Mortgages Renewals in 2024 and Beyond with Ron Butler | E115

Financial Planning For Canadian Business Owners

Jason talks to Ron Butler, the founder of Butler Mortgages and a prominent figure in the Canadian mortgage space. Ron, known for his insightful Twitter presence, discusses the impending "perfect storm" of mortgage renewals and the current interest rate landscape in Canada.

Episode Highlights:

• 00:39: Ron describes himself as an experienced mortgage broker with 29 years in the business, highlighting substantial mortgage volume.
• 05:10: Ron explains the impact of COVID, quantitative easing, and selling fixed-rate mortgages at 1.49%. He also talks about the upward trend in rates in 2019, coinciding with economic buoyancy and surging house prices.
• 09:02: Ron addresses the surge in mortgage debt during COVID, particularly with variable-rate mortgages starting at 1.45% and now at 6.2%. He describes the genuine consumer pain experienced by those facing mortgage payment increases, especially those dealing with income changes or additional financial commitments.
• 15:19: Ron mentions the impact of high immigration on the demand for housing and the challenges in obtaining permits for new builds. talks about the significant governmental costs associated with building houses today compared to 25-30 years ago.
• 17:30: Jason asks Ron about what people should be thinking about in preparation for upcoming renewals, 12-24 months out.
• 18:48: Ron advises those with variable rates experiencing negative amortization to make voluntary payments and lump-sum payments to avoid growing mortgages.
• 20:50: Ron highlights that despite talk about longer mortgage terms, the utilization of 10-year terms has never exceeded 3% in Canada, indicating the strong desire for low-interest rates.
• 21:53: Jason emphasizes the strain people put on themselves to negotiate for minimal interest rate improvements, showcasing the demonstrated preference for lower rates.
• 23:26: Ron explains that self-employed individuals often aim to minimize personal tax, resulting in reduced income visibility for mortgage applications. He mentions the government's emphasis on net taxable income as the primary metric for mortgage qualification, regardless of assets or retained earnings.
• 25:28: Ron and Jason discuss the tendency of business owners to prioritize accountants who reduce personal taxation, even if it comes at the cost of Canada Pension Plan contributions.
• 26:16: Jason acknowledges the complexity of tax planning and the compromises involved, such as lower reported income affecting personal borrowing capacity.
• 27:35: Ron encourages listeners to shop around for mortgage renewals, emphasizing the potential savings even if it's only a quarter percent, and cautions against giving the bank more money without reason.

Key Points:

1. Ultra-low interest rates led to a surge in mortgage debt, posing challenges for renewals in 2024 and beyond.
2. Business owners may face reduced borrowing capacity at mortgage renewals due to lower reported income for tax planning. Plan wisely.
3. Amid changing interest rates, shopping for mortgage renewals is crucial. Don't settle – explore options and save money in the long run.

Tweetable Quotes:

• Recognize that interest rates are dynamic, and lower rates might be on the horizon by 2025. Understand the potential impact on mortgage renewals.
• Don't settle for the status quo. Take the time to explore different mortgage options and lenders during renewal periods, even small interest rate differences can result in significant savings.
• If your mortgage is increasing, take proactive steps to avoid paying interest on interest. Consider prepayment and increased payments to maintain control over your financial situation during renewals.

Resources Mentioned:

• https://www.butlermortgage.ca/

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