Let me begin with my heartfelt hope that you and your loved ones are in good health. We are all in this together and I want you to know that I am here for you to help de-stress your financial situation. Please get in touch if you have any questions.
The mortgage marketplace has been continually shifting since this coronavirus crisis began. Here is a summary of some of the most common questions to help you understand how you may be impacted.
Q. What do the mortgage payment deferrals mean, and should I consider this?
A. Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. This is a compassionate option only for those who are in a serious financial hardship and unable to make their mortgage payments. You need to apply, with assistance determined on a case-by-case basis. In the meantime, please do not start skipping payments. If you urgently need help, please get in touch. I can help you find the right channels to apply.
Keep in mind that a deferral is not mortgage payment forgiveness or interest free. There are also other options also available, which include extending your amortization, or using a line of credit and paying interest only until you can pay the borrowed amount back. Lenders will not be foreclosing on homes during this time period. Everyone is onboard to help homeowners as much as possible. Please ask for assistance if you need it.
Q. The Bank of Canada as lowered its key rate. Will this help me?
A. Yes, your interest rate will also drop if you have a variable-rate mortgage and/or line of credit. Keep in mind that these changes don’t happen immediately, and your own rate typically won’t move in lockstep with the Bank of Canada rate. It’s the lender’s decision on whether, and how much of, the rate cut will be passed along to you, the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in defaults. If you currently have a deeply discounted variable-rate mortgage, then you are in a very good position going forward.
Q. What about my current fixed-rate mortgage?
A. Nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to transfer your mortgage to take advantage of today’s rates. I need to review your mortgage and determine if the savings will offset any fees and penalties.
Q. I have some credit-card and/or loan debt that now has me worried.
A. If you’re carrying high-interest credit card or other debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings. I can do an analysis to see if you can benefit. Refinances don’t qualify for the lowest rates but I’m working with several clients who are seeing a great benefit.
Q. Are people still buying homes?
A. Open houses and home visits are certainly not wise, so the market is slowing. Most activity will be on hold until the future becomes clearer. If you are thinking of buying within the next year, this is a great time to get in touch for a discussion of your situation, so you are ready to go when the time is right for you. At anytime, I can arrange a rate hold for you for up to 120 days.
Q. Do the stress test changes make it easier to qualify?
A. The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th. We did however see the qualifying rate drop from 5.19% to 5.04% which will help with qualifying.
Q. I keep hearing about Bank of Canada rate drops, have rates dropped significantly for new mortgages?
A. While rates for new mortgages initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime, while fixed rates started to go up not long after they initially went down. Historically speaking though, rates are very low.
My best advice is to take things as calmly as you can, evaluate your priorities, and make decisions that are needed for the long term.
Health and happiness to you and your family. Here’s a BIG VIRTUAL HUG FOR ALL OF YOU!
