How to Buy a Home in Alberta with Poly B Plumbing

Are you trying/ looking to buy a home in Alberta with Poly B plumbing?

We just completed financing on a purchase in Calgary with Poly-B throughout the home AND we managed to INCLUDE the cost to replace it it all into the mortgage too!!

Mortgage Mark Herman, best Calgary Alberta mortgage broker near me.

Action Steps

Please reach out if you would like to talk about:

  1. The contact for the home/fire insurance company that INCLUDES Poly B, with full replacement value of the home, as required
  2. Buying a home / getting a mortgage that needs Poly B replacement.
  3. Adding/ including the cost of a renovation into your mortgage on purchase, or on renewal, or at any time.

Summary

Homes with Poly B are priced lower accordingly due to the difficulty of getting home/fire insurance BUT there is some “good uplift to the value” if it can be fixed.

It was a rough ride but now that we have all the pieces in place, the next ones will be easier.

2 extra moving parts to a normal deal:

  1. Getting the quote for the replacement of the Poly B for the entire home, from a company that will do it.
  2. Hardest part was getting the home/fire insurance to cover 100% of the home replacement cost.

Below is the wording in the mortgage approval that came back to us on what it had to include from the mortgage lender:

  • *Copy of home insurance policy – need receipt of valid fire insurance particulars for the subject property.
  • **Coverage must include full replacement cost of Poly B for single family dwelling
  • *** Require full disclosure to insurance provider that home contains Poly B Plumbing and endorsement.

Tricks

Sometimes the insurance companies will only cover it for 30 – 60- or 90 days; until the work is completed. Then they go back to a normal policy at normal rates. If that is the case then the bank adds this clause:

  • It must be noted that Poly B will be replaced within “x” amount of days.
    • (This is usually whatever the contractors timeline to having the work done is the “x-days”)

Adding the cost of the reno into the mortgage – our specialty for the last 20 years.

We have a fantastic “Perfect Home Mortgage” that allows you to add up to $40,000 easily, or with some difficulty (more questions and paperwork) up to $100,000 in renos to the mortgage.

Essentially, 1 quote is needed for the work being done, then bank send the funds for the home, and the reno to the lawyer. When the work is 100.000% complete we order an inspection of the work, and the the lawyer pays the company for the work. this usually has to be completed in 90 days.

Below is the wording from the bank for this:

  • Please ensure the client knows there will be a holdback at the lawyers for the full cost of the Poly B improvement.
  • It is the buyer’s responsibility to make arrangements with the contractor to either pay them direct or have lawyer directed funds once completed.
  • It is a condition that an appraiser inspects and confirms the work done prior to funds being released and the cost of the inspection is paid by buyer.

 

ENDING…

Is this for you? Are you ready for the ride?

 

* Poly B, or polybutylene, is a type of plastic plumbing pipe that was commonly used in residential plumbing systems from the mid-1970s to the mid-1990s. It was initially favored for its low cost and ease of installation, but it has since been identified as a material prone to leaks and failures.

Bank of Canada lowers benchmark interest rate to 3%

The Bank of Canada opened its monetary policy playbook for 2025 with a 0.25% reduction in its overnight rate. The 6th since June of last year.

In issuing its January Monetary Policy Report, the Bank also noted that its projections are subject to “more-than-usual uncertainty” because of the rapidly evolving policy landscape, particularly the threat of trade tariffs by the new administration in the United States.

Variable rates win, but can you handle some possibly sleepless nights if Trump’s tariffs increase fixed rates as much as 3%?

(Click to see the link to the report showing this.)

If Canada does a full retaliation to Trump’s 25% tariffs our Canadian interest rates could go up by 3%; and if there is no retaliation at all, Canadian interest rates could go down by up to 3% as well!

Mortgage Mark Herman, 20+ years of mortgage experience with an MBA from a top school & Top Calgary Alberta Mortgage Broker

 

Below, we summarize the Bank’s commentary.

