Mortgage Prepayment Penalties – What you need to Consider

When entering a closed term mortgage, many borrowers do not pay nearly enough attention to the prepayment penalty clause. Often borrowers do not realize the seriousness of these penalties, until they want to get out of their mortgage and they are faced with paying potentially thousands of dollars to do so. When breaking your mortgage contract early, usually because of a refinance or the sale of your home, you will unfortunately have to pay your lender a penalty called a prepayment penalty – unless you are in an open mortgage. But, most borrowers enter into closed mortgage contracts as the interest rates are much lower for closed mortgages than open mortgages.

The prepayment penalty amount you pay will depend on a variety of factors including the day you signed your original mortgage contract, the term of that contract and your existing mortgage balance, rate type and mortgage rate. One of the biggest drivers of your mortgage penalty is whether you have a variable or fixed mortgage rate. Fixed rate holders pay the greater of interest rate differential or three months interest, while variable rate holders pay just three months interest.

As borrowers are coming close to the end of their current mortgage term they should be very clear on their goals. For example, if you believe you will want to pay your mortgage early – say you are expecting to receive a financial windfall in the near future, then you will not want to lock into a new term or you should only renew for a short-term term. Likewise, if you think you will need to move your mortgage to another lender changing the terms of your current mortgage, then these penalties may become payable and you should seriously consider your options before locking into anything.
For those who considering a reverse mortgage, it is very likely you will face the payment of a prepayment penalty to refinance your current mortgage if you refinance before the end of your current mortgage term. If you are considering a reverse mortgage and the end of your mortgage term is near, ask your current mortgage lender to allow your mortgage to float until you have been able to arrange the necessary reverse mortgage financing. This way your mortgage remains open in that interim period between the end of your current mortgage term and when it is paid out in full with the reverse mortgage funds.

The process to complete a reverse mortgage from start to finish can be completed within generally three to four weeks. Often it can be done much quicker depending on where you live, how quickly and appraisal can be done and the availability of your lawyer. The period in which the mortgage would be open would not be that long, but it could save you thousands of dollars in the long run.

If you are thinking of reverse mortgage financing, before you lock into your next renewal term please feel free to call me at 1-855-770-3225 or email I would be happy to explain your options and help you navigate the process.

Joanne Thomas

Tips to Improve your Credit Score

The rush to get ourselves ready for the holiday season can often lead us to overspend and leave us wondering in the new year, how we are going to manage to pay our bills. If we do not manage our credit wisely, we can get ourselves into trouble, leading to a diminished credit score and fewer available good options when it comes to borrowing in the future. It can become a downward spiral until we are proactive in turning the situation around. The following are some tips to help you both prevent your credit from worsening and improving the credit score you already have.

Tip #1 – Pay your Bills on Time

Even if you make the minimum payment, paying your bills on time is probably the most important factor for keeping your credit score in good condition. Late payments can and do bring down your credit rating.

Tip #2 – Don’t Apply for Credit on a Regular Basis

Don’t be a victim to the intense marketing strategies of various retailers that offer you credit every time you are at the cashier. These applications are sent is and do negatively affect your score if they are numerous and frequent. Chose your credit wisely as the store incentive for signing up may not be worth it in the end.

Tip #3 – Try to keep your credit balance to under 30% of your maximum credit limit

While it is good to carry low balances to establish and improve your credit, carrying high balances has the opposite affect. Continued high balances looks like you are not able to handle your credit wisely.

Tip #4 – Don’t close out too many of your older credit cards

In keeping with tip #3, you want to continue the optics that you are good with credit. Therefore, having some credit cards which you have had for a long time shows your ability to manage your credit over the long term.

Tip #5 – Don’t buy too much on credit all at once

Again, back to optics, if you make too many purchases on credit around the same time, it gives the appearance that you are not financially stable.

Tip #6 – Don’t Pull your Credit Score too often

Like Tip #5, you should not have your credit score pulled too frequently. Every time you apply for credit, including a pre-approval for a mortgage, retailers and banks pull your credit. While credit card pulls are looked upon more negatively than those pulled by say auto retailers and banks, nevertheless, too many pulls will ultimately reduce your credit score.

Tip #7 – Try to avoid disputes going into Collections

Many of us do get into disputes over credit related issues and often rightly so. However, it is best from your credit score point of view, to try to reach an arrangement, pay the account and close it, rather than force the creditor pursue a collections remedy. A collection on your credit report will reduce your score and scare away creditors you wish to borrow or purchase from.

Tip #8 – Don’t go over your credit limit

Unlike some situations, were it is easier to ask for forgiveness rather than permission, when it comes to credit, you want to try an seek a credit increase before a purchase rather than go over your limit and suffer the consequences of a credit score reduction.

