This Demographic is Giving Real Estate Professionals a ‘Trillion Dollar Opportunity’
Plus, the Right Mortgage For Homeowners Over 55
Since the COVID-19 pandemic left its mark on the Canadian housing market, the real
estate industry has had its watchful eye on what to do next.
The housing market has been strong, and despite a drop in equity market valuations at
the beginning of the pandemic, there’s been a notable turnaround.
Following this period, what surprising demographic should real estate professionals be
thinking about – and how can homeowners make the most of this process?
A recent web seminar titled ‘Riding the Retirement Wave’ featured experts who offered
answers to these questions. The webinar featured Jason Mercer, the Toronto Regional
Real Estate Board’s chief market analyst, and Sue Pimento, the vice president of referred
sales at Home Equity Bank.
Recovery is a Puzzle
In summer 2021, the housing market is strong, and if Mercer is right, it’ll stay that way
for a while.
On the webinar, Mercer explains that housing demand is a puzzle made up of three
parts:
- Long-term population growth
- High employment rates
- High or increased income levels
All three factors, he says, are looking good in the near future.
With vaccination numbers increasing, population growth, immigration, and business
recovery are looking better than it has in a long time – and this, Mercer says, will lead to
an increased demand for housing.
On the subject of inflation, Mercer points to where borrowing costs are going.
“The Bank of Canada is laser-focused on inflation and keeping it around the 2% mark
over the long-term,” he said in the webinar.
It is anticipated that the Bank of Canada will raise interest rates, but the stress test will
ensure that homebuyers are approaching the process with a net of safety.
So, how can the real estate industry maximize success from what Mercer and many
others believe will be an uptick in demand? There’s a “trillion-dollar opportunity” with
one particular demographic.
Riding the Retirement Wave
On the webinar, Pimento explained that the current housing market tends to target
first-time buyers and younger groups like millennials – but this, she says, isn’t
necessarily the right way to find success.
Instead, Pimento suggests marketing to those over the age of 55, as there’s home equity
that can be worked with among this group.
“A trillion dollars – that’s how much home equity there is,” she explained, adding that 42
percent of homeowners in Canada are 55 or older.
The CHIP reverse mortgage offers homeowners in this age group the perfect
opportunity to capitalize on success – without having to down-size or compromise
similarly.
“Everybody has figured out downsizing doesn’t work - not very many people can yield
enough money to retire on, unless they move hours outside of their neighbourhood,”
Pimento explained. “No wonder they don’t want to list their home.”
CHIP is a type of reverse mortgage that allows homeowners to tap into the value of their
home without having to move or sell. This is done using the home’s equity and allows
homeowners to get up to 55 percent of their home’s appraisal value.
Homeowners who take advantage of CHIP may choose to help their children, finance
further purchases, or upgrade their home to increase its sale value.
“It’s simply a mortgage with optional payments,” Pimento said. “It’s a tax-free way of
accessing equity to finance retirement, among other things with very little qualifying
criteria”
If you’re 55 years of age or older, ask your mortgage broker if CHIP could be right for
you.
Home Sales, Property Listings See Drop In May
Data Reveals Decrease In Canadian Housing Market Activity
New data suggests that Canada’s fiery housing market might be finally cooling off.
The Canadian Real Estate Association (CREA) released its set of monthly statistics for May 2021 on June 15. The data shows that national home sales have continued a downward trend, dropping 7.4 percent from April to May.
Meanwhile, the number of new property listings across Canada has also dropped by 6.4 percent from April to May. This is the fourth month in a row that the ratio of sales to new property listings has dropped.
The news follows months of concern regarding Canada’s heated housing market. For months, demand for housing has gone far above the supply, leading to higher home costs and unmanageable mortgage rates. Experts have warned that Canada could be facing an overheated market this summer.
CREA’s latest data is reassuring for those concerned about overheating. The 7.4 percent decline in sales follows the 11 percent decline from March to April, and suggests that the market is ready to cool down.