Canadian economic performance and housing

  • Past interest rate reductions have started to boost the Canadian economy
  • Recent strengthening in both consumption and housing activity is expected to continue
  • Business investment, however, remains weak
  • The outlook for exports is supported by new export capacity for oil and gas

Canadian inflation and outlook

  • Inflation measured by the Consumer Price Index (CPI) remains close to 2%, with some volatility due to the temporary suspension of the GST/HST on some consumer products
  • Shelter price inflation is still elevated but it is easing gradually, as expected
  • A broad range of indicators, including surveys of inflation expectations and the distribution of price changes among components of the CPI, suggest that underlying inflation is close to 2%
  • The Bank forecasts CPI inflation will be around the 2% target over the next two years

Canadian labour market

  • Canada’s labour market remains soft, with the unemployment rate at 6.7% in December
  • Job growth, however, has strengthened in recent months, after lagging growth in the labour force for more than a year
  • Wage pressures, which have proven sticky, are showing some signs of easing

Global economic performance, bond yields and the Canadian dollar

  • The global economy is expected to continue growing by about 3% over the next two years
  • Growth in the United States has been revised upward, mainly due to stronger consumption
  • Growth in the euro area is likely to be subdued as the region copes with competitiveness pressures
  • In China, recent policy actions are boosting demand and supporting near-term growth, although structural challenges remain
  • Since October, financial conditions have diverged across countries with bond yields rising in the US, supported by strong growth and more persistent inflation, and bond yields in Canada down slightly
  • The Canadian dollar has depreciated materially against the US dollar, largely reflecting trade uncertainty and broader strength in the US currency
  • Oil prices have been volatile and in recent weeks have been about $5 higher than was assumed in the Bank’s October Monetary Policy Report

Other comments

The Bank also announced its plan to complete the normalization of its balance sheet, which puts an end to quantitative tightening. The Bank said it will restart asset purchases in early March 2025, beginning gradually so that its balance sheet stabilizes and then grows modestly, in line with growth in the economy.

It also offered further rationale for today’s decisions by saying that with inflation around 2% and the economy in excess supply, the Bank’s Governing Council decided to reduce its policy rate. It also noted that cumulative reduction in the policy rate since last June is “substantial.” Lower interest rates are boosting household spending and, in the outlook it published (see below), the economy is expected to strengthen gradually and inflation to stay close to target.

Outlook

In today’s announcement, the Bank laid out its forecast for Canadian GDP growth to strengthen in 2025. However, it was quick to also point out that with slower population growth because of reduced immigration targets, both GDP and potential growth will be “more moderate” than what the Bank previously forecast in October 2024.

To put numbers on that forecast, the Bank now projects GDP will grow by 1.8% in both 2025 and 2026.  As a result, excess supply in the Canadian economy is expected to be “gradually absorbed” over the Bank’s projection horizon.

Setting aside threatened US tariffs, the Bank reasons that the upside and downside risks in its outlook are “reasonably balanced.” However, it also acknowledged that a protracted trade conflict would most likely lead to weaker GDP and higher prices in Canada and test the resilience of Canada’s economy.

The Bank ended its statement with its usual refrain: it is committed to maintaining price stability for Canadians.

2025 will bring more BoC news

The Bank is scheduled to make its second policy interest rate decision of 2025 on March 12th. I will provide an executive summary immediately following that announcement.

Typical income documentation requirements – Canadian mortgage

Below are the typical income documentation requirements for each type of income.

  • Salaried employees & commission income

    Salaried

    Salaried and hourly employees may need to supply:

    • A job letter and a recent pay stub to show consistent salary

    If your hours aren’t guaranteed or if there is a lot of overtime, you may also be asked for a 2-year income history.

    Commissioned

    Commissioned salespeople typically need the same documents as a salaried employee except they may also need to provide:

    • 2 years of T1 Generals with corresponding NOA’s – Notice of Assessments to establish a 2-year income average.

