that’s negotiated with your creditors by a Licensed Insolvency Trustee wherein an amount to be repaid is proposed, and once accepted, usually reduces your debt and results in one monthly payment.

The benefits of a consumer proposal also include protection from collection action (and a stop to all currently being levied against you), no interest, and a repayment term of 4-5 years, not to mention a fresh start financially.

A bankruptcy is similar in that it is a legal process wherein you repay a portion of your debts to your creditors.  A Licensed Insolvency Trustee administers your bankruptcy, distributing funds to your creditors as repayment. When you file bankruptcy, collection action stops, as does interest.

During the term of your bankruptcy, which can last for as few as nine months, you will have certain obligations to fulfill including providing a monthly income statement to your Trustee and attending credit counselling sessions. Once your bankruptcy is complete, you will be discharged and can start on fresh financial footing.

Know that there is no ultimate silver bullet, no magical formula. Even in bankruptcy you have to pay something, but the end results will leave you with significant relief. Both of these options are very valuable, and discussing your situation with a Trustee is the best way to find out which one is best suited to your situation.

If you’re wondering how to get out of debt, we’re here to help. With over 25 years of experience, Spergel can help you find the right solution for your situation.

Call us today, toll free, for a free consultation: 310-4321.

 

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Canadian Interest Rates Are on the Rise – Are You Financially Ready?

Back in July, the Bank of Canada raised the Canadian interest rate for the first time in 10 years. Then, in September, it happened again. This has been cause for concern amongst some.  Those fearing a further increase (as many economists predict) could be troublesome for an economy still on the up-and-up.

According to the Financial Post, “Officials within Prime Minister Justin Trudeau’s government are concerned the Bank of Canada is moving too quickly to raise interest rates, fearing higher borrowing costs could inadvertently trigger a downturn…The officials, speaking anonymously because they’re not authorized to comment, are concerned a series of rate hikes would lead consumers to claw back spending, stunting a recovery from a two-year oil shock.”

Read more on this here: http://business.financialpost.com/news/economy/trudeau-officials-are-said-to-fear-impact-of-speedy-poloz-hikes/wcm/6d71b9d3-5668-4f7f-9421-5684835625e4.

With a further rate increase, borrowing rates would jump yet again, causing many Canadians financial stress. While fixed-rate mortgages aren’t susceptible until renewal, those with variable rate mortgages are probably already feeling the heat, as are those with home equity lines of credit and other personal LOCs.

For those with a significant amount of debt, the extra costs of borrowing could make it harder to meet financial obligations, leading to missed payments or the further accumulation of costly debt. So, what’s the solution?

Getting those debts straightened out before Canadian interest rates increase again is a good strategy. One such method is a consumer proposal. A consumer proposal can help you settle your debts with creditors, often resulting in lower overall total payments and one, easy-to-manage monthly payment with no interest. You also know exactly when you will be debt free – so no more worrying about the future!

At Spergel, we have the tools and expertise to help you get ready should Canadian interest rates rise again. Don’t continue to struggle – we offer real relief.

Call us today, toll free, for a free consultation: 310-4321.

 

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Remembrance Day

Today, and Every Day, We Remember

This weekend we take a moment to remember all of those brave Canadians who gave, and continue to give, all that they have to ensure that we are able to enjoy the freedoms that we hold dear. Those men and women who’ve fought over the years, giving their lives for an honourable and just cause.

Thank you for your courage, your dedication, your selflessness and your bravery.

We remember, today, and always.

 

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Spergel Provides Debt Solutions Expertise to The Globe and Mail

The trustees at Spergel have been providing debt solutions to thousands of individuals in Canada for the past 28 years, and regularly share our wealth of experience.

Spergel trustee Gillian Goldblatt was quoted in an article in The Globe and Mail this week offering her perspective on Canadians’ anxiety over increasing interest rates. The article is called “Already pinched, many Canadians anxious about higher rates” and was released on October 23.

The Bank of Canada has increased interest rates twice since July 2017, taking rates from 0.5% to 1%. More rate announcements are expected before the end of the year.

Goldblatt, a licensed insolvency trustee with msi Spergel inc. in Toronto, was quoted about how rate increases affect her clients who are looking for debt solutions.

“You can live in a bubble for a while until some event snaps you out of it,” Goldblatt told The Globe on Monday. “That’s when we have people come to see us.”

Nearly half of Canadians are worried about repaying their debts, The Globe reports, while four in 10 Canadians fear further interest rate increases will leave them in financial trouble. In September, Canadian household’s credit-market-debt-to-disposable-income ratio hit a new record of 167.8%.

Goldblatt told The Globe she’s seen an influx of millennials approach her firm, Spergel.

Thanks to the interest rate increases, millennials are realizing their spending habits don’t align with financial sacrifices needed to start families and break into the housing market, Goldblatt said. Easy credit and tap-and-go technology make spending too easy and leads to living beyond one’s means.

According to the article, “Among the various structural struggles faced by millennials, ‘a lot of it comes down to a lack of education,’ she [Goldblatt] said, suggesting that public schools hardly include enough material on financial literacy in curriculums. The effects of that, she continued, are now revealing themselves in reality.”

The Globe reports 40% of millennials say they already feel the effects of increasing interest rates. More than half say they’re worried about being able to repay their debts and 38% say rising rates could send them towards bankruptcy.

“The bankruptcy figure for millennials is 10 percentage points more than the average of all age cohorts,” The Globe writes.

Studies across Canada are reporting the same figures — Canadians are worried about their debt levels. Breaking into the housing market could be harder than ever before and Canadians aren’t certain they’ll be able to cover living and family expenses without taking on more debt.

To read The Globe and Mail full article, visit https://beta.theglobeandmail.com/globe-investor/personal-finance/household-finances/already-pinched-many-canadians-anxious-about-higher-rates-survey/article36687521/.

If you’re finding yourself in a precarious debt position, or want to make sure you’re set up for success, Spergel can help. Licensed Insolvency Trustees like Goldblatt can find you the debt solutions you need.

Contact us today at 310-4321 or visit www.spergel.ca.

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