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Britain on a cliff edge: Brexit, bedlam or bust?

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If a Brexit deal falls in the British Parliament and no one is around to save it, does Theresa May survive as prime minister?

Of the glut of existential questions facing Britain at this crucial moment, that is perhaps one of the easier ones to answer. If the House of Commons votes down May’s draft Brexit deal, she could well be forced to give up her tortuous turn at the premiership and step down.

But what happens after that? And could something prevent that parliamentary vote happening in the first place?

If Britain’s immediate future were made into a book, it would break records for the possible multiple endings.

Much of the uncertainty is driven by the strong opposition to May’s “soft” EU divorce deal from all political parties, including from many members of her own Conservative Party.

The draft deal includes a withdrawal agreement that sets out the divorce terms, and also includes the outlines of an agreement on the future relationship between the E.U. and the U.K. — still to be fully fleshed out.

Critics have poked holes in several parts of it. There isn’t consensus even on all the ways this could unfold in the coming days.

Here is a look at some of the possible scenarios.

Theresa May and the EU: Full steam ahead

In May’s — and the European Union’s — version, the roadmap is clear.

With discussions on the withdrawal agreement “complete,” May says she plans to spend this week in “intense” negotiations on what the future relationship between the EU and the U.K. looks like.

Leaders of the European council are then set to meet on Sunday to vote on the entire package.

“I am confident that we can strike a deal at the council that I can take back to the House of Commons,” May said Monday.

An anti-Brexit demonstrator protests outside the Houses of Parliament in London on Monday. (Henry Nicholls/Reuters)

May has given British lawmakers an ultimatum: vote for her deal or face chaos — perhaps even a government led by Labour Party Leader Jeremy Corbyn.

There is a chance that ultimatum is enough to persuade nervous MPs to support the agreement on the table. Britain would then exit the EU on March 29, as planned.

But there are politicians of all stripes on Britain’s fractious political landscape who have other ideas — starting with members of May’s own Conservative Party.

Tories hold a no-confidence vote

To scuttle a deal they don’t like, more than a few Tories want to topple May as leader.

The Sun reports that 42 MPs have submitted letters to a party committee demanding a leadership confidence vote. The rules say 48 MPs have to send in letters before the vote is held.

So far, they are six letters shy. If they do, and they challenge May but she retains her leadership, she continues on her path as planned towards a vote in the Commons.

If she loses a leadership vote, both she and her deal are finished.

“What it will do is mean there is a delay to those negotiations and that’s a risk that Brexit gets delayed or frustrated,” she told Sky News on Sunday.

“This isn’t about me. This is about the national interest. The next seven days are critical.”

Removing May “will send shockwaves through the entire country,” says Joe Twyman, director of Deltapoll UK, which has done extensive polling on the Brexit pulse.

“The panic will inevitably set in and then the question will be: ‘What happens now, with only a few weeks remaining — can anything be done?’ “

The answer right now is unclear.

What if the House of Commons votes and rejects the deal?

If May is unchallenged by her party or if she wins a no-confidence vote, the deal is likely to go to the House of Commons for a vote as she planned.

Large elements of the Conservative Party, the Labour Party and the Democratic Unionist Party — which is propping up May’s government — are opposed to the deal as it stands. It’s highly unlikely to pass without changes.

Pro Brexit protesters hold placards trying to get media attention near Parliament in London on Nov. 16. (Alastair Grant/Associated Press)

If it’s defeated, May then has three weeks to make more changes to the deal. There are no guarantees the EU would be sympathetic to requests for changes.

If a new deal fails, May’s government could also face a no-confidence vote in Parliament, and if it loses that, it could mean a snap election.

That brings on a whole slew of other possible Brexit outcomes.

Can Brexit be delayed?

The date can be changed if both sides agree. It may be necessary especially if a general election is called — but it could be done now if the prime minister chooses.

The current date for Brexit is March 29, 2019. If a general election is called, that leaves little room for a new government to be formed and for making any tweaks to the deal necessary for it to win parliamentary and EU approval.

Brexit but with no deal

Both the EU and the U.K. agree this is the worst of all possible options because it risks chaos — so all efforts now are on trying to avoid it.

Still, both sides have put in contingency plans in the event Britain crashes out of the EU, although they have not yet triggered full-scale preparation.

