6 Dec

Why You Should Buy Now

General

Posted by: Maria Solverson

Why you should consider buying now and getting ahead of the market correction:

Rates are going up. Fast. Why?

5 year fixed rates are up about 1.25% since last year this time.

The Federal Government. They have taken steps in an attempt to regulate our housing market in the last few years. Toronto and Vancouver housing markets have grown beyond economic norms due to a variety of factors. The government began its steps to manage this by implementing new mortgage guidelines and rules nation-wide. Many of these are direct to the consumer, such as the benchmark qualifying rules, restrictions on rental and investment mortgages, and foreign investor restrictions/taxes. In addition, there have been new rules that are indirect to the consumer, and unfortunately not as publicized. Intense OSFI regulations have affected all lenders, including the major banks, monoline lenders, trust companies, credit unions and private lenders. Perhaps most notable, is the drastically increased capital reserve requirements for mortgage lenders. The government mandated a 3-year time window for mortgage lenders to fund these capital reserve requirements. Much of this is being funded by increased mortgage rates for the consumer. In addition, there have been regulations implemented regarding back-end insurance for conventional borrowers. The cost for this is also funded by the consumer in the form of higher interest rates.

Canadian Bond Yields. Bond yields determine the discounted 5-year fixed rate. They have been trending upwards, especially in the last 18 months.

US Economics. (Aside from social-political views of course) the Trump administration has grown the US economy, and they are incurring the longest expansion in US history. Basic economics will tell us that a recession is due soon. When that occurs, it will likely drive our interest rates downward. The timing for this is difficult to predict, and I am by no means an economist.

Most Canadian Economists predict that 5 year fixed rates will rise another 0.5% by this spring, and another 0.50% through 2019. Mortgage holders and prospective buyers should expect rates to be around 5% in the next 2 years, at which point we predict a further stagnation in the market and then rates dropping again.

Why Should I buy now, with all of this market correction business going on? I’m waiting for prices to drop.

Now is an opportunity to get ahead of the housing market with a 5 year fixed rate.
For example:

If the monthly payment is your concern:

• Buy a home at $400,000 today with 5% down @ 3.69% and your payment will be $2012.96
• If you wait for a year, and rates are 4.69% and you want to have that same payment, you’ll have to buy a house for $361,000. You would be looking at a monthly payment of $2229.26 on a $400,000 purchase
• This is a huge range in the Calgary market. Depending on the area you’re looking at, this can be the difference between condo or freehold, or attached or detached. Housing prices are not going to drop that quickly, these things take time. Also, if you work with us on a pre-approval, we can hold your rate for 120 days while you shop.

If longer-term interest savings is your concern:

• Buy a home today at $400,00 with 5% down. 3.69% and monthly payment at $2012.96
• After 5 years your principal paydown will be $53,045.00
• Buy a home next year at $400,000 with 5% down. 4.69% and monthly payment at $2229.26
• After 5 years your principal paydown less payment differential will be: $34,168.00
• That’s $18,877.00

If qualifying is your concern:

• If your annual household income is $92,000 today, you would qualify for the above loan scenario ($400,000 with 5% down) assuming you have good credit and do not have excessive loans/debts.
• If rates are 1% higher next year, with 5% down, you would only qualify to buy at $366,000.

Whatever your scenario may be, you can feel free to call me for mortgage advice.

6 Dec

Mortgage Qualifying Solutions

General

Posted by: Maria Solverson

Many people are having trouble getting the mortgage they want these days. Working with a Licensed Mortgage Advisor offers you not only access to a variety of products but also a variety of experience-based solutions.

Here are a couple strategies we have used to get home buyers qualified, who have had difficulty elsewhere:

CREATE THEIR DOWN PAYMENT

Take out an RRSP loan with a lender who has the right guidelines. You utilize a payment on the RRSP loan that fits into their long-term debt service ratios to qualify for a house. After 90 days you use the Home Buyers plan to withdraw the down payment. The advantage of our scenario is that our lender does not require the loan to be paid off to use the RRSP money for the down payment. Most RRSP lenders will demand that the withdrawn funds are used to pay the balance of the RRSP loan off in full. If they qualify, (in RRSP room and GDS / TDS ratios,) up to $25,000 in down payment could be available.

 

RE-WRITE A CAR LOAN TO REDUCE THE MONTHLY PAYMENT

We have a bank lender who rewrites car loans with a longer term creating a lower monthly payment.  Lower car payments can lead to a higher mortgage. Recently, we had clients with a newer vehicle with a large payment. With the new lower payment that we organized, they then were able to obtain a $70,000 higher mortgage. They were very happy that they were now able to purchase the house they really wanted NOT the house that the bank said they should be purchasing.

 

If you think you can benefit from these strategies or would like to know about other solutions, please contact me. Let me use my experience and skill as a licensed mortgage advisor get to know your situation and get you on the path to owning the home of your dreams.