Mortgage brokers explained: What they do, and what they don’t

General Cedric Pelletier 14 Nov

Canadians are increasingly turning to mortgage brokers and better understand what the channel offers. But despite that progress, some misconceptions continue.

According to Mortgage Professionals Canada’s 2025 Consumer Survey, one-third of Canadians used a mortgage broker to secure their current mortgage. However, two-thirds say they’re at least somewhat likely to work with a broker in the future, and 81% of those who have used one before intend to return, compared with just 58% of bank mortgage customers.

Client satisfaction when working with a broker was also up across nearly every attribute tracked in the survey compared with 2024, including ease of doing business, reliability, knowledge, trust, timeliness, personalisation and communication.

At the same time, the survey highlighted a few misconceptions about how brokers operate, how they’re compensated and how they differ from the Big Banks.

What brokers do

Serve everyone

Colin Shea, the principal broker at TMG Performance, describes brokers as the bridge between lenders and everyday Canadians.

“A lot of times, the clients don’t really understand what the bank is looking for, and the bank needs to hear things the way they want to hear them,” he says. “Brokers are the intermediaries that can help smooth out the edges and help the two communicate.”

That role, however, has evolved over time, leading to some outdated ideas about the broker community.

There was a time when brokers were limited to non-bank products and largely served borrowers turned away by traditional lenders. Now, brokers can work with clients at every credit level and have access to products from most of Canada’s Big Six banks.

“There still is a little bit of that misconception—especially among the older generation—that we only deal with B-lenders, we don’t deal with the bank and we’re more of a last resort,” says Shea. “That’s for sure changed.”

Though some still see brokers as a place for those with few options, the opposite is now true. While banks are limited to selling their own products, brokers have access to products across many providers, from non-bank lenders to most major financial institutions, allowing them to offer clients more options.

Understand the products they’re selling

Many of the mortgages facilitated through brokers are provided by the major banks, leading many to assume that the bank’s staff are the main experts on the subject.

Just because their logo is on the paperwork, however, doesn’t necessarily mean that the representatives at the local branch have a deep understanding of the product.

“The person at the branch is a generalist — they understand a little bit about mortgages, credit cards, bank accounts, RSPs (registered savings plans), and all the other financial tools they offer — we only focus on mortgages,” Shea says. “Good mortgage brokers know their bank guidelines better than the person at the branch.”

What brokers don’t do

Brokers don’t typically charge fees to the client directly

One of the biggest misconceptions about mortgage brokers is how they get paid.

According to MPC’s 2024 consumer survey, respondents who chose not to work with a broker most often cited concerns about having to pay for the service.

While brokers can charge clients directly in specific situations, these cases are uncommon. For most traditional mortgages, the broker is compensated by the lender rather than the borrower.

“If you’re putting a borrower into a prime mortgage, the lender pays the broker for sending them that deal, which is colloquially referred to as a ‘finder’s fee,’” explains Katie Caravaggio, the Vice President of Membership and Professional Development for MPC.

Katie Caravaggio, VP, Membership and Professional Development, MPC

In other words, Canadians who qualify for a traditional mortgage and turn to a broker to help them find the best deal do not pay the broker directly, since the lender they choose covers the compensation.

“When it comes to the private or MIC (mortgage investment corporation) side, there is a finder’s fee that goes to the mortgage broker, but for these deals there’s more work for the broker, and more risk, so the broker may charge the client directly,” Caravaggio explains. “There are stipulations around those costs, it is a regulated space, and the mortgage broker must provide a disclosure to that client in advance as to what they’re charging them and why.”

Most borrowers, and especially those who qualify for a traditional loan with a major bank, never see a bill from their broker, while the few that do typically require specialized services not offered by banks, and are informed of those fees in advance.

Brokers don’t offer services without a licence

The rapid growth in the housing market during the low-interest pandemic period may have created the impression that brokers were entering the industry as part of a gold rush.

Mortgage brokers, however, need licences to sell loan products in Canada and undergo training before they can legally work in the industry.

“There are educational requirements involved in obtaining a licence to practise as a mortgage broker across Canada, there are different acts and regulations per province, but they all generally follow a similar path,” says Caravaggio.

“There is mandated education, there are background checks, an approval process, a requirement to join a brokerage that has a principal broker, so there is a process to become a broker,” she adds.

Brokers don’t give you the same one-size-fits-all advice found online

Canadians can find plenty of mortgage information online, and many prefer to research what may be the biggest financial decision they’ll make. However, even with more information at their fingertips, key details and lender-specific options aren’t always accessible, meaning those who go it alone may miss out.