     

  • Self-employed: Incorporated & Sole Proprietor

    Incorporated

    Self-employed clients who are incorporated and can provide traditional income verification may need to supply:

    • Most current T1 General including statements of business activities. To establish a stable income, but also so a lender can see your sources of income.
    • Confirmation of no taxes owed
    • Accountant prepared company financials supported by business bank statements. To establish your company is in good financial standing and to compare the income level being pulled out of the company is sustainable.
    • Current corporate search to confirm business ownership.

     

    Sole Proprietor

    Self-employed clients who are sole proprietors and can provide traditional income verification may need to supply:

    • Most current T1 General including statements of business activities. To establish a stable income, and so a lender can see their sources of income.
    • Confirmation no taxes owed
    • One of the following: Business license/registration, trade license, or GST registrations/returns to prove business ownership/partnership

     

    Alternative provable income & other documentation

    Alternative provable income verification

    This is a proprietary, specialized approach using gross-ups and add-backs available.

    Alternative verification of income can be provided via the following documents:

    Sole proprietor/partnership

    • Most current T1 General
    • Confirmation no taxes owed
    • Recent financial statements or statement of business activities to indicate a level of income
    • One of the following: business license/registration, trade license, or GST registrations/returns to prove business ownership/partnership

     

    Incorporated or limited company

    • Most current accountant prepared financials or corporate T2s
    • Most current T1 General and confirmation no taxes owed
    • Corporate search/articles of incorporation – for business ownership
    • Six months of bank statements

    Gross-ups and add-backs approach is considered in this instance.

    Other documentation

    There are other income sources that can help your client’s application get approved.

        • Canada Child Benefit (CCB)
        • Alimony/child support
        • Government and/or private pension
        • Rental property income
        • EI benefit for maternity leave

     

    Buying a Rental property — this is the income documentation needed.

    You can verify rental income via the following:

    • Full T1 Generals showing net rental income
    • If not reported in T1 General, market rent from an approved appraiser

    Verified Income

    • A job letter and recent paystub. If the client’s hours aren’t guaranteed, underwriter may also ask for a 2-year income history.

    Alternative Proveable Income

    Proprietary, specialized approach using gross-ups and add-backs.

    Sole Proprieter

    • Most current T1 General
    • Confirmation no taxes owed
    • Recent financial statements or statement of business activities supported by business bank statements
    • One of the following: business license/registration, trade license or GST registration/returns

    Incorporated or limited company

    • Most current accountant prepared financials or corporate T2s
    • Most current T1 Generals and confirmation no taxes owed
    • Corporate search/articles of incorporation
    • Six months bank statements

Divorce & Mortgage Buy-Out Details, Canada, May 2024

Important data for separating / divorcing  partners, this may help with “Buying the ex-spouse out” of a divorce, when some debts need to be rolled in.

 

The way most lawyers and Big-6 banks do it:

as a refinance, max loan is 80% of the appraised value of the home,

and you get refi rates – the highest – today:

  • 3 year fixed 5.76%, 5 year fixed 5.59%

and usually NO debts can be rolled into the mortgage past that 80% of the home value.

 

with OUR WAY/ Broker way…

we do it as “a purchase after marital breakdown” which allows

max loan of 95% LTV (of the home value) – which usually makes ALL THE DIFFERENCE in a buyout situation.

  • BEST RATES again: 3 year fixed 5.39%, 5 year fixed 4.99%

and usually Most/ All/ some debts can be rolled into the mortgage – at no extra cost, depending on your lending ratios.

 


 

Data from a similar file –

As long as the deal IS insurable (meaning it conforms to CMHC rules and guidelines) to get that lower rate – actually 0.6% LOWER as of today – then we need an offer to purchase too. Most lawyers do not want also write an “offer to purchase,”

If the Big-6 bank is doing it as a conventional refinance then an offer to purchase is not needed.

Banks don’t have substantially different rates for insurable and conventional like we do. (o.4 to o.9% rate difference makes a huge difference.)

 

So yes, we can get a separation done without an Offer to Purchase as long as at least 20% of the value stays in the home and we use refinance rates at 0.6% higher than broker best rates today.

