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HOW SOME YOUNG PEOPLE CAN AFFORD A HOME

– HOW SOME YOUNG PEOPLE CAN AFFORD A HOME –

By: Edward Trapunski

We were recently very flattered to be invited to dinner by a young couple that we know. It was the first time that we visited their home and we were overwhelmed by how beautiful it is. Home for them and their two pre-schoolers is on an attractive street in one of the most desirable enclaves in the city.

He’s on leave from his job while he pursues more education so that he can better himself. She has a good job but, as yet, she has no security. It’s scary.

It’s very hard for young people to buy a house, according to what you read and hear. Still, here’s a young couple who own a beautiful five-bedroom, four-bathroom house near a ravine for which they paid $1.2 million. It’s not out of line for Toronto.

Here’s how they managed to do it:

The house they owned previously wasn’t in a nice neighborhood. It was a fixer-upper and they spent the money to have the work done. It was a good investment because they were able to sell their modest first house for considerably more than they bought it for. It helped that housing prices were escalating and the area they were leaving had yuppified.

So it was the first house that gave them the leverage. They had saved up for it. My young friend is a family guy and the prospect of a household full of children was a stronger motivator for him than travelling. He still enjoyed his good seats watching the Blue Jays but he came straight home right after the game. The nest egg my friend and his wife accumulated by being homebodies showed the lenders enough that they were responsible and had no problem shopping for a favorable mortgage.

For that first house they also took advantage of the Home Buyers’ Plan (HBP). The Canadian government allows first-time home buyers to borrow up to $35,000 tax free from their RRSP. If you’re purchasing with someone who’s also a first-time homebuyer, you can both access the $35,000 for a total of $60,000. If you have a down payment of at least 20% of the purchase price of the home, the savings can be significant, and you won’t have to buy mortgage default insurance. Married couples and common-law partners both qualify. However, since the HBP is considered a loan, it must be repaid within 15 years at the rate of at least 1/15 of the loan every year.

My friends also accessed what is colloquially known as the Bank of Mom and Dad. They were lucky enough that both sides of the family were prepared to help them out with the down payment. This isn’t as rare as you think any more. In the 1960s, people usually lived until they were 65 or 70. When they passed away, they’d leave enough in their estate for their children—who were 30 or 35 years younger than them—to use to buy a house. Now that people are living longer, they’re giving their adult children the money while they’re still alive to help them get into the housing market.

Many parents these days are prepared to help their children settle down faster than they could do on their own. Also, with interest rates at such historically low levels, it makes sense to help your children take advantage of a situation that may never come again. Provided it doesn’t jeopardize their own finances or retirement plans, many parents feel a sense of personal satisfaction in making a difference in their adult children’s lives. They also want to ensure that they’ll see the rewards of having a stable life for their grandchildren before they’re gone.

My young friends began with a starter home, as I did. Now they plan to live in their lovely home for the rest of their lives — and they can — so they see it as an important investment for themselves and for their children. That’s why they’re glad they did it.

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo
We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

Lenders hike fixed rates yet again, bringing them closer to 4.5%

-Steve Huebl of Canadian Mortgage Trends-

 

Following a jump in bond yields last week, lenders across the country once again bumped up their fixed mortgage rates.

 

Big banks like RBC, TD and BMO hiked 5-year fixed rates by 20 to 25 basis points, with all three offering uninsured rates at 4.39%.

 

The move follows a nearly 10-bps jump in the Government of Canada 5-year bond yield, which leads 5-year fixed rates. The 5-year bond yield closed at an 11-year high of 2.88% on Friday. Since the beginning of the year, bond yields are up over 165 bps.

 

 

Among national lenders, the average uninsured 5-year fixed rate is now 4.37%, up from 3.92% a month ago, according to data tracked by Rob McLister, rate analyst and editor of Mortgage Logic. The average rate for an insured 5-year fixed mortgage, meaning that with a down payment of less than 20%, is now 4.14%, up from 3.78% a month ago.

 

That means fixed rates are now up roughly 40 bps in just the span of one month. For perspective, a 50-bps rate increase translates into a roughly $25 higher monthly payment per $100,000 of debt, based on a 25-year amortization.

 

While this doesn’t impact most borrowers with fixed rates, new borrowers and those renewing a mortgage are facing significantly higher rates compared to just several months ago, and potentially double for those renewing a mortgage.

 

As fixed rates march higher, variable rates are likely to jump again following the Bank of Canada’s next rate decision meeting on June 1, when it’s expected to hike interest rates another 50 bps. That could bring prime rate—the rate upon which variable rate mortgages and lines of credit are priced—up to 3.70%.

 

How rising rates will impact mortgage borrowers…

Aside from higher monthly payments, how will mortgage borrowers be impacted by these rising rates?

 

“As interest rates march higher—we expect the overnight rate to hit 2% by October, a projection that increasingly looks conservative—borrowing costs for Canadians will also rise, leaving the average Canadian household to spend almost $2,000 more in debt payments in 2023,” say economists from RBC Economics.

 

“This will erode spending power, especially for the lowest earning fifth of households which spend 22% of their after-tax income on debt servicing (including mortgage principal and interest payments),” they add.

 

On the other hand, RBC notes that the pandemic helped boost savings among Canadian households.

 

“The pandemic may have boosted debt, but it also left Canadian households sitting on $300 billion in savings,” the RBC economists wrote. “That’s a huge backstop—enough to cover about a year and a half of total Canadian household debt payments.”

 

How will rising rates impact home prices?