“They don’t have access to the suite of lenders that a mortgage broker has,” Caravaggio says, explaining that some loan products are offered exclusively through brokers and are not available to individual consumers. “People can do their own research, but not everything is accessible to them, so why not utilize someone who has expertise in that area?”

Furthermore, while online advice is often generic, brokers seek to gain a deeper understanding of their customers’ financial situation to offer more personalized recommendations.

“A good broker understands a client’s financial history and can be the expert that places them in the most suitable mortgage,” Caravaggio says. “They dig in deep with a client to find out exactly what they want and present them with suitable options based on their expertise.”

Written by the Marketing Team at CMT

Payment Shock 2026: Why Many Renewals May Jump 20%

General Cedric Pelletier 21 Oct

What’s driving the sharp renewal increase forecast for 2026 and how homeowners can prepare.

A large wave of Canadian mortgages comes due through 2026. Bank of Canada staff estimate roughly 60% of outstanding mortgages will renew in 2025 and 2026. Five-year fixed borrowers who locked in during 2020 or 2021 face some of the biggest adjustments, with typical payment increases in the 15% to 20% range at renewal, depending on rate path and remaining amortization.

Why 2026 Bites

1. The renewal bulge: Pandemic-era originations are maturing together. Both the Bank of Canada and OSFI have flagged the concentration of renewals by the end of 2026 as a systemic risk that could stress borrower budgets and lender portfolios.

2. Rate reset math: Even if rates drift lower from their 2023 and 2024 peaks, many 2020 and 2021 mortgages will still renew at 1.5 to 2 percentage points higher than their original rate. According to Bank of Canada modeling, this equates to mid-teens to near-20% payment lifts for a large share of five-year fixed renewals.

3. Amortization catch-up: Variable-rate borrowers who kept payments static during 2022 to 2024 effectively extended their amortization. When those loans reset, amortization “catch-up” adds pressure even if headline rates fall.

4. Tighter oversight: Regulators are instructing lenders to monitor higher-risk renewals closely. The Financial Consumer Agency of Canada (FCAC) released updated guidance in 2025 requiring lenders to proactively contact borrowers facing hardship and offer payment relief options.

How to Estimate Your Own Jump

Confirm your maturity date and balance. You can find this on your renewal letter or lender portal.
Run a renewal quote with today’s rates plus a 0.5 to 1.0% buffer. That is a realistic “stress-tested” range.
Review your amortization schedule. If your amortization grew due to variable-rate underpayment, expect your new payment to rise even more as it resets.
Model your total housing costs. Include taxes, insurance, utilities, and maintenance, not just the mortgage payment.

Tactics to Blunt the Shock

1. Lock early. Most lenders offer 120-day rate holds. Securing one can protect you from pre-renewal spikes.

2. Adjust the amortization. Extending from 25 to 30 years can soften the monthly impact. Just ensure you have a plan to shorten it later.

3. Make pre-renewal payments. Even small lump sums reduce the balance that your renewal payment is calculated on.

4. Shop the market. Many lenders will offer no-fee switches to attract strong borrowers. Compare both fixed and variable offers.

5. Blend strategically. If rates drop before maturity, a blend and extend may offer stability without penalties.

6. Fix what you can predict. If volatility stresses you, choose a fixed term that balances rate and flexibility.

7. Build a cash buffer. Aim for three to six months of housing costs in savings or available credit.

8. Eliminate high-interest debt. Pay off credit cards or loans before renewal. It improves ratios and rate eligibility.

9. Know your hardship options. Lenders can temporarily adjust terms for borrowers in good standing. FCAC’s 2025 guideline ensures fair treatment and transparency.

What If Rates Drift Lower Before You Renew

If the Bank of Canada begins rate cuts before your renewal window, it may ease some pressure, but do not count on a full rollback to pandemic-era levels. Remember, payment savings only lock in when you actually renew, not when you see headlines.

Hold your rate, monitor the bond market, and re-price before closing if yields move in your favor.

A Quick Case Study

Original mortgage: $500,000, five-year fixed from late 2021 (25-year amortization) Renewal in 2026: Approximately $425,000 balance

Scenario A: Renew at a rate 1.75% higher than the original. Payment jump of about 18%.
Scenario B: Extend to 30 years, prepay $10,000 before renewal, then add $150 monthly once renewed. This trims the payment shock to under 10% and preserves long-term flexibility.

Broker Checklist Before You Sign

Get written quotes from multiple lenders.
Compare effective rates after cash-back or switching costs.
Review penalty and portability clauses.
Confirm prepayment flexibility and amortization options.
Have updated income documentation ready for any refinance.

Bottom Line

Payment shock is coming, but it does not have to be devastating. With early preparation, accurate modeling, and a few tactical adjustments, most homeowners can absorb the 2026 renewal wave without major financial disruption.

