24 Apr

How You Can Access and interconnect your CRA and Service Canada Accounts online

Financial

Posted by: Garth Chapman

How You Can Access Online all your Interactions with your CRA and Service Canada Accounts…Online…Anytime

My Service Canada Account (MSCA) is a secure online portal that lets you apply, view and update your information for:

  • Employment Insurance (EI)
  • Canada Pension Plan (CPP)
  • Old Age Security (OAS).
  • And now also any of the many COVID-19 benefit programs for Canadians.

If you do not already have one, start by creating your Service Canada ‘My Service Canada Account’ here .

Within your ‘My Service Canada Account’ you should first setup or to confirm that your direct deposit account information is correct to facilitate the receipt to your bank account of any Government of Canada benefits, from CPP to OAS and EI and any of the many COVID-19 benefit programs.

To do this, login and go to ‘Service Canada account services’ and in the View/Change tab click on Canada Pension Plan (CPP) / Old Age Security (OAS) link and then click on ‘Payment information’ and then click on ‘2020’ and it will then display the payments you have received for both pensions by date.

Connecting your ‘My Service Canada Account’ with your CRA ‘My Account for Individuals’

From your My Service Canada Account, you can also securely access your income tax and other benefit information by clicking on the Canada Revenue Agency “My Account” button. This will connect you to your Canada Revenue Agency account without having to login or revalidate your identity. And if you have not yet registered for your online CRA ‘My Account for Individuals’ you can do this here Registration process to access the CRA login services

Learn how you can also sign in to your My Service Canada Account from your bank account login

My Service Canada Account: Register with your bank

Link between My Account and My Service Canada Account

The link provides you with a convenient connection between the Canada Revenue Agency’s (CRA) My Account for Individuals and Employment and Social Development Canada’s (ESDC) My Service Canada Account.

If you are registered for CRA’s ‘My Account for Individuals’ you can securely access ESDC’s My Service Canada Account without having to login or revalidate your identity. The link will take you directly to your My Service Canada Account within a single secure session, without having to sign in or register with MSCA.

Using the “Tell Us Once” feature you can now update and share your direct deposit banking information with both CRA and ESDC in one easy step.

Individuals receiving a Canada Pension Plan (CPP) benefit, will be able to update their banking information with one department and can choose to share it with the other. Canadians can choose to share direct deposit information through multiple service channels including:

How to get your CRA ‘statement of account’

Your Statement of Account is what you will need when applying for a mortgage in order to prove you have paid any money showing on your NOA as owing to CRA.

Login to your CRA ‘My Account’ and you will land on the ‘Overview’ page.  In the Accounts and section of that page click on ‘View statement of account’ and then print that page or save it as a pdf file.

12 Apr

Calculating Mortgage Payout Penalties

Mortgage Tips

Posted by: Garth Chapman

It is very common for people to believe that the rate is the most important consideration when selecting a mortgage product. In many cases, this is a reasonable assumption, many times customer are deciding between mortgage products that are very similar in rate. In this case, as in most, understanding the terms of the mortgage are more important then the interest rate. It is unfortunate that too many  Canadians find themselves learning  about one of the most important terms which has very negative  effect on their financial situation when it’s too late, Payout Penalties.

When calculating a mortgage payout penalty, banks and broker lenders use the greater of:

  1.  A 3 month interest penalty or
  2.  The interest rate differential (I.R.D)

This is where the similarities end.  Banks calculate their I.R.D. based on the discount off the posted rate for the nearest term at the time of payout, while the broker lender uses a re-investment rate.  The bank discount is the discount you received at the time of approval.

The example that I am using is a mortgage with a balance of $400,000.00 at 2.79% with 26 months left on the original 5 year term.  The 2.79% rate from your bank was a 2% discount off the original 5-year posted rate of 4.79%.  The broker lender does not deal in posted rates as such.

Interestingly enough, the bank posted rate for the nearest term of 2 years was 3.24%, and the reinvestment rate for the broker lender was also 3.24%.

For the broker lender, the reinvestment rate was higher than the rate on the mortgage paid out, so the 3-month interest penalty is charged.  The penalty worked out to $2,790.00.

