Month: October 2021

In order to combat difficulties in the rental market in 2017, the city of Vancouver implemented the empty homes tax also known as the vacancy tax. Vancouver’s vacancy tax was the first of its kind in a major Canadian city and has been the model for other cities to follow in implementing a tax of their own.

However, the empty homes tax is fairly new and faced some growing pains along the way. To this day, many Vancouverites are still unsure of how the tax works, how to deal with an audit, and what counts as a vacant home. In this article, we will answer many of the questions you have about the Vancouver empty homes tax.

What is the empty homes tax?

The empty homes tax is a yearly tax applied to any homes or properties in the Vancouver area that are left unoccupied for more than six months in a given tax year. That’s the simple answer, but the actual terms of who the tax applies to are more complicated and we will explain in more detail further on.

Why was the empty homes tax put in place?

The empty homes tax was proposed in 2016 but was implemented in 2017. The purpose of the empty homes tax is to help increase the availability of rental properties and housing supply in Vancouver. The proposal is that, by making it far more expensive to keep a property vacant, the owner will be more inclined to put it on the market, thus increasing availability for Vancouverites.

The city of Vancouver has one of the lowest rental vacancy rates and highest rent prices in the country. The empty homes tax is one of a few measures put in place to help the Vancouver real estate market, another being the foreign speculation tax which applies a similar tax to foreign-owned properties.

How much does the empty homes tax cost?

When the empty homes tax was first implemented it cost the property owners 1% of the property’s assessed taxable value if the property was determined to be vacant. For the year 2020, the rate was raised to 1.25% and for the year 2021, the rate will increase further to 3% of the property’s assessed taxable value.

The increase in price is meant to put increased pressure on property holders to put their properties on the rental market or to sell to someone who will.

For context, the average home price in Vancouver is over $1.3 million. On a home of that value, you would have to pay $39,000 a year to keep your house vacant. For additional comparison, the Vancouver property tax rate is less than half a percent of your home’s value. By renting your property out, you would easily make back the property tax and a sizable profit to go with it. The empty homes tax can add up to be one of the most significant costs on your property if you choose to keep it vacant.

Who is subject to the empty homes tax?

The tax only applies to “class 1 residential” properties in the city of Vancouver. The tax is calculated yearly and each year a residential property holder is required to submit a property status declaration for the previous year.

Most residential property owners in Vancouver will not be subject to the empty homes tax. Only those properties that are zoned as “class 1 residential” and remain unoccupied while not eligible for an exemption will be required to pay the tax.

Further, the empty homes tax only applies to properties that are not the owner’s principal residence. If the owner lives on the property as their principal residence, there is no limit to the amount of time they may be absent from the property.

Of the almost 200,000 residential properties in Vancouver, the vast majority were the principal residences of the owner. After principal residence, the most common status of residential properties was tenanted rentals. Vacant properties make up the smallest portion of homes in Vancouver.

A property owner can only legally have one principal residence and therefore investors owning multiple properties are most likely to be subject to the empty homes tax.

Finally, the tax only applies to the city of Vancouver and properties that fall within it. Any properties in surrounding areas such as in Burnaby or Surrey are not subject to the tax.

What is the income from the empty homes tax used for?

The empty homes tax has a second means of completing its goal of making housing more available through the use of its revenues. All tax revenue generated from properties paying the empty homes tax will go towards affordable housing initiatives in Vancouver. The city outlines over 120 actions in its three-year housing strategy designed to address housing issues. According to the 2020 yearly report, the city collected almost 28 million dollars in 2019.

Making a property status declaration

Your property status declaration is the official way of notifying the government of your property’s status. Your declaration is usually due in the first quarter of each year. You can submit your property status declaration online through the city’s website.

They will send you an access code along with your property tax bill, and after assessing your property status declaration they will inform you if you are subject to the vacancy tax or not. If the property has more than one owner, only one owner is required to make a declaration for the property.

There are also numerous exemptions that may apply to make you ineligible for the vacancy tax. We will cover exemptions in more detail in the next section. Failure to make a property status declaration on time will result in a $250 penalty and your home being deemed vacant, thus requiring you to pay the vacancy tax.

Exemptions from the vacancy tax

There are multiple cases in which a property that is neither a principal residence or occupied for more than six months of the year can be exempted from the vacancy tax. Some of these exemptions include:

Court Order

A property that is empty for more than 180 days of the tax year due to a court order, court proceedings, or other orders of legal authority will not be subject to paying the vacancy tax.

Strata bylaw restrictions

If your property is subject to a strata bylaw that limits the number of rental units or the bylaw restricts rentals altogether, you may not be subject to the vacancy tax. If the bylaw was enacted before November 16, 2016, then you will not be eligible for the vacancy tax. If the bylaw in question was enacted after that date, the exemption does not apply.

Limited property use exemption

A limited-use property is any property that is not used for residential purposes despite being zoned as such. This could be because the property in question is used for vehicle parking for example, or that it was not eligible for a residential building as a result of property size or other limitations. Such properties are exempt from the tax.

Owner in care exemption

A property that is empty for more than six months in a year due to the occupant being in extended medical care at a hospital or supportive care facility will not be eligible for the vacancy tax. Some conditions also apply. For example, the exemption does not apply to homes used as temporary residences for the purpose of receiving medical care in Vancouver.

This exemption can not be claimed for more than two consecutive tax years.

Owner passed away

If a property was vacant for more than six months because the registered owner has passed away, the home will not be required to pay the vacancy tax.

Properties under construction

Any property vacant for more than six months of the tax year due to significant ongoing construction or undergoing major renovations will not be required to pay the vacancy tax as long as all relevant permits were issued and the construction was being conducted in a diligent fashion without undue delays.

A minor renovation project is not applicable for this exemption.

In most circumstances, renovations or construction that would require an occupant to vacate the property will not take six months or more. If construction is ongoing for less than six months in the year, there must still be an occupant on the property for 6 months of the year to avoid paying the vacancy tax.

Properties for sale or recently transferred

If the property is empty solely because the property was listed for sale, it will not be exempt from the vacancy tax. However, if the property is sold and there is a transfer of legal ownership, it will not be eligible for the tax in the year that the sale took place. The proof of a change of legal ownership will be determined by proof of payment for the land transfer tax.

If your property is for sale during the period in which a property status declaration is due to be made for the previous tax year, it is the responsibility of the registered owner to declare the status before the sale is made.

Situations not eligible for exemption

Lack of a tenant

There is no exemption to the vacancy tax for a rental property if the owner claims they were unable to find a suitable tenant. In this case, the city would encourage you to lower the asking rental cost to attract tenants, or otherwise take actions to make the property more appealing.

