Get A Mortgage Advisor On Your Side

Let’s have a serious talk.

Homeownership is a great life accomplishment for Canadians. Normally we buy our first home when we have the savings and the income to make the big leap. Why is buying a home so significant? We believe it’s because there is a sense of pride and responsibility that comes along with owning property. Homeowners have to care for the house and the property in order to improve it, and hopefully, one day sell it for more than you bought it for.

One thing we forget to care for is the mortgage that comes along with it. Who on earth wants to talk about finance and lending, it’s such a dry topic. Statistics Canada noted that almost 1/3 of budget spending for a Canadian households went into the shelter. That’s huge, year in and year out Canadians are spending massive amounts of money on their mortgages. Where Canadians are missing out is in the advice and consulting side of mortgages.

We have an arsenal of professionals that help us in life. We rely on doctors for our health, personal trainers for our fitness, accountants for our taxes, and lawyer for a whole slew of issues. So why don’t we seek proper advice on our mortgages if they’re such a significant part of our financial life? Well, we’re lazy and going to our bank is just easier.

Canadians who don’t use a mortgage broker are missing out on massive amounts of advice and potentially throwing away boatloads of money. We can’t be experts in everything, that’s why we surround ourselves with professionals for other aspects of our life. Even having the option of sending off an e-mail to your mortgage adviser to hear their thoughts and get their advice could help you immensely, and they are happy to do it.

Get a mortgage professional on your side, having a go-to person for mortgages and lending advice will only make your life easier.

Full Steam Ahead

There hasn’t been a better time for borrowing money than now. Mortgage interest rates are sitting at all time lows across Canada. Despite stricter lending criteria implemented July 1, 2020 the housing market expects to see further activity growth into the rest of summer.

It definitely goes without saying that COVID-19 has had a significant impact on the Canadian economy so far in 2020. The spring housing market of 2019 was much slower than 2020. The Canadian Real Estate Association (CREA) confirmed that May 2020 saw the lowest volume of sales in the last 20 years. Housing prices we able to maintain consistent levels as supply met demand.

In June national home sales climbed 63% according to CREA and a newly listed properties rose 49.5% from May to June. Canadians are taking advantage of the low interest rates and supply is hard pressed to keep up with demand. We suspect to see a very active housing market into winter as Canadians lock in their mortgages at these record low rates.

Housing Market Outlook

The Canadian Mortgage Housing Corporation’s latest Housing Market Outlook doesn’t expect to see housing sales and prices rebound to pre-COVID-19 levels until at least 2022. These findings are largely attributed to significant increases in unemployment across major Canadian cities. 

CMHC’s chief economist said in the agency’s report release that “ short-term uncertainty will lead to severe declines in sales activity and in new construction.”  The report focused on six major urban centres and goes into depth on the economic effects the housing market is expected to face post-COVID-19.

The uncertainty of home buyers and lenders headed into the rebound will be significant but confidence is expected to grow slowly as Canada returns to normalcy.

We have included below the breakdown of CMHC’s housing market performance forecast for end of 2021.

Toronto

  • Average price in Q1 2020 – $892,238
  • 2021 forecast: +2% (best case) / -11% (worst case)

Vancouver

  • Average price in Q1 2020 – $962,184
  • 2021 forecast: -7% (best case) / -15% (worst case)

Calgary

  • Average price in Q1 2020 – $438,194
  • 2021 forecast: -8% (best case) / -23% (worst case

Edmonton

  • Average price in Q1 2020 – $359,072
  • 2021 forecast: -9% (best case) / -24% (worst case

Ottawa

  • Average price in Q1 2020 – $498,000
  • Q2021 forecast: +2% (best case) / -14% (worst case)

Montreal

  • Average price in Q1 2020 – $444,748
  • 2021 forecast: +2% (best case) / -9% (worst case

Latest Housing Market Outlook

The Canadian Mortgage Housing Corporation’s latest Housing Market Outlook doesn’t expect to see housing sales and prices rebound to pre-COVID-19 levels until at least 2022. These findings are largely attributed to significant increases in unemployment across major Canadian cities. 