The bank penalty was calculated using the original 2% discount subtracted from the 3.24% posted rate for a 2 year term.  This resulted in the penalty being charged as the difference of 2.79% minus the 1.24% or 1.55% differential for the remaining 26 months of the term.  The result was a penalty in the amount of $13,433.33 or a difference of $10,643.33.  The banks not only get to charge the higher penalty but also get to reinvest the money at the higher rate.  Win, win for the banks but lose, lose for the borrowers.

In the past three years, many Albertans had to sell their homes due to unforeseen circumstances. Do you not think that the $10,000.00 plus in penalty differences would have been better in the hands of these Albertans or your hands versus going to the Ivory Towers on Toronto’s Bay Street?

For all your mortgage financing requirements, please contact Jencor Mortgage Corporation.

Written by: Dave Melnyk, Mortgage Advisor – Jencor Mortgage Corporations

7 Apr

My Favourite Books

Just For Fun

Posted by: Garth Chapman

These are the books that stayed with me, often for days after finishing them, and some for weeks.

GENERAL INTEREST:

  1. Three Day Road, by Joseph Boyden
  2. The Tiger: A True Story of Vengeance and Survival, by John Vaillant
  3. Guns, Germs and Steel: The Fates of Societies, by Jared Diamond
  4. An Anthropologist On Mars, by Oliver Sacks
  5. Final Rounds, by James Dodson
  6. Survival of the Sickest, by Sharon Moalem
  7. The Tipping Point, by Malcolm Gladwell
  8. 1491, by Charles C. Mann (about pre-Columbian Americas)
  9. Angela’s Ashes, by Frank McCourt
  10. No Country For Old Men, by Cormac McCarthy
  11. Positively Fifth Street, by James McManus
  12. I heard You Paint Houses, by Charles Brandt (inspired the movie ‘The Irishman’)
  13. Dances of Dependency, by Calvin Helin
  14. The Cellist of Serajevo, by Steven Galloway
  15. The Kalahari Typing School For Men, by Alexander McCall Smith
  16. A Time To Kill, by John Grisham
  17. A Painted House, by John Grisham
  18. The Goal, Eliyahu M. Goldratt
  19. The Imperial Cruise, by James Bradley
  20. Dublin, by Edward Rutherford
  21. The Millionaire Next Door, , by Thomas Stanley & William Danko

SCIENCE FICTION / FANTASY

  1. Stranger in a Strange Land, Robert Heinlein
  2. 2001: A Space Odyssey, by Arthur C. Clarke
  3. Foundation (the series), by Isaac Asimov (and there are so many more great books by Asimov)
  4. The Heechee Saga (the first 3 books of this series: Gateway, Beyond the Blue Event Horizon, Heechee Rendezvous), by Frederick Pohl
  5. Lord Valentine’s Castle (of the Majipoor series), by Robert Silverberg

BIOGRAPHIES AND AUTO-BIOGRAPHIES:

  1. Ben Hogan: An American Life, by James Dodson
  2. When I left Home, by Buddy Guy
  3. Guy LaFleur’s autobiography
2 Apr

Why You Should Monitor Your Credit Report Once You’re on ANY Debt Deferral Program

Credit

Posted by: Garth Chapman

Why You Should Monitor Your Credit Report and Score Once You are on a Mortgage or any other Debt Payment Deferral Program

  • The banks all have automated systems that report on your Credit Bureau that you did or did not make a payment as agreed. When the payment is controlled by a Pre-authorized Debit the bank’s system knows when the payment is due and debits your account.
  • When a payment request is rejected, usually due to insufficient funds or a cancellation made by you, the bank’s systems then automatically notifies the Credit Reporting Bureaus (Equifax and TransUnion) of the late payment.
  • When the bank grants you a payment deferral they re-set your next payment due date for the date that you are to re-start making payments. So if you started a 6-month deferral on April 1 the bank re-sets your next payment due date to October 1.
  • With these deferral programs being a brand new process and the banks scrambling to do this in a very short timeline, it is possible a few mortgage payments may end up not being re-set to the deferred date. This will be unusual, but it is possible. Those who made the deferral agreement with their bank just a very few days before of their next payment might be more at risk of that happening.  Again, it will be very rare.
  • Check your credit reports weekly for the next 5-6 weeks to ensure there are no errors on your credit report related to any mortgage or other payment deferrals.
  • If you find there is an incorrect reporting of a late or missed payment, write immediately to your Bank and strongly request that they immediately correct their reporting to all Credit Bureaus that they report to, and also have them write you a letter confirming that the reporting was incorrect. Make sure they refer in the letter to exactly what was incorrectly reported, when, and any other relevant details.
  • So with that in mind, now is a great time to begin the process of monitoring your credit report and credit score. See below what that looks like – it is very easy, free, and completely automatic.

