Make sure mortgage math is in your favour

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Yes, you may be able to afford a new home in Toronto. No, you can’t have a backyard

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Home ownership is a hot issue this election. But will politicians’ promises hurt or help prospective buyers?

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Whole Life Insurance, A Whole New Investment Class

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The recent developments in investment markets and the volatile performance that has resulted have brought about a new appeal to an old workhorse.  For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Whole Life Insurance.

Why is Whole Life Insurance a good investment?

  • The tax advantaged steady growth, combined with significant estate benefits are the primary reasons why Participating Whole Life is now being thought of as a new investment class.
  • Unlike other accumulation policies such as most Universal Life policies, mutual funds and other equity investments, the cash and dividend value of a Whole Life policy cannot decrease as long as premium payments are made.

Who should consider Whole Life Insurance as an investment?

  • Anyone looking for stable returns on their investment portfolio.
  • For those that have corporations and are accumulating surplus, the use of Whole Life in the corporation not only provides the same stable, tax deferred returns but also provides opportunities for Capital Dividend Account planning.

What is Whole Life Insurance?

  • It is permanent life insurance protection – meaning it won’t expire before you do!
  • It has level guaranteed premiums for the life of the policy. (Shorter premium paying periods are often available.)
  • It has tax advantaged cash value growth.
  • It can pay annual dividends (participating whole life).
  • Dividends can be taken in a number of different ways but the option most often selected to provide the maximum tax advantaged growth is “paid-up additions”.
  • The assets of the participating pool are professionally managed and largely in fixed income investments.  Management fees are extremely low (some as low as 0.07% management fee) and the funds have very little volatility.
  • This combination of guaranteed cash value and the non-guaranteed portion from the dividend account grows tax deferred.  At death it is paid to the beneficiary tax free.

Can I access the cash value of the policy?

  • During the lifetime of the insured, the cash values can be accessed by way of partial or total surrender, or policy loan.
  • Income tax may be payable on withdrawals. However, one alternative to avoid paying income tax is to use the policy as collateral and borrow from a third party lender.  And if structured properly, the interest on the loan may be tax deductible.

Favourably compares to a long term, high yield bond

  • Today most portfolio managers recommend that a prudent investor have a diversified portfolio with a significant portion in fixed income investments, such as bonds, term deposits, etc.
  • Many investment managers suggest one third to 40% of an investment portfolio be in these types of investments for balanced growth.

Including participating whole life in your portfolio can produce some significant results, and reduce overall volatility.

Whether investing as an individual or via a corporation, the significant results that can be achieved by using Participating Whole Life are worth investigating.

Please call a member of Outline Financial if you think you would benefit from this strategy or use the sharing buttons to share this article with a friend or family member you think may find this information of value.





Copyright © 2017 Outline Financial & FSB  – All Rights Reserved

CMHC Policy Revision: Get Ready for a Busy Weekend

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As you enter the weekend, we wanted to provide you with an important update to the stress test implementation guidelines that were initially announced by the Minister of Finance on October 3rd.  These changes to the initial announcement will likely result in a flood of buyers trying to beat the end of weekend deadline.

Our understanding of the revisions are as follows:

Updated guidance from CMHC and lenders state that the new stress test rules (i.e., having to qualify at the benchmark rate of 4.64% vs. the lower actual interest rate if you have less than a 20% down payment) will not apply to borrowers that enter into a legally binding agreement of purchase and sale before October 17th, 2016 regardless of the date the borrower applies for financing and/or the closing date of the purchase.

This is in contrast to the initial announcement that stated the submission for financing had to occur prior to October 17th and fund by March 1, 2017.

  • Key Impact #1 – if someone purchases a property before or including this weekend, the old lending rules will still apply — even if the borrower submits a financing application after the Oct 17th cut-off date.
  • Key Impact #2 – There was some uncertainty around new build purchases and if they have to register before March 1, 2017 to qualify under old lending guidelines.  This latest update clarifies the issue as old lending rules should apply if a legally binding purchase and sale agreement is in place prior to Oct 17th (regardless of the occupancy or registration date).

We hope the above is timely and helpful, and we are on stand by should you have clarification questions or would like to discuss.

Please find below a link to our previously issued updates on this topic:


Outline Financial


How Could the Recent Mortgage Policy Changes Impact You?

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What a week — As noted in a previous post, the Minister of Finance caught everyone off guard earlier this week with what could be the most significant changes to the real estate and financing market we’ve seen yet.