Considering customers will leave us for 0.05% and this is 0.6% – that is >10x multiple of what customers consider “worth leaving us for” this is an important way to get divorce deals to work better for everyone.

Mortgage Mark Herman, top/ best Calgary Alberta Mortgage Broker

Canadian Residential Mortgage Market: Inflation & Interest Rates: the Lead Characters for 2023

Summary:

  1. The Bank of Canada (BOC) increased interest rates 7 times in 2022. Exactly as expected 16 months ago.
  2. Inflation is at least 5.7%; and it needs to get down to 3%
  3. The BoC would rather over-tighten than under-tighten
  4. Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle

These 4 painful data points mean Prime will increase from 6.45% to 6.70% on Jan 25th.

We now expect there to be at least 1 or 2 more o.25% increases to Prime before it is expected to hold for the rest of 2023, and then begin to decrease in 2024.

Mortgage Mark Herman, Top Calgary Alberta Mortgage Broker

DATA

A lot of the recent talk in financial and real estate circles has been centering on the possibility of a pause in the Bank of Canada’s aggressive interest rate increases.  Some speculate that could happen at the next rate setting, later this month, on January 25th.

The Bank raised rates 7 times last year in an effort to rein-in galloping inflation.  It does seem to be working, but there are some stubborn sticking points.

Headline inflation, known as the Consumer Price Index (CPI), has dropped.  It was 8.1% in July and drifted down to 6.8% in November.  However, the drop from October to November was a mere one-tenth of one percentage point and the Bank’s target rate remains significantly below that, at 2.0%.

As well, the BoC’s preferred inflation measure, Core Inflation (which strips out volatile components like food and fuel), actually increased.  A simple averaging of the three components that the Bank uses to measure Core Inflation came in at nearly 5.7% in November, up from 5.3% in October.

Other factors that figure into the Bank’s plans include Gross Domestic Product and unemployment.  Canada’s GDP continues to grow, albeit modestly, despite rising interest rates.  It increased by 0.1%, month-over-month in November.  Unemployment dipped 0.1% to 5.0% in December.  Both of these tend to fuel higher wages which are a key driver of inflation.

The Bank of Canada, itself, remains firmly dedicated to battling back inflation.  Governor Tiff Macklem has said he would rather over-tighten than under-tighten and run the risk of having high inflation linger and become entrenched.

The U.S. central bank has made it clear it plans more rate hikes.  Given the integration of the Canadian and American economies, the Bank of Canada does have to pay attention to what its American counterpart does.

The BoC will have new economic data by the time it makes its January 25th announcement.  The December numbers will provide a fresh look at how well the inflation fight is going.

Normally it takes 18 to 24 months for interest rate increases to work their way into the economy and we are only about 10 months into this tightening cycle.  It is reasonable to expect another 25 basis-point increase on the 25th.  Given the Bank’s apparent success so far it also seems reasonable to expect a pause sometime after that.

Looking ahead to a year from now some forecasters say we might start to hear talk of interest rate cuts, which would be welcome news.  Cuts would allow the BoC to move toward its, long stated, goal of normalizing rates back into the neutral range of 2.5% to 3.5%.  The Bank of Canada, and central banks around the world, have been trying to do that for more than a decade – since the ’08 – ’09 financial collapse.

CIBC mortgage penalties: “UNFAIR”

We always focus on the Terms and Conditions of the mortgage. Most people have no idea what the bank is talking about when they sign the mortgage. We DO as we do this every day.

Here is a link from a Canadian Law website about a CLASS ACTION LAW SUIT against CIBC for calculating their payout penalties incorrectly: https://canliiconnects.org/en/commentaries/66074

My favorite part of the article is here:

“difficulty of enforcing fairness to consumers … there is a serious imbalance of bargaining power between the oligopolistic banks and individual borrowers. Legislative action to provide better consumer protection would be desirable.”

MORE

And here is a link to a guy that was almost our customer but stayed at his bank because they matched our broker rate. And now he is paying a $35,000.00 payout penalty because of it.

https://wordpress.com/block-editor/post/blog.markherman.ca/1447

July 2017, when Canadian interest rates are expected to increase

This is just in from TD Economics, a .75% Prime rate increase is expected to be phased in – probably in 1/4% increases – starting in July 2017 and being fully in by December.

