2023 Real Estate Outlook (And What It Means for You)

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Last year, one factor drove the real estate market more than any other: rising mortgage rates. 

In March 2022, the Bank of Canada began a series of interest rate hikes in an effort to pump the brakes on inflation. And while some market sectors have been slow to respond, the housing market has reacted accordingly.

Both demand and home prices have softened, as the primary challenge for buyers has shifted from availability to affordability. And although this higher-mortgage rate environment has been a painful adjustment for many Canadians, it should ultimately lead to a more stable and sustainable real estate market.

So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While no one can forecast the future with certainty, here’s what several industry experts predict will happen to the Canadian housing market in the coming year.

MORTGAGE RATES WILL EVENTUALLY STOP CLIMBING

Over the course of 2022, we saw the benchmark rate rise at a record pace—a whopping 400 basis points in just nine months. Fortunately, there are signs that the central bank’s series of rate hikes may be coming to an end.

After last month’s half-point rate increase, Bank of Canada officials struck a noncommittal tone about future rate hikes, prompting economists to speculate that the central bank may pause hiking rates by early spring, if not sooner.

According to Stephen Brown, a senior economist at Capital Economics, the central bank is likely to hike rates at least one more time before it shifts gears. “We would not rule out a final 25 basis point interest rate hike in January,” said Brown in a client note. “But the Bank is very close to the end of its tightening cycle.”

What impact will this have on mortgage rates? Variable mortgage rates could finally stabilize. However, buyers hoping for a big drop later in the year may be disappointed. Although some market analysts are betting on lower rates, CIBC economist Benjamin Tal thinks that's unlikely as long as inflation remains a factor. “I think that the Bank of Canada is determined to make sure that they will not touch interest rates in terms of cutting them before inflation is totally dead,” said Tal in an interview with Canadian Mortgage Professional.

Fixed mortgage rates, on the other hand, could continue to trend lower as bond yields crumble. James Laird, co-CEO of Ratehub.ca, predicts that Bank of Canada’s benchmark rate will hold steady through 2023, but fixed mortgage rates may tick down because of bonds. “Bond yields will decrease throughout the year, allowing fixed rates to follow suit,” said Laird in an interview with Canadian Mortgage Professional. However, those rate decreases may be fairly muted as long as banks’ borrowing costs stay higher overall.  

It's also possible that rates on both variable and fixed-rate mortgages will climb instead. Bank of Canada Governor Tiff Macklem has made clear that the central bank is prepared to keep hiking rates aggressively if inflation fails to dissipate. “If high inflation sticks, much higher interest rates will be required to restore price stability,” said Macklem in a recent speech to business leaders.

What does it mean for you?  While no one can predict the future of mortgage rates with certainty, an end to interest rate hikes could bring some much-needed relief for borrowers. If you have plans to buy a home or renew your mortgage in the coming year, you’ll want to weigh your options carefully when deciding between a variable or fixed rate. Reach out for a referral to a mortgage professional who can help.

BUYERS WILL RETURN TO THE MARKET

The pace of home sales fell steeply last year as higher mortgage rates priced would-be buyers out of the market. However, some industry experts predict that the Canadian housing market is poised to turn a corner. 

Although many buyers and sellers are currently in a stalemate over housing prices, market dynamics may shift this spring as more homes go up for sale. 

“Zooming in on demand and supply conditions, the drop in unit sales has been the steepest on record, but the pace of the decline is starting to slow,” write CIBC economists, Benjamin Tal and Katherine Judge, in a recent forecast. Douglas Porter, chief economist at BMO Capital Markets, projects that existing home sales will fall through the first half of 2023 and then reverse course and begin to rise in Q3.

Victor Tran, mortgage expert at Ratesdotca, also speculates that a stabilization in mortgage rates will bring home buyers back out. He told the Financial Post in a December interview: “We may be seeing the bottom of the housing market trough before buyers begin to enter the market in spring of 2023.”