Tip #9 – Fix Mistakes on your Credit Report

What you must bear in mind is that your credit score is your responsibility and whether it goes up or down very much depends on your debt management. And, there are times when the credit companies make mistakes. It is imperative that these mistakes get corrected as quickly as possible and it is the consumers responsibility to follow up and do so. The credit bureau will provide assistance and important information to help you. This will go a long way to improving your score as errors will negatively affect your credit score.

Tip #10 – Make Sure Collections are noted as paid as soon as possible

Much like Tip #9, make sure your credit report accurately reflects your situation. If you have paid a collection, ensure that the collections agency follows up with the credit bureau company to ensure the collection is properly noted as paid, and if possible removed from your credit bureau.

Joanne Thomas


Seniors and Debt Management

The availability of credit and the willingness of Canadian consumers to take on large debt loads has evolved over the last few decades and it is not for the betterment of our personal finances. In the past 20 to 30 years, Canadians have witnessed: an incredible growth in easy access to credit though such avenues as pay day lending and other short-term lending institutions; a willingness to incur debt; and changes in the mortgage rules. This has ultimately lead us to the situation where many Canadians, including seniors, are finding their lives are dictated by their debt load and they are struggling to make ends meet.

We are more tolerant to debt than we have ever been historically. Back in the early 1990’s, our Canadian debt to income ratio was such that for every dollar made, we owed 90 cents. Today, this ratio has increased such that for every dollar earned, we owe $1.67. One can speculate why we have allowed this to occur, but we cannot ignore the strong influence of consumerism. While there are more obvious reasons such as layoffs, accidents, unexpected expenses and other reasons for people facing economic hardship, we cannot ignore what we see around us daily which in some ways is more insidious. We are bombarded with advertising and somewhere along the way, we, as a society, have developed the notion that we deserve those consumer goods. There was a time when people saved to make their purchase. It may have meant there was only one car, or one television in the house, but savings were used, rather than taking on more debt to make the purchase. This is no longer the case today as we typically want instant gratification and will make the purchase relying on credit to do so.

Being online and social media also affects us as our preferences. We are now creepily tracked and monitored. For example, how many of us have made a google search only to find an advertisement about that very product in our next Facebook visit? Furthermore, recent studies have shown that many people find it somewhat depressing looking at such social media applications as Facebook, only to see what appears to be all their friends and family having a wonderful time, eating gourmet meals and taking amazing vacations. Of course, we tend to forget people are not going to post the negative things in their life in the same way. This leads us to develop the notion that we too must eat out at fancy restaurants, travel, buy fashionable clothing, buy impressive automobile etc. for fear we will fall behind or miss out on life.

What is somewhat surprising in all of this is that the generation that at one time would live by such sayings as “a penny saved is a penny earned” is now facing high debt loads themselves. We see more seniors now trying to get back into the work force to pay off debt- which is not easy by any means. These seniors have often held off on seeking help, due to embarrassment, until their debt load has reached a critical level.

In a period of slowing rising interest rates, there is no wiggle room for many people. We may well see an increase in insolvencies in due course. Interest rates rising will also likely slow the housing market making it a challenge for people carrying a lot of debt to sell for top dollar.

However, there are many avenues for people to seek help. They could consider selling an asset, consolidate their debt, perhaps receive help from family members or seek credit counselling. For seniors 55 and over who own their own home, a reverse mortgage may be the perfect solution for them to allow a consolidation of debt and to let them continue with the worry of monthly mortgage payments. This is but one solution, but it is an effective one and one which should be considered.

Joanne Thomas,

Mortgage Regulations just got a little tougher making Reverse Mortgages an Option to Consider

Last week OFSI (the Office of the Superintendent of Financial Institutions) just released the latest in a string of guidelines over the last couple of years, which are targeted to keep Canadians from taking on more debt than perhaps they can handle, and consequently attempting to cool overheated housing markets. The new revised mortgage underwriting requirements are to come into effect January 1, 2018. Several key changes involve:
• Stress test – the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
• Enhanced LTV (loan-to-value) measurement – federally regulated financial institutions must establish and adhere to appropriate LTV ratio limits that are reflective of risk and are updated as housing markets and the economic environment evolve.
• Restriction of certain lending arrangements – federally regulated financial institutions will be prohibited from arranging with another lender a mortgage, or a combination of a mortgage and other lending products, in any form that circumvents the institution’s maximum LTV ratio or other limits in its residential mortgage underwriting policy, or any requirements established by law.
What does this all mean? In short, it has become harder once again to borrow conventionally at your bank in Canada. For those on a fixed income, it means that the amount you are eligible to borrow will likely drop about 10%. If you are wanting to refinance your home, or take out a secured line of credit, the maximum amount you are eligible to borrow has dropped.
However, these changes do not affect the reverse mortgage products. It may be that the reverse mortgage is now the ideal solution for you if you are over 55 and own your own home. Not needing to worry about whether you income or credit qualify, you may be able to borrow what you need and not make the monthly mortgage payments until the home is eventually sold. Or, if you would rather not have the interest accumulate over time, you can make the interest payments and certain principal repayments without any penalty, thus keeping the borrowed amount the same or even paying it down over time
There is more flexibility in the Canadian reverse mortgage products than there ever has been. As a senior, you may want to review your reverse mortgage options before borrowing against your home. I would be happy to discuss these with you and welcome your questions.