Property is uninhabitable

Unless your property applies for other exemptions, you will not be exempt if it is unoccupied solely for the reason of being uninhabitable. Again, the responsibility is on you to make the property inhabitable, apply for reclassification, or to sell it, otherwise, you will be subject to the tax.

Vacant land, a heritage property, or properties that are part of a phased development are also exempt from the vacancy tax provided applications have been submitted to redevelop the land.

How property audits work

In some cases, the city chooses to go beyond the declarations and conduct an audit on select properties to determine the accuracy of their property status declarations. If you are audited you will be required to submit a collection of supporting documentation such as income tax returns, pay statements, or your driver’s license to prove the occupancy of your property. For most property holders who live in their homes as principal residences, an audit should be little cause for concern.

The city of Vancouver conducts audits on a horizontal basis. This means they audit as many as possible properties, rather than targeting fewer properties with more scrutiny. In 2020, about 4.8% of all properties were audited, or about 9,310 audits.

Of that 9,310, around 7.8% were found to be not in compliance and were deemed vacant and required to pay the empty homes tax. If you feel you were audited and issued a vacancy tax notice wrongfully, you have the option of issuing a notice of complaint and potentially having the notice reversed.

Scenarios that may complicate the audit process

The nonresidential use of residential property

It is possible that a property once zoned for residential use is now being used as a commercial property. In this case, you will still be required to declare the residential occupancy status of your property. This could very likely result in you having to pay the vacancy tax or being audited, as commercial tenancies are not considered for the empty homes tax. If this is your situation, it will be best to contact BC Assessment and request your property to be re-classified as a commercial property.

Use of an alternate mailing address

Another situation that can complicate your declaration is if the owner or property resident does not use it as their primary mailing address. It is not uncommon for people to use multiple different addresses, especially as most mail can be delivered digitally these days.

The issue is that when it comes time for an audit, the occupant’s address on file with various institutions may not line up with the property address. This could raise red flags with auditors and it is best to resolve this issue before an audit.

Unable to find documents from a former tenant

Even if your property should not otherwise be eligible to pay the vacancy tax, you may be in the situation where you get audited and are unable to prove your tenant status due to insufficient documents. Many of the documents requested by auditors such as government-issued IDs or income tax returns will not be available to the landowner directly.

If your tenant has already moved on and can not be contacted, or a tenant does not wish to offer documentation for privacy concerns, you may be out of luck. As the property owner, the best way to avoid this situation is to collect supporting documentation well in advance of the vacancy declaration, perhaps even upon signing the tenancy agreement.

Are there any Vancouver empty home tax loopholes?

The vacancy tax bylaw is pretty thorough in determining who is and who is not eligible. If you believe that you are being taxed wrongfully, you should file a complaint. In terms of loopholes, there is little advice we can offer. There are only a couple of ways that you can avoid having to pay the vacancy tax in Vancouver:

The first is to rent out your property to a tenant for more than six months of the year. The city technically can’t tax you for a vacant property if someone is living there. The added benefit of this method is that you actually make money by collecting rent from tenants. If you really can’t rent the property, consider making it your principal residence.

Your second option is to sell your property and no longer have to worry about keeping it occupied. The city of Vancouver has decided that homes are more valuable as places for people to live rather than as an unused investment asset. If you don’t agree with the city’s legislation, you may want to consider other real estate markets that do not have a vacancy tax for now or other investment avenues.

Is the vacancy tax working?

According to the city’s report “isolating the effect of a single policy like the EHT in a housing market as dynamic as that of the city of Vancouver is challenging. However, City staff have noted positive trends.”

Firstly, in each year since its introduction, the tax has made far more than the $2.5 million yearly operating costs and quickly made back the $7.5 million initial investment to implement the tax.

One positive trend for example is the decrease in revenue from the 2018 tax year to the 2019 tax year. While it means less money going towards housing initiatives, it is also the result of simply fewer vacant properties in the city of Vancouver, which is ultimately the goal of the program. 2019 saw over 1,800 fewer vacant properties than in 2017, and that’s after accounting for newly added stock in the market.

In fact, since the implementation of the tax, the city has seen year-over-year increases in tenanted properties. However, the city has also seen rental rates continue to rise, and vacancy rates remain very low. According to data received from the Canada Mortgage and Housing Corporation, the average rent in 2020 in Vancouver increased by 4.7%, and rent in vacant units was up to 20% more expensive than rents in occupied units. Clearly, though the vacancy tax is effective in some aspects, it has not been able to address all issues in the Vancouver market.

Many Canadians take a winter getaway every year as the days get shorter and the temperature drops, and in recent years some of these travellers are doing more than just enjoying the sun, sand and sea on holiday – they are spending vacation time looking at foreign properties for investment purposes and/or second homes.

One property well suited to those seeking an investment property, which also can meet second home needs, is a new residential development in the Cayman Islands called OLEA, located in one of the Caribbean’s most unique and modern communities.

The Cayman Islands is a British Overseas Territory, comprising three islands in the western Caribbean, located 475 miles southwest of Miami and a 45-minute flight south of Cuba. In addition to stunning beaches, a fabulous marine environment, year-round warm weather, the Cayman Islands features well-developed infrastructure, a stable government, a low crime rate, high-quality health services, and regular service by major Canadian airlines.

The Cayman Islands presents an attractive option for foreign real estate investors, and a recent boom in sales and development on the islands reflects this.

Grand Cayman, the largest island of the Cayman archipelago, is where most of this boom is taking place. Demand for properties in the Seven Mile beach neighbourhood is high and of particular interest is owning property that is proximate to the 685-acre community of Camana Bay.

The community is built on the principles of New Urbanism and is the first of its kind in the Caribbean. Camana Bay is home to approximately 3,000 tenants and residents and includes close to one million square feet of retail space, restaurants, and offices. The entire town center is easily walkable, and only a short car or ferry ride away from the many attractions on Grand Cayman. The community is in a prime location, just outside the capital of George Town, only a 10-minute drive from the international airport and directly adjacent to the world-famous Seven Mile Beach. And now for the first time, the OLEA development offers buyers the chance to own property in this one-of-a-kind community.

“OLEA is well suited to people that either want to live in the Cayman Islands full time, people that want to own a vacation property here, or people that want to buy an investment property,” said Sue Nickason, vice president of real estate marketing and sales at Provenance Properties – the exclusive Christie’s International Real Estate affiliate in the Cayman Islands. Nickason explained the numerous communal amenities available to residents at OLEA, including a gym, a yoga garden, a resort-style swimming pool, and Cayman Island’s first lazy river.

OLEA also offers a variety of different unit types. “There are condominiums, townhouses and even semi-detached villas with a swimming pool in the backyard.”

Construction began on OLEA in 2019, and the first residents have already begun settling in. That means the properties at OLEA are brand new and built to the highest modern standards. For sustainability-conscious Canadians, these innovations offer peace of mind.

