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1/3 of Canadians live paycheque to paycheque, survey suggests – Consult with a Vancouver Mortgage Broker

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“They felt that their incomes were not keeping pace with the cost of living,” said Rock Lefebvre, co-author of the study, which surveyed more than 1,800 people.

Almost a third of Canadian households report never or almost never having any money left to save after paying their bills, according to a new study issued Wednesday.

Households that reported no wealth accumulation tended to be working, middle-aged people — although of varying income levels, says the study by the Certified General Accountants Association of Canada.

Consumer debt

Consumer consumption, such the use of home equity lines of credit, were among things hurting the accumulation of wealth, Lefebvre said.

“This consumption pattern that has emerged over the last decade . . . is playing havoc with people’s ability to save,” he said.

“Because of the low interest rates coupled with the behaviour of borrowing, people are possibly buying homes and cars that are a little more expensive than what they would typically be able to afford.”

Meanwhile, two-thirds of households with no wealth accumulation — meaning the value of their assets was less or about the same as the amount of their household debt — didn’t expect to get any further ahead in the next three years, the study said.

However, about 70 per cent of Canadian households reported they had accumulated some wealth.

But Lefebvre said the result may have been more of a “feeling” than an objective assessment of wealth.

“They could be saving $100 or they could be saving $100,000,” said Lefebvre, vice-president of research and standards.

Lefebvre said one of the main ways for most Canadians to accumulate wealth is to pay off a mortgage as quickly as possible.

But the survey found that only 10 per cent of households had refinanced a mortgage to pay it off sooner.

“This is a beautiful time to get ahead with these low interest rates. (But ) people just seem to be living the life rather than make the sacrifice to get rid of this debt while it’s low interest and come out of it on the bright side.”

Fewer savers

Meanwhile, Canada’s household savings rate plummeted to 3.8 per cent at the end of 2012 from its peak of about 20 per cent in the early 1980s, the study said.

The wealth of an average Canadian adult increased by $6,600 in the four years up to 2012, or 2.7 per cent higher when compared to their net worth at the beginning of 2008.

The report also found that only three in 10 households surveyed believed the accumulation of wealth was a very important personal goal, while half saw it only as a somewhat important pursuit.

The online survey was conducted last Sept. 14-21 by Ipsos Reid with 1,805 Canadians aged 25 and older.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Mortgage Buying Rules for the Self-Employed and Entrepreneurs

First Time Buyers

Latest News

Refinancing

Self Employed

Mortgage Buying Rules for the Self-Employed and Entrepreneurs

Did you know that over 16% of all working Canadians are self-employed or have entrepreneurial styled businesses?

These hardworking folk also need real estate financing to buy a home but the new B20 (Underwriting Guidelines for Residential Mortgages) have made this more of a challenge.

Knowing what to expect and getting prepared is your best strategy to overcome any hurdles that have to be tackled beforehand.

What’s Changed for the Self-Employed and Entrepreneurs?

The challenge with the self-employed is that that they don’t have a traditional salary. They use instead what is called their “stated income” which is the amount the borrower claims they have earned as income. Lenders would generally assess the ability of the self-employed to repay the loan based upon:

• Credit rating
• Size of the down-payment
• Debt repayment history
• Savings
• The cash flow of the business

The new regulations which came into effect have resulted in traditional lenders such as banks taking a more cautious approach for mortgage applications. Lenders are performing more due diligence to examine the income statements and tax returns of self employed applicants.

What Do Mortgage Lenders Want from the Self-Employed and Entrepreneurs?

Many lenders will examine your income as it relates to the average income earned for your particular industry or field. They will also examine your income relative to the type of business you run and to the amount of time you have been operating your business.

Another key area that is receiving closer scrutiny by lenders is the amount that is being written off of your income tax submissions. The purpose is to get a clearer understanding of your stated income versus how much you are reporting as income to Revenue Canada.

Mortgage Application Preparation Tips for the Self-Employed and Entrepreneurs

Although getting approved for a mortgage is more of a challenge for the self-employed and entrepreneurs, you can make the application much less painless by preparing your paperwork beforehand.

Some tips to keep in mind include:

Pay down your Debt

One of the key factors of getting a mortgage approved is known as “debt-service ratio.” Credit cards may be convenient, but too much credit dependence is a red flag for lenders. This refers to how much of your income is used to cover your debts including what you would pay for the mortgage, heating and property taxes.

Most lenders don’t want to see it much greater than around 32%. Lenders will check your credit history and credit rating so you should do this in advance to understand where you stand. This applies to both your personal credit and your business credit history and standing.

Financial Statements

Most lenders would like to see 3 years worth of your financial statements. This especially includes your income tax returns as lenders want to know how much tax you owe and how much you’ve written off on your returns.

You will also need to gather up your business license, articles of incorporation and your business financial statements. To show that you have a steady source of income, your client contracts and work orders will also demonstrate proof of your income and cash flow.

You should also be prepared to show that your GST/HST payments are all current as well.

The more information the lender knows about your business assets, the more comfortable they will be in approving your application.

How to Improve your Chances of Getting Approved

Several tactics you can use to bolster the strength of your mortgage application is to consider the following approaches:

• Increase the amount of your down payment
• Have an available co-signer

Bottom Line

Lenders feel they are taking more of a risk when it comes to the self-employed and entrepreneurs. You may be eligible for low rates but should be prepared to pay more for higher rates. Also, don’t forget about mortgage insurance as well.

When it comes to real estate financing you can increase your chances of success by working with a Vancouver mortgage broker like me. We can help you prepare the paperwork and have access to broad range of lenders to increase your chances for approval.