I know you’ve been anxiously waiting for Part 2 so here it is! Earlier this week I chatted with Niko Mavrikos from Tribeca Mortgages and today I’m sharing with you some of his tips for first time home buyers and the impact of Covid-19 on the Canadian mortgage industry. If you missed part 1, you can read it here.
1. As a first step, it’s important for buyers to get pre-qualified. Once you’re pre-approved, you should contact a Realtor® to get an understanding for different neighbourhoods and the properties you’re interested in within your price range.
2. You should be certain that you have good job security or confidence that your job will remain constant for the next few years. That way, you can afford to make the payments once you find a home. For instance, home insurance, property tax, utilities, strata fees and/or landscaping are additional fees that require money out of pocket.
3. Save, save, save for a down payment! The more you can put down, the lower your mortgage payments will be. Don’t forget to build a safety fund as well for all the additional payments that come along with home ownership.
4. Don’t necessarily go to your highest pre-approved amount. You should look for a home that will meet your needs but not stretch you financially on a month-to-month basis.
5. Do not take a big car loan out before you buy your home as that significantly hinders your qualifying power. For example, on average, a $400/month car loan reduces your qualifying buying power by $100,000 in mortgage debt. For every $100 increase in your car loan payments, it is approximately $25,000 in mortgage borrowing power that you won’t be able to receive.
6. If you have any student loans you should try to get your university or college to lower your payments. Additionally, you should be diligent about chipping away at it. The amount of your student loan will reduce your borrowing power and can negatively impact your credit score if you miss payments.
This is a multi-faceted question because there are a few variables but I’ve noticed in Victoria that purchases have definitely decreased. However, refinances and line of credit applications have increased due to the low interest rate environment. Purchases have decreased due to Covid-19 for various reasons; layoffs, no open houses, less listings, and people are waiting to see how everything plays out.
However, refinance and line of credit applications have increased as clients wish to capitalize on lower rates and restructure their higher interest debt. The Bank of Canada dropping the key interest rate is meant to benefit existing home owners with variable rate mortgages and home equity lines of credit. This interest rate decrease allows existing home owners to realize smaller monthly payments during these overwhelming circumstances.
The Bank of Canada’s 5-year benchmark rate is at 5.04% so unfortunately the low interest rate environment hasn’t affected the qualifying rate. Until the Bank of Canada eases their qualifying restrictions, the existing low variable and fixed rates offered don’t help new home buyers who are having difficulty qualifying.
It’s important to get all your necessary documents such as job letter, income taxes, pay stubs, purchase paperwork, and down payment history to your mortgage broker as soon as you have an accepted offer. Then, your mortgage broker can submit your mortgage application for approval right away.
I can definitely see that there will be some pent up demand and hopefully the summer months will pick up as people are wanting to get into the market. I think that Victoria is a very stable and desirable real estate market. We might even see prices increase into 2021 due to low supply and pent up demand.
Thanks again Niko! If you have any mortgage questions you can reach Niko Mavrikos at Tribeca Mortgages in Victoria, BC.
*Disclaimer: The topics of discussion, content and resources on this website are general information that may not be the right solution or advice for you specifically. Not intended to solicit buyers or sellers currently under contract with a brokerage.
*Stock images from Social Squares
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April 22, 2020