The existing deal isn’t perfect, John Allen, head of the Confederation of British Industry, said Monday in a speech ahead of May’s remarks pitching it to their members.

But it prevents “the nightmare scenario of a no-deal departure, which would be a wrecking ball for our economy.”

A new referendum

A sizable number of MPs and a growing national movement have been pushing for a new vote.

They believe British people should have a final say on whether to leave the EU now that they have more complete information on what it will look like.

May has been adamant that this isn’t an option because the people have already spoken and the will of the majority must be respected.

Others have warned a new vote risks instability and a loss of faith in the democratic process.

A rain-damaged placard in favour of a second Brexit referendum features pictures of former foreign secretary Boris Johnson and former transport minister Jo Johnson in London on Nov. 12. (Henry Nicholls/Reuters)

A referendum may be an option if the country finds itself with a new government and nowhere to go in negotiations with the EU.

Some believe the developments of the past week make a referendum more plausible.

“It seems to me that it is more likely given the weakness of Theresa May’s position,” Tom Watson, deputy Labour Party leader, told The House, a political magazine.

“She leads a government without a majority. It now looks like she leads a cabinet without a majority as well.”

It’s also an option for May herself if she loses a vote in Parliament.

No Brexit

This was raised by the prime minister as a possible consequence of rejecting the existing deal, but it is unlikely unless a new referendum makes it an option.

It could be that Brexit is delayed for a long time as Britain gets its political house in order, but without a new vote the procedure that has been triggered cannot be undone.

Most likely outcome: More compromise

Britain is on a cliff’s edge and the situation defies prediction.

But could there be room for the EU and the U.K. to make slight changes to make the deal palatable to enough U.K. MPs to pass it?

May has said negotiations on the withdrawal deal are over and EU ministers insisted again Monday that the deal is set.

“There have been long months of intensive and difficult negotiations,” said Austrian EU minister Gernot Blumel.

“I believe this is the best possible compromise and I hope it will now receive consent on both sides.”

European Parliament President Antonio Tajani displays the agreement of the withdrawal of the U.K. at the European Parliament in Strasbourg, France, on Nov. 15. (Vincent Kessler/Reuters)

However, there are a number of Brexit ministers who are reportedly trying to persuade May to make tweaks to the deal to get it through Parliament.

This may be one way to guarantee the deal sails through, says Twyman.

He suspects May “will get the deal through Parliament perhaps with one or two slight amendments,” when people “realize that actually time has run out and there is no better deal on the table.”

“It’s extraordinarily difficult to know what will happen.”

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Real Estate

5 ways to reduce your mortgage amortization

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Since the pandemic hit, a lot of Canadians have been affected financially and if you’re on a mortgage, reducing your amortization period can be of great help.

A mortgage amortization period is the amount of time it would take a homeowner to completely pay off their mortgage. The amortization is typically an estimate based on what the interest rate for your current term is. Calculating your amortization is done easily using a loan amortization calculator which shows you the different payment schedules within your amortization period.

 In Canada, if you made a down payment that is less than the recommended 20 per cent of the total cost of your home, then the longest amortization period you’re allowed to have is 25 years. The mortgage amortization period not only affects the length of time it would take to completely repay the loan, but also the amount of interest paid over the lifecycle of the mortgage.

Typically, longer amortization periods involve making smaller monthly payments and having a much higher total interest cost over the duration of the mortgage. While on the other hand, shorter amortization periods entails making larger monthly payments and having lower total interest costs.

It’s the dream of every homeowner to become mortgage-free. A general rule of thumb would be to try and keep your monthly mortgage costs as low as possible—preferably below 30 per cent of your monthly income. Over time, you may become more financially stable by either getting a tax return, a bonus or an additional source of income and want to channel that towards your principal.

There are several ways to keep your monthly mortgage payments low and reduce your amortization. Here are a few ways to achieve that goal:

1. Make a larger down payment

Once you’ve decided to buy a home, always consider putting asides some significant amount of money that would act as a down payment to reduce your monthly mortgage. While the recommended amount to put aside as a down payment is 20 per cent,  if you aren’t in a hurry to purchase the property or are more financial buoyant, you can even pay more.

Essentially, the larger your down payment, the lower your mortgage would be as it means you’re borrowing less money from your lender. However, if you pay at least 20 per cent upfront, there would be no need for you to cover the additional cost of private mortgage insurance which would save you some money.