The final phase of construction on OLEA is set to be finished in summer 2022, Of the 108 units on offer so far, 92 have already sold.

For Canadian investors looking to buy property abroad, the Cayman Islands’ property market is easy to access. Nickason points out major benefits to investing in property in the Cayman Islands, such as the lack of restrictions on foreign property ownership, no alien landholding licenses, and local banks working to finance properties with qualified foreign applicants.

For those interested in renting their properties, OLEA’s property management team is ready to assist in the process.

“We have a property management company that can assist, and the team at our brokerage, Provenance Properties can also assist with finding long-term tenants.”

Thanks to a globally mobile population and the presence of international businesses on the island, there is no shortage of renters looking to reside in Camana Bay.

“There’s a lot of demand for long-term rentals in the Cayman Islands,” said Nickason, “For those people that want to buy a property and then lease it out long term, OLEA is wonderfully located.

“OLEA is proximate to a lot of the top law businesses and accounting firms that regularly recruit a great number of employees every year. These professionals move to Cayman to work for a couple of years, and seek long-term rentals.”

Nickason adds one caveat to the rental option, one that may appeal to potential residents.

“The one thing I should note with these properties is that short-term rentals such as Airbnb and VRBO are not permitted, so it’s a truly residential community.”

As of November 20, the Cayman Islands will open its borders to most vaccinated tourists, meaning Canadians can once again travel to the islands. But, in the face of future unpredictability, OLEA still remains accessible digitally.

“We’ve helped a number of people buy property without coming here. We provide a video tour of the property and send Matterport videos and still photographs. We can also arrange an independent inspection of the property for buyers. It is a new property, but we realize that for investors coming from abroad, sometimes they want that additional peace of mind. Once a client decides that they want to acquire a property, we’re happy to introduce lawyers on the island to convey the property. We can also introduce banks that finance the purchase of property for international clients. Typically, they will finance up to 65% of the property’s value for international buyers that are qualified. We’re just there every step of the way to help make sure the process goes smoothly. It will typically take about three months to close on a property here.”

In addition to buying for investment or vacation home purposes, some buyers intend to move to Cayman full time.

“Some people buy with a goal to establish permanent residency. We’re also able to help clients if they are looking to purchase with the goal to apply to achieve permanent residency by investing in real estate. We can certainly help them with this process.”

Interested investors should get in touch with Sue Nickason directly at [email protected].

If you are looking to get the best available interest rates when applying for a mortgage, your credit score can make a big difference in helping you secure the best options. When it comes to mortgages, the higher your credit score, the better your rates will be. Generally, the best interest rates are offered to Canadians with a credit score above 680, with the very best being offered to those with a score above 740. For Canadians who want to secure a mortgage but have bad credit, there are also options available to you, so read on and don’t consider yourself out of luck just yet.

In this article, we are going to show you how credit levels affect your mortgage rates, some information on how credit scores work and why they matter, and offer some advice for those looking to secure a mortgage with bad credit. We will also cover what other factors mortgage lenders consider in determining your mortgage rates and how to find the best mortgage for you.

What is a credit score and why does it exist?

Your credit score is essentially an indicator of how safe it is for banks to lend you money. Banks are averse to lending money unless they can get it back, as they make most of their money by collecting interest. Every person has their own unique credit score that reflects their personal history of borrowing and repayment.

Before the invention of credit scores, creditworthiness had to be judged in less formal and less accurate ways. This may have worked for smaller local lenders, but in the modern world where lenders are international organizations who don’t know you, there needed to be a formalized system for determining one’s creditworthiness. Thus, credit scores were invented in the mid-20th century to simplify the process. Though many people bemoan the importance placed on credit scores, and there have been many valid criticisms on the failings of the system. Without them, you would have the burden of proving your own credit history and trustworthiness which would be a lot more difficult than pulling a credit report.

Why banks care about your credit score

If you have a high credit score it means you have a well-established history of borrowing and repayment. Therefore, a bank can be more confident in its loan to you and offer you lower interest rates among other benefits. If you have a lower score, the bank can not be as confident in its loan and will deploy increased rates or other protections to minimize damage from a potential default. Sure, the banks could just charge everyone the same high rates, but they want to attract safe borrowers and discourage risky ones in order to guarantee their success.

Check your credit report regularly for the most up to date info

Like it or not, the credit score system is a major component of our financial reality and every person who hopes to borrow money will have to take their credit score into consideration. You can easily find your credit score through one of the various credit reporting websites that offer a credit report, or by contacting the credit bureaus who can issue a full credit report. Canada has two major credit bureaus: Equifax and TransUnion. Your credit score changes often and the factors that influence it are not always well understood. You should always check your credit score regularly for the most up-to-date info.

Some factors beyond pure payment history that credit reporting agencies use to calculate your credit score include:

Credit Utilization

Funnily enough, using too much credit can actually be bad for your credit. Conventional advice says to keep below 30% usage of your available credit limit. For example, that means if you have a credit limit of $10,000, you should try to keep your usage below $3,000. Maxed-out credit accounts can cause banks to be suspicious of your financial responsibility and spending choices.

Numerous credit reports on your account

Anytime a borrower takes a credit report from your account for the purpose of checking your score, this is noted in your credit history. If your credit file shows multiple credit checks in a short period of time it can make you seem desperate for money and make banks wary. These so-called ‘hard inquiries’ can stay in your history for up to two years.

However, there are online services that offer regular credit scores without needing to make a note on your history. These reports might be less accurate and provide less information than a full report, but they do allow you to quickly check your credit without raising any red flags.

Other factors

Other factors impacting your score may include the diversity of credit products used, your income and debt to income ratio, and any previous history of bankruptcies or delinquencies.

It’s easier to have good credit if you have very little history and, as a result, fewer chances to have damaged your score. Between two borrowers with the same score, mortgage lenders will be more attracted to one with a longer credit history. This is also why older people tend to have higher credit scores than younger people – they have had more time to secure a good history.

Comparison of scores and rates

Your credit score affects the interest rates you can access when looking to get mortgage approval. The higher your credit score, the better rates you will get and vice versa. A credit score ranges between 300 and 900 with anything above about 660 being considered a good credit score. Here is what to expect with each given credit score when trying to get approved for a mortgage:

• 741+: your credit score is fantastic and you will be able to secure the best possible rates.

• 713 – 740: You have good credit and you will have your pick of many favourable rates.

• 660 – 712: Your credit score is fair to the average territory. The average score for most areas in Canada is in the range of 680 – 620, so you can expect fairly average interest rates as a result.

• 575 – 659: This is range is beginning to fall into below-average credit score territory. You will receive the least favourable rates from banks, or they will not agree to offer you a mortgage loan at all At the lower end of this range, you will need to either work to raise your score or look to alternative lending options.