How to Automate the Monitoring of Your Credit – and How to Check it Manually

You can easily have your bank monitor your credit for you, which will result in alerts when your credit is pulled, and perhaps other alerts as well. To do this login to your bank account and activate their free credit monitoring.  All the big-6 banks have these services (at Scotiabank it is called InfoAlerts).

We also have these two free services monitoring our credit.

  • Credit Karma https://www.creditkarma.ca/
    • Free to use.
    • Provides alerts by email.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed TransUnion credit report. 
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
  • Borrowell https://app.borrowell.com/#/public/login
    • Free to use.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed Equifax credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report. 
2 Apr

How to Automate the Monitoring of Your Credit

Credit

Posted by: Garth Chapman

How to Automate the Monitoring of Your Credit and How to Manually Check the Detailed Report

You can easily have your bank monitor your credit for you, which will result in alerts when your credit is pulled, and perhaps other alerts as well. To do this login to your bank account and activate their free credit monitoring.  All the big-6 banks have these services (at Scotiabank it is called InfoAlerts).

I also have these two free services monitoring our credit.

  • Credit Karma https://www.creditkarma.ca/
    • Free to use.
    • Provides alerts by email.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed TransUnion credit report. 
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.
  • Borrowell https://app.borrowell.com/#/public/login
    • Free to use.
    • Does not create a ‘hard pull’ on your credit (no impact on credit score).
    • Is a good source for your detailed Equifax credit report.
    • You can login anytime to review your full credit report, and you can drill down to the details of each item on your credit report.
    • The credit score you see is not the Beacon Score that Banks and Mortgage Brokers see, but it is close enough to tell you how lenders will view your credit in general terms.

Why You Should Monitor Your Credit Bureau and Score once on a Debt Deferral Program

  • The banks all have automated systems that report on your Credit Bureau that you did or did not make a payment as agreed.
  • When the payment is controlled by a Pre-authorized Debit the bank’s system knows when the payment is due and debits your account.
  • When a payment request is rejected, usually due to insufficient funds or a cancellation made by you, the bank’s systems then automatically notifies the Credit Reporting Bureaus (Equifax and TransUnion) of the late payment.
  • When the bank grants you a payment deferral they re-set your next payment due date for the date that you are to re-start making payments. So if you started a 6-month deferral on April 1 the bank re-sets your next payment due date to October 1.
  • With these deferral programs being a brand new process and the banks scrambling to do this in a very short timeline, it is possible a few mortgage payments may end up not being re-set to the deferred date. This will be unusual, but it is possible. Those who made the deferral agreement with their bank just a very few days before of their next payment might be more at risk of that happening.  Again, it will be very rare.
  • So with that in mind, now is a great time to begin the process of monitoring your credit report and credit score. See below what that looks like – it is very easy, free, and completely automatic.
2 Apr

What is the Cost of a 6-month mortgage payment deferral?

Challenging Times

Posted by: Garth Chapman

What is the Cost of a 6-month mortgage payment deferral?

We will assume the deferral occurs in the first 6 months of the new mortgage, which is unlikely to happen but provides the most expensive case scenario. We will use the method used by most Credit Unions, and by TD Bank and others, whereby the bank will re-set you payment at the end of your current term, to have you pay back the accrued interest over the remaining entire amortization of the mortgage.  This keeps the amortization period unchanged from its original  length. This method is the most generous for your cash-flow, and is also the most expensive possible method.