The key is acting early, not waiting for renewal notices to arrive in the mail. A proactive broker or financial advisor can model your options now and save you thousands later.

Written by the team at BBM

Smart-Sizing: Making Your Home Work for You

General Cedric Pelletier 9 Oct

For many Albertans heading into retirement, the family home isn’t just where memories were made — it’s also where a big chunk of their wealth is sitting. Your home is likely your biggest asset, and while it offers stability, it can also tie up your money in space you might not really need anymore.

That’s where smart-sizing comes in.

Unlike the old-school idea of “downsizing,” smart-sizing isn’t about giving things up — it’s about adjusting your living situation so it fits your life now: your lifestyle, your goals, and your future plans.

Unlocking Your Home’s Equity

When you sell your larger home and move into something smaller or more efficient, you unlock the equity you’ve built over the years. That money can go toward investments, retirement savings, paying off debt, or even just giving yourself more flexibility and peace of mind.

For many retirees, this is one of the best ways to supplement income without relying fully on pensions or government benefits.

Lower Costs, Less Stress

A smaller home typically means lower utility bills, less maintenance, and lower property taxes — all of which can add up over time. Even if you choose a more desirable area or newer build, the efficiency and reduced upkeep usually mean you’ll still come out ahead financially.

Living Better, Not Smaller

Retirement should be about freedom — not more rooms to clean or lawns to mow. Smart-sizing often means moving closer to the things that matter most: family, healthcare, amenities, or simply a community that fits your pace. You trade square footage for convenience, connection, and comfort.

A Quick Example

Let’s say a couple sells their suburban home for $800,000 and buys a $550,000 condo closer to the city. They free up $250,000 in equity, and their annual maintenance and utility costs drop by around $6,000.

Over 10 years, that’s hundreds of thousands of dollars that can go toward travel, health, or just enjoying a worry-free retirement.

Before You Make the Move

Smart-sizing takes planning. Ask yourself:

How much equity will I actually unlock after selling and buying?

Will this new home truly reduce my ongoing costs?

Does the location fit the lifestyle I want for retirement?

What’s my plan for reinvesting the extra equity?

The Bottom Line

Smart-sizing isn’t about living with less — it’s about living better with what you have. When you align your home with your goals, you can free up equity, reduce stress, and make retirement more comfortable and financially secure.

Written by the marketing team at Breaking Banks

First-Time Homebuyer in Alberta? Here’s What Really Counts

General Cedric Pelletier 12 Sep

In Canada, first-time homebuyer doesn’t always mean “never owned a home.”
Federal programs each define it differently—and understanding those rules can save you thousands when buying in Alberta.

RRSP Home Buyers’ Plan (HBP)

What it is: Withdraw up to $60,000 per couple from RRSPs tax-free for your down payment.

Key rules (4-year look-back):

You and your spouse/common-law partner must not have lived in a home you owned in the current year or the previous 4 calendar years.
You need a signed agreement to buy or build a qualifying home.
The home must become your principal residence within one year.

💡 Tip: Even if you owned property in the past, you may qualify again after four years of renting—perfect for anyone starting fresh.

First Home Savings Account (FHSA)

What it is: A new tax-sheltered account that combines the perks of an RRSP and TFSA, letting you contribute up to $40,000 toward your first home.

Key rules:

Must be 18–71 and a Canadian resident.
You must not have owned or jointly owned—or lived in—a qualifying home in the year before opening the account or during the previous four calendar years.
Spousal ownership counts if you lived in that property.

💡 Tip: You must meet the definition when you open the FHSA, not just when you buy.
Open one early—even with a small deposit—to start tax-free growth and lock in eligibility.

Mortgage Insurance Bonus

Being a first-time buyer can also affect your mortgage structure:

First-time buyers can qualify for a 30-year insured amortization on both resale and new homes.
Repeat buyers are limited to 25 years on resale properties (30 years is allowed only for new construction).

Your Next Steps

Talk to a mortgage professional early to confirm which programs you qualify for.
Open an FHSA as soon as possible if you think you might buy within the next few years.
Be upfront about any past ownership—even outside Canada—to avoid surprises.

Bottom line:
Whether this is your first purchase ever or your first in a while, knowing how the federal programs define “first-time homebuyer” can put thousands of dollars back in your pocket.

RRSP, TFSA, FHSA, RESP: The ABCs

General Cedric Pelletier 2 Sep

As many young Canadians head off to college and university, some will be fortunate enough to be able to tap into a registered education savings plan.

