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Zero-emission rules mean fewer electric car choices for most Canadians: Don Pittis

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Canadians trying to buy the electric vehicle of their choice in many parts of the country are finding it almost impossible — and a provincial strategy intended to get more green cars onto dealers’ lots may actually make the problem worse.

The strategy — called a zero-emission vehicle standard, or “ZEV mandate” — has already been imposed in Quebec.

There are now widespread rumours that British Columbia could announce a similar scheme within days as part of a promise to help balance out the greenhouse gas deficit produced by the province’s planned $40-billion liquefied natural gas plant in Kitimat.

That sucking sound

Unless the federal government moves ahead with a promised national ZEV mandate of its own quickly — something critics think is unlikely — green car advocates fear the provincial schemes will merely suck electric vehicles out of other parts of the Canadian market in order to beef up sales in B.C. and Quebec — without increasing the total national supply.

That doesn’t mean ZEV mandates aren’t potent policy tools within the jurisdictions that impose them, says Dan Woynillowicz, policy director with Clean Energy Canada, a think-tank at Simon Fraser University.

“California has been the pioneer with a zero-emission vehicle mandate,” said Woynillowicz. “It’s been very successful, and as a result more than a dozen other states, plus Quebec here in Canada, have adopted similar policies.”

California has been a leader in the ZEV market, and you can find electric cars available there that are never even seen in Canada. (Robert Galbraith/Reuters)

Meant to influence the market without distorting it too much, ZEV rules differ from jurisdiction to jurisdiction. But in principle, ZEV standards have a single intent.

“The standard seeks to spur the supply of zero-emission vehicles (ZEVs) and low-emission vehicles (LEVs) to afford … consumers access to greater numbers and a broader range of plug-in motor vehicles, which are the cleanest and the most technically advanced on the market,” reads a Quebec government website.

Despite a handy explanatory leaflet, ordinary car-buyers may find the complexities of the rules heavy. 

But in essence, ZEV systems are put in place as an attempt to counterbalance market forces that have made selling internal combustion engine (ICE) cars more profitable for automakers than selling electrics. ​

Please don’t buy our cars

The late Fiat Chrysler boss Sergio Marchionne once notoriously asked customers not to buy the company’s battery-powered Fiat 500e because the business lost money on every one sold, although he reversed that view shortly before his death.

While electrics are cheaper for consumers over the life of the car, automakers have been able to make more money selling cars manufactured in old plants using established technology. Dealer repair shops make more from combustion-engine vehicle maintenance since, by comparison, electrics have so few moving parts.

A Nissan Leaf and a Chevy Bolt are shown at Toronto’s Electric Vehicle Discovery Centre, run by non-profit Plug’n Drive. A national ZEV program could attract more electric cars to Canada. (Don Pittis/CBC)

What ZEV mandates do is force carmakers to increase the percentage of ZEVs and LEVs sold year after year. And if they fail to meet those rising quotas, it forces them to pay what the rules describe as a “royalty.”

That means the most profitable thing car companies can do in the short term is to hold steady the total supply of Canadian electric cars — and merely sell more of them in ZEV jurisdictions. In other words, in Quebec and in B.C.

“Most electric vehicles that are earmarked for the Canadian market are likely be going to be going to those two provinces,” said Woynillowicz.

The federal government has considered a national plan, with a Transport Canada announcement last year going so far as to promise to develop a Canada-wide strategy to increase the number of ZEVs on Canadian roads “by 2018.”

But according to insiders, an advisory group that included carmakers and environmentalists became deadlocked and the group’s report has not been released.

Global shortage

Industry representatives make it clear they don’t like pressure from the sudden imposition of ZEV rules.

David Adams, the president of the industry group Global Automakers of Canada, called the possibility of a ZEV scheme in B.C. “disconcerting,” partly because there just aren’t enough cars to go around.

“The supply issue is a global issue that is going to be with us for two or three more years,” he said in a recent interview.

Ontario electric car expert Cara Clairman has a certain sympathy for an industry that has been surprised and overwhelmed by the demand for battery-powered vehicles.

“To be honest, it’s just so much cheaper,” said Clairman, the CEO of Plug’n Drive, a non-profit organization sponsored by the electric and automotive industries that promotes electric cars. 

The Toronto resident has driven her own Chevy Bolt to Montreal, Ottawa and Windsor.

Mitsubishi brought in plenty of its best-selling Outlander PHEV SUV. But other companies may need a nudge from a ZEV program to provide enough electric cars. (Mitsubishi Canada)

Clairman said she has noticed more cars being shipped to Quebec since the province adopted of a ZEV mandate, but she also notes that places like California have electric cars she’s never seen available in Canada.

“Those jurisdictions with a ZEV mandate tend to get the supply when there’s a limited number,” she said.

People shopping for an electric outside Quebec have found some cars — including the Volkswagen e-Golf and any of the Ford electrics — hard to come by. But some car companies — including Mitsubishi, whose Outlander plug-in-hybrid is billed as the world’s best-selling electric SUV — planned ahead and currently has a plentiful supply on dealer lots.

Companies that lead the way on producing enough electrics will win in the long run, Clairman said. But for others, it’s possible the ZEV mandate is necessary to twist a few arms.

“I think, for quite awhile, most of the automakers didn’t want it because they said, ‘We’ll make sure the supply is there.’ But if the supply isn’t there, I think there becomes more and more public pressure to have a ZEV mandate.”

Follow Don on Twitter @don_pittis


The ‘ZEV mandate’ versus the ‘CAFE standard’

Those with a passing familiarity with the rules to make cars less polluting may be confused between the ZEV mandate and the existing CAFE standard, which stands for “corporate average fuel economy,” that U.S. President Donald Trump has moved to abolish. While the two sets of rules overlap in encouraging greater fuel efficiency, some experts, including those advising the State of California, say the ZEV does not replace the need for the CAFE. While the ZEV mandate gradually increases the percentage of zero and low-emission cars on the road, the CAFE standard requires greater efficiency in the entire fleet. “When we talk about a zero-emission mandate requiring one in three cars sold 12 years from now be electric, that means that even 12 years from now, two out of three being sold will have a gasoline engine,” said Dan Woynillowicz. If that occurred, the majority of cars sold could include the highest polluting vehicles — so long as automakers find them profitable. In theory, said Cara Clairman, after many more years, you will have enough electric cars on the road that the effect would be the same. “But I don’t think California would ever go for that,” she said.

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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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