  • A $100,000 mortgage at 3.00% interest with a 25 year amortization would have a monthly payment of $473.25. We will assume it is on a 5-year term.
  • If a client defers a $100,000 mortgage at 3% interest for 6 months you would accrue $1,500.00 in interest.  The interest each month for those 6 months is on a static balance rather than on a declining balance, so this amount is slightly higher than the $1,490.70 in interest you would pay if the payments were not deferred.
  • Once the 5-year term ends, and the mortgage renews the balance owing is higher by the accrued interest, plus interest on that accrued interest, plus the principal not paid and the interest on the principal not paid. All of that adds up to $3,266.87. You would have not made 6 payments totaling $2,839.50.
  • So upon renewal the balance owing would be $88,741.17 instead of the $85,474.30 it would have been without a deferral.
  • Therefore the total cost of the deferral at the end of the 5-year term would be $427.37.  So the total cost of a 6-month deferral after 5 years is equal to 90% of one monthly payment.
  • This assumes you pay all of that deferred money back on your mortgage at the end of that term. If you don’t then the cost will increase over time. Let’s look at that next.
  • Assuming the new interest rate at renewal was unchanged at 3.00%, and renewing with a 20-year amortization, your new monthly payment would be $491.33 instead of $473.24, a difference of $18.09 per month.
  • If you renewed again and again at the same interest rate until the mortgage was paid off you would have paid a total of $45,059.69 instead of $41,972.92, for a total cost of $3,086.77

TAKEAWAYS AND SUGGESTIONS:

  • Taking a payment deferral on any debt is a defensive and protective move taken at a time of great uncertainty. You may need that money during this challenging economic time or you may not, but you won’t have it if you don’t take the deferrals available to you. And you likely don’t currently know if you will need it or not. If you know you will not need it, then why take it.

What We are Doing:

  • We are being defensive and are protecting our financial position and our liquidity by taking deferrals on all 9 of our mortgages.
  • We are depositing the entire amounts of the deferred payments each month into a separate account. We will use only of that money what we must.
  • When this is over we will use the remaining money to pay down debt.  We might decide to use it to pay down our HELOCS instead of our mortgages because the HELOCS have higher interest rates than the mortgages.
  • That might not be the case for others, but we have very low fixed rate mortgages. And doing so will have the greatest impact in reducing our monthly payments.

Some Considerations for You:

  • If you take a 6-month deferral and you put that money into a separate bank account and spend of it only what you must, and then when the dust settles you pay what is left in that account directly on that mortgage you will reduce the long-term cost of the deferral.
  • Or, if when the dust settles you decide it is more important to reduce your overall monthly debt payments by the highest possible amount, then take that remaining money and pay down the debt that would reduce your monthly payments by the largest amount, or the debt with the highest interest rate.
  • It’s your money. Use it in the way that best serves you.

The following information is taken from a Money Coaches Canada article

Should I Defer my Mortgage Payments?

According to Vancouver based mortgage broker Marci Dean, each lender has created a policy around the deferral program. In some cases, the lenders default to a 6-month deferral and it’s up to the borrower to call/email to stop the deferral. For other lenders, it is month to month. In that case, borrowers will login or email their request to skip payment the following month.

Again, depending on the lender, interest will either be added to payments after the deferral or it will be added to the mortgage balance at the end of the term which will result in larger payments later.

Here are a few examples from bank lenders:

TD: Payments will be adjusted automatically at the start of your next term or, if you change anything else before renewal, at that time, to ensure your mortgage is paid off at the end of your original amortization period.

Scotiabank: A mortgage payment deferral means that payments are skipped for up to 6 months, during which interest is accrued to the outstanding balance of the mortgage. The amount is incorporated into the monthly payment when mortgage payments resume at the end of the deferral period.

CIBC: The interest that accrues during the deferral period will be added to the principal balance of your mortgage to provide you with immediate payment relief while experiencing temporary hardships. As a result, once payments resume, you will continue to pay interest on the principal, and your payments may increase after the deferral period.

I hope this information helps you in your decision-making and actions on your mortgage(s).  Do not hesitate to call or email me for further advice.