“While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices,” said CREA chair Cliff Stevenson. "More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID-19 would also be expected to fade at this point given where we are with the pandemic.
CRA’s Senior Economist Shawn Cathcart added that, “with the synchronous cooling off of demand, supply and prices in recent months, one could draw comparisons to last year’s initial lockdowns, but this year feels different.”
Cathcart explains that the housing market initially came to a halt following the beginning of the COVID-19 pandemic in March 2021 – though it eventually picked up, demonstrating patterns that did not reflect what would normally be seen in a typical year.
“The slowdown in the market was coincident not just with record COVID-19 cases and fresh lockdowns but with the take up in the vaccination rate, so maybe we all finally have something else to think about other than housing and being stuck at home all the time,” he added. “Going forward, there is still a good probability of increased churn in resale markets as we get more certainty around our post-COVID lives and people move around more than they would have in a non-COVID world. But for now at least, with the light at the end of the tunnel so close, it feels like housing may take a back seat to us all starting to get our lives back to normal this summer
Canadian Homeowners Warned Following Rapid Increase In Mortgage Loans
Experts Fear Effects Of Red-hot Housing Market On Homeowners
Mortgage experts are warning that the recent sharp increase in mortgage loans will come at a steep cost for Canadians.
On June 18, the government reported that Canadians have broken the record for the fastest monthly increase of housing loans in the country’s history. Homeowners took out nearly $18 billion in new mortgage loans, leading to a total of $2 trillion in housing debt in the country. Canada’s total mortgage debt has grown by 7.8 percent over the last year.
Throughout 2021, Canada’s housing market has been red-hot; demand for housing has rested high above the supply, and prices have risen accordingly. With more debt being required to pay off mortgages, Canadians have gone in over their heads, experts fear.
C.D. Howe Institute economist Jeremy Kronick explains that the country’s sky-rocketing mortgage debt numbers are not surprising consider the state of the housing market.
“The fundamentals here are pretty clear,” he says. “Over the course of the pandemic there have been low interest rates, tight housing supply, and big increases in disposable income. At the same time, debt servicing costs are actually lower now than they were before the pandemic. So, you combine all those things, and it’s not really surprising that people are taking on more debt.”
The Bank of Canada has argued that new measures should be put in place to make it harder to obtain a mortgage – this would stop buyers from ending up with mortgages that they may be unable to pay off.
This month, Canada’s federal banking regular tightened rules pertaining to mortgage stress tests for the same reason.
As mortgage debt continues to rise, experts fear that homeowners will struggle to pay off their loans if the Bank of Canada raises interest rates later this year.
Inflation is expected to subside eventually – but if it continues to rise rapidly, experts believe interest rates could increase sooner than expected.
Pedro Antunes, chief economist at the Conference Board of Canada, warns that homeowners taking on larger mortgages should be aware of the risk they’re taking.
“The real risk is around a housing market correction,” he said. “We’re starting to see home prices declining and there’s a real risk this could unravel more than we expect.”
Following a heated housing market, the average price for a home in Canada has increased by 38 percent over the last year. Numbers finally began to show signs of cooling in May, with a slight decrease of home sales – and according to Antunes, we may see a slight correction in housing costs in the near future.
CHIP Mortgages – Now’s the Time!
Reasons to Consider a CHIP Reverse Mortgage
During the pandemic, seniors across Canada have been flocking to take advantage of CHIP Reverse Mortgages and there’s no sign of the trend slowing down. The Wilson Team of Mortgage Experts is happy to assist you in joining the growing number of Canadians who are benefiting from this opportunity.
What is a Reverse Mortgage?
A reverse mortgage is a loan secured against the value of your home, offered by HomeEquity Bank or Equitable Bank. It’s a convenient vehicle for taking advantage of the equity you’ve earned in your home over the years, instead of dipping into savings or cashing in your portfolio. Undoubtedly, the value of your home has grown over the years and is worth much more than you originally paid for it. Much of that equity is at your fingertips in the form of a reverse mortgage.
