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Looking Forward to 31 Years

In 2024, we graduated from our twenties and into our thirties. With age comes knowledge, confidence and purpose, and we’re just as proud of the road behind us as we’re excited for the road ahead. Read on to learn how Magenta Capital Corporation celebrated its 30-year anniversary and how we plan to move forward. 

How did we celebrate 30 years?

By living the same purpose that’s made us one of Canada’s leading Mortgage Investment Corporations: connecting people with opportunities to build a better tomorrow. With new broker and investor web portals launched this year, making those connections has never been easier or more integrated. Coupled with our new, streamlined product suite tailored to the needs of alternative borrowers, these innovations promise to make tomorrow matter for more customers than ever before. 

Magenta began with our founder establishing headquarters in the basement of his home and has now grown to be a team of collaborative, curious, and industrious professionals who manage millions in assets under management. We are grateful for the support of a community of investors, investment advisors, brokers, and borrowers who all share that same vision of building a better tomorrow. Thank you for helping us mark 30 years. Our partners and customers have trusted Magenta these past three decades to help reach the horizon we’ve all been dreaming of. 

That’s why in 2024, we said thank you, and we gave back.   

Saying Thank You

Saying ‘Thank You’ began with recognizing the people who shaped Magenta into the company it is today; individuals like Susan Marshall, who reminded our founder about the Magenta sunset that inspired him as a little boy; Evelyn Kihl, our first shareholder since 1994; and Margo Pratt, the first person to join the Magenta team in 2002. 

We commemorated the kindness of all our broker partners by paying it forward to our shared communities. We chose to donate to Tree Canada in their name, contributing to an organization that originated in our largest lending area, Ottawa. Magenta also gave thanks through our support at broker events like:  

• Donna Squire Charity Golf Tournament; Donna Squire International Nursing Student Bursary; Verico.   

• Annual charity golf tournament; The London Foodbank; FC Funding and more.   

A Random Act of Magenta (kindness) was also conducted for our broker network, rewarding them for their loyalty and thanking them for their partnerships.   

In June, we once again supported the Canadian Mortgage Professional’s Women in Mortgages Summit, celebrating and acknowledging our gratitude for the women who make up over 50% of our staff. Supporting gender equity in our field has always been and will always be a priority for us, and we hope to continue empowering women through opportunities such as this one. 

Giving Back

At Magenta, we believe our ability to move forward is only as good as our willingness to give back. Over the years, we’ve donated to causes as diverse as access to education, hunger relief, medical research, and reforestation, because tomorrow doesn’t belong to one person alone: it’s only a new day when the sun rises for all of us.  

Our CEO and founder exemplifies this in his efforts volunteering on the Philanthropy Board of Trent University, spearheading Trent’s current Campaign for Momentous Change, which hopes to raise $100 million towards funding new scholarships and developing existing programs at his alma mater. Marshall has lent his philanthropic support to several University funds and initiatives, including the Student Centre, an International Nursing Placement, and a Philanthropic Fellowship position.  

On June 12th and 13th, we participated in our inaugural Purpose Day- a day where Magenta facilitated our employees’ ability to volunteer in Ottawa and Toronto, the two cities our offices call home. For our first year, we stepped up in support of our local food banks: the Ottawa Food Bank and Toronto’s Daily Bread Food Bank. In Ottawa, we assisted with bringing in the summer harvest at the community farm, which will help stock the bank’s shelves with fresh produce, while in Toronto we sorted donations for distribution throughout the Greater Toronto Area.  

We’ve also been hard at work offering free educational resources on our blog this year, from a beginner’s guide on RESPs to another on RRIFs. These resources better inform our shareholders and prospective shareholders, as they look to navigating the financial landscape in Canada. 

Moving Forward

As we wrap up 2024, we’ll be celebrating brokers with our new 30YourWay promo. Brokers will be able to choose to have 30 Basis Points (BPS) taken off their choice of the listed rate or lender fee or added to the broker fee. 

This fall, we plan on continuing the trend by giving our broker affiliates, investors, and investment advisors the opportunity to come together with us in support of a charity of our choosing. Join us in the weeks leading up to GivingTuesday on December 3rd as we invest in a cause that always pays dividends- support for all.  