Buyers’ purchasing power will still be constrained by higher mortgage rates, though, as well as by a stringent mortgage stress test for uninsured mortgages and a hefty monthly payment for insured ones. So a buyer’s ability to participate in the market will depend, in part, on a seller’s willingness to negotiate.  

What does it mean for you?  If you’re a buyer who has been waiting for conditions to normalize, now may be an ideal time to start your home search. As more buyers begin to enter the market, you’ll face steeper competition and reduced negotiating power.

And if you’ve delayed selling your home, this could be the year to make a move. Reach out to schedule a free consultation and home value assessment.

HOME PRICES WILL STABILIZE LATER THIS YEAR

Canadian home prices have fallen roughly 10% from their peak, and analysts expect they could fall further before moderating in the second half of this year.

A Reuters poll of industry experts found a wide range of predictions. But on average, the analysts surveyed project that home prices could fall another 7.5% or so. However, the majority report that the risk of a market crash is low.

A nationwide housing shortage is expected to prop up prices even as sales volume falls. According to Robert Kavcic, senior economist at BMO Capital Markets, “We have a unique situation where demand has cracked and buyers can’t qualify for, or afford, early-year prices. But, outside some areas, there’s not a bounty of listings to choose from, and sellers are still able to say ‘no thanks.’”

Economists at CIBC speculate that home prices will hit a floor in the coming months: “A lower 5-year rate and pent-up demand amplified by demographics will work to establish a bottom in prices by the spring of 2023,” write Benjamin Tal and Katherine Judge.

RBC Assistant Chief Economist Robert Hogue offers a similar projection: “We expect prices will keep falling until a bottom [this] spring. Our forecast calls for the national benchmark price to drop 14% from (quarterly) peak to trough.”

What does it mean for you?  It can feel scary to buy a home when there’s uncertainty in the market. However, real estate is a long-term investment that has been shown to appreciate over time. And keep in mind that the best bargains are often found in a slower market, like the one we’re experiencing right now. Contact me to discuss your goals and budget. I can help you make an informed decision about the right time to buy.

RENT PRICES WILL CONTINUE TO CLIMB

While home prices have fallen, rent prices have surged—rising around 12% year-over-year, according to data from Rentals.ca.

The average monthly cost to rent a home in Canada is now higher than ever and some analysts are growing increasingly concerned that renters won't be able to keep up with the higher payments. “We're getting close to a point where rents are just simply becoming unaffordable for renters,” said Urbanation president, Shaun Hildebrand, to CBC News. 

But that's not stopping landlords from collecting higher rents. In 2023, affordability challenges for would-be buyers, inflationary pressures, and an overall lack of housing are expected to continue driving up rent prices in much of the country. 

“Interest rates are actually working to elevate rent inflation because many people are not buying, so they are renting more,” CIBC Economist Benjamin Tal told CBC News.

And according to Tal, the higher rates have also disincentivized builders and developers from investing in rental properties. That, in turn, has exacerbated the under-supply of available units.

It's possible rent prices could ease if Canada's economy deteriorates, says Urbanation's Hildebrand. “But over the medium and longer term with aggressive immigration targets and rental construction that's been stalling recently due to high costs, it's pretty clear that rents are going to continue to rise higher.”

What does it mean for you?  Rent prices are expected to keep climbing. But you can lock in a set mortgage payment and build long-term wealth by putting that money toward a home purchase instead. Reach out for a free consultation to discuss your options. 

And if you’re planning to sell this year, you’ll want to chart your path carefully to maximize your profits. Contact me for recommendations and to find out your home’s market value.

I'M HERE TO GUIDE YOU

While national real estate forecasts can provide a “big picture” outlook, real estate is local. Local market experts can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighbourhood. 

If you’re considering buying or selling a home in 2023, contact me to schedule a free consultation. I’ll work with you to develop an action plan to meet your real estate goals this year.

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.