Once you are approved for a reverse mortgage, you can obtain your loan in a lump sum or installments. The money is yours to use for any reason: travel, home repairs, a fancy car, or helping your children make a down payment on their own home. You’re the boss.
CHIP (Canadian Home Income Plan) mortgages, the brand issued by HomeEquity Bank, allow seniors to borrow up to 55 per cent of the appraised value of their home – ideal when home prices are appreciating and interest rates on home loans are low.
There are also no monthly loan payments required. Seniors don’t pay back the CHIP until they sell the house, so they can stay in their homes and communities without worrying about the expense of doing so. Once the home is sold, the loan must be repaid; any balance remaining goes to the seniors or their estate.
Another bonus is that the money you borrow is tax-free and it does not affect any Old-Age Security or Guaranteed Income Supplement (GIS) benefits seniors are receiving. The homeowner must, however, maintain the home and remain current on property taxes and homeowner’s insurance.
Why Now?
Global News has reported that Canada’s two reverse mortgage lenders both saw a surge in loans in 2020: Home Equity Bank had a 14 per cent increase in new reverse mortgages during the last quarter of the year, while Equitable Bank doubled its reverse mortgage balance between Nov. 2019 and Nov. 2020. Part of this interest is due to concerns about long-term care, given the spread of COVID-19 in those facilities; seniors are more eager to age in place in their homes. However, much of the interest stems simply from the climbing house prices and the low mortgage interest rates that will allow seniors to get a loan cheaply to access the value buried in their home, an amount that has likely grown since it was purchased.
Easy to Arrange
The Wilson Team of Mortgage Professionals is here to guide you through the process of obtaining a reverse mortgage; it’s painless.
Not all lenders offer reverse mortgages. In Canada, the major recognized lender is HomeEquity Bank. The bank began in Vancouver in 1986 as the Canadian Home Income Plan Corporation. In 2009, it became a chartered bank, recognized as a Schedule 1 Canadian Bank, HomeEquity Bank. Today, its head office is in Toronto. Equitable Bank also offers reverse mortgages.
To apply for a CHIP Reverse Mortgage, you will need a current appraisal of your home’s value. Once you have the appraisal done, the lender will consider these factors in evaluating your application:
- Your age and your spouse's age;
- Location of your home;
- Type of home (e.g., detached, condo, townhouse, etc.);
- The appraised value of your home;
- The condition of your home; and
- Your home equity.
Once the lender approves your application, you’ll need the services of a lawyer to finalize the transaction. When you meet with your lawyer, you’ll need to have:
- Valid and adequate home insurance;
- Property tax statement (current year or deferred property tax statement);
- Two pieces of valid identification;
- Power of Attorney and Power of Attorney Identification (if applicable); and
- Statements for any secured debt.
Before deciding upon a CHIP Reverse Mortgage, you should consult your financial advisor – and the Wilson Team will be happy to recommend one of the professionals with whom we work regularly. There are advantages and disadvantages to choosing a CHIP.
Advantages
- Tax-free money to use as you see fit;
- CHIP income doesn’t affect Old-Age Security or Guaranteed Income Supplement benefits;
- No need to make regular payments on the loan;
- You maintain ownership of your home;
- Your income and credit are not part of the evaluation for a CHIP;
- Repayment is not required until you sell your home, the surviving partner passes away or you reach the maximum borrowing amount;
- The amount you owe can never exceed the value of your property;
- Interest paid on the CHIP is tax-deductible if the loan was used to earn investment income;
- You and your beneficiaries will not be responsible for any shortfall if interest rates rise and housing values drop; and
- You can repay the loan at any time, although penalties may apply.
We at the Wilson Team of Mortgage Professionals would be happy to help you explore the CHIP Reverse Mortgage and determine if it is right for you. Contact us today for an exploratory meeting.