• 300 – 574: You have poor credit and are considered a high-risk borrower. Even if you can get a mortgage loan with this credit score, the high-interest rates you will be forced to pay may make it a better option to wait until you have a better credit score.

What is the minimum credit score to get a mortgage?

There is no minimum score per se. However, securing a mortgage loan gets much harder with a bad credit score, and at rates below 600, it can get very hard to find a mortgage that is worth it. You can always try applying for a mortgage with a poor credit score but be prepared to get less than ideal terms – or nothing at all.

Credit scores and default insurance

Your credit score also affects your eligibility to receive mortgage default insurance. For buyers putting less than 20% down on their mortgage loans, they will be required to get mortgage insurance. This measure is put in place to protect lenders from defaulting loans. This is also why, according to the Canada Mortgage Housing Corporation, you need a minimum credit score of 600 to receive insurance.

If your score is below 600, you may be able to get approved for a mortgage by some private insurers and private lenders who do not have the same minimum credit score requirements, but you may have to pay much higher rates.

How to get a mortgage with a lower credit score

Increase your down payment

Even if you have bad credit, the ability to put up 20% or more of your down payment may help convince lenders of your financial responsibility. The logic is that not only does the high down payment indicate a healthy income and ability to cover mortgage payments, it also allows you to make lower regular payments or a have shorter amortization period. This gives some security back to the lender that may have been lost by a low credit score.

Consult an alternative mortgage lender

The major banks are not the only lenders offering mortgages in Canada, though they are the most popular. There is a slew of other financial institutions offering mortgages to Canadians, often with very different terms and rates than the traditional lenders.

An alternative lender may require a down payment, collect a higher interest rate, or both. They may also charge additional fees that are not required by the big banks such as a loan processing fee.

Find a co-signer or sign a joint mortgage

If you don’t like the options of an increased down payment or an alternative lender, you may consider a co-signer. The co-signer agrees to take responsibility for mortgage payments if you fail to pay and their credit score will be taken into account when securing the mortgage. However, make sure your co-signer knows that they will be on the hook for missed payments, and how they may be at risk of damaging their own credit.

Improve your credit score

If you can’t secure a mortgage you are happy with, it may be worth holding out until you can achieve a good credit score. There are multiple different things you can do to improve your credit score, but it won’t happen overnight and will take some commitment on your part.

Things such as paying bills on time, keeping credit utilization low, paying down debts, maintaining a mix of credit products, and being selective about asking for new credit should gradually help your score increase. Be sure to check your credit report regularly to see if your efforts are working, as well as to catch any mistakes in credit reporting that could damage your efforts. If you notice any mistakes, contact your credit bureau immediately.

What else can affect mortgage rates beyond just your credit score?

A credit score is one of the biggest considerations in terms of the terms of your mortgage, but other things can cause your rates to change as well. Some potential factors include your income, employment history, the amount of your loan, and the actual property in question. Lenders will also consider your living expenses and financial responsibilities like property taxes and utilities when considering your mortgage proposal. You will also need to pass the mortgage stress test to ensure you can handle your mortgage payments in order to be qualified.

I have a good credit score, what should I do now?

First of all, though your score means you probably already have good credit habits, do your best to make sure you keep your score high while you look for mortgage approval.

Most Canadians take their mortgages from the big banks, so this may be the place to start for you. Banks are all in competition with each other and will offer similar packages, though with subtle differences. It’s important to shop around and find what works best for you.

If you feel unsure about choosing the best mortgage, a mortgage broker may be good for you. A mortgage broker is a professional whose job is to evaluate the different mortgages available to you and help you get the best deal possible. Mortgage brokers can help you save time and find a better deal by comparing the many mortgage rates across major banks, credit unions, and alternative lenders. They will also help you submit your mortgage application and secure mortgage pre-approval. Of course, you will pay for the services of a broker, so make sure to weigh the costs and savings.

Final Thoughts

The mortgage approval process can be complicated, but by having a strong credit score you can give yourself many more options. Beyond just mortgages, a good credit score can help you out in other types of borrowing such as getting credit cards or a car loan. You should make yourself aware of your current score and always keep in mind how you can improve it in the future.

Last week, Teranet released their quarterly Market Insight Report analyzing data on Ontario land registry. Their data revealed that multi-property owners are the largest single buyer category in Ontario real estate.

Teranet is the owner and operator of the province’s online property search and registration system. This gives them the opportunity to examine data collected on property transfers, and they employ a number of data scientists to do just that. The benefit of this approach, according to Teranet is that it does away with news constructed on “anecdotal evidence or surveys” and instead presents a “comprehensive, data-driven analysis” of the Ontario market.

The rise of the multi-property owners category has been gradual over the last five years. In 2015 the category represented less than 20% of sales in the province, sitting well below the categories of First-Time Homebuyers and ‘other’ (largely foreign investors).

The rise of the category was probably helped in part by legislation put in place to curb the growth of its competitors. One such change was the Non-Resident Speculation Tax that made it harder for foreign investors to buy in Canada. In addition to the Non-Resident Speculation Tax, pandemic restrictions significantly lowered the number of visitors and immigrants able to come to Canada, and therefore, reduced their ability to buy properties here.

Another piece of legislation beneficial to the multi-property investors was the mortgage stress test which drove many new homebuyers away from the market. These changes left the perfect opening in the market to be filled by investors.

Another consideration is that under current conditions of high prices and low interest rates, investors are in the best position to be making purchases. They have more money to spend than first-time buyers, for example, are able to access it cheaply, and have greater resources to leverage.

Other factors may have contributed to the recent growth of this category, such as the recovery from a dip in 2018- 2020 caused by rising interest rates that drove some investors away.

In Toronto itself, the change is even more dramatic. Where first-time buyers once represented 30% of all sales in Toronto 10 years ago, they are now down to a quarter of all activity. Over the same time period, multi-property owners grew from less than 20% of the market to now slightly overtaking first-time buyers to represent the largest segment of buyers in the city.

Teranet also offered an age breakdown of all buyers in each segment. Unsurprisingly, data shows millennials as the largest demographic for first-time homebuyers, representing almost 70% of sales. In the multi-property owners category, Gen X is the largest contributor, though millennials represent a not-insignificant 20%.

With major supply issues facing the real estate market, many people are finding it hard to find an affordable home, while over one million homes sit empty across Canada, partly due to multi-property owning investors. The question is, how long will it be before legislation comes after this segment of the market as well?

While self-employed people enjoy the freedom of being their own bosses, they are often restricted by mortgage lenders.

There are over 2.9 million self-employed Canadians who enjoy the freedom of making their own schedules, being their own boss, and having complete control over their work-life. Despite the freedom that their jobs afford them, many self-employed people are restricted by mortgage lenders.