7 Tips to Maximize Your Home's Sale Price

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Over the past few years, a real estate buying frenzy bid up home prices to eye-popping amounts. However, as mortgage rates have risen, buyer demand has cooled. Consequently, home sellers who enter the market today may need to reset their expectations.

The reality is, it’s no longer enough to stick a “for sale” sign in the yard and wait for buyers to bang down the door. If you want to net the most money possible for your property in today’s market, you’ll need an effective game plan and a skilled team of professionals to implement it. 

Fortunately, I’ve developed a listing strategy that combines my proven approach to preparation, pricing, and promotion—all designed to help you get top dollar for your home. But you will play an important role in the selling process, as well. 

Here are some crucial steps you can take to set yourself up for success as a home seller in this market:

  

  1. Make Strategic Repairs and Improvements

When you sell something, it’s important to consider what your customer wants to buy. And according to a recent survey, 83% of Canadians view “affording necessary renovations” as a major hurdle to buying a home. If you can present buyers with a move-in-ready option, they will feel more confident in making an offer. 

Before your home goes on the market, we’ll conduct a thorough walk-through to identify any problems that could prevent it from selling. In some cases, I may recommend a professional pre-listing inspection. Finding and addressing issues like leaks, rot, and foundation problems up front can pay off in the final sale price. Plus, it prevents sales from falling through because of a red flag on the home inspection, a scenario no seller wants to face.

Beyond repairs, I’ll also help you identify the simple upgrades that offer the highest return on your investment. For example, new paint can give your home a fresh look at a reasonable cost. And according to a recent report, it’s one of the top renovations for return at resale. Similarly, minor landscaping improvements can pay off in a major way. A healthy lawn offers an estimated 256% ROI.

     2.  Declutter and Depersonalize

This is high on my list of ways to create appeal. When buyers look at a home for sale, they’re trying to envision themselves living there. That’s hard to do if it’s chock-full of the current owner’s family photos, children’s artwork, and souvenir collections. Plus, cluttered homes look smaller, and older items can make them feel dated. 

Decluttering before you put your home up for sale will help you in the long run—after all, you’ll need to move all your things to your new home eventually. Now is the time to shred, digitize, or organize old documents, donate old clothes, or move bulky furniture into storage. At a minimum, you’ll want to pack away excess items neatly before potential buyers view the home. Remove personal photos and other trinkets to create a blank slate that viewers can imagine decorating with their own prized possessions.

If you feel overwhelmed by this process, I’d be happy to make recommendations or refer you to a local service provider who can help.

    3.  Stage Your Home for Success

Just as you take care to dress professionally for a job interview, you should always ensure your home looks its best for potential buyers. Like it or not, home shoppers today are used to scrolling through Instagram and Pinterest, and they want to see the same wow factor when touring a home.

The process of making your home look its best and appeal to potential buyers is called staging, and it can be a game changer. According to the International Association of Home Staging Professionals, an average priced staged home sells 5 to 11 times faster than its unstaged counterpart. Even better, the majority of staged homes sell for 4% to 20% over list price!

It’s also important to consider what buyers in your neighbourhood are likely to be looking for in a home. I will the staging choices with local market insights. For example, in neighbourhoods where a large share of residents work from home, it may be effective to stage one room as an office space so potential buyers can envision their day-to-day routine.

   

    4.  Prep for Each Showing 

Most of us don’t live picture-perfect lives, and our homes reflect that (sometimes messy) reality. But when your home is on the market, it’s important to ensure that it is ready for viewers, even on short notice. A missed showing is a missed opportunity to sell your home!

Before your home hits the market, it may be worth hiring professional cleaners to get in all the nooks and crannies. After, try your best to keep things spic and span. Just a few minutes a day wiping down counters, sweeping the floors, and vacuuming can make a big difference. 

It’s also worth noting that most buyers will open cabinets, drawers, and closets—so try to make sure everything is as neat and organized as possible. Keep toiletries and small appliances off countertops, and secure valuables and sensitive documents in a safe or off-site.  In today's market, average days on market has increased. Be prepared for a bit of a longer haul.