Bank of Canada Warns Homeowners Will Be Vulnerable Following COVID-19 Debt
A New Report Sheds Light On The Housing Market Over The Last Year
The Bank of Canada has published its 2021 Financial System Review. The review's purpose is to determine what factors affect financial stability among Canadians. It also identifies challenges within the country's financial system that it says "will need to be watched closely."
The review provides in-depth analyses on the experiences of homeowners from the start of the COVID-19 pandemic until now – and some of the report's messages warn that home owners have been left vulnerable.
Specifically, the review claims that many Canadian homeowners have taken on mortgages that are considerably large in comparison to their income. As a result, the review explains that unprecedented events, like a job loss, could hit these homeowners harder.
The report is paired with information pertaining to changes to homeowner data over the course of the pandemic. For example, total household debt has risen by four percent since last spring. It rose significantly after the housing market heated up last summer.
The percentage of 'costly loans,' or those that are 4.5x higher than the household's income, rose as well.
How a Change in Stress Rates is Addressing Debt Problems
According to the bank's report, the housing market is behaving similarly to that of 2016 – notably, a time followed by stress tests were implemented for mortgage applications in Canada. A stress test determines whether you would be able to afford a hypothetical mortgage if your circumstances were to change. Buyers must 'pass' the test in order to proceed with their mortgage.
Now, mortgage stress test rules are changing in Canada. According to the Office of the Superintendent of Financial Institutions, qualifying rates for stress tests will change on June 1. Following these changes, buyers must be able to afford whichever rate is higher: a rate at 2 percent above the contract rate, or 5.25%.
The federal government also announced that it would set the same standard for insured mortgages, hoping that buyers will be stopped from racking up debt.
Accompanying the announcement, Finance Minister Chrystia Freeland said that "the recent and rapid rise in housing prices is squeezing middle-class Canadians across the entire country and raises concerns about the stability of the overall market." She added that "maintaining the health and stability of Canada's housing market is essential to protecting middle-class families and to Canada's broader economic recovery."
April Data Shows Slight Dip In Fiery Housing Market
Home Sales Drop In Canada After Record-Breaking March
Data from the Canadian Real Estate Association (CREA) shows that the home sales dipped in April following a month of historically high sales.
The CREA, which represents realtors in Canada, released its April data on May 17. Most notably, the data shows that sales dropped by 12.5 percent across the country compared to sales in March. Additionally, most markets in Canada – about 85 percent in the country – saw drops.
March saw a boom in home sales in Canada, and experts suspect that it happened due to the unpredictability of life following the beginning of the COVID-19 pandemic last spring.
"While housing markets across Canada remain very active, there is growing evidence that some of the extreme imbalances of the last year are beginning to unwind, which is what everyone wants to see happen," said CREA chair Cliff Stevenson.
The pandemic has dramatically affected the real estate market. Normally, the market follows a predictable pattern: home sales rise in the spring, peak in the summer, and dip when fall begins. When the pandemic began, however, sales dipped almost instantly. They finally began to rise again in May – and March 2021 has been the busiest month on record.
With April 2021 showing signs of slowing down, it’s not clear yet whether the year’s peak came early or if sales will continue to fluctuate.
According to TD Bank economist Rishi Sondhi, “More months of information are required to assess whether the market still has some upward momentum, or if activity is indeed on a cooling path.” He added that sales may lower as interest rates rise and stricter stress test regulations are implemented.
Mortgage broker Samantha Brookes told CBC News that would-be buyers have stopped trying to find a home, causing the April drop.
“Buyer fatigue is real,” she said. “If you are putting in offers on 10, 20 homes, you're tired and probably thinking you are wasting your time right now […] because there's nothing in the price range for the average person right now."
Pricing data was also revealed in CREA’s report. The average price of a home in Canada reached $696,000 – an increase of 41.9 per cent from the average price in April 2020.