Self-employed people have a more difficult time applying for a mortgage loan. Lenders’ criteria are more difficult to meet when dealing with business expenses, and the precariousness of self-employed income makes a business owner a risky lender.

Nevertheless, it’s not impossible to qualify for a mortgage as a self-employed person. You can apply for a mortgage and buy property without having to sacrifice your career.

Lenders’ aversions to self-employed borrowers

Lenders are much more reluctant to lend money to self-employed individuals because there is more risk involved.

Self-employed mortgage applicants are known as risky borrowers because their income is not fixed—they almost always have a varying amount of income. Self-employed people’s income varies depending on their sales, other business costs, and more. Their unstable income makes lenders worried that self-employed borrowers will not be able to make their monthly payments, thus defaulting on their mortgage.

In addition, most business owners tend to use their business expenses to reduce their taxable income. As a result, lenders wonder whether self-employed borrowers can truly afford a mortgage.

Self-employed mortgages: What are they and how you can get one

Self-employed people rarely qualify for a standard mortgage because of their varying employment income. But, thankfully, this doesn’t mean that you need to choose between property and your career—there is a special type of mortgage developed solely for business owners.

A self employed-mortgage is a non-traditional type of mortgage that is only open to people who own full-time or part-time businesses, including sole proprietorships, incorporations, and partnerships. Individuals need to have owned their business for at least two years to qualify.

Like most home loans, self-employed mortgages are available in fixed and variable mortgage rates for a variety of different term periods. A borrower will also need to pay a premium if their down payment is less than 20%. However, a self-employed individual can expect to pay a higher premium than a person with a standard mortgage. The higher premium is added on top of the mortgage and paid off in your mortgage payments.

Business owners interested in applying for a self-employed mortgage should seek the help of a mortgage broker. Mortgage brokers are professionals who have special access to private mortgage lenders beyond the big banks. They can help you locate private lenders who specialize in self-employed home loans.

Applying for a self-employed mortgage

The traditional mortgage application process is relatively fast and easy. Applicants need to provide proof of their employment income, some bank statements, and their credit score before they receive approval. This process is not as easy for self-employed workers.

It can take a lot of hard work and waiting for an independent worker to get a mortgage. They will need to jump through more hoops, proving their self-employment income and their ability to make their mortgage payments.

Since self-employed home loans are high-risk, applicants will need to provide more documentation than the traditional application. Some documents that you can expect to provide for your self-employed mortgage application are:

• Financial statements about your business income
• A Notice of Assessment from the past two to three years
• Your personal credit score and history
• Proof that your personal tax returns are paid
• Proof that you are the principal owner of your business
• Contracts that show expected revenue for the coming years (if applicable)
• A copy of your borrower’s business, GST license or Article of Incorporation proving that you are licensed
• Proof that your down payment was not gifted (optional)
   

If you can provide a Notice of Assessment proving your income, you may be able to receive the same mortgage products and rates as traditional borrowers.

Things all self-employed borrowers should do

Self-employed income mortgages are, inarguably, one of the hardest types of mortgages to qualify for. You must own your business for two years before you can qualify, and approval is not guaranteed.

How to better your chances of receiving approval

Receiving approval for a self-employed mortgage takes a lot of hard work and documentation. You can prepare for your application—and set yourself up for success—by taking the necessary steps.

Create a good system of documenting your income and employment

Self-employment is a very fulfilling career path, but it can cause your bank statements to shrink.

Many business owners use their own income to pay business costs, reducing their tax returns. While this is beneficial because it allows more money to go back into your business, a lender may see it as an inability to make a mortgage payment.

You can prove that you have sufficient income by documenting your income with a paper trail.

The Canada Mortgage and Housing Corporation (CMHC) has permitted a broad range of documents to be used to prove your net income and employment. These documents include T-4 slips, pay stubs, a copy of your federal tax return, proof of income statement from the Canada Revenue Agency, and a T2125, which is a statement of business or professional activities. These documents can help prove your net income to your lender.

We recommend filing these documents away every year. Not only will it help you apply for a home loan in the future, but it will also be better for your tax returns.

Improve your credit score

A good credit score is integral to receiving approval for mortgage financing. Most lenders will look for a credit score anywhere between 690 and 900 because it shows your ability to spend and pay off loans responsibly.

The best way to get a good credit score is to take out loans. Loans could be buying a car and paying it off or something as simple as using your credit card. With every on-time payment, you will build up a good credit history, thus improving your score.

Save more than the minimum down payment

A down payment is integral to showing lenders that you are a financially responsible individual despite your self-employment.

Although you are only required to have a 5% down payment, a down payment of this size categorizes your mortgage as high-risk. If possible, we recommend that every self-employed borrower save a larger down payment.

A down payment of 20% will allow you to get a mortgage easier and show your responsibility to your private lender. A 20% down payment will also allow you to avoid having to pay for mortgage loan insurance, also known as mortgage default insurance.

Default insurance premiums cost homebuyers anywhere from 2.8% to 4.0% of the purchase price—a hefty addition to your mortgage. It’s best to save more and avoid having to pay this premium on top of your mortgage.

The Liberal Party of Canada has taken a significant step in recognizing and combating the Canadian housing crisis by creating a new cabinet role, that of the Minister of Housing. The new cabinet was sworn in on Tuesday and featured many new and familiar faces, with Trudeau expressing a commitment to “delivering for Canadians in the coming years.”

Ahmed Hussen, the man tasked with the job as well as the role of Minister of Diversity and Inclusion, immigrated to Canada in 1993 and was previously the minister of Families, Children and Social Development in 2019 and Minister of Immigration, Refugees, and Citizenship in 2017. Before that, he was a practicing lawyer with a degree from the University of Ottawa.

All that goes to say he seems like a capable enough candidate for the role, but many eyes are on him to tackle the complex issue of housing.

The current situation in Canadian housing has been commonly referred to as a housing crisis and was a major issue in this past federal election. Every major party made fixing our housing market a central platform issue on the campaign trail, and many Canadians saw it as one of the most pressing concerns along with the COVID-19 pandemic. 

In the past year housing supply has struggled to keep up with high demand, and housing prices across the country have risen far beyond what many are able to afford. Recently, the UBS Group in Switzerland named the Canadian cities of Toronto and Vancouver as some of the worst potential housing bubbles in the world. 

The Liberal party laid out many promises during their campaign that they say will help increase affordability and accessibility for Canadians. These measures include making purchases easier for first-time home buyers, repairing or restoring over a million existing homes, and limiting access for foreign buyers.

In the past, Trudeau’s government received criticism for failing to address housing issues sufficiently in his previous term, as the market began to run rampant. Already, Hussen and the Liberals have been criticized by the National Post, calling his title “absurdly broad and meaningless” and depicting a fantasy image of buzzwords being thrown at a ministry position as an afterthought to appease young voters.