Here’s to 31 

Lastly, we hope to ring out our birthday with a final anniversary celebration at the Mortgage Professionals of Canada National Mortgage Conference from October 26th to 28th. We look forward to seeing many of our industry partners there. Furthermore, new products, such as options tailored for those in Business for Self, are on the horizon.  

Throughout 2024, we have delivered consistent returns for our investors. Our proven conservative, residential, short-term lending strategy will be optimized by a series of initiatives focused on operational excellence in 2025. Meanwhile, with a dedicated and diverse team of professionals beside us, we are committed to delivering an exceptional customer experience for our investors and investment advisors. 

Whether you’ve been with us since the beginning or are only now joining us on our journey, if you are reading this, then you are a part of the Magenta story. Without a doubt, we couldn’t have made it this far without the investors, brokers, borrowers, and investment advisors who put their faith in us, and we can’t wait to see what tomorrow will bring.  

And after all, your tomorrow matters. 

Magenta Gives Back

Ever since our inception in 1994, our founder has made giving back a priority. For the past thirty years, Magenta has contributed to the communities we operate and lend in.

Why Philanthropy?​

Progress is about more than just more- it’s about creating a more caring and just world. That’s why Magenta gives back to the communities we serve. Indeed, progress is achievable, when we not only believe progress is possible but are prepared to dedicate ourselves to the effort required to attain it.

Over three decades, Magenta has demonstrated this belief in our donations to organizations as diverse as:

• Canada Helps- Project Trauma Support,
• the Canadian Cancer Society,
• the Children’s Hospital of Eastern Ontario,
• Free the Children,
• Interval House,
• the Ottawa Food Bank,
• the Ottawa Regional Cancer Foundation,
• Tree Canada,
• Trent University, and
• Red Cross efforts in Lebanon and Ukraine.

We’re in the business of making tomorrow not an anxiety to escape, but as a gift to cherish and hand down. As a business, we build better tomorrows in many ways like:

• in our capacity as a lender to grant borrowers the capital to take that next step into their future;
• in our partnerships with brokers so we can help them achieve success by fulfilling their alternative clients’ needs;
• as part of an investor’s plan to leave a financial legacy whether it comes in the form of shares or funds set aside for post-secondary education; and
• as part of an Investment Advisor’s investment options, offering access to a professionally managed portfolio of short-term, residential mortgages.

Leading From the Front ​

Our CEO, Gavin Marshall, leads by example, making his company (Magenta Capital Corporation) a place where ‘Your Tomorrow Matters’ is more than a slogan. In his own words, “We all want to build a better world. To do so is how we transcend today and touch the tomorrows we shall never see.”  Our CEO is someone who would not have been able to attend post-secondary education without the grants in place at the time. Therefore, the cause of access to higher education has always been close to Gavin’s heart. Gavin is:

• the leader of the Campaign for Momentous Change at Trent University (TU);
• has been an avid volunteer for many years serving as the inaugural chairperson of Trent’s Philanthropic Advisory Committee; and
• a member of the Advancement Board of Governors External Committee.

Marshall has lent his philanthropic support to several University funds and initiatives, including the Student Centre, an International Nursing Placement, and a Philanthropic Fellowship position.

Magenta’s Inaugural Purpose Day​

On June 12^th and 13^th, we participated in our inaugural Purpose Day- a day where Magenta facilitated our employees’ ability to volunteer in Ottawa and Toronto, the two cities our offices call home. For our first year, we stepped up in support of our local food banks: both the Ottawa Food Bank as well as Toronto’s Daily Bread. In Ottawa, we assisted with bringing in the summer harvest at the community farm, which will help stock the bank’s shelves with fresh produce, while in Toronto we sorted donations for distribution throughout the Greater Toronto Area. We look forward to using Purpose Day to explore future opportunities to engage with and uplift the communities we work in for many years to come!