Want help finding a cleaning service to make your home shine for buyers? Reach out for a referral!

    5.  Price Your Home Correctly From the Start 

In the past few years, you may have seen homes in your neighbourhood sell for shocking amounts and wondered if you could get a similar price for your property. The temptation to list your home on the high side can be strong, but it’s best to be realistic from the start. Even in a strong market, some homes will sit for months. And the longer a property is listed, the more buyers worry that something is wrong with it. 

Of course, you also don’t want to set your price too low and lose out on potential profit. That’s why it’s essential to work with real estate agents (like me!) who knows the ins and outs of our local market and what buyers are willing to pay today. In a quickly-evolving market, comparable sales from a few months ago can lag the current market reality.  

Fortunately, if you’ve owned your home for several years, chances are good that it’s worth much more today than you paid for it. That means you stand to walk away with a handsome profit.

 

    6.  Avoid Acting on Emotion

The past few years of over-asking-price offers with few conditions have set certain expectations for many sellers. It’s only natural to feel hurt or even offended if an offer comes in lower than what you think your home is worth. 

However, it’s important to keep in mind that those market conditions were unprecedented, and we are now returning to a more typical market. Home sellers who act rationally, rather than emotionally, are going to get the best results. 

Remember: You can always counter a low offer. The same goes for repair requests and conditions—everything is negotiable. However, it’s important to accept that the market is adjusting and flexibility is key. Keep your expectations reasonable, and remain open-minded. And you can rest assured knowing that I’ll be by your side every step of the way to help you navigate the process and negotiate a great deal.

    7.  Work With a Local Market Expert

The economics impacting mortgage rates may be national, but real estate markets are hyperlocal. That’s why working with a professional agent who understands your neighbourhood’s dynamics is essential. Through experience, we’ve gathered insights that can help us position your home for success in this market. Plus, we have the resources to connect with qualified buyers searching for a home like yours.  

Working with a knowledgeable agent is also the secret to getting as much money as possible for your home. We have access to extensive data on recent sales in your neighbourhood, which we use to price and promote your property. That’s one reason why homes sold by agents draw much higher prices than those sold by their owners alone. The U.S.-based National Association of Realtors found that for-sale-by-owner homes went for a median price of $260,000 in 2020, while the median for homes sold by agents was $318,000. That’s a difference of $58,000—and money you don’t want to leave on the table.

YOUR AGENT AND ADVOCATE

Selling a home in a changing market can be stressful. You’re likely to hear conflicting advice and opinions from people in your life, and decisions like what colour to paint your front door or how much to list your home for can be overwhelming. 

That’s where I come in. The market may be adjusting, but I'm here to help you make the most of it. As a listing expert I know what steps you need to take for a smooth, profitable transaction.

If you’re considering buying or selling a home, I invite you to reach out to schedule a free consultation. I'm happy to talk through your specific situation and goals and help you identify your next steps.

 

The above references an opinion and is for informational purposes only.  It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.


Great Opportunity to Purchase in a NEW 55+ Active Adult Lifestyle Community!

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River Crest Estates is a soon-to-be-built four storey 55+ Adult Active Lifestyle Community in Niagara Falls that will have 60 luxury condominiums units with sizes ranging from 740 sq. ft. to over 1800 sq. ft.

Listed exclusively with Marion for $659,900, Unit 109 is a 2 bedroom, 2 bathroom, 2 full bathroom, ground floor unit with in-suite laundry and 2 separate terraces accessible from each of the bedrooms. 1 underground parking spot.

Every unit in the building features a chic and modern design with nine-foot-high ceilings, including large open hallways, and well-appointed common areas, two private bedrooms, walkout to balcony or terrace, full bath and closet, along with an open style living, dining and kitchen. Each unit has individually controlled heating & air conditioning systems, along with a Smart Sub-metering for all utilities. 

This property offers security and peace of mind that come from knowing others are close at hand and for someone who lives alone!