People walk through McGill University's campus in Montreal

By Ian Bickis

They will also be benefiting from the 20% match on contributions to the plan, up to a set limit, because like other registered savings options, the government offers incentives for people to save for major life goals like school, retirement and buying a first house.

Financial advisers say that ideally, Canadians want to max out the contribution room on all of their savings plans, but with unemployment, the cost of living and overall economic uncertainty on the rise, that’s increasingly hard to do, requiring some tough choices on how to sprinkle savings across the various options.

It’s clear few savers manage to add to them all, if they’re able to put anything away in the first place.

Statistics Canada data shows that in 2023, 11.3 million tax filers contributed to either a Registered Retirement Savings Plan or a Tax-Free Savings Account, which is about half the labour force that year. Of those, only 2.5 million contributed to both. About 484,000 tax filers also contributed to the First Home Savings Account that launched in 2023.

Given the range of options available, advisers say it’s key to map out your goals and timelines when trying to allocate your cash on hand.

But the first step is knowing how much you have to work with, said Jordan Damiani, a senior wealth adviser at Meridian Credit Union.

“You start with what are your surplus funds that you’re comfortable saving,” he said.

For some, this might first mean going through basic budgeting, especially if they’re struggling to put money aside, while others will just need to double-check that the amount they’re already putting aside still makes sense.

From there, savers need to look at the time horizon for their various goals, as well as their income expectations, said Damiani.

For younger Canadians, the TFSA often makes the most sense because it offers the most flexibility, and those in school or just starting their careers don’t need the benefit as much from the tax deductions offered by other registered accounts, he said.

Despite the TFSA’s name, it’s important to remember money in that account can be put into investments like stocks, ETFs and bonds to boost the growth of tax-free gains. The contribution room for TFSAs start to accumulate when someone with a social insurance number turns 18, with the starting amount set at $7,000 this year.

“You always kind of start with a TFSA to say, OK, this is your emergency fund, this is your most liquid bucket, and then you start getting a little bit more specific about goals,” said Damiani.

If someone is sure they want to buy a house, they can open a FHSA, which offers tax deductions for any contributions, which are limited to $8,000 per year up to a total of $40,000.

“If you’re starting by putting the money in a First Home Savings Account and they have a life emergency or they want to buy a car, you’re not able to take that money out without penalty to cover those costs. So it’s a balance.”

If unsure, it’s possible to open an account and start to accumulate the contribution room without actually adding money to the account, said Damiani. A saver could also put money into their RRSP to save for a house, since up to $60,000 can be withdrawn from the plan to go toward a home (but eventually has to be put back in).

Knowing the timing is important. If a home purchase is potentially in the cards in the next few years, it’s possible to set a budget to maximize the contributions over the next five years to fully take advantage of the $40,000 lifetime limit.

Similarly, if a future student is getting closer to the cut-off for the federal government’s match on RESP contributions, which are only available until the end of the calendar year that a beneficiary turns 17, then it can make sense to direct more money there.

“When do you want to have this money available to you? Because that’s going to dictate realistically which type of registered account you want to use,” said Sara Kinnear, director of tax and estate planning at IG Wealth Management.

She said that when unable to contribute to all the accounts, there are ways to get creative in adding funds. One option is to contribute to an RRSP or FHSA, with the expectation that you’ll generate a tax refund during the income tax filing season, which you can use to fund other savings goals.

Speaking with a financial adviser can help figure out the timing and money allocation, said Kinnear, and generally speaking, the earlier the better in starting to save for any goal.

“For all of these types of plans, the longer you can have it sitting in there working for you, the better, because all of these registered plans, the funds are growing on a tax-deferred basis and you benefit from that by having them in there a long time.”

Written by The Canadian Press

How long does a consumer proposal stay on your credit report?

General Cedric Pelletier 26 Aug

A consumer proposal shouldn’t haunt your credit file forever. Learn how long it stays on record in Canada and what steps to take if outdated remarks are still holding you back.

When you’ve worked hard to complete a consumer proposal and get back on your financial feet, it’s frustrating to still see remnants of it lingering on your credit report. We hear this all the time, especially when someone is preparing for a mortgage renewal or applying for new credit.

So let’s clear up what should be there, what shouldn’t, and what to do if your credit report hasn’t caught up with your reality.

How long does a consumer proposal stay on your credit report in Canada?

Most consumer proposals are structured to be five years in duration. Typically with a fixed payment amount over sixty months.

Equifax and TransUnion handle consumer proposals a bit differently, but the general rule in Ontario is:

Equifax: A consumer proposal is removed three years after the date of completion or 6 years from the filing date, whichever comes first.
TransUnion: The proposal and related accounts stay on your file for three years after completion or 6 years from the date you defaulted on the debt, whichever comes first.