2. Make bi-weekly payments

Most homeowners make monthly payments which amount to 12 payments every year. But if your bank or lender offers the option of accelerated bi-weekly payment, you will be making an equivalent of one more payment annually. Doing this will further reduce your amortization period by allowing you to pay off your mortgage much faster.

3. Have a fixed renewal payment

It is normal for lenders to offer discounts on interest rate during your amortization period. However, as you continuously renew your mortgage at a lower rate, always keep a fixed repayment sum.

Rather than just making lower payments, you can keep your payments static, since the more money applied to your principal, the faster you can clear your mortgage.

4. Increase your payment amount

Many mortgages give homeowners the option to increase their payment amount at least once a year. Now, this is very ideal for those who have the financial capacity to do so because the extra money would be added to your principal.

Irrespective of how small the increase might be, in the long run, it would make a huge difference. For example, if your monthly mortgage payment is about $2,752 per month. It would be in your best interest to round it up to $2,800 every month. That way, you are much closer to reducing your mortgage amortization period.

5. Leverage on prepayment privileges

The ability for homeowners to make any form of prepayment solely depends on what mortgage features are provided by their lender.

With an open mortgage, you can easily make additional payments at any given time. However, if you have a closed mortgage—which makes up the larger percentage of existing mortgages—you will need to check if you have the option of prepayments which would allow you to make extra lump sum payments.

Additionally, there may also be the option to make extra lump sum payments at the end of your existing mortgage term before its time for renewal.

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Real Estate

Mortgage insurance vs. life insurance: What you need to know

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Your home is likely the biggest asset you’ll ever own. So how can you protect it in case something were to happen to you? To start, homeowners have a few options to choose from. You can either:

  • ensure you have mortgage protection with a life insurance policy from an insurance company or
  • get mortgage insurance from a bank or mortgage lender.

Mortgage insurance vs. life insurance: How do they each work?  

The first thing to know is that life insurance can be a great way to make sure you and your family have mortgage protection.

The money from a life insurance policy usually goes right into the hands of your beneficiaries – not the bank or mortgage lender. Your beneficiaries are whoever you choose to receive the benefit or money from your policy after you die.

Life insurance policies, like term life insurance, come with a death benefit. A death benefit is the amount of money given to your beneficiaries after you die. The exact amount they’ll receive depends on the policy you buy.

With term life insurance, you’re covered for a set period, such as 10, 15, 20 or 30 years. The premium – that’s the monthly or annual fee you pay for insurance – is usually low for the first term.

If you die while you’re coved by your life insurance policy, your beneficiaries will receive a tax-free death benefit. They can then use this money to help pay off the mortgage or for any other reason. So not only is your mortgage protected, but your family will also have funds to cover other expenses that they relied on you to pay.

Mortgage insurance works by paying off the outstanding principal balance of your mortgage, up to a certain amount, if you die.

With mortgage insurance, the money goes directly to the bank or lender to pay off the mortgage – and that’s it. There’s no extra money to cover other expenses, and you don’t get to leave any cash behind to your beneficiaries.

What’s the difference between mortgage insurance and life insurance?

The main difference is that mortgage insurance covers only your outstanding mortgage balance. And, that money goes directly to the bank or mortgage lender, not your beneficiary. This means that there’s no cash, payout or benefit given to your beneficiary. 

With life insurance, however, you get mortgage protection and more. Here’s how it works: every life insurance policy provides a tax-free amount of money (the death benefit) to the beneficiary. The payment can cover more than just the mortgage. The beneficiary may then use the money for any purpose. For example, apart from paying off the mortgage, they can also use the funds from the death benefit to cover:

  • any of your remaining debts,
  • the cost of child care,
  • funeral costs,
  • the cost of child care, and
  • any other living expenses. 

But before you decide between life insurance and mortgage insurance, here are some other important differences to keep in mind:

Who gets the money?

With life insurance, the money goes to whomever you name as your beneficiary.

With mortgage insurance, the money goes entirely to the bank.

Can you move your policy?

With life insurance, your policy stays with you even if you transfer your mortgage to another company. There’s no need to re-apply or prove your health is good enough to be insured.

With mortgage insurance, however, your policy doesn’t automatically move with you if you change mortgage providers. If you move your mortgage to another bank, you’ll have to prove that your health is still good.