Joanne Thomas,

Financial Strategies to Retire Comfortably  

Retirement planning has always been important, but as Canadians are now living longer it’s even more critical to have a realistic retirement plan in place. For many people, their retirements year can be almost as long as their employment years and this means their savings have to managed wisely.  In the meantime, inflation and higher costs for just about everything can make it harder to make your money go as far in retirement.

As a result, it’s more important than ever to be financially prepared so you can retire happily and securely. However, retirement planning can be complex and it requires an understanding of both the sources of income and how much is needed to fund the full retirement.

Sources of Income Post-Retirement

You’re likely to have three potential sources of income in retirement:

Canadian Pension Plan and Old Age Security

The Canadian Pension Plan (CPP) is funded by your contributions, and Old Age Security (OAS) is funded by the government. It’s based on several factors, including your age and the number of years you’ve lived in Canada. Though the average Canadian will receive funds annually from these sources, the amount may fall short to cover existing lifestyle requirements or any sudden contingencies.

Employer-based pension plans

Many employers use Defined Contribution pension plans. As a worker, you can contribute to one of these plans, and so does your employer. The amount you’ll receive depends on how successful the investments are. Alternatively, employers may use a Defined Benefit pension plan which provides monthly benefits upon retiring based on a workers earnings history, tenure of service and age.

Personal savings

If you have investments such as a Registered Retirement Savings Plan (RRSP), Tax Free Savings Account (TFSA) or Retirement Savings Plan (RSP), you may have additional money in retirement. The amount depends on how early you start to save and how much you put into your accounts, as well as the interest or dividends you receive on your earnings.

The above listed savings and income are the primary sources for most Canadians and unfortunately, these funds may not provide enough money to get you through retirement comfortably. Perhaps your investments were hit hard by the stock market downturn. Or maybe you haven’t worked as many years as you’d planned due to health issues or layoffs. You may have been forced to spend more of your savings than you’d planned to due to these issues. There are a myriad of reasons why your retirement savings may just not be able to support you and your family during retirement.

Financial Strategies That Aid Retirement Planning

The following financial strategies for retirement planning can help your retirement be more financially secure:

Continue working

Staying employed, even perhaps part time, will help you earn more money and possibly increase the amount of money you have in an employer-based pension. Your CPP benefit will increase by 6 percent each year you can delay retirement, up until age 70. If your investments have taken a downturn, they may be able to bounce back some if you can delay retirement and give them some additional time to rebound.

Increase your savings

If you have several years before retirement, investing extra money each month can help get you closer to your retirement planning goals.

Cut your debt as much as possible

Debt can hurt any budget when you’re still in the workforce. But when you retire, it can hurt even more since you may have less money coming in each month to make your debt payments and meet your other living expenses. Your retirement planning should include a strategy to help you pay off debt that will otherwise be a financial burden once you’ve retired.

Monitor – and modify – your investments

If you’re nearing retirement, you may want more conservative investments than you’ve had in the past. Your risk level changes as you age.  As you age,  you are likely less able to weather the ups and downs of the market.  Your investment strategy should reflect the place you are in life, making any adjustments necessary to help make sure you’ll have the money you’ll need to retire.

Consider a reverse mortgage

If you’re nearing retirement and have lived in your house for a long time, you probably have built up a significant amount of equity or even own your home outright. Your home may be the most valuable asset you own, but you may not want to sell it. You may have emotional attachment to it or may not want to incur the significant expenses associated with moving and find another place to live.  The primary benefit of a reverse mortgage vs. other forms of secured financing such as a conventional mortgage or line of credit is that you do not need to make monthly mortgage payments.  This allows you the ability to use the equity you have taken years to build so that you can live comfortably in your retirement years while still living in your home.

A reverse mortgage can be a sound financial solution to help fund your retirement, but you need to understand the terms and conditions to find out if it’s the right choice for you.  I would be happy to discuss reverse mortgages in more detail should you wish more information.  You can contact Joanne at 1-855-770-3225 or 819-639-8867 or


Reverse Mortgages help Seniors and Retirees Stay in their Homes

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This is but one testimonial from the many thousands of people who have been able to remain in their home because they were able to obtain a reverse mortgage.  For many Canadians over the age of 55, a reverse mortgage could help provide them with a level of financial freedom which would allow them to enjoy life worry free.