However, the creation of a standalone ministry to address housing where there was once none at least signals a heightened commitment to the issue. Unfortunately, it seems fairly late to be getting serious on housing. The Liberal housing plan is still in its early stages, but if they are able to deliver on their promises, hopefully, we will see a better state for the Canadian housing market.

We’re in desperate need of housing in the GTA. Yet, developers still face roadblocks when they try to take action to boost supply.

A big part of Toronto’s problem is that NIMBYism is being allowed to dictate housing policy. NIMBYs often put pressure on city councillors to vote against any kind of development. They threaten development of all forms of accommodation, whether it be rental, affordable, or private housing.

In North York, for example, the Bayview Woods Neighbourhood Association was recently formed to object to an ambitious proposal to build 15 apartment buildings of various heights with a total of 1,504 units on the Tyndale University site at 3377 Bayview Ave., south of Steeles Avenue. The group has cited a number of concerns, one being that Bayview is not designated as a high-density corridor.

In the Liberty Village area of Toronto, meanwhile, a proposal to add three 30-storey condos is facing opposition because the local residents’ association doesn’t want more condos built in the area.

According to new research done by the Smart Prosperity Institute, Ontario will need 910,000 new homes over the next decade. But that is unlikely to happen as Toronto is lagging other jurisdictions. The city’s housing starts rose by only 1.4 per cent (or 500 units) compared to the 2015 to 2019 average – well short of the national rate of 26 per cent over the same four-year period.

If we are to solve the housing situation, Toronto needs an Official Plan that is more reflective of the present housing situation. The city is presently updating the plan, so it’s the perfect time to right the wrongs. The plan must allow a greater mix of housing and permit more housing near transit stations.

There are many neighbourhoods where more housing could be built, especially along main streets and avenues. More mid-rise and multiplex buildings, semi-detached homes, and townhouses could be built in these areas. We must allow more density if we are to keep up with anticipated population growth.

The Ontario government has taken steps to encourage cities to put higher density, mixed-use developments near transit as a means of boosting housing supply and increasing transit ridership. Minister of Transportation (GTA) Kinga Surma has explained that the program will bring housing closer to transit, helping to increase ridership, reduce congestion and stimulate economic growth.

It’s an approach that has been used with great success in Vancouver and a number of other jurisdictions around the world, including Tokyo, Japan, London, U.K., Sydney, Australia, and Washington, D.C.

However, Toronto’s planning division recently did an analysis of more than 180 potential major transit station areas and determined that six per cent, or 11 stations, would not be appropriate areas to increase density. In other words, the city is pushing back against the provincial mandate and determined that city policy trumps provincial policy.

This is unacceptable. The population of the GTA is expected to grow by 2.27 million people over the next 10 years. People must be able to live near transit.

Presently, families are living in hovels while bureaucrats split hairs. It’s pointless, irrational, and unnecessary. Smacks of a make-work project to block, rather than promote, new homes and rentals being built.

There is plenty of space available in Toronto for intensification. The city must do better.

Richard Lyall, president of RESCON, has represented the building industry in Ontario since 1991. Contact him at [email protected].

Prices of lumber skyrocketed to never before seen heights in the past year as the supply chain suffered the effects of the ongoing COVID-19 pandemic. Now, those higher prices have vanished as quickly as they arrived and prices have stabilized.

With lumber being a major input cost of housing development and renovation projects, hopes are rising that this could be a sign of things to come. But despite positive signs, we aren’t out of the woods yet.

What has happened since 2020?

When the pandemic swept over the world in early 2020, most industries around the globe were interrupted and forced to adapt. There were multiple major factors in that time that drove high lumber prices.

What follows is a basic rundown of the conditions affecting softwood lumber prices in the early days of the pandemic and some information on current conditions, as well as a future forecast into 2022.

Reduced production capacity caused supply woes

The first difficulty in the lumber industry was the constricted ability for lumber harvesting and milling to continue at the same pace it had held previously. Most workplaces across the country had to limit the number of workers on-site at any time and the lumber industry was no exception.

With fewer hands at work, the productivity of logging and lumber mills naturally fell.

A sluggish supply chain amplifies inventory issues

The issue of lower supply created by slowed production was only accentuated by difficulties in the transportation and logistics of lumber. It takes many steps to take a tree in the woods and turn it into the walls of your home. Every step of the way, from transport to consumer retail, was slowed to a crawl.

Slowdowns are one thing without even considering the many workplaces subject to complete shutdowns as a result of workplace covid outbreaks, and the fact that those working in manufacturing, transport, construction, and retail were among the most likely to die from COVID-19. Commodity might have been high, but the human costs were as well.

Furthermore, much of the lumber being transported from Western Canada was limited by the rampant wildfires that afflicted the province in the middle of the year. This past year’s wildfire season in BC was the third-worst on record in terms of the total area burned.

New build and renovation frenzy pushed demand higher

Another major factor was the changing importance of the homes to the many people stuck there for most of their day. Many people made the decision to move in the last year, and facing intense supply issues, many opted to have new homes built instead.

Along with an increase of people looking for new home builds, there was also a huge increase of people looking to renovate their existing homes either to accommodate space for working from home or simply to keep themselves occupied with little else to do.

The combination of limited softwood lumber supply availability and increased demand was the perfect storm to create sky-high prices for lumber.

Softwood lumber prices peaked in May 2021

Through 2020 and into early 2021, weekly lumber prices rose at unprecedented rates. Finally, Softwood lumber prices peaked in May of 2021 with benchmark softwood commodity Western Spruce-Pine-Fir coming in at over $1,600 U.S. dollars per thousand board feet. According to Madison’s Lumber Reporter, that’s over three times pre-pandemic levels. Compared to those earlier rates, a home built at the record high of softwood lumber prices would have cost up to an additional $40,000 U.S. for the same amount of wood.

From that peak, things started to decline. In fact, prices for lumber futures fell even faster than they rose. Again, numerous factors are at play in this change. Firstly is the easing of restrictions and the increased capacity for production.

Another is the mounting of uneasy consumer feelings of prices far higher than they should be. Despite many people choosing to hold off on construction until prices were better, the prices continued to rise.

However, excess lumber inventories began to rise and lumber sales volumes fell as more and more people balked at prices. Fortunately for consumers, prices eventually bowed to lowering demand and corrected dramatically.

Producers in Western Canada reacted dramatically to falling prices

Between May and September 2021, cash prices tumbled all the way down to around $400 U.S., about a quarter of their prices at peak. Though prices now are lower than the same week in 2020, they are still up from the prices of the same week two years ago.