Standard Features:

  • Nine-foot (9 +/-) ceilings
  • Exceptionally spacious light-filled homes inspiring indoor/outdoor living

  • Graceful foyers and open living rooms

  • 36” Solid core entry door

  • 36” Masonite 800 series interior doors

  • Chef style kitchen with solid surface countertops 

  • All major appliances including stacked Washer/Dryer

  • Acrylic walk-in tub/shower units  

  • Quality Flooring throughout

The units and development are suitable for someone who would like to live there themselves with 2 bedrooms - or - through co-ownership where 2 people purchase the unit together, yet separately, have their own bedroom, bathroom and patio and share the other spaces in the unit. If purchased as a co-owner, should the need arise in the future one of the owners could sell their portion of the unit separately from the other owner.  At River Crest Estates care and/or support services will be available a-la-carte from Water View Estates, a sister property to be built in St. Catharines and overlooking the Welland Canal.

River Crest Estates may be of interest to an investor who could rent out the unit to either 1 or 2 parties. There's also an opportunity for a non-resident owner to have River Crest Estates lease out and manage the unit on the owners behalf. As well, someone could buy a 2 bedroom unit, occupy one bedroom and lease out the other.
And the best part - pets are permitted (with restrictions)!
Memberships are currently available which affords the Member various benefits.
Don't hesitate to reach out with any questions you have or for additional information. 

List Price:  $659,900

Bedrooms:  2

Bathrooms: 2

Size: 1174 sq. ft. (based on builder plans)

Parking: 1 Underground

Taxes: To be determined

Condo Fees: To be determined. Includes Building Insurance, Common Elements, Ground Maintenance/Landscaping, Parking, Property Management Fees, Snow Removal.

Other models also available.


Potential Changes to Burlington Riding Boundaries

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This information below has been provided by Karina Gould, Member of Parliament for Burlington. 

After every 10-year census, our Constitution requires that federal electoral ridings be reviewed, to take into account any population changes. 

This review is undertaken by independent provincial commissions. Here in Ontario, the Federal Electoral Boundaries Commission for Ontario published their proposal on August 19th, 2022.  

In relation to our community, the Commission’s report proposes to:  

- Remove sections of the Elizabeth Gardens neighbourhood to a new riding, Oakville Lakeshore; 

- Remove sections of the Tyandaga and Brant Hills neighbourhoods to a new riding, Burlington – Milton West;

- Add sections of the Headon Forest and Millcroft neighbourhoods, which are currently part of the Oakville – North Burlington federal electoral riding.  

As a community, we all want to be part of an electoral riding that is representative of who we are, and where we are. 

I am concerned about the subsuming of Tyandaga and Brant Hills into a Milton riding and Elizabeth Gardens into Oakville, as these neighbourhoods are served by schools, hospitals, and other services located in the City of Burlington. 

I encourage all residents to take a look at the proposed new boundaries put forward by the Commission. 

The Commission, in its initial proposal looks only at population, and not communities of interest, therefore when petitioning the Commission, it is important to explain why or why not a certain area should be a part of an electoral riding.   

Following the publishing of the new boundaries, the Commission will also accept written submissions from the public by mail and email until September 25th, 2022. There will then be both virtual and in-person hearings from September 26 – October 29th.  

In Halton, there will be a virtual hearing on September 28th, and an in-person hearing on October 12th. These require registration by September 25th in order to participate. I will be participating in both hearings.  

The Commission will then submit a report, consider objections from the public and the House of Commons, and prepare a final decision outlining the new boundaries for the province of Ontario.  

As these proposed changes will affect our community of Burlington, and neighbouring Oakville and Milton, it is important that residents be informed and have their say.  

You can view the proposed changes, complete and register your submissions, and learn more at redecoupage-redistribution-2022.ca.


8 Strategies to Secure a Lower Mortgage Rate

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Interest rates have risen rapidly this year with the latest increase announced on September 7, 2022. These increases have been triggered by the Bank of Canada’s efforts to curb inflation. And the July MNP Consumer Debt Index found that 59% of Canadians “are already feeling the effects of interest rate increases.” 