That means if your proposal was completed early, say, in early 2022, it should have been fully cleared off (purged from) your report by early 2025 at the latest. This is true even if you filed your proposal only months before paying it off completely.

Purging rules may differ slightly across provinces and territories, so please check directly with the credit reporting agencies to learn their rules.

What should be removed, and what should remain?

Here’s the important part. When your consumer proposal is cleared from your credit report, it should disappear from both the public records section and from each individual account that was included in the proposal.

If you’re still seeing account notes that say things like:

“Account closed, included in proposal”
“Written off as part of a proposal”

even though the proposal itself no longer appears, those notes are stale, and frankly, they shouldn’t still be there.

Why these leftover notes still matter

Even if your balances are showing as $0 and the accounts are closed, those negative remarks can still impact how lenders see you.

Mortgage lenders in particular use Equifax data heavily, and if their underwriter sees a bunch of charge-off-style language, like “settled through proposal” or “included in proposal”, they’ll often treat you like you’re still in the recovery phase, even though you’ve done the hard work and moved on.

Worse, if you apply for credit and are denied, based on that outdated information, that rejection could damage your profile further. You don’t want to be penalized again for something you already resolved.

What you should do next

If you’ve completed your consumer proposal and enough time has passed, but you’re still seeing old notes on your credit report, it’s time to clean it up.

Here’s what we recommend:

Get a current copy of your credit reports from both Equifax and TransUnion. Make sure you’re reviewing the full reports, not just the consumer summaries.
Flag all accounts still showing proposal-related comments. Take screenshots or highlight them, these are what you’ll dispute.
Don’t apply for any new credit or mortgages until these are corrected. A premature application could lead to a rejection, and that rejection will be visible to future lenders.
Work with a professional to dispute the items.
For example, Richard Moxley, a CMT contributor, is one of Canada’s most knowledgeable experts on credit file accuracy and disputes. He knows how to deal with Equifax and TransUnion directly and effectively.

The bottom line

Once your consumer proposal is behind you and enough time has passed, your credit report should reflect a clean slate. If it doesn’t, that’s not your fault, but it is your responsibility to fix it before moving ahead with major financial steps like mortgage renewals or new applications.

Don’t guess your way through this part. A few lingering notes can cost you thousands in higher rates, or even a flat-out decline. Get your credit file properly updated, and you’ll be in a much stronger position to move forward with confidence.

By the Marketing team at CMT

TFSA Strategies: How to Maximize Canada’s Most Flexible Account

General Cedric Pelletier 22 Aug

The Tax-Free Savings Account (TFSA) is one of Canada’s most versatile financial tools. Since its introduction in 2009, it has given Canadians the ability to grow investments without paying tax on the earnings. Contributions are not deductible as they are with an RRSP, but the growth inside the account and all withdrawals are completely tax-free. This makes the TFSA a unique vehicle for saving, investing, and planning throughout a lifetime.

Many people still treat the TFSA like a basic savings account. In reality, the account is far more powerful when used strategically. With thoughtful planning, it can be used to build tax-free growth, manage debt, and provide flexible retirement income.

Long-Term Growth Through Equities

One of the most effective uses of the TFSA is holding growth-oriented investments such as stocks, ETFs, or mutual funds. The key advantage is that gains and income are never taxed. Over decades, the effect of compounding inside a TFSA can rival or even surpass what an RRSP delivers after tax.

Younger investors are in the best position to benefit because they have the most time for compounding to work. Filling a TFSA with equities early allows those gains to build uninterrupted for decades. Dividend-paying stocks add another layer of efficiency, since the payouts are received tax-free without the need to navigate the dividend tax credit system. Global diversification through ETFs can further improve outcomes by reducing concentration risk while still aiming for strong returns.

Funding Short- and Medium-Term Goals

The TFSA is also well-suited for shorter objectives because funds can be withdrawn at any time and recontributed the following year. For first-time homebuyers, the account works particularly well when combined with the First Home Savings Account. The FHSA offers deductible contributions, while the TFSA provides greater flexibility for withdrawals, creating a powerful combination for building a down payment.

For those focused on safety and liquidity, the TFSA can serve as an emergency fund. Interest earned on cash or a high-interest savings product would otherwise be taxable, but inside a TFSA it is fully sheltered. The account also works well for lifestyle goals such as vacations, weddings, or education expenses, since money can be withdrawn tax-free without affecting long-term investment plans.

Retirement Income Buffer

In retirement, the TFSA becomes an essential part of tax-efficient income planning. Retirees can draw from it in years when required withdrawals from RRIFs or pensions would otherwise push them into a higher tax bracket. Because withdrawals are not counted as taxable income, the TFSA is also a valuable tool for avoiding Old Age Security clawbacks.