With the crash in prices, many retailers were forced to sell off inventory at a loss. Some softwood lumber yards such as Canfor Corp in British Columbia even decided to curtail production for a limited time. They cited concerns of wildfire season in Western Canada, though many believe the choice was instead an attempt to lower availability and slow the decline of lumber markets.

Prices back up to above $500 U.S. per thousand board feet shortly after bottoming out

Now, after tumbling rapidly, lumber markets are back on the rise again in recent weeks, though not so dramatically as before. As of October 8, 2021, the price of Western S-P-F was $580 U.S., according to Madison’s Lumber Reporter weekly lumber prices report.

Now, as pandemic tensions ease and many aspects of life return to normal, the question of the future of lumber prices is on the mind of analysts. The past year alone has seen multiple significant climbs and drops in softwood lumber prices – so what does the next year hold?

A return to stability forecasted for lumber prices

One trend being witnessed in multiple markets right now, including the housing market, is a return to stability after a year of unpredictable fluctuation. You could say that the current trends of lumber prices post-correction are displaying the same stabilizing.

Prices have increased since the bottom of the crash, but nowhere near at the rate they did previously. Though prices are now slightly elevated on a historical basis, they are not significantly overvalued either.

It’s likely that the recent drop could be the lowest price we see for a while now. There is still a huge demand for houses, and with society reopening, a surge in new house builds will likely continue to drive strong demand for lumber. Current estimates predict the price of lumber continues to edge upwards into next year.

What lower prices mean for consumers

A drop in prices does not necessarily mean that consumers can rush out today and buy wood at a greatly reduced price, however, things may start to look better very shortly. Unfortunately, the prices quoted above are internal industry prices and often do not reflect the retail price that the average person has access to. As cheaper lumber cycles through the industry, savings can begin to be passed off to consumers. Until then, some may continue paying more.

Retail prices can’t immediately reflect industry prices

As mentioned before, stores are, in some cases, still trying to sell off more expensive inventory without taking too much of a loss. Until that inventory has cleared, prices may remain higher.

Also, consider that many lumber trends are reported as futures, meaning that the price paid now to suppliers is for lumber delivered at a future date, affecting how quickly price changes can be spread.

Gradually, however, lumber pricing at retail should come to reflect market prices.

Retail demand could pick up, though many are forgetting DIY ambitions

There is also the fact that many have held off on completing building projects and home renovations until the price came down. As they do, you may find that the new issue is not wood being too expensive, but finding any to buy in the first place as retail demand picks up once again.

Hopefully, this demand will be offset somewhat by the many people now looking to fill their time with travel and social events rather than DIY projects and home improvements now that many pandemic-related restrictions are beginning to ease across Canada and set to be fully removed by the middle of next year.

Effects on new builds and home prices

Many are hopeful that a drop in softwood lumber prices will be reflected in a drop in home prices. With lower prices of wood, more people may be able to opt for newly built properties, taking pressure off the resale market and promoting lower prices.

It may also encourage later developers who have held off on large-scale projects due to the lumber rally to finally take action, possibly easing some of the demand on the market.

Unfortunately, the relationship between lumber and home prices is complicated. For example, many people have already signed contracts for home construction long ago and may be forced to pay at the more expensive rate they originally agreed to. Just like stores, builders may have excess inventory of more expensive products that they will try to sell above current market value to maintain profitability.

Shortages in other home building components to keep prices inflated

Another thing to consider is that most houses are not made of strictly wood. As the supply chain still struggles to catch up, many of the other components that go into construction may still be hard to come by or only available for a high price. These shortages include electrical, plumbing, household appliances, cabinetry, and even labor required to build the homes themselves.

Prices will remain elevated to an extent until supply chains across multiple industries are able to stabilize. Until then, new builds will remain expensive, and new housing inventory can only help cool off home prices when they are able to be built for a better price than resale homes. Currently, that is not the case.

Development slowing despite affordable lumber

This is somewhat proven by recent data from the Canada Mortgage and Housing Corporation which indicates that housing starts in Canada were down across Canada in September 2021, though still above pre-pandemic levels. Now, it’s not uncommon to see development go in cycles through the year, but it’s clear that the crash in lumber has not caused a proportional boom in development.

Ultimately, there are many more factors than just lumber at play, and the relationships between commodities and developments are highly complex.

Conclusion

With so much discussion in the real estate world being concerned about abstract market forces it is often overlooked how important the materiality of homes is to their value. After all, without the actual building itself, and the materials that comprise it, there would be little purpose to most real estate investments. Therefore it is important that investors educate themselves beyond the housing market, and consider the supplemental commodity markets that all play their small part in economic trends that can have serious impacts on your investments.

These days, many Canadians are finding it hard to keep up financially, a result of the COVID-19 pandemic which caused many to lose income or their jobs altogether. Prices on many things have gone up and some are now being forced to go into arrears on their mortgage.

If you signed your mortgage years ago, you would have had no way to predict such an unprecedented global event and now you have to adapt. The biggest fear for many borrowers is to go into arrears and lose their homes.

There’s good news, however. Banks are well aware that people’s financial situations can change unexpectedly, especially in times like these. Because of that, there are various options open to you if you feel the need for extra support. In this article, we will cover the current state of mortgage arrears in Canada and options for those in financial trouble.

After an explosion of mortgage arrears, Canada is slowly starting to recover

If you have gone into arrears on your mortgage, just know that you’re not alone. In October of 2020, the rate of mortgages in arrears in Canada peaked at 1.59%. This is the highest rate of arrears in Canadian history, after a previous peak in the 1980s. In an effort to help borrowers during the pandemic, banks and lenders offered many deferrals on their mortgage payments. In addition, the rate of mortgages being extended went up greatly.

We will go into deferrals and extensions in more detail below, but one thing important to know is that in the large part they are working. Canada Mortgage Housing Corporation data now shows that of the mortgages that went into deferrals during 2020, the vast majority of deferrals ended and were able to continue payments once again. Additionally, the rate of extensions on insured and uninsured mortgages is in decline.

The figures for mortgages in arrears are now on their way back down from the peak. Generally, the rate of arrears can be an indicator of economic health. This means a lower rate of arrears indicates that more Canadians are in a healthy financial position, and our economy is recovering from recession.

How excess mortgage lending puts Canadians at risk

For many years now, the ratio between the value of Canadian mortgage loans and the income of borrowers has been high. That means that today, a large amount of a household’s disposable income goes towards their home. This wasn’t helped by the recent boom in housing prices.

Unfortunately, this puts some financial risk upon the borrower. A slim margin between income and the value of mortgages leaves little wiggle room when financial pressures crop up. This means it is easier than ever for Canadians to find themselves unable to keep up with payments.

