Blog Post

BC’s Isolationist Tax

Luisa Hough • July 29, 2016

The BC government’s “blame non-resident homeowners” campaign is now officially out of control.

Provincial leaders have just molested international homebuyers with a savage 15% land transfer tax. Worse, and incomprehensibly, they’ve applied it retroactively and with no compunction to purchasers already locked into contracts, people with no other way out besides losing their deposit. This is how the premier wants B.C. to be judged by those outside our borders.

Of course, there are other countries with protectionist real estate practices. But there are also other countries that levy 80% marginal tax rates and jail women because they forgot their burkas. Taking cues from other nations is not, by default, sound.

Given the knee-jerk nature of this tax (the market got all of eight days’ notice to prepare for it), one wonders if B.C.’s premier ever pondered its hypocrisy.

Yesterday I asked a personal finance “guru,” who shall remain nameless thanks to her vulgar response, whether the U.S. should retaliate and force onerous taxes on Canadian snowbirds. It’s a legitimate question.

Those who exclaim, “Yes! Protect hapless local Americans from marauding Canadian purchasers,” should think about that response for a moment. For if Canada snubs international buyers, we can’t argue against the same treatment for Canadians abroad. We have no basis to complain if other countries erect tax fences to shut our people out.

As important as it may be to stabilize home values, before exhausting other options and branding ourselves real estate protectionists, important questions should be considered:

How would we feel if the Americans slapped a demoralizing new retroactive tax on the half-million+ Canadians who own down south, and the millions more that will someday buy there?
How just is it for officials in Florida or Arizona or California to disadvantage and displace Canadians so locals enjoy cheaper homes?
How wise is it to discourage global investment in a country like ours, with its insufficiently diversified economy, and whose outlook deteriorates every time commodity prices drop 10%? (Note that many international investors and their executives, who invest and work in Canada, need second homes here.)
How much should pandering politicians put equity at risk for the 70% of Canadians who own homes, and the one in four seniors who depend primarily on home equity for survival?
Given the myriad of supply/demand factors driving home prices, to what extent does legal foreign buying (which likely accounts for just 1 out of 20 purchases long-term, most being high-end properties) really push up prices for working-class Vancouverites?

A key word there is “legal.” Fraudsters, money launderers and other criminal buyers must be chased down, fined, spend time in a 6’x9′ box and/or have their properties confiscated.

By contrast, overseas buyers who respect our rules and buy a second home here should be welcomed with wide open arms, for their diversity, capital and contributions can be a net benefit to this great country. In so many cases they invest here, spend here, help fund the educational system here and support Canadian jobs here (and let’s not let student mansion owners distract from that message).

In cases where non-residents leave “affordable housing” vacant and don’t invest in and foster employment, perhaps that specific practice should be discouraged. But how short-sighted it is to lump all non-nationals into that same boat.

At first blush, most people support higher taxes on Chinese, Korean, U.S., UK, Indian, Taiwanese and other non-Canadian buyers, and you can understand why. People are frustrated. They love Vancouver and they want a comfortable, affordable place to live in or near the city.

Heck, my wife and I lived in Vancouver for five years and we often wished we had enough money to buy a nice house near our workplace. But clearly, owning in a beautiful high-demand area in one of the world’s greatest cities was not our God-given right. Nor is it anyone’s.

Sometimes people who can’t afford something have to make hard decisions, like commuting an extra 45 minutes, changing jobs, living in a condo, migrating or otherwise improving their lot in life.

Without fail, however, both people and economies ultimately adapt to affordability challenges. But it takes forethought and time, and politicians focused on upcoming elections don’t feel they have that time. So we get short-term mindsets creating long-term policy—a bona fide travesty.

B.C.’s new land tax reeks of hypocrisy. If this country’s leaders want to be open members of the global community, and benefit from international trade, and protect our ownership privileges abroad, and attract foreign investment, we simply cannot send a message to non-Canadians that they’re less valuable to our society than we are.

This article was written by Rob McLister from Canadian Mortgage Trends, and was originally published here on July 28th, 2016.

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What is a Second Mortgage?

By Luisa Hough • February 19, 2025

If you're not all that familiar with the ins and outs of mortgage financing, the term "second mortgage" might cause a bit of confusion. Many people incorrectly assume that a second mortgage is arranged when your first term is up for renewal or when you sell your first home. They think that the next mortgage you get is your "second mortgage." This is not the case. A second mortgage is an additional mortgage on a single property, not the second mortgage you get in your lifetime. When you borrow money to buy a house, your lawyer or notary will register your mortgage on the property title in what is called first position. This means that your mortgage lender has the first claim against the sale proceeds if you sell your property. If you happen to default on your mortgage, this is the security the lender has in repossessing your property. A second mortgage falls in behind the first mortgage on your property title. When you sell your property, the lawyers will use the sale proceeds to pay off your mortgages in sequence, the first position mortgage is paid out first, and the second mortgage is paid out second. After both mortgages are paid off completely, you get the remaining equity. When you secure a second mortgage, you continue making payments on your first mortgage as per your mortgage agreement. You must also then fulfill the terms of the second mortgage. So why would you want a second mortgage? Well, a second mortgage comes in handy when you're looking to access some of your home equity, but you either have excellent terms on your first mortgage that you don't want to break, or you’d incur a huge penalty to break your first mortgage. Instead of refinancing the first mortgage, a second mortgage can be a better option. A second mortgage is often used as a short-term debt consolidation tool to help provide you with better cash flow. If you’ve accumulated a considerable amount of high-interest unsecured debt, and you have equity in your home, you can secure a second mortgage to lower your overall cost of borrowing. If you'd like to know more about how a second mortgage works, or if you'd like to discuss anything related to mortgage financing, please connect anytime!