The rates they show below are for corporate rates, consumer rates are a bit higher.

Consumer prime is at 2.7% today so that would be the same increase of .75% taking it from 2.70 to 3.45% by the end of 2017.

OBSERVATION
• Our current forecast is for the Bank of Canada to begin raising interest rates in July of 2017, increasing the policy rate to 1.25% (from its current level of 0.5%) by the end of 2017. It is possible that with additional infrastructure-led growth the Bank may choose to begin hiking rates earlier and perhaps more aggressively.

All this and more from Calgary, Alberta top mortgage broker, Mark Herman.

Numbers on why this recession is not that bad

All recessions are tough – but the sky is not falling. Below is one of the better articles we have seen on why this one will not be that bad.

Mortgage Mark Herman,

Calgary Alberta mortgage broker for home purchase and mortgage renewal.


Only two recessions in Calgary since 1987 and both more severe than 2015 forecast

http://calgaryherald.com/business/energy/only-two-recessions-in-calgary-since-1987-and-both-more-severe-than-2015-forecast

How the US may start to raise interest rates

This bite of an article is as interesting and as funny as US interest rate increase articles can be.

See why it is better to have your mortgage broker follow this stuff for you then to read it yourself!

Mark Herman, Top Calgary Alberta mortgage broker for home purchases and mortgage renewals


Bill Gross, the former Pimco “bond king” … believes the Federal Reserve could – and should – raise interest rates in September and then hold off on another rate hike for at least six months, a strategy he calls “one and done.”

The strategy adheres in principle if not specifics to numerous messages conveyed recently by influential Fed policy makers, including Fed Chair Janet Yellen, who have said rates will rise “gradually” after the initial rate hike is announced.

“The Fed … seems intent on raising (short-term interest rates) if only to prove that they can begin the journey to ‘normalization,’” Gross wrote in his September Investment Outlook. “They should, but their September meeting language must be so careful, that ‘one and done’ represents an increasing possibility – at least for the next six months.”

Gross, who has been calling for higher interest rates for months, suggested the Fed may have missed its opportunity to raise rates earlier this year when markets were rising steadily and the U.S. economy seemed to be humming along nicely.

In recent weeks, global turmoil has rocked U.S. markets, leading to volatility that pushed all three U.S. stock markets into correction territory last week. A strong bounce-back this week has raised optimism that the downturn was temporary but also led to concerns that markets could be in for a volatile run.

Any mention now by the Fed of returning interest rates to a more normal level of say 2% “cannot be approached without spooking markets further and creating self-inflicted ‘financial instability,’” Gross wrote.

from Fox Business – I know it’s Fox but it’s true: http://www.foxbusiness.com/economy-policy/2015/09/03/bill-gross-fed-likely-eyeing-one-and-done-hike-strategy/

How the new math on LOC’s is calculated.

Below are how the banks now have to take your debts into account for doing the qualifying math for your purchase. A bit complicated and not intuitive at all!

Mark Herman, Top Calgary, Alberta mortgage broker for renewals.

Secured LOC – Calculate the monthly payment on the balance amortized over 25 years using the contract rate. **Must have the statement showing the contract rate otherwise the current BoC rate will be used.

Unsecured LOC – or a Personal Line of Credit = 3% of the outstanding balance a month for the payment – so 20,000 owing @ 3% ends up as a $600 a monthy payment. YES, it is unfair.

Student Loans –

  1. If it’s a true student loan it should be reporting as an installment with CDA. If there is no payment, the bank will use 1%.
  2. If the debt is reporting to the bureau as a revolving LOC, and the client is paying interest only payments, the bank must use 3%;
  3. if we can  provide proof that the LOC has a fixed payment and the loc has been re-written as a loan and is no longer revolving the bank can use this payment vs. 3%. In some cases, this may already be the case but it still reporting to the bureau as revolving.