CMHC’s chief economist said in the agency’s report release that “ short-term uncertainty will lead to severe declines in sales activity and in new construction.”  The report focused on six major urban centres and goes into depth on the economic effects the housing market is expected to face post-COVID-19.

The uncertainty of home buyers and lenders headed into the rebound will be significant but confidence is expected to grow slowly as Canada returns to normalcy.

We have included below the breakdown of CMHC’s housing market performance forecast for end of 2021.

Toronto

  • Average price in Q1 2020 – $892,238

  • 2021 forecast: +2% (best case) / -11% (worst case)

Vancouver

  • Average price in Q1 2020 – $962,184

  • 2021 forecast: -7% (best case) / -15% (worst case)

Calgary

  • Average price in Q1 2020 – $438,194

  • 2021 forecast: -8% (best case) / -23% (worst case

Edmonton

  • Average price in Q1 2020 – $359,072

  • 2021 forecast: -9% (best case) / -24% (worst case

Ottawa

  • Average price in Q1 2020 – $498,000

  • Q2021 forecast: +2% (best case) / -14% (worst case)

Montreal

 

  • Average price in Q1 2020 – $444,748

  • 2021 forecast: +2% (best case) / -9% (worst case

What is a broker?

What is a broker?

A broker is a person or company that buys, trades, or negotiates on your behalf. A broker isn’t actually selling you a product or service. Rather, they’re connecting you to a provider or buying a product for you, as an intermediary. Some common types of brokers are mortgage brokers, stock brokers (including online brokers), and GIC brokers.

A broker will buy, sell, trade, and negotiate on their client’s behalf. A broker provides intermediary service and connects their client to the entity selling or buying the products in questions. The most common brokers Canadians include mortgage brokers and stock brokers.

Pros and cons of using brokers

A broker will possess expertise in their field and often have autonomy in their operations. With that being said, brokers typically can offer independent and expert advice in their field and are not require to push certain products on their clients. Another benefit of brokers is their access to markets that may not be available to retail consumers.

What is a mortgage broker?

A mortgage broker serves homebuyers by searching the market for the mortgage with the lowest rate and desired structure and features. A mortgage broker will compare the rates of the banks and private lenders to find competitive offerings and often are able to secure special deals. A mortgage broker provides expert advice on the specific products and assesses the needs and circumstances. Mortgage brokers generally are paid in commission at the time of the mortgage deal closing.

Alternatively consumers are able to approach their own bank as well as other banks and lender to seek out the best mortgage option, the downside is the time spent searching and comparing and the advice provided may be tilted to favour the employee of the lending institution as they work for the bank, not the consumer.

Considering a home equity line of credit

They are considering securing a home equity line of credit (HELOC) worth $800,000. Ultimately they decide against the HELOC. Alternatively, they will have the option of a regular loan if they require a large amount of cash in retirement. A few years later, they decided they want to purchase a cottage in a peaceful lake 45 minutes from their principal residence.

Unfortunately, they do not qualify for the amount they require to purchase the cottage as their retirement income doesn’t meet the bank’s requirements. The Martins would have been able to utilize their home equity line of credit to complete the purchase cottage on the lake.

A home equity line of credit is a versatile financial tool that provides access to funds when it counts.

 

How does a home equity line of credit work?

A home equity line of credit is a form of secured debt, the debt is secured to your home. As we learned with the Martins, HELOCs are approved base on income, securing the HELOC prior to retirement could save the homeowner a headache down the road.

The beauty of a HELCO is that you are not required to use the loan, in fact, you may never access the funds. You will only be charged interest on the money you borrow and being able to borrow those funds quickly and without hassle provides huge peace of mind to homeowners.

A home equity line of credit is also flexible with respect to the payments. It is up to the borrow whether they would like to make payments that cover the principal and interest or just the interest.

 

When should you get a home equity line of credit?

The majority of banks do not seek out and offer homeowners a home equity line of credit. You will need to consult a mortgage professional to discuss the details of your situation.