Our Trajectory​

Magenta Capital Corporation will be participating in this coming GivingTuesday on December 3, 2024. Canada Helps created GivingTuesday in 2012. Canada Helps is Canada’s foremost online destination for connecting charities to donors. It started as a simple idea: a day that encourages people to do good. The idea caught on and has grown around the world, inspiring hundreds of millions of people to give, collaborate, and celebrate generosity, with over 50 million dollars donated last year alone.

Every generation has believed in tomorrow. They wanted to build a better tomorrow for themselves and especially for their children. That’s the Magenta story. That’s why it’s important that Magenta gives back. Our team is committed to making meaningful contributions and aspiring to do more for our customers and our communities.

Knock, Knock? No Doc!

At Magenta, we know there are many reasons why clients might require equity-based mortgage products. For some, unexpected challenges such as the COVID-19 pandemic may have left a mark on their credit or a gap in their tax filings that make applying for traditional mortgages difficult, regardless of their current assets and income. Others might simply have an income that’s difficult to verify, whether because they are self-employed, or their income is from a separation or bereavement, rather than employment. With these challenges in mind, let’s explore how Magenta’s No Doc mortgages can be a game-changer for alternative borrowers who fall just outside of traditional lending criteria.

Business For Self

Magenta offers No Doc mortgages tailored to alternative borrowers whose circumstances may not be best served by other institutions. For instance, consider the small business owner looking to use home equity to fund their business. If that business has a significant cash component, it will lack the verifiable income needed to qualify for a bank loan. But with Magenta’s No Doc mortgages, that borrower would only need to provide proof of ownership of a marketable home in a high-quality location to apply for a No Doc mortgage with up to 75% loan-to-value (LTV).

Rentals

Consider also the self-employed property investor hoping to get a mortgage on a rental property to free up the capital to renovate their other projects. Due to the fluctuating nature of their cash flow, they may lack the evidence to prove their ability to repay a loan, despite their actual financial capacity being more than sufficient. With a Magenta No Doc Mortgage for Rental Properties, not only is there a 100% offset on rental income with no maximum number of doors, but there is also up to 75% LTV on student rentals. Furthermore, Magenta offers 2-year terms in addition to traditional 1-year terms to better suit the needs of a property investor.

Our solutions accommodate your alternative borrower clients by placing the burden of proof on the quality of the property to be mortgaged. Keep reading to find out why you shouldn’t knock no doc:

1. Smaller Monthly Payments: Magenta offers 50-year amortization or interest-only payments. This balances our rates in favour of smaller monthly payments, passing the benefits on to your client’s cash flow.
2. New Longer Terms: Magenta is proud to have recently added 2-year terms as an option, in addition to our traditional 1-year term offerings.
3. 24-Hour Quick Closes: Has a borrower’s lending institution option fallen through? Our team will put in the work to help you meet your client’s deadline.
4. Capitalized Fees: We capitalize lender fees and broker compensation. This means the cost is added to the client’s principal and spread over the life of the mortgage.

 
See our selection of no-doc mortgages for yourself- all funded this year:

No Doc Mortgages are available in urban, small centre and rural locations throughout our lending areas. Please view our interactive Google Map or speak with your Magenta representative to find out more.

Interested in what Magenta has to offer?  Connect with our mortgage origination team, or click here to learn more.

Spotlight on Second Mortgages 

At Magenta, we know there are many reasons why clients choose to take out second mortgages. For some, second mortgages are valuable financial management strategies for dealing with debt efficiently at lower interest rates. For others, second mortgages are an avenue for funding the acquisition or improvement of homes, paying tuition for oneself or one’s family, or any one of life’s other major expenses.

Business For Self

Magenta offers second mortgages tailored to the needs of alternative borrowers whose unique circumstances may not be best served by other financial institutions. For instance, consider the small business owner looking to use home equity to fund their business. If that business has a significant cash component, it would lack the verifiable income needed to qualify for a bank loan. But with Magenta’s Stated Income Program for Second Mortgages, that borrower would only need to provide non-traditional income documents like business ownership, bank statements and other supporting documentation to qualify for a Stated Income Second Mortgage with up to 75% loan-to-value (LTV).

