As more and more homeowners face mortgage renewals at surprisingly higher interest rates, some are facing the dreaded prospect of having to sell a home they can no longer afford.
But experts say while that option may be on the table, there are steps financially stretched homeowners can take before putting a “For Sale” sign on their front lawn.
“We need to acknowledge at the start that selling the house might end up being the only option for some homeowners,” said Becky Western-Macfadyen,a financial coaching manager with Credit Canada.
However, homeowners should begin with reworking their family spending, she said, by looking at the money coming in and going out, including frequent expenses on household maintenance, car repairs and medical bills.
The next step would be to gather all potential ideas on paper to find ways of diversifying their income sources. That might mean a second job, asking for a raise at work or renting a room in the house, Western-Macfadyen suggested.
“Be realistic,” she cautioned.
She also warned that in dire cases, drastic measures might be needed to lower spending.
“It’s not the time to focus on cutting out lattes,” she said. “You want to make sure you’re making some big changes and it needs to be sustainable.”
She suggested homeowners put any spare cash toward their current mortgage with a lump-sum payment before it gets renewed at a higher rate to help manage the expected increased monthly payment.
Homeowners can also seek help from a financial adviser or a certified financial planner to gauge what an affordable, yet sustainable, lifestyle could look like, according to Tony Salgado, founder of AMS Wealth.
As the mortgage renewal approaches, don’t assume the first offer presented by a lender is the best rate, he said.
“If you have the opportunity to work with a mortgage broker, make sure you shop around,” he said. “Because one per cent or a half per cent savings could be very valuable in today’s environment.”
The mortgage amortization, picking the most suitable option between fixed and variable rates and finding the best rate offer could also help soften the burden of higher rates upon renewal.
Current mortgage rates with traditional banks are north of five per cent, and rates with alternative lenders can be even higher. That compares with mortgage rates below three per cent during the pandemic when the Bank of Canada’s benchmark rate was ultralow.
Salgado pointed out there’s a popular belief that the rapid surge in mortgage rates is only affecting low- or middle-income households.
“It is a bit misleading,” he said. “Whether you are low-income or a high-income person, provided you have a mortgage, these rates are affecting you.”
However, someone with a higher income may be able to adjust better to higher borrowing costs by moving around assets, capital or retirement savings, Salgado said.
“When we work with lower-income people with a higher mortgage, they may not come with so many other investment accounts that you could tweak or move around to help offset those costs.”
Salgado said some younger homeowners are turning to their parents for help in keeping up with rising mortgage payments, as a sort-of advance on their expected inheritance.
“We see that happening in our community,” he said. “A lot of older generations would like to see the fruits of their hard work benefit the family while they’re still alive.”
However, if all of these options have been exhausted, it might mean it’s time to move on.
“Mortgage is typically the very last thing that someone would let go,” said Western-Macfadyen. “They probably maxed out their credit cards and lines of credit and at that point, they just don’t see any other alternatives.
“You want to then take action,” she said, which may include selling, foreclosure or surrender of the home.
Western-Macfadyen suggested homeowners should consider opting for a sale rather than getting foreclosed to avoid having the property sell for below market value and incurring the costs that might arise in a situation of surrender.
As higher interest rates take a toll on housing market activity, it could make it harder for homeowners to get the price they expected from the sale.
Talking to a licensed insolvency trustee could also be an option to help alleviate the stress of selling the house and managing debts.
But selling the property doesn’t necessarily spell the end of the homeowner’s responsibilities, she warned. Homeowners would still have to pay leftover utility expenses and house insurance until the ownership is transferred.
“It’s not a pure walk away.”
If the house sells at a loss, Western-Macfadyen said the homeowner is responsible for covering the difference — likely coming from other investments or reviewing other options such as consumer proposal or bankruptcy.
After the house is sold, the most obvious question follows: “Then what?”
Western-Macfadyen said people who sold their home have to face the housing market again — with higher interest rates, skyrocketing rental prices and the overall affordability crisis.
“There’s a belief that rates are going to fall again,” she said. “But that might not happen for years.”
“Anyone who is going to be renewing in the next year or two is definitely going to feel this pinch.”
This report by The Canadian Press was first published Oct. 16, 2023.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
