What should I do with my mortgage in 2019?

If you’re recovering from a good party on New Year’s Eve, here is something to sooth your real estate woes. But if you’re like me, I had trouble staying up past 10 pm and am ready for a new and profitable year!

With all the volatility in the last year around mortgage rates and the real estate market, we can expect stability in 2019. This email is longer than usual but it’s worth the read if you’re interested in real estate.

IT’S A BALANCED MARKET SO IF YOU’RE A FIRST-TIME BUYER OR A REAL ESTATE INVESTOR NOW’S YOUR OPPORTUNITY.

In the last three years, sellers have had the upper-hand in the market. If you had a property to sell, and it was reasonably priced it would sell in no time. There are still hot spots in the market especially lower-priced homes or condos under $400K. That’s because of the demand from three key cohorts:  first-time buyers; real estate investors, and those down-sizing.   The new mortgage rules have affected these cohorts the most. Many self-employed individuals are also having difficulty getting approved at a bank.

The 2018 real estate market ended with a whimper, but there are two converging trends that may give the housing market a boost in 2019. The unemployment rate is at historical lows and when people are working they are buying or able to refinance and pay their debts off. The Bank of Canada (BofC) is also slated to keep rates steady into 2019 because the prospect for inflation is low (have you seen the cost of gas lately?).

There’s also been a lot of attention placed on consumer debt loads. With the new mortgage rules borrowing has slowed and home appreciation is on a more sustainable increase. First-time buyers are also benefiting from their parents, as a massive transfer of wealth is happening both in terms of gifted down payments and co-signing on mortgages.

WHAT SHOULD I DO WITH MY MORTGAGE?

If you’re renewing your mortgage it may make sense to pay the penalty and renew early especially if you’re looking at consolidating debts. Your improvement in cash flow will offset the penalty so it’s worth considering. Five-year fixed rates are currently just under 4% and we can typically get at least a .5% lower on a variable rate mortgage (CRM). So does it make sense to do a VRM? About 40% of our clients have a VRM.  Even if rates go up this year by .5% you’re still further ahead especially if you can make a pre-payment on your mortgage while rates are low.  I currently have a VRM so I track this carefully for myself and when I’m locking in I’ll let you know too.

IF YOU KNOW SOMEONE WHO’S BEEN TURNED DOWN BY THEIR BANK – TELL THEM TO CALL US. WHY? WE CAN PROBABLY GET THEM APPROVED.

As a mortgage broker, not only do we do mortgages for chartered banks like TD and Scotia, and credit unions like Meridian and Your Neighbourhood Credit Union, we also have access to lenders that will lend to borrowers even if they don’t meet the usual criteria. Have your friends or family come to us first, as it’s our goal to get the best mortgage that the borrower can qualify for.

It's been a while...what's up?

It's been a while since I've posted on the blog...what's up? Well, there's been a change in the ownership of my business, and it's good news for our clients and business partners.

I'm working in partnership with Chris Bisson, one of the top mortgage brokers with The Mortgage Centre network in Canada. We've teamed up because he's great at helping our referral partners (such as realtors, accountants, financial planners and lawyers) with their own businesses. And I love helping our clients get the best advice and rates around mortgages to help them be financially successful. The really cool thing is that Chris and are spouses...we've been married for over 17 years, but we worked independently! I know it was a little "weird".

We're really different at The Mortgage Centre (Guelph). With the decades of experience, and helping thousands of clients we have the knowledge that most mortgage bankers and other brokers don't have. I know that sounds "canned", but just give us a call to find out.

We're here to help (and we're not the bank!) Tel 519-763-3900519-763-3900 - you can reach me directly at ext. 1001 or via e-mail at lastovic.s@mortgagecentre.com

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The hazards of waiting to buy your first home

Buy now or wait – the hazards of market timing and waiting to buy your first house

	Base Scenario	Scenario 1: Home prices stay the same Interest rates increase by 0.75%	Scenario 2: Home prices increase by 4% Interest rates increase by 0.75%	Scenario 3: Home prices decrease by 2% Interest rates increase by 0.5%
Home Price	$280,000	$280,000	$291,200	$274,400
Down payment	$14,000	$14,000	$14,560	$13720
Interest Rate	Current rate 3.5%	4.25%	4.25%	4.0%
Monthly Mortgage Payment	$1365	$1475	$1534	$1408

One of the most common questions I get is, “Should I wait to buy a home until I have more money saved?”

I think that good job stability and credit history are almost more important that having a significant down payment on a house. Job stability will give you the financial means to pay for the home expenses. Mortgage lenders are now conservative to whom they lend to. A good credit history is mandatory if you’re putting less than 20% as a down payment on your first house. And your credit history proves you can pay your financial obligations on time.

A home purchase is likely the largest financial purchase you will make in your life. As a mortgage professional, I’m programmed to take the financial approach. I’ve included a table to help explain why it makes sense for first-time home buyers to purchase now, rather than wait another year for a greater down payment.