While the latest housing data showed home sales plummeting in April, house prices have so far held steady throughout most of the country outside of Ontario. In the Greater Toronto Area, average prices are so far down roughly 6%, but by as much as 22% depending on the housing type and specific region. Benchmark prices are often a lagging indicator, so further price declines are likely in the months ahead.

 

“…tomorrow’s homebuyers are going to have a much harder time paying today’s prices if they’re paying 5% on their mortgage compared to the low 2% range just a few months ago, and the high 1% range a year ago,” wrote real estate analyst John Pasalis, president of Realosophy Realty, in a recent post on move smartly.

 

Pasalis noted some have argued that this isn’t a concern, since many borrowers have been qualifying at a stress test rate of at least 5.25%, but he suggests that’s an oversimplification of the situation.

 

The mortgage stress test is currently used to qualify borrowers at the greater of the buyer’s actual mortgage rate plus 2% or the benchmark rate, which is currently 5.25%.

 

“As these are dynamic measures that will change as rates do, the stress test will also increase, which will reduce the amount of debt a buyer can take on,” Pasalis writes, adding that the contract rate influences how much mortgage debt the borrower is willing to take on.

 

“A buyer who qualifies for a $1M mortgage may be willing to take on that much debt when interest rates are 1.75%, but less so when rates are 4%, because under the higher rate their actual mortgage payment would be roughly $1,100 per month higher,” he wrote.

 

As a result, if interest rates continue to trend higher, Pasalis says he “would not be surprised if we see some downward pressure on home prices over the next 9 to 18 months due to homebuyers being unwilling or unable to pay today’s prices at tomorrow’s higher interest rates.”

 

Although, he adds that any price decline would “likely be a temporary one due to long-term fundamental factors that have been contributing to rising home prices in the Toronto area.”

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Supporting Ukraine…

Mortgage Professionals Canada | 2022

 

Mortgage Professionals Canada and the Mortgage Professionals Canada Foundation have partnered to raise and distribute humanitarian relief funds to Ukraine.

 

The MPC and MPC Foundation Boards of Directors have carefully selected two established charitable organizations for their outstanding efforts to provide much needed medicine, supplies, and shelter to vulnerable individuals coping with hardship in Ukraine.

 

With the urgency facing the people of Ukraine, we ask that mortgage professionals donate generously to this joint initiative to provide humanitarian relief through: The Canadian Red Cross, and Doctors Without Borders/ Médecins Sans Frontières (MSF). Funds will be collected by the MPC Foundation and distributed evenly between these two very capable organizations, each of which will provide support directly to those most impacted.

 

Mortgage Professionals Canada has already donated $10,000 to support this initiative.

 

Please join us. Any amount helps. Click here to donate… https://mpcfoundation.ca/donate/ukraine/

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Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

 

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

 

Facebook: www.facebook.com/midislandmortgagenanaimo

We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

 

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.

VANCOUVER ISLAND BOOK TALK – SUPPORTING LOCAL

INTRABIT – ONE WORLD… A FICTIONAL AUTOBIOGRAPHY BASED ON LIFE…

This innovative book focuses on numerous themes such as good versus evil, everlasting love, redemption, perseverance, change versus tradition, facing darkness, and understanding reality. The novel also touches on experiences with racism, environmental concerns, and abuse.

The two main characters are Lillian and Melayna, who exist in different planes of existence, yet, are connected on a primitive level. They both discover they have the power to visit each other’s lives, and can even subconsciously influence the thoughts of the people around them. When one woman finds herself in peril, the other is there to support them, and vice-versa.

Then, the novel takes unexpected twists and turns while the women discover the truth of their connection, and, eventually their core purpose as a combined unit as they overcome traumas from their past. They travel and grow as individuals but it’s their connections with loved ones that anchor them in a singular place.

About the Book:

“Lillian seeks a universal melody for all the refugees of Red City. But in her path is the Jade aristocracy, fueled by greed and tainted memories.

Hundreds of years and universes away, Melayna’s being led astray. Her world’s devastated by climate change and evil men for whom she’s prey.

Two woman leading very different lives, each with boyfriends who wish to make them wives. Their connection, however, cannot be denied, as they each visit and live through the other’s eyes. It’s this bond alone that ensures they’ll survive.

As the follow the music deep within their cores to overcome traumas from before, they develop an inner rapport that enables them to discover even more.”

INTRABIT: ONE WORLD BY MELODY LILY JADE – MELODYLILYJADE ON INSTAGRAM

Available in hardcover, paperback, and ebook formats on Amazon and 50,000 bookstores worldwide. 

GET IT AT BARNES & NOBLE NOW! CLICK ON THIS LINK… 

https://www.barnesandnoble.com/w/intrabit-melody-lily-jade/1140720940;jsessionid=701602D49C3B1507E87AFB8AF1CC7A27.prodny_store02-atgap16?ean=9781039126879

Have more mortgage questions or concerns? Call our office today at 250 753 2242 and we can help with all of your mortgage questions!

“LIKE” our Facebook page or “SHARE” this post to be entered into our quarterly draw for a $150.00 gift card!!!

Facebook: www.facebook.com/midislandmortgagenanaimo
We thrive off of your continued support and client referrals. Let us reward you for helping us get our name out into the community! Please mention who referred you or how you heard from us, when filling out your mortgage application. The name you give us will also be entered into the same draw for coming in to see us!

We are open Monday to Friday from 9 am to 5 pm. Kevin Decker can also be reached after hours at 250 619 2262 and Jason Barudin can be reached at 250 668 2203.