For those who leave the workforce before government benefits begin, the TFSA can act as a bridge. Drawing on tax-free savings in those years allows retirees to delay CPP or OAS and secure a higher lifetime benefit. In this way, the TFSA can smooth retirement cash flow and preserve other sources of income.

Planning for Spouses and Families

The TFSA is equally effective when coordinated across a household. A higher-earning spouse can gift money to the other in order to maximize both accounts. The attribution rules that normally apply to income-splitting do not apply here, so any investment growth remains tax-free in the receiving spouse’s TFSA.

Parents can also help adult children by gifting them funds to contribute. This builds wealth earlier in life and removes future growth from the parents’ taxable estate. These simple planning moves create meaningful long-term benefits for the entire family.

Managing Debt and Cash Flow

Although it is often overlooked, the TFSA can play a role in debt management. Withdrawing from the account to eliminate high-interest debt usually produces a better return than leaving the money invested. Once cash flow improves, the account can be recontributed in later years.

Homeowners can also use the TFSA as a holding account for lump sums intended for mortgage prepayments. Rather than sitting idle, the money can earn tax-free returns while waiting for a renewal date. When the time comes, those funds can be withdrawn and applied directly to the mortgage balance.

Advanced Investment Approaches

For experienced investors, the TFSA provides a unique shelter for higher-risk or higher-growth assets. Small-cap stocks, for instance, may deliver substantial upside. Inside a TFSA, those gains are never subject to capital gains tax.

Regular contributions through dollar-cost averaging help investors remain consistent and reduce the risk of poorly timed lump-sum investing. Another useful approach is asset location optimization. By placing the highest-growth assets inside the TFSA and holding income-generating or lower-growth assets in RRSPs or non-registered accounts, investors can maximize overall after-tax returns.

The Power of Withdrawal Timing

A feature that many people underutilize is the ability to recontribute withdrawals in the following year. This opens up opportunities for careful timing. For example, withdrawing money in December means new contribution room is available as soon as January, which minimizes the time the funds spend outside the account.

The TFSA can also act as a short-term financing tool. Temporary withdrawals can cover expenses without interest costs, provided the funds are recontributed in the next calendar year.

High-Net-Worth Planning

Even for those with significant wealth, the TFSA remains relevant. Contribution limits may be modest compared to other accounts, but the shelter it provides is permanent. Over time, even small annual contributions to high-growth assets compound into meaningful tax-free wealth.

It is also highly efficient for estate planning. TFSA assets can pass directly to a spouse or successor holder without tax, preserving capital for the next generation. For families with large estates, this makes the TFSA a valuable piece of the overall strategy.

Final Word

The TFSA is far more than a savings account. It is a flexible, tax-free investment tool that can adapt to nearly every stage of life. With deliberate planning, it can fund short-term goals, enhance retirement income, support family wealth-building, and accelerate long-term growth. The people who treat it as part of a broader financial strategy are the ones who realize its full potential.

Written by the Marketing team at Breaking Banks

Cash Flow Is King: Building a Monthly Wealth Engine with Passive Income

General Cedric Pelletier 19 Aug

For most Canadians, the path to wealth has long been tied to saving and investing for the future. But waiting decades to enjoy the fruits of your labour doesn’t appeal to everyone, especially if you’re focused on building a life with more freedom today. That’s where cash flow strategies come into play.

A growing number of Canadians are shifting their focus from long-term capital appreciation to monthly income that covers expenses and creates lifestyle flexibility. Passive income focuses on creating steady, reliable cash streams that flow into your account each month with minimal effort. The goal is to build a foundation of financial stability, like having your own private pension.

Here’s how to design a monthly wealth engine using three proven income streams: dividends, REITs, and rental property cash flow.

1. Dividend Income: The Classic Foundation

Dividend-paying stocks have been a staple of income investing for decades. These are companies, often in sectors like utilities, banks, telecom, and pipelines, that distribute part of their profits to shareholders.

Investing in blue-chip Canadian dividend stocks offers two key benefits: income and stability. Many of these companies have long histories of increasing dividends over time. That means your monthly or quarterly income can grow, even if you’re not adding more capital.

To build consistent dividend income:

Focus on Dividend Aristocrats. Companies that have increased their dividends annually for at least five years.
Diversify across sectors to reduce risk.
Use a non-registered account if you’re in a lower tax bracket to take advantage of the dividend tax credit.

Set a target. For example, a portfolio yielding 5% annually requires $240,000 invested to generate $1,000 per month.