Rentals

Consider also the property investor hoping to get a second mortgage on a rental property, but running up against the limits banks place on the number of rental properties a borrower can have. With a Magenta Second Mortgage for Rental Properties, not only is there a 100% offset on rental income with no maximum number of doors, there is up to 75% LTV on student rentals. Furthermore, Magenta offers  2-year terms in addition to traditional 1-year terms to better suit the needs of a property investor’s longer view.

Our solutions are designed not only to address your client’s short-term credit challenges but also to help them return to traditional lending channels as soon as possible. Keep reading to find out why Magenta’s mortgages are worth a second look:

Smaller Monthly Payments

We offer up to 50-year amortization, or interest-only payments, and balance our rates and fees in favour of smaller monthly payments, passing the benefits on to your client’s cash flow.

New Longer Terms

Magenta is proud to have recently added 2-year terms as an option on our second residential mortgages, in addition to our traditional 1-year term offerings.

24-Hour Quick Closes

If a borrower’s lending institution option falls through, our team will put in the work to help you meet your client’s deadline.

Capitalized Fees

We capitalize lender fees and broker compensation, meaning the cost is added to the client’s principal and spread over the life of the mortgage.

No Notice of Assessment? No Problem

Even clients with low or no documentation verifying their income are eligible for second mortgages through Magenta, subject to only a small increase in their starting fee.

Simplified Financial Planning

We’ll match the maturity date of our second mortgage solution with your client’s first mortgage, simplifying their financial planning.

A selection of second mortgages funded this year (borrower and identifying property details have been removed):

* Small Centre refers to properties located in towns with a population of 1,000 or more within 45 minutes of one of our urban centres.  Rural refers to properties with septic and well access within 45 minutes of one of our urban centres.

Second Mortgages are available in urban, small centre and rural locations throughout our lending areas. Please view our Google Map or speak with your Magenta representative to find out more.

Interested in what Magenta has to offer?  Connect with our mortgage origination team, or click here to learn more.

The Canadian Federal Budget 2024 and You: Navigating the New Economic Landscape 

The Canadian Federal Budget 2024 has arrived, bringing a host of new policies, tax adjustments, and funding allocations aimed at addressing the nation’s economic opportunities and challenges. In this article, we break down the key elements of the budget to help you understand its implications, especially as they pertain to Magenta investors.

Government policies can often be overwhelming, filled with complex details and a laundry list of exemptions and policies. It can be challenging at times to find what is and is not relevant to your day-to-day life. Our summary focuses on the most relevant points to make it easier for you to grasp what matters most to your financial decisions. Before making important financial decisions, use this article as a starting point to better understand the budget and to engage in informed discussions with your financial advisors.

Canadian Federal Budget Changes to the Capital Gains Tax

To reduce the appeal of real estate as a class of speculative asset, the federal government will be increasing the capital gains tax on June 25th with a view toward driving down the cost of housing. To break this down further, whenever you sell an asset or investment for more than you paid for it, that difference is a capital gain. Conversely, when you sell an asset for less than you paid for it, this is a capital loss. These assets or investments could take the form of:

• stocks and bonds;
• shares in a mutual fund; or
• physical property (with the notable exception of gains from the sale of your primary residence), to name a few.

As an individual, the changes coming into effect on June 25th only apply if you stand to make more than $250,000 in a single year from capital gains (after taking into consideration capital losses)- up to that point, you will still pay the current capital gains tax of 50%. It is only for capital gains over $250,000 that the 66.67% rate comes into effect. On the other hand, all capital gains made by a corporation or trust will be taxed at the new rate of 66.67%.

Managing Your Tax Burden

You can take many steps to manage your finances when it relates to the 66.67% rate. For instance, income earned and funds withdrawn from a Tax-free Savings Account (TFSA) are not subject to the capital gains tax but do have strict annual contribution limits. Capital gains income placed in a Registered Retirement Savings Plan (RRSP) is not taxed until the funds are withdrawn, at which point they are taxed at your marginal tax rate. Your Magenta shares are both TFSA and RRSP eligible.

The federal government taxes based on your net capital gains, rather than your gross capital gains. Knowing when to sell an underperforming asset or investment for less than you paid for it (thus creating a capital loss) can be a great long-term strategy to keep your annual capital gains within a favourable tax bracket. This provided that the mitigation in potential additional taxes is greater than the immediate loss.