CREA notes that large markets like those in Toronto and Vancouver likely skewed the average prices. They suggest looking at the House Price Index, which functions similarly to the average price, but takes market relativity into account. The HPI rose 23.1 percent from last April.
As Canada’s hot housing market continues to make national news, experts are anticipating data recorded during May to determine what path the market is on.
Consider a Cottage … or a Vacation Home
Why Now is the Time to Invest in a Secondary Property
The COVID-19 pandemic has given all of us cabin fever. Especially with spring is upon us and temperatures warming, we’re all thinking about getting outdoors, feeling some sunshine on our faces, and breathing fresh air.
It’s the perfect time to consider purchasing a cottage, vacation home, or recreation property, especially if you’re working remotely. Why not work from a cottage, rather than from cramped quarters in an urban environment?
Imagine sitting by the water, swimming in a pristine lake, or casting a fishing line to catch some dinner. And, although we’ve been talking about warmer weather, there are pleasures to be had at a cottage or vacation home year-round: roaring fires in the fireplace or woodstove, hiking, cross-country skiing, and snowmobiling among them.
A cottage offers a wonderful escape from your daily experience – and it can also be profitable if you choose to rent it for all or part of a season. In addition, you don’t need to shoulder the entire financial burden yourself – you can share ownership with family or a friend
The Wilson Team of mortgage professionals will be happy to guide you through the ins and outs of shopping and buying a second property. Why not start reaping rewards now?
Types of Vacation Properties
Vacation homes are classified as Type A or Type B for mortgage purposes.
A Type A cottage property is usable year-round:
- Is essentially a second home;
- Has a full foundation (immovable);
- Is a four-season property with central heating and year-round road access;
- Is located in an area that has reasonable and demonstrated resale value;
- Has a well, municipal serviced or cistern for its water source. Water must be drinkable;
- Must, as a minimum, have a kitchen, 3-piece bathroom, bedroom, and common area;
- Must be zoned and used as residential, rural, or seasonal; and
- Is essentially a single unit.
A Type B cottage property:
- Requires a full foundation (immovable);
- Doesn’t require winterization;
- Doesn’t require year-round access;
- Doesn’t require a permanent heat source; for example, a wood stove, fireplace, stove, or heat blower is acceptable;
- May have a floating foundation (sitting on blocks);
- Need not have a potable water source – a lake water intake is acceptable; however, running water is required;
- Can have indoor plumbing that is chemical, portable, or a holding tank; and
- Access may be by boat only.
Valuing a Vacation Property
The amount of mortgage financing you require is dependent on the property’s value. The value of your vacation property is determined by an assessment, conducted every four years by the Municipal Property Assessment Corporation (MPAC). The newest assessment values were made available on Jan. 1, 2020.
If your property is a waterfront home, it will generally be more valuable than an inland cottage. MPAC will consider your property a waterfront lot if “it has direct access to a natural or man-made waterway such as a lake, river, channel or canal. Properties separated from the water by a right-of-way, private road or unopened road are also considered waterfront.”
Five key factors contribute to MPAC’s assessment and account for 85 per cent of the property’s value:
- Location;
- Square footage of living area;
- Property’s age;
- Lot dimensions; and
- Quality of construction.
Other considerations include the body of water your property is located on, the amount of water frontage you have, the shoreline composition, sanitary services, and water source.
Mortgage Eligibility for a Vacation Home
If you are planning to purchase a Type A property, you must:
- Have sufficient income to carry all debts, including carrying costs on your principal residence
- Have a minimum credit score of 650 as the primary earner
- Occupy the property yourself or have a relative live there rent-free
To cover down-payment costs, you may use funds given as a gift from immediate family members.