Which offers more flexibility, life insurance or mortgage insurance?

With life insurance, your beneficiaries have the flexibility to cover the mortgage balance and more after you die. As the policy owner, you can choose how much insurance coverage you want and how long you need it. And, the coverage doesn’t decline unless you want it to.

With mortgage insurance through a bank, you don’t have the flexibility to change your coverage. In this case, you’re only protecting the outstanding balance on your mortgage.

Do you need a medical exam to qualify? 

With a term life insurance policy from Sun Life, you may have to answer some medical questions or take a medical exam before you’re approved for coverage. Once you’re approved, Sun Life won’t ask for any additional medical information later on.

With mortgage insurance, a bank or mortgage lender may ask some medical questions when you apply. However, if you make a claim after you’re approved, your bank may ask for additional medical information.* At that point, they may discover some conditions that disqualify you from receiving payment on a claim.

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Real Estate

5 common mistakes Canadians make with their mortgages

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This article was created by MoneyWise. Postmedia and MoneyWise may earn an affiliate commission through links on this page.

Since COVID-19 dragged interest rates to historic lows last year, Canadians have been diving into the real estate market with unprecedented verve.

During a time of extraordinary financial disruption, more than 551,000 properties sold last year — a new annual record, according to the Canadian Real Estate Association. Those sales provided a desperately needed dose of oxygen for the country’s gasping economy.

Given the slew of new mortgages taken out in 2020, there were bound to be slip-ups. So, MoneyWise asked four of the country’s sharpest mortgage minds to share what they feel are the mistakes Canadians most frequently make when securing a home loan.

Mistake 1: Not having your documents ready

One of your mortgage broker’s primary functions is to provide lenders with paperwork confirming your income, assets, source of down payment and overall reliability as a borrower. Without complete and accurate documentation, no reputable lender will be able to process your loan.

But “borrowers often don’t have these documents on hand,” says John Vo of Spicer Vo Mortgages in Halifax, Nova Scotia. “And even when they do provide these documents, they may not be the correct documentation required.”

Some of the most frequent mistakes Vo sees when borrowers send in their paperwork include:

  • Not including a name or other relevant details on key pieces of information.
  • Providing old bank or pay statements instead of those dated within the last 30 days.
  • Sending only a partial document package. If a lender asks for six pages to support your loan, don’t send two. If you’re asked for four months’ worth of bank statements, don’t provide only one.
  • Thinking low-quality or blurry files sent by email or text will be good enough. Lenders need to be able to read what you send them.

If you send your broker an incomplete documents package, the result is inevitable: Your mortgage application will be delayed as long as it takes for you to find the required materials, and your house shopping could be sidetracked for months.

Mistake 2: Blinded by the rate

Ask any mortgage broker and they’ll tell you that the question they’re asked most frequently is: “What’s your lowest rate?”

The interest rate you’ll pay on your mortgage is a massive consideration, so comparing the rates lenders are offering is a good habit once you’ve slipped on your house-hunter hat.

Rates have been on the rise lately given government actions to stimulate the Canadian economy. You may want to lock a low rate now, so you can hold onto it for up to 120 days.

But Chris Kolinski, broker at Saskatoon, Saskatchewan-based iSask Mortgages, says too many borrowers get obsessed with finding the lowest rate and ignore the other aspects of a mortgage that can greatly impact its overall cost.

“I always ask my clients ‘Do you want to get the best rate, or do you want to save the most money?’ because those two things are not always synonymous,” Kolinski says. “That opens a conversation about needs and wants.”

Many of the rock-bottom interest rates on offer from Canadian lenders can be hard to qualify for, come with limited features, or cost borrowers “a ton” of money if they break their terms, Kolinski points out.

Mistake 3: Not reading the fine print

Dalia Barsoum of Streetwise Mortgages in Woodbridge, Ontario, shares a universal message: “Read the fine print. Understand what you’re signing up for.”

Most borrowers don’t expect they’ll ever break their mortgages, but data collected by TD Bank shows that 7 in 10 homeowners move on from their properties earlier than they expect.

It’s critical to understand your loan’s prepayment privileges and the rules around an early departure. “If you exit the mortgage, how much are you going to pay? It’s really, really important,” Barsoum says.

She has seen too borrowers come to her hoping to refinance a mortgage they received from a private or specialty lender, only to find that what they were attempting was impossible.

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