Capital gains related to the sale of qualified small business corporation shares or qualified farm or fishing property are considered tax-exempt up to a limit of one’s lifetime capital gains exemption (LCGE). As a Canadian, your LCGE will increase from $1,016,836 to $1.25 million on June 25th, alleviating capital gains taxation for those specific investment classes.

Looking Ahead

As a Canadian, your marginal effective tax rate (METR) is 14.5%, which is the lowest among all G7 counties. The international Organisation for Economic Co-operation and Development (OECD) calculates your METR. This calculation takes your federal and provincial income tax rates and combines them with the effective tax rate from government benefits, credits and tax deductions that are dependent on your income.

Canada’s inflation rate has decreased from 8.1% in June 2022 to 2.8% in February 2024. The introduction of the Canadian Entrepreneurs’ Incentive, offering a lower capital gains tax rate of 33.3% up to $2 million in lifetime capital gains from selling small business shares, positions Canada as an attractive destination for business growth and investment.

There have been many changes to the Canadian Mortgage Charter, namely:

• new provisions that allow for 30-year amortizations for first-time home buyers purchasing newly constructed homes; and
• expanded access to Halal mortgages among other alternative financing options.

This will allow younger Canadians and Muslim Canadians to participate in the housing market like never before- adding two untapped demographics of borrowers to Magenta’s diverse portfolio.

For more information on the federal budget, please visit the Government of Canada website.

For more information on investing in Magenta shares, please reach out to us.

Disclaimer

The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.

Digital Safety with Magenta: Password Protection

In today’s digital age, protecting your financial identity is vital. With the launch of our online broker and investor portals, we want to ensure you are following digital safety best practices around identity theft and financial fraud.

Our Broker Portal is an integral part of our delivering fast, flexible, and easy mortgage solutions for our brokers servicing the needs of alternative borrowers.

Our Investor Portal serves as a convenience feature for our investors never wavering on our commitment to personalized service.

Scroll down to learn more about how you can explore our customer portals while ensuring you are safe with your information.

Protecting Your Identity

Protecting your identity starts with securing your digital presence. Your online accounts, especially those related to financial services, are prime targets for cybercriminals. The security of these accounts heavily relies on the strength and secrecy of your passwords.

Passwords serve as keys to your digital life. They grant access to your email accounts, social media profiles, online banking services, and more. Therefore, the security of your passwords is directly tied to the security of your personal information.

The Importance of Password Protection

Password protection is a critical aspect of online security. A strong, unique password is the first line of defence against unauthorized access to your accounts. Strong passwords keep your personal information confidential, protect your identity and ensure the security of your assets. Weak passwords are easily guessable and crackable, making them a soft target for cybercriminals. They can lead to unauthorized access to your accounts, identity theft, financial loss, and even damage to your reputation.

How to Create a Strong Password

• A strong password consists of at least 8 characters and includes a mix of uppercase and lowercase letters, numbers, and symbols (for example, Gr@H4!7#).
• Avoid Personal Information: Your password should not contain easily identifiable information such as your name, birthdate, or common words.
• Changing your password every six months enhances your account’s security by making it harder for cybercriminals to gain unauthorized access.

Digital Safety Tips to Keep in Mind

• Your financial institution will never ask you for your personal information through email or text.
• Always contact your financial institution when in doubt or if you notice any unfamiliar activity on your account.
• Some financial institutions use multi-factor authentication to reset passwords. Make sure you are familiar with which institutions will text you a temporary password.

Password Hygiene With Magenta

• Magenta will not prompt a password reset on its own. You will always prompt your password reset.
• Your password reset will come to you through the email that you used to register with the portal.
• We will not initiate a temporary password after the account activation Welcome email.
• Never share or give your password away.

Click here to access the Broker Portal.

Click here to access the Investor Portal.

Disclaimer: The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writer’s current or former employers. Efforts have been made to verify the accuracy of the information and analysis provided, but it is intended purely for informational purposes. The writers alone are responsible for any opinions, forecasts, or predictions made. No guarantees are made regarding the precision or completeness of this document’s contents. This document is not intended to offer professional or investment advice. The writers are not liable for any consequences resulting from reliance on this piece. It is advised that readers consult with a certified expert before making any financial decisions.