While we will continue to post updates on our website, should you have any questions please call or email at any time as our team is on standby to discuss how these changes may impact you and/or any opportunities that may still be available given we are at the lowest interest rate point in history.

What has changed?

We have included a list of key articles at the bottom of this email that describe the changes in detail, but in summary:

  • October 17th – the maximum affordability for those with less than a 20% down payment will be reduced dramatically.  As an example, someone that could have qualified for an $800,000 purchase on October 16th could see that shrink to $650,000 on October 17th.
  • Impact for those with more than 20% down payment (or refinances) – While this area is still in flux, what we do know at this point is that the cost and restrictions for lenders to securitize their mortgages will be increasing – which will ultimately be reflected in higher rates and/or tighter mortgage restrictions for the consumer.

How Could This Impact You?

Depending on your current circumstances and/or goals, you may want to consider the following potential risks or opportunities:

  • Qualification Impact – The potential for higher rates (actual and/or qualifying), shorter amortizations, and tougher qualifying guidelines could make it increasingly difficult to purchase at desired price levels or access existing equity in your home.  If you have any plans to renovate, consolidate debts for a lower overall interest cost, purchase an investment property, or borrow to invest, it may be an opportune time to look at your options under existing lending rules.
  • Rate Impact – to put it bluntly, rates have never been lower.  Given the recently announced changes, combined with regulatory statements published earlier this year, we anticipate a steady upward pressure on mortgage rates over the coming weeks, months, and year.  If you were/are planning on accessing any additional equity from your home, or would like us to review any opportunity to restructure your current mortgage/rate, we are happy to assist.
  • Home Value Impact – consistently high demand and low supply has driven GTA average price increases into the double digits (on pace for 14%+ year over year growth in 2016).  The recent changes should slow the demand side of the equation (move some buyers down in price, or out of the market completely) resulting in potential buying opportunities for qualified borrowers.  On the flip side, if you are looking to sell or refinance, as the changes will take some time to work through the market this could signal a good opportunity to review your options.

Media Summary: 

October 2016

September 2016

July 2016

December 2015

Please contact our team if you have any questions, or would like any additional information.


Outline Financial


Major Policy Change – Mortgage Qualification Guidelines

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While the details are still trickling in, The Minister of Finance potentially dropped a bombshell on the Toronto real estate market as of this morning.  While their press release was vague [click here], we understand the changes to be as follows:

Mortgage Qualification Policy Change:  Currently, if you select a 5-year fixed mortgage term, you would qualify based on your actual monthly mortgage payment (i.e., calculated on 5-year fixed rates in the low to mid 2% range).  Going forward, while your actual mortgage payment would still be based on your contract rate, you would need to qualify using a much higher monthly mortgage payment based on the Bank of Canada “stress-test” Benchmark Rate (currently 4.64%) — resulting in a significantly reduced maximum purchase price (refer to impact section below).

Implementation Dates: It is expected this change will be effective on October 17th for all those with less than 20% down.  We are awaiting additional details, but the change may also impact those with greater than 20% down given the banks/lenders use of portfolio insurance.  If that is indeed the case, it is expected that change may be implemented on November 30th.

Impact: While every case is different, we have included a sample max purchase price impact calculation for a 10% down buyer.  Please contact us if you would like us to run the numbers for any specific scenario:

Impact Example (Max Affordability):

Total household salaried income = $120,000
Down payment available = 10%
Mortgage Product Chosen = 5-year Fixed
Purchase Style / Location = Freehold / Toronto
Debts = limited debts (i.e., credit card, car, etc.)

Current Max Purchase Price = Approx. $800,000*
Max Purchase Price After Oct 17th = Approx. $640,000*
(Note: the above is for illustration only.  Please contact a member of The Lang Team to discuss)

Media Coverage:  While additional details are expected to be published throughout the week, we have included a few relevant articles that have come out in the media today.  We have also reached out the Department of Finance, lenders, and mortgage insurers directly and will pass along any relevant information as/when received.

Should you have any questions regarding the above, please contact any member of our team.


Budget 2016 Highlights

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Finance Minister Morneau’s budget includes many new infrastructure spending initiatives that will support our economy and help continue our growth, albeit controlled, with a view to the long-term success of the country. His budget is focused on middle-class families, seniors and veterans, helping the less fortunate, committing to a clean economy, and strengthening relationships with indigenous peoples.

