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Alberta may buy rail cars to increase oil transport capacity




Alberta Premier Rachel Notley says her government is continuing to push Ottawa to do more to facilitate transporting a greater volume of oil-by-rail until pipeline capacity increases and is considering buying trains to do it.

“The bottom line, Ottawa needs to join Alberta to help ease the economic pain that Alberta played no part in causing but is, in fact, the same pain that is affecting the well-being of this entire province and, quite frankly, this entire country,” she said Thursday. 

“And let me say, if Ottawa won’t come to the table, then we’ll get it done ourselves … and if it takes buying trains to do it, well then that’s what we’re going to do,” she said.

Notley said the province is willing to go it alone to buy trains to add between 120,000 and 140,000 barrels per day of oil export capacity if the federal government isn’t willing to help.

That capacity would be in addition to current record levels of crude-by-rail shipments, she added. The National Energy Board reported Wednesday exports reached about 270,000 bpd in September.

Federal finance ​Minister Bill Morneau told reporters Thursday in Ottawa that the Liberal government has no plans to introduce new measures to boost oil-by-rail shipments.

Notley added her government is close to finalizing investment deals on six projects for partial upgrading of oilsands bitumen that will be worth nearly $5 billion of new private sector investment and create hundreds of long-term jobs.

“For decades, Albertans have been talking about getting more for our oil by upgrading more here at home. We’re taking action to make that a reality,” Notley said in a release, shortly before repeating the message in Calgary Thursday at a meeting of the Canadian Association of Oilwell Drilling Contractors (CAODC).

“By supercharging energy upgrading in Alberta, we can create more jobs and open more markets to finally get top dollar for our resources,” said Notley, a day after Morneau released a fiscal update that the Alberta government said contained no specific measures to address the impact the oil price differential is having on the national economy.

The projects are being pursued under the Energy Diversification Act, introduced in March 2018, which earmarked up to $1 billion in incentives to help leverage billions more in private investment to build partial upgrading facilities.

The government says it’s still reviewing the short list of proposed projects for their economic viability. 

“We’ll be sitting down with those companies very shortly and expect big investment decisions soon,” Notley said.

Partial upgrading reduces the thickness of oilsands bitumen so it flows through pipelines more easily, without having to be blended with diluent.

It can increase pipeline capacity by up to 30 per cent, the province says.

Carbon levy exemption for drilling

Notley also announced — to one of the biggest rounds of applause in the room — that drillers will be exempt from the provincial carbon levy for clear fuel usage for on-site drilling. She said they would be also be eligible for rebates going back to when the carbon levy began at the start of 2017.

The premier’s office says the government estimates the rebates to drillers will add up to between $775,000 and $1.5 million a year.

The Canadian Association of Oilwell Drilling Contractors released its drilling forecast for 2019 just ahead of the premier’s speech.

The association is projecting that 6,962 wells will be drilled, an increase of just 51 from this year — a relatively flat year-over-year uptick, the association says.

The industry drilled about 13,000 wells in 2014 before global oil prices crashed.

The CAODC predicts the overall rig fleet to decrease by 58 next year, down to 522 actively drilling from 580.

“The lack of activity is not hard to understand,” said CAODC president Mark Scholz. “The Canadian oil and gas industry is simply too dysfunctional to anticipate any kind of quick recovery.”

Notley has been busy making announcements this week as part of her government’s so-called made-in-Alberta strategy to get more value for the province’s energy resources.

The price of Western Canadian Select crashed in September due, in part, to a backlog of oil in Alberta.

As oilsands production ramped up throughout the year, export pipelines reached full capacity. Making matters worse, several refineries in the U.S. that process heavy oil from Alberta shut down for maintenance.

The differential between West Texas Intermediate and Western Canadian Select averaged around $45 US per barrel last month. One estimate pegged the cost of the price differential to Alberta’s energy sector at $100 million a day. 

Pipelines preferred over rail shipments

Asked about the rail request, Morneau said pipelines are his preference, vowing to continue to push to build the Trans Mountain expansion.

However, a government official speaking on background said if there were industry and government consensus on a new approach, Morneau would assess how to move forward.

Notley said Prime Minister Justin Trudeau would likely hear a great deal of frustration as he visited Calgary on Thursday to give a speech to the Calgary Chamber of Commerce and meet with oil and gas company CEOs.

“There are a lot of folks here who would be forgiven for saying, ‘Gee, if there were this kind of economic crisis going on in the manufacturing sector in Ontario, we’re pretty sure it would make its way into the first two paragraphs of the fiscal update.’ Yet it didn’t find its way into the first two paragraphs,” she told reporters.

“I think that Ottawa needs to be seized of the matter and I suspect they will be by the end of the prime minister’s day here today.”

Cenovus CEO calls for production cuts

Alex Pourbaix, president and CEO of Cenovus Energy, told CBC News Network’s Power & Politics host Vassy Kapelos that ramping up oil-by-rail is an important part of the solution to the crisis, but it’s more complicated than some people realize.

“The cars are a bottleneck, but it’s not just cars. It’s crews, it’s locomotives, it’s the upgrades that CN and CP need to do to their tracks in order to accommodate these increased freight movements,” he said Thursday.

Cenovus has been urging the Alberta government to implement “temporary” production cuts across the oil sector as Canadian crude prices continue to struggle.

Cenovus says there is a strong case for the government to temporarily mandate reduced production for the industry since the market can’t fix a problem that is “inherently political.”

“By any measure, this has become an extraordinarily serious situation. And we, our industry, Albertans and Canadians, are losing money or value every day that this issue is not resolved.”

But he said the government seems to be moving with “pretty good speed” to address the crisis.

Pourbaix said that, assuming that the Enbridge Line 3 project comes about next year, and that rail ramps up, the current crisis will be alleviated and the government wouldn’t need to curtail production for very long.

New provincial investments

On Tuesday, Notley unveiled a plan to boost its investment in two petrochemical upgrading programs by $1.1 billion, for a total of $2.1 billion.

She also announced a new “energy upgrading unit” in her office to prioritize the upgrading and refining of more of Alberta’s energy resources within the province, and said funding announcements were expected within days.

On Monday, the premier said she has appointed three special envoys to work with energy sector experts and CEOs to find solutions for closing the oil-price differential.

The envoys are Robert Skinner from the University of Calgary’s School of Public Policy, Brian Topp, Notley’s former chief of staff, and deputy energy minister Coleen Volk.


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Real Estate

5 ways to reduce your mortgage amortization




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




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




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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