Unlocking the Power of a RRIF

As you approach retirement, it’s important to have a solid plan to ensure a steady income stream. This blog discusses a popular and tax-efficient option, the Registered Retirement Income Fund (RRIF).

What is a RRIF?

A RRIF is a tax-deferred investment account designed for individuals who have reached retirement age and are seeking a steady income stream. It serves as an extension of your Registered Retirement Savings Plan (RRSP), allowing you to transfer your accumulated savings from your RRSP into a vehicle that provides regular payments while continuing to grow your investments on a tax-deferred basis.

RRIFs offer Flexibility

One of the primary advantages of a RRIF is its flexibility. Unlike traditional pension plans, which often have rigid payout structures, a RRIF empowers you to tailor your income stream to your unique financial needs and lifestyle preferences. You can choose the frequency and amount of withdrawals, subject to certain minimum requirements, enabling you to strike the perfect balance between meeting your expenses and preserving your savings.

Eligibility and Conversion Timeline

RRSPs are primarily focused on accumulating savings during your working years. The government mandates that these accounts be converted into a form of retirement income by the end of the year in which you turn 71. This is where RRIFs come into play, providing a seamless transition from the accumulation phase to the distribution phase of your retirement planning.

The conversion process is straightforward: you can transfer your RRSP holdings directly into a RRIF, typically on a tax-deferred basis. Until you start making withdrawals, you won’t incur immediate tax consequences, allowing your investments to continue growing tax-free.

Key Considerations

The Government of Canada has established a schedule that explains the minimum amount you must withdraw from your RRIF based on your age and the value of your account at the beginning of the year. However, note that you can elect to have your RRIF payment calculated based on your spouse’s or common-law partner’s age, rather than your own. This flexibility allows you to adjust your withdrawals based on your changing financial needs and circumstances throughout retirement. It is also worth keeping in mind that withdrawals from your RRIF are subject to income tax at your marginal tax rate. You can learn more about this by speaking with your financial advisor or visiting the Canadian Revenue Agency’s (CRA) articles on the topic.

Converting your RRSP into a RRIF

When you convert your RRSP into a RRIF, although you cannot continue to add to the account, you can continue investing in a wide range of eligible investment products. Examples of eligible investment products might include:

• cash,
• guaranteed investment certificates (GICs),
• mutual funds,
• bonds, and
• equities.

Whether self-directed or via a professional, this versatility allows you to maintain a well-diversified portfolio tailored to your risk tolerance, personal circumstances and investment objectives.

Receiving your RRIF Payments

When it comes to receiving your RRIF payments, financial institutions typically offer a variety of options to accommodate your preferences. You can choose to receive payments in:

• cash,
• via electronic fund transfer (EFT) to your bank account, or
• as an in-kind transfer to a non-registered investment account.

You can select the frequency of your payments, ranging from bi-monthly to annually. It allows you to align your income stream with your budgeting and cash flow requirements.

There are many other considerations such as spousal or common-law situations, attribution rules and rollback options, fees, and more. It is crucial to evaluate your options and consult with a professional to determine the most suitable approach for your unique circumstances.

Integrating RRIFs into Your Retirement Plan

While RRIFs are a powerful tool for generating retirement income, they should only be viewed as part of a complete retirement plan. Your holistic retirement blueprint should encompass various income sources, investment strategies, and risk management considerations.

Working closely with a qualified financial advisor allows you to develop a retirement plan that integrates your RRIF with other retirement vehicles. Examples of retirement vehicles are:

• pensions,
• annuities, and
• non-registered investments.

Your retirement plan should be tailored to your specific goals, risk tolerance, and lifestyle aspirations. Take some time to think ahead. It will provide you with the financial security and the peace of mind you deserve when you retire.

There are many useful sites and tools, like the Canadian government website, that can help you learn more about RRIFs so you will be prepared for conversations that will help you best manage your retirement.

For more information about Magenta Capital Corporation please visit our About page.