Here are a few highlights that specifically affect the mortgage and housing sectors​:

Affordable Housing
The government announced it will spend $2.3 billion over the next two years. A significant portion of this will be allocated to provinces and territories were the need for investment is greatest. There will also be considerable investment in First Nations, Inuit and northern housing.  The government also announced it will invest $208 million over five years to create an “Affordable Rental Housing Innovation Fund” to be administered by CMHC.

Researching the Impacts of Foreign Ownership
Minister Morneau stated the government will investigate the impact of foreign ownership on housing and household indebtedness. Statistics Canada will develop methods for gathering data on foreign ownership on purchases of Canadian housing.

Introducing a Bank Recapitalization “Bail-in” Regime
To protect Canadian taxpayers in the unlikely event of a large bank failure, the government is proposing to implement a bail-in regime that would impose bank shareholders and creditors be held responsible for the bank’s risks—not taxpayers. This would allow authorities to convert eligible long-term debt of a failing bank into common shares to recapitalize the bank and allow it to remain open and operating. Such a measure is in line with international efforts to address the potential risks to the financial system and broader economy of institutions perceived as “too-big-to-fail”.

We will continue to monitor the discussions that result from the budget announced today and keep you informed of further developments.

*The above article is courtesy of Mortgage Professionals Canada, our industry association.
*Picture courtesy of


What’s coming for Canada’s economy

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VERICO economist Michael Campbell gives us an overview into the current state of the Canadian economy and what you should be aware of.

After continually underestimating the impact of falling resource prices – especially oil, the Bank of Canada has come to realize that this is a major restructuring of the economy that it estimates can take up to 5 years and remove $50 billion out of the economy annually.

While the economic pressures are focused in Alberta, Saskatchewan and Newfoundland – the economy outside resources appears to be moving along.

The big economic hope on the short term rests on a falling loonie that represents a de facto 40% plus pay cut for Canadians over the last 2 ½ years. Given that 75% of our exports go to the States, exporters will be thrilled with the lower dollar.

We’re also looking for a big year in tourism thanks to the low dollar. The drop in the loonie has already spurred a 21% increase in same day visit from the US in the first 10 months of 2015 while same day visits to the States by Canadians dropped 9.3%, which is good news for retail.

[Click here] to review the full report.


Provincial Outlooks: Ontario on the path to a bright year while Alberta will post a decline in GDP


Although oil prices seem to have stabilized, Alberta’s economy will post an overall decline in real gross domestic product (GDP) this year, according to The Conference Board of Canada’s Provincial Outlook: Spring 2015.

“Alberta’s economic performance will be underwhelming this year and next, especially compared with recent years,” said Marie-Christine Bernard, Associate Director, Provincial Forecast, The Conference Board of Canada. “Oil prices remain well below break-even levels for most new projects in the oil patch, and conditions are not expected to turn around until sometime next year.”

Reminiscent of last year, the Ontario economy got off to a slow start this year. The weakness, however, will be temporary, as economic growth should pick up in the coming quarters. Overall, real gross domestic product (GDP) is forecast to expand by 2.6 per cent in 2015 and 2.3 per cent in 2016.

“Ontario has not performed up to expectations, but the outlook over the short term remains positive, as strength in the United States economy will help bolster the province,” said Bernard. “Along with exports, consumer spending will continue to increase at a good pace in Ontario, fuelled by improving consumer confidence.”

Saskatchewan’s economy will feel the effects of the drop in oil-related activities in 2015. However, the province is not expected to fall into recession this year, as other industries will keep the economy growing.

“With the oil sector an important part of the Saskatchewan economy, the province is feeling the impact of lower oil prices. The number of wells drilled was down this past winter, and capital expenditures in the energy sector are not expected to recover until 2017,” said Bernard. “However, strength in potash and metal mining, as well as a rebound in the agriculture sector, will temper the impact of lower crude oil prices on Saskatchewan’s economy.”

Manitoba’s economic performance will be one of the strongest among the provinces in 2015 and 2016.

Manitoba is expected to post real GDP growth of 2.8 per cent in 2015 and again in 2016, when it will lead all provinces.

“As a wind of change blows through the country thanks to the slide in oil prices, Manitoba will be one of the country’s strongest economic performers until at least 2016,” said Bernard. “Strong growth in construction, a rebound in agriculture, and stable domestic demand are expected to lift labour markets and increase disposable household income for Manitobans.”

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