Mortgage Availability
A Type A mortgage generally covers up to 10 acres of property. Generally, a Type A buyer is eligible for:
- A conventional loan covering up to a maximum of 80 per cent of the property’s value
- An insured loan covering up to a maximum of 95 per cent of the property’s value
- The opportunity to purchase the property and refinance it
- A maximum amortization term of 30 years
If you are planning to purchase a Type B property, you must:
- Have a minimum credit score of 680 for all applicants
- Have no prior bankruptcy or judgments
- Make a down payment from your own resources – no gifts are allowed.
- Not use any third-party guarantors for qualification purposes
- Have sufficient income to carry all debts, including carrying costs on the principal residence
Mortgage Availability
A Type B mortgage can cover up to five acres of property and is only offered for properties valued at $100,000 or more. Generally, a Type B buyer can expect:
· An insured loan (Sagen) covering up to a maximum of 90 per cent of the property’s value
- An insured loan only, regardless of the loan-to-value ratio (LTV).
- To be prohibited from refinancing the property
- A maximum amortization term of 30 years
- A maximum loan amount of $350,000
Don’t Worry, Be Happy
This may all sound complicated, but it isn’t. It’s not much different than buying a principal residence. The Wilson Team of mortgage professionals can walk you through the process to ensure you understand the benefits, the costs, and all the details.
It’s time to dream big and explore the possibilities. If you’re working from home, that home could be among the trees or on the shores of a pristine lake. Give us a call at 613-440-0134 or email us: kelly@wilsonteam.ca. We’re here to lend a hand.
Spring Equals a Hot Ottawa Housing Market
Tips for Military & DND Personnel Relocating to Ottawa
As the weather heats up in Ottawa after a long, cold winter, so does the local housing market – pandemic notwithstanding. For military/Department of National Defence (DND) personnel relocating to the area or those simply looking for a new residence, the Wilson Team , Ottawa Mortgage Brokers offers you tips for thriving in this competitive market, along with basic information about travelling to the area.
There is no question that it has been a challenging year for military and DND personnel who are relocating, given the travel and quarantine restrictions that have been imposed at various times. Nonetheless, the Ottawa housing market remains robust. Realtors with the Ottawa Real Estate Board sold 964 homes and condos in January 2021, up 24 per cent from the previous January. Of these, 674 were homes and 290 were condominiums.
“We would have certainly seen higher sales numbers if there were more properties available because the demand is definitely there,” said Debra Wright, OREB president, in a news release.
Key Steps
If you plan to join the hunt, prepare yourself in advance by having your finances in order. Interest rates are low, so it’s a great time for military/DND personnel to enter the local housing market. Talk to a mortgage broker about the financing options available and get pre-approved for a mortgage, as there are so many mortgage contracts to choose from. Rates are important, but not the most important factor to consider when you are looking at military pricing. There are may things to consider, depending on the type of home, city you are moving to, mortgage penalties when you need to break the mortgage, what happens if you take the mortgage with you, and much more. All these mortgage contracts work differently, and we are here to protect your equity.
We work with the Big Banks that have DND special rate mortgages, but it is important to make sure that is your best solution. There is no one size fits all mortgage, and the wrong decision can cost you thousands of unnecessary interest costs and charges down the road if you are not properly advised.
The Wilson Team also provides a full assessment of your current financial structure and can offer many unique strategies that will allow you to be mortgage-free decades sooner. Mortgages can be so much more than just a debt. Mortgages have the power to turn into one of your greatest wealth building tools that will help you grow your savings 10xs faster than you anticipated.
In addition, you need to find a good realtor who understands the HHT process. From your posting message (even if you have not received it yet ) and all the way the closing date, you need the right professionals that can handle all of the intricacies that are involved, and of course help steer you to where you can find the other professionals when you come such as doctors, dentists, health and wellness and so much more when you come to Ottawa. We can provide you with the best Ottawa Relocation Real Estate Agents that have not only served in the military, but have also built a very successful real estate business and will ensure you are relieved from all stress.
Buying a home is already stressful enough. Leave the process to a team of professionals equipped to handle the details and provide you with sound advice that only comes from years of experience.