Disclaimer

The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.

Unlocking the Power of an RESP

The Essence of RESPs: Securing Educational Futures

A Registered Education Savings Plan (RESP) is a tax-advantaged investment vehicle designed to assist families in funding their children’s post-secondary education. This long-term savings strategy empowers parents, grandparents, and other contributors to proactively plan and invest in higher education, be it at trade schools, colleges, universities, or apprenticeship programs.

Recognizing the significance of accessible education, the Canadian government provides incentives for RESP contributions through grants, making these plans beneficial for families across socioeconomic spectrums. By leveraging the power of compound growth and government assistance, RESPs are a tool for financing educational aspirations and may help reduce the potential burden of student debt.

There are a few things to consider when informing yourself about RESPs:

1. The type of RESP
2. Personal contributions and government grants

In this article, we will discuss the types of registered education savings plans as well as government grants. Be sure to monitor Magenta’s social media channels for our next blog on strategies and tailoring your investment.

The Type of RESP

Individual RESPs

Characterized by their simplicity, individual RESPs allow anyone to open and contribute to an RESP for a designated beneficiary. These plans offer a straightforward path to educational savings, making them an accessible choice for many families. You cannot have more than one beneficiary on an individual RESP.

Family RESPs

Designed to accommodate multiple beneficiaries within the same family, Family RESPs enable parents, grandparents, and siblings to collectively contribute towards the educational pursuits of their related children or grandchildren. This plan type fosters a collaborative approach to investing in the futures of loved ones. However, while you can have multiple beneficiaries on this plan, only the subscriber can make the deposit.

Group RESPs

Group RESPs allow a collective of individuals to pool their resources and contribute towards a single beneficiary’s education. This arrangement transcends familial ties, fostering a sense of community and shared responsibility in nurturing the academic aspirations of the next generation. Each group plan is different and has its own rules.

Personal Contributions and Government Grants

At the heart of an RESP’s effectiveness lies a strategic combination of personal contributions and government incentives, working in tandem to maximize the growth potential of your educational savings.

Personal Contributions

While RESP contributions are not tax-deductible, they serve as the foundation upon which your child’s educational fund will be built. Contributors can allocate funds annually, subject to a lifetime maximum of $50,000 per beneficiary. To optimize government assistance, it is advisable to contribute at least $2,500 per beneficiary each year. Reaching this threshold unlocks the maximum annual grant entitlement. Subscribers can go back a year to invest the $2,500 per year for their beneficiaries if they miss it. Contact the Canada Education Savings Program (CESG) at 1-888-276-3624  for more information to find out your contribution amount.

Government Grants and Bonds

The Canadian Education Savings Grant (CESG) is a powerful incentive that matches a percentage of your contributions. For children under 18, the government contributes 20% of the first $2,500 contributed annually, up to a maximum of $500 per beneficiary per year. This grant can accumulate a lifetime maximum of $7,200 per beneficiary, providing a substantial boost to your educational savings.

Moreover, low and middle-income families may be eligible for the Additional CESG (A-CESG), which can add an extra 10% or 20% to the first $500 contributed annually, further amplifying the impact of your contributions.

Furthermore, for families facing financial constraints, the Canada Learning Bond (CLB) offers a non-repayable grant of up to $2,000 for eligible beneficiaries, providing a head start on their educational journey.

Investment Growth

Once contributions and government grants are deposited into the RESP, they are invested in various financial instruments, such as mutual funds, stocks, bonds, and guaranteed investment certificates (GICs) etc. This strategic investment approach harnesses the power of compound growth, allowing your educational savings to accumulate markedly over time. Potentially, this could yield substantial returns by the time your child is ready to pursue their post-secondary aspirations.

What’s to come for RESPs?

Finally, according to the new federal budget, from 2029 onward, parents may be required to open RESPs for newborns. Stay tuned in the coming months for more information on RESPs. For more information on the CESG visit their website or call 1-888-276-3624.

Disclaimer

The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.

Open Term Versus Closed Term Mortgages: Know What Works for You

There are many things to consider when your mortgage is coming up for renewal. As the maturity date approaches, your renewal paperwork will arrive and you will probably be offered the option of opting for either an open term or a closed term.