Unsure About the Housing Market? Let's Talk.

By Luisa Hough • February 12, 2025

If you’ve been thinking about buying a property, whether that be your first home, next home, forever home, or a home to retire into, the current state of the Canadian economy might have you wondering: Is this really the right time to make a move? There is certainly no shortage of doom and gloom in the news out there. The truth is, that’s a tough question to answer in the best of times. It’s nearly impossible to know for sure what’s going to happen next with the housing market in Canada. It could heat up or it could cool down. So here’s some advice. Instead of basing your buying decision entirely on external market factors, like the economy or housing market, consider looking for the answers internally. When you stop looking at the market to determine your timing to buy a home, and instead examine the personal reasons you have for wanting to buy a home, the picture can become much clearer. Here are some questions to consider. Although they are subjective, they will help bring you clarity. Ask yourself: Does buying a property now put me in a better financial position? Do I make enough money now to afford a new home and maintain my lifestyle? Do I feel confident with my current employment status? Have I saved enough money for a down payment? How long do I plan on living in this new home? Is there any scenario where I might have to sell quickly and potentially lose money? Does buying a property now move me closer to my life goals? Do I really want to buy now or am I just feeling a lot of pressure to just buy something? Am I holding back because I'm scared property prices might drop soon? There’s no doubt that buying a home can be stressful, but it doesn’t have to be. Having a plan in place is the best course of action to help you make good decisions and alleviate that stress. If you’d like to have a conversation to discuss your plans, ask some questions, and map out what buying a home looks like for you, we can address many of the unknowns together. The best place to start is to work through a mortgage pre-approval. There is no cost for this service, you’ll learn exactly what you can qualify for, and it will provide a lot of clarity about your situation. You might decide that it’s best to wait before buying, and that’s just fine. You might find that now’s a perfect time for you to buy! If you'd like to talk, please connect anytime. You’re not in this alone. We can work through everything together.

Improving Your Credit Score

By Luisa Hough • February 5, 2025

Your credit score and how you manage credit are huge factors in qualifying for a mortgage. If you want the best interest rates and mortgage products available on the market, you want a high credit score. Here are a few things you can do to improve your credit score. Make all your payments on time. Making your payments on time is so important; in fact, it might just be the most important factor in managing your credit. Here's how credit works. When you borrow money from a lender, you agree to make payments with interest on a set schedule until the debt is repaid in full. Good credit is established and maintained by making your payments on time. However, If you break the terms of that schedule by not making your payments, the lender will report the missed payments to the credit reporting agencies, and your credit score suffers. It’s that simple. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the lender will most likely send your debt to be recovered by a collection agency. Collections stay on your report for a long time. So the moment you realize you have missed a payment or as soon as you have the money for it, make the payment. If something prevents you from making a payment, consider contacting the lender directly to let them know what happened and work out an arrangement to make the payment as soon as possible. It's good to note that lenders only report late payments after a payment is 30 days late. If you miss a payment on a Friday and catch it the following Monday, you won't have anything to worry about - except maybe an NSF fee. Now, just because payments don't report until being 30 days late, don’t get comfortable with making late payments; the best advice is to pay your debts on time, as agreed. Stop acquiring new credit. If you already have at least two different trade lines, you shouldn’t acquire new trade lines just for the sake of it. Of course, if you need to borrow money, like to purchase a vehicle to commute to work, go ahead and apply. Just remember: having more credit available to you doesn’t really help your credit score. In fact, each time a potential lender looks at your credit report, it may lower your credit score a little bit. With that said, if you already have two different trade lines and your lender offers you an increase on your limit, take it. A credit card with a $10k limit is better for you than a credit card with a $2k limit because how much you spend compared to your credit card's limit impacts your credit score. This leads us directly into the next point. Keep a reasonable balance. The more credit you use compared to the limit you have, the less creditworthy you appear. It’s better to carry a reasonable balance (15-25% of the card’s limit) and pay it off each month than to max out your credit cards and just make the minimum payments. If you have to spend more than 25% of your card limit, try to remain under 60%. That shows good utilization. Paying down your credit cards every month and carrying a zero balance will undoubtedly improve your credit score. Check your credit report regularly. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time. Lenders misreport information, or people with the same names get merged reports. Any number of things could be inaccurate without you knowing about it. You might even have become a victim of fraud or identity theft. By checking your credit regularly, you can stay on top of everything and correct any errors promptly. Both of Canada's credit reporting agencies, Equifax and Transunion, have programs that, for a small fee, will monitor and update you on any changes made to your credit report. Handle collections immediately. When checking your credit report for accuracy, if you happen to find a collection has been registered against you, deal with it immediately. It could be a closed-out cell phone account with a small balance owing, a final utility bill that got missed, unpaid parking tickets, wage garnishments, or spousal support payments. Regardless of what it is, it will harm your credit score if it's registered on your credit report. The best plan of action is to handle any collections or delinquent accounts as soon as possible. Use your credit card. If you have acquired credit cards to build your credit score, but you rarely use them, there is a chance the lender might not report your usage, and that won’t help your credit score. You'll want to make sure that you use your credit at least once every three months. Many people find success using their credit cards for gas and groceries and paying off the outstanding balance each month. There you have it. Regardless of what your credit looks like now, you will continue to increase your credit score if you follow the points outlined above. If you're looking to buy a property and you’d like to work through your credit report in detail, let’s put together a plan to get you qualified for a mortgage. Get in touch anytime; it would be a pleasure to work with you!