You will need to have equity in your home that you are able to borrow, ideally, you will also be earning a stable income.

A home equity line of credit is another tool that Canadians use to ensure their financial success and peace of mind, we encourage homeowners to organize a HELOC sooner rather than later.

CMHC Mortgage Rule Changes Coming

CMHC Mortgage Rule Changes Coming

Our mortgage specialists have summarized the recent CMHC changes coming to Canada starting next month.

The announcement made by CMHC included more restrictive underwriting criteria. These changes will be effective on July 1, 2020, and apply to new purchases thereafter.

Below is a list of CHMC’s Changes to Underwriting Criteria

The maximum Gross Debt Servicing Ratio (GDSR) is decreasing to of 35% of income. Prior to the changes, the ratio was allowed to be as high as 39%. The sibling of the GDSR is Total Debt Servicing Ratio (TDSR) which will have a new maximum of 42% of income, previously the maximum was 44%. The effects of the changes will come through in purchasing power for homebuyers.

  1. The new credit score minimum for at least one borrower will be 680. Prior to the changes, the minimum credit score was 600.
  2. CMHC will no longer allow borrowed down payments, also known as flex down payments. The housing transactions with borrowed down payments account for a negligible percentage of home sales.

    What do these changes mean for homeowners and homebuyers? These changes may generate stagnation in the housing market and lead to fewer home sales, as well as home prices. Ultimately, these changes have overlap and will affect upwards of 25% of housing sales.

    If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 1-885-869-8999 or email at info@propertyxpress.ca

    Please complete the application here to begin the first steps to becoming a homeowner

Should Homebuyers Use Mortgage Brokers

The process of purchasing a home is an experience roughly 75% of Canadians will go through in their lifetime according to the Mortgage Professionals Canada March 2020 report. Data has shown over the past few years that between 30-43% of consumers use mortgage brokers in their real estate transaction. There is an unbelievable amount of opportunity for Canadian to save by utilizing mortgage brokers based on that information. 

The average home price in Canada sits around $475,000. With an interest rate of 3.25% the interest cost on a 30-year amortized mortgage will be $267,159. Interest brings the total cost of purchasing that home to $742,159. Yes, that is correct, mortgages are massively expensive. Banks are making from the interest, and rightfully so, they are taking the risk of lending and should be compensated. But, here is where we have an issue, why would homebuyers consult only their bank for mortgage options. Whose interest do the bank representatives serve? (excuse the pun) A mortgage broker looks after the interest of their clients and negotiates with banks on the homebuyer’s behalf. If the broker is able to save even 0.05%, that translates into savings of roughly $5,000 for homebuyers

What is a mortgage broker?

A mortgage broker is a representative who serves homebuyers in finding mortgage products. Similar to a real estate agent in the sense that real-estate agent finds what housing is available on the market and helps negotiate the final sale price. A mortgage broker consults with a homebuyer on their financial circumstances and mortgage eligibility, then shops the market to find which lenders are offering the desired mortgage structure at the most competitive rate.

Mortgage brokers have access to many different forms of lending, whether it is small private lenders or one of the Big Five banks of Canada. Mortgage brokers are able to seek out what is available to homebuyers and provide them with the most competitive offers on the market.   

Pros and Cons of a Mortgage Broker

Below we have outlined the positives and negatives of using a mortgage broker when purchasing a home. 

Mortgage Broker Pros Mortgage Broker Cons
Easy of use: Brokers straight forward and can normally serve clients remotely without requiring a sit-down meeting New Experience: You feel comfortable walking into your bank branch.
Experience: Broader experience base Lender Access: Brokers may not have access to certain lenders
Competitive rates: Larger selection of mortgage options
Know where the mortgage stands: Compare the mortgage with the current market offering
Free: Brokers make a commission from the bank or lender. That means the lender pays the fee, not the homebuyer.
Serves the homebuyer: Brokers want recurring business and referrals. Good service will ensure their success

 

Let’s go into some more detail on the pros for using a mortgage broker in Canada:

Pros of using a mortgage broker

  1. Easy: Mortgage Brokers want the serve homebuyers. They serve their client and accommodate the client’s needs. In today’s age of technology, much of the document exchange is done electronically, or if you are old-school, the broker is more than happy to have a sit-down and go over the process.
  2. Free: The homebuyer doesn’t pay a cent for the mortgage broker services. Mortgage products have built-in fees that compensate the broker
  3. Experience: Mortgage brokers do business with many different lenders while serving their pool of clients. This allows them to gain broader experience vs. the in-house mortgage representative at the banks 
  4. Better rates: If a mortgage broker has recurring business with a lender they will receive volume discounts and be able to provide homebuyers with better rates
  5. Access to more lenders: Mortgage brokers have a breadth of lenders they can access and that allows them to shop the market and find the most competitive rate
  6. Independent: Mortgage brokers are responsible for building their own business and getting their own clients. They do not serve the banks or lenders and do not receive referrals from the lenders. Brokers will always serve the interest of their clients in order to gain recurring business and referrals.

Cons of using a mortgage broker

  1. New Experience: Everyone would feel more comfortable walking into their own bank and seeing the familiar faces. 
  2. Lender Access: Brokers might not have access to all lenders, but it sure beats having only one lender like the bank representative

COVID-19 Resource Guide

Canadian Mortgage and Housing Corporation

https://www.cmhc-schl.gc.ca/en/media-newsroom/coronavirus-update

CMHC Expands the Insured Mortgage Purchase Program

The Government of Canada has implemented the Insured Mortgage Purchase Plan (IMPP) made to stabilize the housing market in the current economic conditions.

The government will purchase $50 billion of insured mortgage pools through CMHC with the aim of providing stable funds for banks and mortgage lenders. Click here for more detail on the Insured Mortgage Purchase Plan.

Struggling to Pay Your Mortgage

1. Organize and clarify your affairs

Gather and organize your financial information.

  • Credit Cards
  • Loans
  • Bills (amount owing and due date)
  • Current income
  • Savings accounts
  • Investments
  • Other assets

2. Contact your mortgage professional

The faster you act the better off you will be. Connect with a mortgage professional if you are concerned about your ability to meet your financial obligation. If you don’t have mortgage professional use this link to connect with a mortgage specialist in your area.

3. Keep up to date

The situation is changing at an alarming pace. Consistently review the government announcements. We will keep this page updated with the most current information.

 

Government of Canada

Please refer here for details on the Government of Canada’s COVID-19 Economic Response Plan.

https://www.canada.ca/en/department-finance/economic-response-plan.html

 

Resources for Renters

Rental housing falls under provincial jurisdiction. Please refer to the table below for your provinces announcement regarding rental housing measures.

British Columbia https://news.gov.bc.ca/releases/2020MAH0048-000561
Alberta https://www.alberta.ca/assets/documents/COVID-19-suspending-eviction-enforcement.pdf
Saskatchewan https://www.saskatchewan.ca/government/news-and-media/2020/march/26/evictions-suspended
Manitoba https://news.gov.mb.ca/news/index.html?item=47219
Ontario https://news.ontario.ca/mag/en/2020/03/ontario-taking-action-to-protect-critical-front-line-justice-services-in-response-to-covid-19.html
Quebec https://www.rdl.gouv.qc.ca/en
New Brunswick https://www2.gnb.ca/content/gnb/en/news/news_release.2020.03.0139.html
Newfoundland & Labrador https://www.gov.nl.ca/releases/2020/exec/0326n03/
Nova Scotia https://novascotia.ca/news/release/?id=20200319004
Prince Edward Island https://www.princeedwardisland.ca/en/news/province-announces-moratorium-evictions
Yukon https://yukon.ca/en/news/government-yukon-making-sure-yukoners-have-home-security-during-covid-19
Nunavut No Official Announcement
Northwest Territories  https://www.nwthc.gov.nt.ca/en/covid-19-updates-nwt-housing-corporation