Furthermore, you’ll want someone with whom you feel comfortable and who has your best interests at heart. After all, buying a home is one of the biggest purchases you'll make, so you'll want the best guidance.
Location, Location, Location
Do some research on the neighbourhoods that might suit you or your family. It’s all a matter of preference. If the idea of living downtown appeals to you, consider Westboro, Wellington Village, Hintonburg, Ottawa South, and the Glebe. They are all walkable and lively neighbourhoods.
However, if you prefer the suburbs, you’ll get more square footage for your dollar. Stittsville is popular with military/DND personnel, given the variety of styles and sizes of the homes and its proximity to the National Defence Headquarters on Carling Ave. If you’re moving to Ottawa from a rural area, you might prefer some of the surrounding towns such as Kemptville or Carleton Place, where there is more greenspace available.
Gatineau, just across the border in Quebec, is also an option. Home prices are less expensive and subsidized daycare is a big draw, although taxes can be higher.
All of this adds up to one major suggestion: Do your homework if you are trying to go this alone, but give us a call to get that conversation going so you don’t have to do this all on your own. We have a comprehensive list of all the professionals you need, including lawyers, who you'll need to be in touch with throughout the entire process.
To get a peek, you can make your first stop the Ottawa Neighbourhood Study. You can also check a website focused on immigration, Moving2Canada.
Other Tips for Buying in a Hot Market
In a hot market, buyers are at the mercy of the sellers and are competing for a limited supply of properties. Here are some steps military/DND personnel can take to ensure they have a chance at the properties that appeal to them:
- Know Your Boundaries. Be aware of items that are up for compromise: finishes, colours ,and appliances can be changed, for example. Noisy streets cannot.
- Offer to Close Quickly. If you know the homeowner is in a hurry, offer to close sooner than the standard time.
- Get a Pre-Inspection. In a competitive market, owners won’t be willing to fix minor problems. If you plan to offer for a home and offers are due on a specific date, a pre-inspection can give you the information you need to steer clear or to make an appropriate offer.
- Don’t Skimp on Price. Don’t offer less than the list price. You may need to offer more than the asking price, given the competition. It won’t work in a hot market unless the property has been sitting more than a few weeks.
- Submit Pre-Approval and Proof of Funds. Date your pre-approval letter the same day you make the offer.
- Offer More Earnest Money. If you can afford to put more money down for your deposit, do so – if the seller is weighing multiple offers, this might have weight.
- Have Money in Reserve. With inflated housing prices, appraisals may not reflect your home’s high price tag, and your mortgage won’t be as large. Have money in reserve to make up the difference. Be prepared, which is why you should not work with a bank on this. You need someone who knows how to cover all the lenders, appraisal process, and structure if this happens.
- Stay the Course. Perseverance will eventually lead you to a home you’ll love. Don’t be daunted by losing out on bidding wars. Remain in the game.
DND House Hunting During COVID-19
Military personnel that are planning house hunting trips (HHTs) or Destination Inspection Trips (DITs) during the pandemic need to be aware of the Covid restrictions in the region they’ll be visiting and consider their safety and that of their families. Having a good Airbnb to stay at with a backyard, a full kitchen, and close proximity to grocery stores is a must if you are coming to Ottawa.
As this article is being written, Military and DND personnel travelling domestically to Ottawa and Gatineau have no need to quarantine, unless they show symptoms. Anyone travelling to Ottawa or Gatineau from outside the country must show proof of negative COVID-19 test taken no more than 72 hours before departure and will be required to be tested again upon arrival and to do a self-test 10 days into your mandatory 14-day quarantine.
Ontario operates on a colour-coded system of threat levels during the pandemic. As of Feb. 24, Ottawa is in the “Orange” level, which means most businesses are open but involves enhanced restrictions and enforcement:
- Indoor dining at restaurants and bars is permitted. Tables are restricted to 4 people maximum, the total number of guests allowed indoors is 50, establishments must close by 10 p.m., and contact information will be collected for the purpose of contact tracing;
- Museums can reopen for visitors;
- Performing arts centres and venues can operate with a maximum of 50 people per venue;
- Most public events and festivals have turned into virtual events or have been cancelled.