Here’s the rational on buying a house now versus waiting a year for a greater down payment.

Most first-time homebuyers can purchase a decent condo or home for the price of $280,000. With $14,000 as a down payment (5%) the monthly mortgage payment will be approximately $1365.

Home prices are slated to go up in the next year. The average price increase over the last 40 years has been approximately 6% in Guelph. However, I’ll be conservative and estimate that home prices will increase by 4% in the next year. Assuming that mortgage rates increase by 0.75% in the year, the same house that you can buy today for $280,000 will be worth $291,200. This same purchase in the future will require another $560 more as a 5% down payment. The monthly mortgage payment will now be $1408 per month, because of the increase in mortgage rates for the future. In a year, the same house will cost $43 more per month in payments and an extra $560 more in a down payment.

In order to circumvent this issue, the borrower would need to put 10% as a down payment to get a similar mortgage payment. They will need to save an additional $15,100 more in a year, or about $1260 more per month over 12 months.

If you don’t have the 5% as a down payment, some good mortgage lenders are still offering mortgages with no-down payments.

Waiting another year to buy your first home can be costly. If you have good credit and job stability, be proactive with your financial future and purchase a home. More and more individuals are buying homes as single people too!

Please contact me if you have any questions about buying your first home. I can be reached at 519-763-3900 ext. 1001 or via e-mail at lastovic.s@mortgagecentre.com.

Is now the right time to choose a Variable Rate Mortgage?

“Should I take a variable- or fixed-rate mortgage?” is the question I get asked most by clients.  While we work with our customers to help them come to a decision on what’s best for their financial circumstance, here are a few questions to consider when deciding on a mortgage type.

Can you qualify for the mortgage you want?

The criteria to qualify for a variable-rate mortgage (VRM) is different than a fixed-rate mortgage. Remember the housing crisis in the U.S.A. almost five years ago? It had a significant impact on the qualifying criteria for people who now want VRM’s. VRM’s are more difficult to qualify for under the debt ratio guidelines because the government has built a buffer for borrowers should rates go up. For VRM’s, borrowers qualify based on the Bank of Canada’s qualifying rate of 5.34%. The impact is that it lowers ones ability to qualify for a certain mortgage amount by about $40,000 less in mortgage money compared to a five-year fixed rate. Many first-time home buyers would like the lower rate of a VRM, but can’t qualify for the mortgage on the home or condo they want to purchase because of the qualifying restrictions of a VRM.

What’s your budget?

Your current money-management practices have an impact on your choice of a VRM or a fixed mortgage. If the only reason you’re choosing a VRM and a lower payment is because it will allow you to spend more in other areas, the VRM is not the best choice for you financially. If you’re a saver and have money set aside if rates go up (and can make the difference in mortgage payments) you’re a good candidate for a VRM.

What’s the forecast?

Historically, borrowers who have a VRM tend to pay less in interest over the life of their mortgage, than a fixed rate. The interest rate on a five-year fixed mortgage is currently in the mid-three percent, while a five-year VRM is below three percent. The Bank of Canada’s overnight lending rate has an impact on a Bank’s prime rate, which is the indicator that VRM’s are based on. The current forecast is that rates may rise in mid-2015. Until then, those who choose VRM’s now should be aggressive in paying down the principal on their mortgage and take advantage of the lower rate.

I'd love to hear how you make your own decisions on the type of mortgage you choose. Please e-mail me at lastovic.s@mortgagecentre.com or visit my blog at www.lastovic.s@mortgagecentre.com and offer your comments. If you're on twitter follow me @Sandra_lastovic.

John and Melanie - this is the real thing!

I love sharing success stories from my clients. This story is the "real deal". Jonathan Sloot* and Melanie Grose* came in to see me about a year ago. They were living in a small house, and they needed more room. However, their current house made a perfect rental property. They came to me with the idea of keeping their current home, and buying a bigger more "family-like" house.

I was really impressed with Jonathan's and Melanie's financial discipline. They had done a really great job at keeping their amortization short on their current home and paying down on their mortgage. They had a a lot of equity tied-up in the house. I showed them how to release it through a secure-line-of-credit and that became the down payment on their new home. We also looked at the cash flow of their current home, which was to become the rental. We wanted to be sure the rents covered the expenses, plus the mortgage. 

Here's what they said about the experience,  

"We went to see Sandra because we wanted to purchase another home to live in and keep our old home as a rental property.  Although there was equity in our current home, we were unsure on how to release the equity and piece together the plan.  Sandra laid-out the strategy in a clear way that we could understand what would take place. She negotiated the mortgages for us and got us better rates than our own bank could. We basically came in and signed the initial paperwork and Sandra and her team took care of the rest"

*permission was granted by Jonathan and Melanie to share their names and story.