Confused as to what the difference between the two might be?  Here is a breakdown of what each type of term involves:

Open Terms
Open terms always have a higher interest rate as it expected that the mortgage will be paid out on or before the maturity date.  30 days’ written notice is generally required in the event of full or partial pre-payment.  A bonus is calculated on a per diem (per day) interest basis will apply in the event that written notice of less than 30 days is provided (e.g. 15 days’ written notice –  bonus equivalent to 15 days’ interest).  Notice must be in the form of a written request from the mortgagor’s solicitor, a title insurance company, or a financial institution, specifying the amount and date of the prepayment.

Closed Terms
Closed terms receive a lower interest rate, but it is expected the mortgage will remain until maturity. In the event of pre-payment in whole or in part prior to the maturity date, a pre-payment penalty equivalent to the greater of: a) three months’ interest at the interest rate prescribed in the renewal agreement; or b) the interest rate differential based on the difference between the interest rate prescribed in the renewal agreement and the lender’s posted interest rate for a closed term that is the next shortest to the remaining term of the mortgage will apply. The pre-payment penalty will be calculated on the principal amount to be prepaid.

Choose the type of term that works best for you and return the completed paperwork to your lender. It’s a good idea to make note of the first date of your new payment and the new amount that will be debited from your account.

About Magenta Capital Corporation
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, call us at 888-267-1744 or  visit Magentacapital.ca.

The Mortgage Renewal Process: What to Expect During the Mortgage Renewal Process

The maturity date of your mortgage is fast approaching. The maturity of your mortgage gives you an opportunity to review your financial situation and make some decisions based on your financial goals and current situation.

If you discussed an exit strategy with your mortgage broker, you may be preparing to refinance with a new lender at a lower rate. If it suits your needs to renew your current mortgage, here are a few things to keep in mind both before and during the process:

Here are some tips to prepare for your renewal.

1. Ensure your account is current: If your mortgage account has fallen behind, make arrangements to bring it back into good standing. Work with your lender to find a solution that suits everyone.  Small changes, such as moving your monthly payment to a new day, can make a difference.

2. Keep your home insurance in good standing: If your insurer has changed since you originally obtained your mortgage, make sure you let your lender know!

3. Keep the home in a good state of repair with no deferred maintenance: Don’t put off those home maintenance projects, big or small. Touch up the paint. Mow the lawn. Make sure the roof, furnace, and electrical wiring are in good repair.

What to expect at renewal.

1. Renewal Options: Your renewal options will be sent to you in advance of the maturity date. Review the options you have been offered. You may wish to discuss your options with your bank or mortgage broker.

2. ‘Business-for-Self’ Income: If you are ‘business for self’ or have ownership in a business, you may be asked to provide confirmation that HST and Source Deductions are being remitted to Revenue Canada.

3. Second Mortgages: If you have a second mortgage you may be asked to provide a current first mortgage statement. Most lenders will either send these out annually, or provide a way for you to access the information on their website or via online banking.

4. Income Verification: You may be asked for updated income verification. Gather or print your two most recent pay stubs, just in case you need them.

5. Appraisals: You may be asked for a new home appraisal. Appraisals always make note of any instances of deferred maintenance that are noted during the inspection. This is why keeping on top of projects around your home is so important.

Following these tips can ensure your mortgage renewal goes as smoothly as possible.

Register for Magenta’s back-end portal to access useful tools and forms today!

About Magenta Capital Corporation
Established in 1994, Magenta Capital Corporation (MCC) is one of Canada’s oldest and largest Mortgage Investment Corporation (MIC) managers.  MCC sources, underwrites and manages a portfolio of primarily residential first mortgages, secured by properties located in Eastern and Southwestern Ontario, two of the strongest, most recession resistant real estate markets in the country. MCC has a long track record of generating superior returns for the shareholders of Magenta Group MICs.  MCC exercises oversight responsibility for the Magenta Group MICs in its capacity as General Partner of three limited partnerships, each of which is wholly owned by one of the MICs.

For more information, call us at 888-267-1744 or  visit Magentacapital.ca.