This is one reason why the government instituted the mortgage stress test, to ensure that lenders would be protected from borrowers falling into arrears. This is also why mortgages with a down payment of less than 20% are required to be insured.

What to do if you are in financial trouble

The most important first thing you can do before going into arrears is to attempt to reduce your costs and contact your lender. Be upfront and honest about your current situation and ask about what arrangement you can come to based on what you are able to pay.

Lenders will be more likely to help you come to an arrangement if you contact them before going into arrears. Therefore, do your best to contact them before you miss any payments if at all possible.

If you can not reach a solution with your lenders, your next step should be to consult a lawyer or credit counsellor. They can help you explore alternative solutions that may be available.

Common options to avoid mortgage arrears

Payment deferrals on mortgage loans

A mortgage deferral is a special agreement that mortgage owners can make with their bank when they find themselves unable to pay their regular mortgage payments. The deferral lasts for an agreed period, during which time you do not have to make any payments.

Once the period is up, you will once again begin paying your mortgage payments and will be responsible to pay off any missed payments and interest. Likely either your regular payment or amortization period will have to be adjusted as a result of the deferral.

If you expect financial hardships to be a temporary situation for you, a deferral can help you out in a pinch. If you are likely to continue experiencing hardships after your deferral expires, it might not be the best option for you.

Factors that financial institutions consider for eligibility

Some of the factors that financial institutions consider when deciding if you are eligible for a mortgage deferral include:

• Are you or your family unemployed due to the pandemic, or have you suffered a significant loss of income as a result of the pandemic?
• Is your mortgage insured or uninsured?
• Is your mortgage in otherwise good standing?
• Is the property your principal residence or not?

What to expect from a deferral

Payment deferrals can affect your mortgage in a big way. The effects of a deferral can impact your payments, your interest, and your mortgage principal.

If you defer your payments, you are effectively keeping the same principal value on your mortgage while it accrues interest. At the end of the deferral, you will still need to pay the same amount plus any additional interest.

The bank will collect your deferred interest after the fact by adding it to your mortgage principal, which is then used to calculate your future interest payments. In effect, this means after your deferral you may actually pay interest on interest.

Some mortgage plans include the payment of property taxes into their regular bills. Some deferrals will allow you to defer your property tax payments along with your mortgage payments. Other plans will require you to keep paying property tax while on deferral.

Additionally, your municipality may offer property tax deferrals.

Extending the amortization period of your loan

By extending the amortization period of your loan, you are essentially agreeing to pay it out over a longer period of time in return for a lower regular payment. Depending on your situation, you may be able to extend out to a limit of 25, 30, or 40 years. The exact length available will differ between insured mortgages and uninsured mortgages.

Remember that the longer your period, the longer you pay interest. This option may allow you to save on payments but can add up to thousands of dollars in interest.

Switching to a blended or extended mortgage

A blended mortgage means that your financial institution will allow you to benefit from current, possibly lower interest rates. Now, they won’t give you a lower interest rate outright. Rather, they will blend your current rate with the lower one, thus the name. Unfortunately, this option will only be available if a better rate exists to blend with. In addition, you can often extend your mortgage term to take advantage of the lower rate for longer.

Locking in a fixed rate

If you have a variable rate mortgage, you may be able to opt to convert it to a fixed rate. Technically you can do this any time as a security measure to protect yourself from fluctuating variable interest rates, but it will only save you money if you lock into a lower fixed rate than your current variable rate. If you decide to take this option, make sure you act promptly, as rates can change often.

Extended deferrals

Some lenders offer extended mortgage deferrals. This allows you to defer your mortgage payments for longer, usually until you reach a certain dollar value of deferred payments. For borrowers with insured mortgages, your bank will need approval from the insurer before offering an extended deferral

Skip a payment, make special arrangements, or interest-only payments

Your bank may offer other payment options that stop short of a complete deferral. One such option is to skip only one or two payments. This is essentially like a mini-deferral. Another option is to agree to lower your payments temporarily, without stopping them altogether. A third option allows you to pay only interest for a period while deferring the principal payments to be paid later.

Capitalization

Capitalization is a process where you can take a late payment and add it to your principal. Capitalization isn’t just for mortgage payments and interest either. Your lender may allow you to capitalize other bills such as utility bills, property repair fees, property tax payments, and more.

The downside of this option is that your principal will go up and your payments will go up with it.

Home Equity Line of Credit (HELOC)

A HELOC allows you to borrow and pay back credit against your home’s equity. HELOCs have a variable interest rate and the credit limit can change at any time as well, so they are not the best option for paying mortgage payments.

Other options

Other options beyond working with your lender include getting a loan or assistance from family, renting out a portion of your home for extra income, selling off valuable assets to raise funds, or taking on a second job.

Conclusion

It can be a stressful and scary situation to be in arrears on your mortgage payments. The biggest takeaway is to remember that many people have been there before you. That’s why lenders have many measures in place to help you recover in hard times. If you find yourself in this position, consult your bank as soon as possible on the best options for you.

A study released this week found that in Canada in 2020, there were up to 1,340,364 vacant homes, comprising 8.7% of all homes in the country.

On the list of countries with the most vacant homes as a percentage of total homes, Canada ranked in eleventh place. Topping the list were Japan, Cyprus, and Hungary, all with over 10% of total homes vacant. The United States has the most total vacant homes in the world, though their relatively larger stock of property puts them at number four. Of the countries studied, England did the best, with less than 1% of homes in the country vacant.

The report was compiled by Money.co.uk using data from the Organisation for Economic Co-operation and Development (OECD).

The figures are confounding when considered against the fact that many analysts cite low supply as one of the major issues in the real estate market today and a reason why so many are struggling to buy homes for reasonable prices. The obvious question is, where are all these vacant homes, and why are they going unused?

While OECD presents its figure, they don’t go as far as to speculate the cause of vacant homes. Some claim vacant homes are the result of investors buying properties and leaving them vacant, purely for speculation or to accrue equity. This has often been blamed on foreign investors more than anyone else. However, it’s unclear how true this belief actually is. With the high rent rates and demand of today’s market, it makes little sense for investors not to use their property. Other issues may cause a house to remain vacant such as the death of a resident, or safety concerns preventing it from being rented.

Even more disturbing are the figures comparing vacant homes to the homeless population of a given country. While Canada ranks lower on this list at 13, it is still not a ranking that we should be proud of at all. It would take just 9% of the over 1.3 million vacant homes in Canada to give every homeless person in the country a place to live.

An earlier report by Point2 Homes found that in 2016 there were still over 1.3 million vacant homes in Canada, so what has been done since then? Recently, cities like Toronto and Vancouver have begun instituting vacant home taxes to combat this very issue. And, the federal government has promised numerous programs to help affordability, supply, and homelessness.

These actions are steps in the right direction, but they clearly have a long way to go.