For the most up-to-date information, visit the Ottawa Public Health website.
Gatineau is also operating under an orange level, but Quebec restrictions may differ from those in Ontario. For the most up-to-date information, check the Gatineau website.
Ontario Real Estate Association Supports Relaxed Mortgage Rules
If the Ontario Real Estate Association had its way, it would be easier for people across the country to buy homes. However, given the current global preoccupation with the COVID-19 pandemic, the
implementation of one of OREA’s suggestions has been suspended and the others are likely to be set aside for consideration once the government can focus on issues beyond the pandemic.
In July, the chief executive officer of OREA, Wayne Hudak, a former Conservative M.P., wrote to Wayne Easter, the M.P. who chairs the standing committee on finance in the House of Commons to suggest
some key changes to federal mortgage rules as a “way of making home ownership affordable and accessible to Canadians.”
OREA, which represents about 78,000 Ontario realtors, advocated for three specific actions:
1. Supporting choice by restoring the option of a 30-year amortization period for people with insured mortgages;
2. Fixing the one-size-fits all mortgage ‘stress test’ by moving to a more flexible and reasonable mortgage stress test than the current one; and
3. Eliminating the stress test for careful savers renewing their mortgage with a different lender, allowing for greater choice in the marketplace.
“These restrictions in particular are unfairly disadvantaging home buyers, especially millennials looking to enter the market for the first time or young families looking to move up,” said Hudak in a news release. “Ontario realtors are continuing to fight for families who are having their dream of becoming home owners dashed by bureaucratic overreach in the mortgage market, outdated red tape and expensive regulations restricting housing supply and choice across the country.”
Research conducted by Navigator and OREA says that 60 per cent of Ontarians support the extended amortization period for insured mortgages, while 58 per cent of Ontarians between ages 18 and 34
support lowering the minimum qualifying rate for insured mortgages.
Recently, federal plans for the April 6 introduction of a new stress test for insured mortgages were suspended, given the financial challenges of the pandemic.
Providing a 30-year amortization period on mortgages for first-time buyers, i.e., those insured by the Canada Mortgage and Housing Corporation, is still on the table. The last time this was allowed was in
2012. Current homeowners who have uninsured mortgages and 20 per cent equity are already eligible for 30-year amortizations.
A 30-year amortization period for uninsured mortgages makes it easier for first-time home buyers to enter the housing market, because it lowers their potential monthly mortgage payments.
There has been no discussion yet of eliminating the stress test for uninsured borrowers who are planning to switch lenders.
“Once the social distancing requirements begin to ease and the infection numbers drop, the government will have time to turn its attention to other issues,” says Kelly Wilson, co-founder of the
Wilson Team of mortgage professionals. “Meanwhile, if you have any questions about these proposed measures or about mortgages in general, please don’t hesitate to call on us. We’re here to help.”
Lowering Payments and Freeing Up Cash During the Pandemic
Welcome to an uncertain time in global history! No one imagined that 2020 would be the Year of the COVD-19 pandemic and we’re all trying to cope. We at the Wilson Team of mortgage professionals hope you are staying healthy and taking proper precautions to remain safe.
We also want to talk to you about ways to reduce your monthly expenses and free up some cash for the days ahead. It’s especially important now, given all the business that are shuttered and the people who are losing their jobs as the economy slows.
Mortgage professionals have been deemed an essential service and we are here to lend a helping hand in any way we can. We are available by phone and you can read our blog and join our Facebook community to keep abreast of the economic changes and obtain practical information about financial issues.
If you’re in a challenging situation, we want to help. If you aren’t, this is probably a good time to re-evaluate all of your finances to determine where the gaps lie. So, stay in touch!