2. REITs: Real Estate Income Without the Hassle

Real Estate Investment Trusts (REITs) let you invest in commercial and residential real estate without owning property directly. These publicly traded trusts hold portfolios of office buildings, apartments, malls, or industrial spaces and pay out most of their rental income to investors.

The key advantage of REITs is accessibility. You can invest with a few hundred dollars, spread across multiple properties and geographies. Many REITs pay distributions monthly, making them ideal for building a passive income stream.

To boost reliability:

Look for REITs with a strong track record of distribution stability.
Focus on sectors with long-term demand, like residential or industrial real estate.
Hold REITs in a TFSA or RRSP to shelter distributions from tax.

3. Rental Property Cash Flow: The Income Workhorse

Owning rental property is a hands-on way to generate passive income. While it requires more upfront effort and management, it can produce steady cash flow, appreciation, and tax benefits.

Cash flow is the income left over after all expenses are paid (mortgage, taxes, insurance, maintenance, and property management). Positive cash flow means your tenants are covering your costs and then some.

For a rental property to become part of your monthly wealth engine, structure it with intention:

Prioritize cash flow over speculation. The numbers must work from day one.
Use fixed-rate financing to lock in predictable costs.
Consider secondary suites or multi-unit properties to maximize rental income.

Done right, a single property can generate several hundred dollars a month, with long-term equity growth on top.

4. MICs: Real Estate Income Without Owning Property

If you like the idea of earning real estate income but don’t want the responsibilities of being a landlord (or even owning property), Mortgage Investment Corporations (MICs) offer a compelling alternative.

A MIC pools investor capital to lend money secured by real estate. In other words, you’re investing in the lending side of real estate, not the ownership side. These mortgages are typically short-term, higher-yield loans made to borrowers who may not qualify through traditional banks.

MICs generate income through the interest charged on those mortgages. In Canada, they are required to distribute most of that interest income back to investors, often on a monthly or quarterly basis.

To use MICs effectively:

Research the quality of the lending portfolio and the manager’s track record.
Consider diversification across multiple MICs to spread risk.
Use registered accounts like a TFSA or RRSP to defer or avoid tax on distributions.

MICs offer higher yields than traditional fixed-income investments, but come with risk, especially in housing downturns or if underwriting standards are weak. Stick to well-established firms with transparent reporting.

Putting It All Together: A Balanced Approach

No single income stream does it all. The real magic comes from blending them.

Imagine this scenario:

$300/month from dividend stocks
$400/month from REITs
$1,000/month from rental cash flow
$500/month from MICs

That’s $2,200 each month, without touching your original capital. Over time, that income can grow, especially if reinvested and optimized for tax efficiency.

Final Thought

Passive income doesn’t mean no effort. But, it does mean front-loading the effort to create lasting freedom. Whether you’re looking to reduce work hours, travel more, or simply stop worrying about every bill, building a monthly wealth engine through cash flow gives you more control, earlier in life.

Start small, stay consistent, and focus on income that arrives whether you’re working or not. Because when your money starts working harder than you do, you’re building wealth on your terms.

Written by the marketing team at Breaking Bank

The Hidden Cost of Breaking Your Mortgage Early

General Cedric Pelletier 28 Jul

You found a better rate. Maybe you’re moving. Or consolidating debt. On the surface, breaking your mortgage might look like a smart move. But before you pull the trigger, take a closer look at the penalty. In many cases, it can eat up most of the savings or potentially worse.

This guide explains how prepayment penalties work, why they differ between lenders, and how to know whether refinancing early is actually worth it.

What Is a Prepayment Penalty?

A prepayment penalty is the cost your lender charges if you end your mortgage term early. It’s their way of recovering lost interest.

In Canada, the penalty is usually whichever is higher:

Three months’ interest
The Interest Rate Differential (IRD)

If you have a variable-rate mortgage, you’ll typically be charged three months of interest. If you have a fixed-rate mortgage, lenders often apply the IRD, which is usually higher.

How Three Months’ Interest Works

This is the simpler of the two. You multiply your mortgage balance by your interest rate, divide by 12, and then multiply by 3.

Example:

Mortgage balance: $400,000
Interest rate: 4.50%

($400,000 × 4.50%) ÷ 12 × 3 = $4,500 penalty

This formula applies to most variable-rate mortgages and some fixed-rate mortgages if the IRD ends up lower.

Understanding the Interest Rate Differential (IRD)

The IRD is the more complex and potentially more expensive penalty.

There are variations to how individual lenders calculate IRD. Here’s a simple example to illustrate the concept:The IRD formula measures how much more interest you’re paying compared to what the lender could earn by lending that money today. The larger the difference between your current rate and today’s posted rate for the remaining term, the bigger the penalty.

