Catherine Barrie Accounting, CPA, MBA With over 25 years of corporate, business and personal accounting experience. Serving the Barrie and surrounding areas. We understand what it takes to help you realize a return on your investment. While there is a lot of debate as to if your personal house should be considered a investment. We will not dive in to that discussion here, however for the sake of this post. The question is, if you are considering buying or selling right now, what to do? Catherine Barrie Accounting just wants to bring a few things to light if you were considering either at this time.
Since the Covid-19 Pandemic a lot of people are not presently working, and have taking advantage of the CERB the Trudeau Government has put in place. Which helped , and is currently helping approximately one in five Canadians. The Website Better Dwelling has a great stats page, please feel free to review it here.
First question is can you even apply for a mortgage while on CERB. While you can always try a traditional lender (the big banks mostly). From this article posted on Team Clinton a Clinton Williams mortgage team website. “those that have applied for CERB may not be able to use this as a source of income when looking to apply for a mortgage. Lenders might not see the CERB as a reliable source of income, which means you are seen as a higher risk for a lender” here is the full post. This does not mean it is not possible, just with a traditional lender this can create some challenges. There always are secondary or private lenders, just the rates will be different. You could be paying more on your interest if you use a CERB as “income” since you might be seen as higher risk.
However, right now mortgage rates are historically low. Rates not seen, in well , forever. The Bank of Canada’s over night rate is 0.25%. If you were considering, and a lot of people are. You could very well get a rate, that is extremely cheap in comparison to anything we have seen before. That in itself, is helping fuel the housing market to continue to grow. The Bank of Canada’s target for the overnight rate is currently at a historic low of 0.25%. That’s effectively the lower limit, and the Bank has said as much. This has meant that prime rates are about as low as they’ll ever be. For borrowers wanting to get a variable rate, this is more or less as low as they come. Mortgage rate outlook
If you’ve already been looking to get into the market as a first-time home buyer, now might be one of the best opportunities to get a mortgage for your first home. Regardless of movement in the housing market, one of the best things you can do right now is to get a mortgage pre-approval.
A mortgage pre-approval is an in-principle offer from a lender for a particular mortgage and a certain rate, which is good for up to four months. Though pre-approvals can guarantee a mortgage rate for you, keep in mind that they do not guarantee final mortgage approval. This will ultimately hinge on your down payment and income source at the time of your mortgage application.
What’s most important to remember is that you shouldn’t rush into home ownership if you’re not ready. When buying property for the first time, it should be a decision you make based on your life stage and financial circumstances, not the market. You need to be able to afford the mortgage payments, have the minimum down payment ready, and have a secure source of income.
You’ll also need to consider whether you’re able to qualify for a mortgage right now. If your employment and income is stable, it shouldn’t be a problem. However, if your income has taken a hit due to the COVID-19 crisis, you may have trouble getting a mortgage in the first place, let alone getting a good mortgage rate. As mentioned above in this post.
Since the onset of the Covid Pandemic there has been discussion of a downturn in the housing market. Catherine Barrie Accounting wants you to be aware as well this is a real possibility and you should consider this. Especially if you were considering buying for the sake of flipping the house. While the market is presently hot, and it is a sellers market. A blog post on a Remax site goes on to say the fall market will remain “active’. Remax predicts a 5% increase in the average sale price across Ontario. Here is a excerpt from their blog ” With Ontario being one of the hardest-hit provinces in Canada, markets like Niagara, Mississauga and Kitchener-Waterloo experienced significant drops in activity, but bounced back aggressively in June as economies began reopening. Toronto continues to be a sellers’ market with low listing inventory and high demand. An uptick in new listings is anticipated for the fall market, now that buyers and sellers are more comfortable engaging in the housing market, with all of Ontario now in phase three of re-opening. RE/MAX brokers estimate a five-per-cent increase in average residential sale price in Toronto for the remainder of the year. According to the RE/MAX broker network in Ontario, market activity in the province is estimated to remain steady in the fall, with the potential for modest price increases of up to six per cent in regions like Hamilton, Brampton and London.”. Please feel free to read the full post here.
And then there are those that would say, the housing market could crash. Back in May Macleans posted
“In all the conversations about Canada’s high home prices over the last few years, no one predicted that a global pandemic would finally bring them down. While prices haven’t collapsed—the average cost of a home in Canada fell by 1.3 per cent year-over-year in April—some cracks are starting to appear. Last month, home sales fell by a record 57 per cent, while month-over-month prices declined by 10 per cent. Last Friday, Evan Siddall, CEO of the Canada Mortgage and Housing Corporation, told the House of Commons’ finance committee that prices could fall by between 9 per cent and 18 per cent from their pre-COVID-19 levels over the next 12 months.
Naturally, this has a lot of people worried, from retirees who planned to fund their golden years with the equity in their homes to new home buyers who may end up with a depreciated asset”. Please read the full post here.
Toronto Life writes “ “People have also been going to the bank to defer mortgage payments. But technically, they’re in default, even though there’s an arrangement with the bank. The Canadian Bankers association is citing that 24 per cent of Canadian households are in technical default at this point, because the homeowners have all asked for mortgage deferments” This post from Toronto Life closes the article by stating ” “Overall, the best time is to buy a house is when you need it and can truly afford it. And the worst time to do that would probably be now.” Toronto Life Blog post
As a Chartered Professional Accountant, Catherine Barrie Accounting and her team, always likes to make err on the side of caution. Buying a home is defiantly a serious decision. One that should never be made in haste. Before you even consider any large purchases like this. You, and possibly your significant other are going to have to have all your taxes filed and up to date. If you have not, or possibly missed some important credits or deductions that could help. This could seriously affect your ability to get a mortgage from any lender. Or have a effect on the interest rate they lenders would offer you. Please contact our office, conveniently located in the Downtown Barrie area for a free consultation. Missing some of these important areas on your taxes in the years past could have a negative impact on your over all declared income for that year. And not having your taxes up to date, you will not be able to qualify for a loan to make this large purchase. So if you are considering buying, or even selling a home. You should meet with a qualified accountant on how that could effect you. Or to get all the needed papers in order to help you.