Today, more and more seniors are carrying debt.  This debt has monthly debt servicing which can be onerous on those with a limited or fixed income.  Reverse mortgages provide an opportunity for those seniors to pay down this debt that involves monthly payments and turn it into reverse mortgage debt which does not require monthly payments.  Now their monthly income can be used for day to day use.

Or, renovations need to be done to a home or retrofitting needs to be done to keep the home user-friendly as medical needs change.  Reverse mortgages allow people over 55 use the equity in their home to make these renovations to allow them to remain in their home for as long as they like.

Additionally, it is a fact of life that as we age our medical needs tend to increase.  But, the cost associated with paying for these medical needs such as extra prescriptions, in-home care etc. can be overwhelming.  Again, a reverse mortgage may be the perfect solution.

There are no stipulations as to how you can use your reverse mortgage funds.  You may want to help a loved one through school or buy a major asset, invest to generate more income for yourself, or travel – the list is endless.  But for many seniors, simply being able to pay down debt and improve their home so they can remain in it for as long as they wish is all they are looking for.

I would be happy to explain this further to anyone looking for more information on reverse mortgages in Canada.


Reverse Mortgage Myth – The Bank owns my home

How to Qualify

Unfortunately, many Canadians make assumptions about reverse mortgages or they hear about it from a friend who themselves may not have as clear an understanding as they think.  Also, many Canadians assume Canadian reverse mortgages are the same as the products in the U.S., which are very different. The CHIP Reverse Mortgage is heavily regulated by governing bodies here in Canada and it is the only reverse mortgage product available.  Canadian borrowers can take comfort in this regulatory oversight.

 A longstanding myth is that a borrower with a reverse mortgage will end up owing more than the property is worth, giving the lender, HomEquity Bank, ownership of your home. This statement is false; in fact, HomEquity Bank has taken a number of measures to ensure the protection of your equity.

  • You retain title and ownership of your home

Just like with any other mortgage, your home is used to secure the loan which means that HomEquity Bank is registered as a standard charge on title. You, as the borrower DO NOT transfer ownership of your home. In fact, once it’s time to pay back the mortgage you or your heirs have the choice to repay the loan however you or they want. Selling the home is the most common option, but it is not mandatory.

  • Conservative lending

HomEquity Bank lends up to 55% of the value of the home depending on the age of the homeowner(s), property type and location of home. Homeowners 55+ are eligible for the product, but the younger you are, the less you will qualify for and the older you are, the more you will qualify for. This is simply a function of the fact that the younger you are, you are expected to have a long life ahead of you and the mortgage will not be repaid for a long time to come.  Given that no payments ever have to be made, in order to assure that the accrued debt does not get too burdensome, a conservative lending practice is followed.

  • Your home may appreciate in value

The total value of your home can appreciate in value, whereas the interest only accumulates on the actual  borrowed amount of the home (which is a smaller value). That is why over 99% of homeowners have money left over when their loan is repaid.

  • Negative equity guarantee

Often people assume that if your home equity depreciates in value at the time it is being sold, you or your heirs will end up owing more than the house is worth. This is simply not true. It is written into the mortgage terms that the borrowers will never pay more than the fair market value of the property at the time of sale.  Borrowers are required to keep their property taxes up to date, and maintain the condition of their home. If these conditions are met, you will never owe more than the fair market value of the home at the time it is sold.

The above measures ensure CHIP Reverse Mortgage customers will not be at risk of losing their home. In fact, a reverse mortgage can be a great solution that allows Canadian seniors to stay in their home for as long as they wish.

For more information or to find out how you can get a reverse mortgage please feel free to contact Joanne at 1-855-770-3225 or 819-639-8867 or


Mortgage Financing as we Age

The world of mortgages is often confusing, as there are so many options, so many lenders and so many lending guidelines you must follow. And, that is just for conventional mortgage lending. So, it is not surprising that many people do not fully understand the mortgage financing options available to them as they age.

Generally, most people see their assets increase along with their income as they grow older. But then something happens. Retirement hits and what was once a given as far as successfully qualifying for a mortgage is no longer a sure bet. There may not be the income to qualify for what you are looking for. Or, perhaps for whatever circumstance, your credit has dropped. Navigating your options at this point requires a little further research and insight. And, that is where I hope to help. As a former lawyer, who left the practice of law to raise three wonderful children, who then returned to a new career of a mortgage brokering, I have spent the last decade specializing in mortgages for Canadian seniors.

Throughout this journey of writing about mortgage lending for seniors, I hope to share insights about the industry in general that will be beneficial to a wider audience. Commentary about such topics as your credit scores, mortgage qualification changes and the housing industry in general are things that I hope everyone of all ages can benefit from.

If at any time you have any questions about mortgage lending in Canada, please feel free to contact me at or 1-855-770-3225. I look forward to hearing from you.

Joanne Thomas