Example:

Balance: $400,000
Fixed rate: 4.80%
Time left: 2 years
Lender’s current 2-year posted rate: 3.00%

(4.80% – 3.00%) × 2 years × $400,000 = $14,400 penalty

That’s more than triple the cost of the three-month interest formula.

Why Penalties Vary So Much

The biggest reason for the variation is how lenders calculate IRD. Some banks use their inflated posted rates in the formula, which increases the penalty. Others, like many monoline lenders (non-bank lenders who work with mortgage brokers), use discounted rates that better reflect the market.

As a result, two homeowners with similar mortgages can face very different costs, depending on which lender they chose.

When Breaking Your Mortgage Makes Sense

Let’s say you want to refinance to a lower rate. Here’s how to do the math.

Scenario:

Balance: $400,000
Current rate: 4.80%
Remaining term: 3 years
Available new rate: 3.50%
Penalty: $12,000
Interest savings at new rate: $16,200 over 3 years

In this case, you come out ahead by $4,200 after covering the penalty.

But if the numbers were reversed…say the penalty was $16,200 and the savings only $12,000, you’d be locking in a loss.

How to Lower the Penalty or Avoid It

There are ways to reduce the impact of a prepayment charge:

Ask for details upfront Before signing a mortgage, ask how the lender calculates penalties. Make sure you understand the math.

Choose lenders carefully Monoline lenders often use fairer IRD formulas than the big banks.

Consider variable rates They usually come with smaller penalties, just three months’ interest.

Explore blend-and-extend options Some lenders will let you blend your current rate with a new one and avoid breaking the mortgage entirely.

Use your porting option If you’re moving homes, some lenders allow you to transfer your mortgage to a new property without a penalty.

Time your break strategically As your maturity date gets closer, the IRD penalty often shrinks. Waiting a few months can make a big difference.

The Bottom Line

A lower rate or better opportunity can be tempting. But breaking your mortgage isn’t always a financial win. The penalty can erase much of the benefit if you’re not careful.

Before making a decision, calculate both the penalty and the long-term savings. If you’re not sure, work with a mortgage broker who can run the numbers and help you choose the best path forward.

By the team at Breaking Bank

Canadian Inflation Accelerates by 1.9% y/y in June; US inflation comes in below forecast for the fifth consecutive month.

General Cedric Pelletier 17 Jul

Today’s Report Shows Inflation Remains a Concern, Forestalling BoC Action

Canadian consumer prices accelerated for the first time in four months in June, and underlying price pressures firmed, likely keeping the central bank from cutting interest rates later this month.

The annual inflation rate in Canada rose to 1.9% in June from 1.7% in May, aligning with market expectations. Despite the pickup, the rate remained below the Bank of Canada’s mid-point target of 2% for the third consecutive month.

Headline inflation grew at a faster pace, as gasoline prices fell to a lesser extent in June (-13.4%) than in May (-15.5%). Additionally, faster price growth for some durable goods, such as passenger vehicles and furniture, put upward pressure on the CPI in June.

Prices for food purchased from stores rose 2.8% year-over-year in June, following a 3.3% increase in May.

Year over year, the CPI excluding energy (+2.7%) remained higher than the CPI in June, partly due to the removal of consumer carbon pricing in April.

Monthly, the CPI rose 0.1% in June. On a seasonally adjusted monthly basis, the CPI was up 0.2%.

The Bank of Canada’s two preferred core inflation measures accelerated slightly, averaging 3.05%, up from 3% in May, and above economists’ median projection. The three-month moving annualized average of the core rates surged to 3.39%, from 3.01% previously.

There’s also another important sign of firmer price pressures: The share of components in the consumer price index basket that are rising by 3% or more — another key metric the central bank’s policymakers are watching closely — expanded to 39.1%, from 37.3% in May.

Bottom Line

The chart below, created by our friends at Mortgage Logic News, shows that Canadian economic data have come in stronger than expected on average in recent weeks. This was evident in the June employment report. As a result, the Bank of Canada is likely to remain on the sidelines on July 30 for the third consecutive meeting. The Canadian economy appears to be weathering the tariff storm better than expected, at least for now.

While we expect to see a negative print on Q2 GDP growth, a bounce back to positive growth in Q3 is also possible, precluding the much-expected Canadian recession.

The June inflation data, released today for the US, was weaker than expected for the core price index. Declines in car prices helped mitigate tariff-related increases in other goods within the US consumer basket.

The US inflation data could draw even greater calls from President Trump for the Federal Reserve to lower interest rates. While some officials have expressed a willingness to cut rates when the central bank meets in two weeks, policymakers are generally still divided as to whether tariffs will cause a one-time price shock or something more persistent. They will leave rates unchanged for now.

Written by Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres

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