Why has the impact been so widespread? In part, due to the rising popularity of variable rate mortgages. According to the Canada Mortgage and Housing Corporation, in the latter half of last year, the majority of mortgage borrowers opted for a variable over a fixed interest rate.

Variable mortgages are typically pegged to the lender’s prime rate, which means they are immediately affected by rising interest rates. Homeowners with fixed mortgages aren’t impacted as quickly because their interest rate is locked in, but they will face higher rates, as well, when their mortgages are up for renewal. And many home-buyers are finding it increasingly difficult to afford or even qualify for a mortgage at today’s elevated rates.

Fortunately, there are steps you can take to strengthen your position if you have plans to buy a home or renew an existing mortgage. Try these eight strategies to help secure the best available rate:

1. Raise your credit score.

Borrowers with higher credit scores are viewed as “less risky” to lenders, so they are offered lower interest rates. A “good” credit score typically starts at 660 and can move up into the 800s. If you don’t know your score, you can access it online from Canada’s primary credit bureaus, Equifax, Transunion and Borrowell. 

Then, if your credit score is low, you can take steps to improve it, including:

  • Correct any errors on your credit reports, which can bring down your score. You can request free copies of your reports through the credit bureau websites. 
  • Pay down revolving debt. This includes credit card balances and home equity lines of credit.
  • Avoid closing old credit card accounts in good standing. It could lower your score by shortening your credit history and shrinking your total available credit.
  • Make all future payments on time. Payment history is a primary factor in determining your credit score, so make it a priority.
  • Limit your credit applications to avoid having your score dinged by too many inquiries. If you’re shopping around for a car loan or mortgage, minimize the impact by limiting your applications to a two-week period.

Over time, you should start to see your credit score climb — which will help you qualify for a lower mortgage rate.

2. Keep steady employment.

If you are preparing to purchase a home, it might not be the best time to make a major career change. Unfortunately, frequent job moves or gaps in your résumé could hurt your borrower eligibility. 

When you apply for a new mortgage, lenders will typically review your employment and income history and look for evidence that you've been financially stable for at least two years.6 If you’ve earned a steady paycheck, you could qualify for a better interest rate. A stable employment history gives lenders more confidence in your ability to repay the loan.

That doesn’t mean a job change will automatically disqualify you from purchasing a home. But certain moves, like switching from corporate employment to freelance or self-employment status, could force you to delay your purchase, since lenders will want to see proof of steady, long-term earnings. 

3. Lower your debt service ratios.

Even with a high credit score and a great job, lenders will be concerned if your debt payments are consuming too much of your income. That’s where your debt service ratios will come into play.

There are two types of debt service ratios:

  1. Gross debt service (GDS) — What percentage of your gross monthly income will go towards covering housing expenses (mortgage, property taxes, utilities, and 50% of condo maintenance fees)? 
  2. Total debt service (TDS) — What percentage of your gross monthly income will go towards covering ALL debt obligations (housing expenses, credit cards, student loans, and other debt)?

What’s considered a good debt service ratio? Lenders typically want to see a GDS ratio that’s no higher than 32% and a TDS ratio that’s 40% or less.7

Low debt service ratios will also help you pass a mortgage stress test, which is required by all Canadian banks and some other types of lenders. The stress test is designed to help ensure you can continue to afford your mortgage payments even if interest rates rise. You can use the government of Canada's Mortgage Qualifier Tool to calculate how much you can afford to borrow. 

If your debt service ratios are too high, or you can’t pass a mortgage stress test, you may need to consider purchasing a less expensive home, increasing your down payment, or paying down your existing debt. A bump in your monthly income will also help.

4. Increase your down payment.

Minimum down payment requirements vary by loan size and property type. But, in some cases, you can qualify for a lower mortgage rate if you make a larger down payment.

Why do lenders care about your down payment size? Because borrowers with significant equity in their homes are less likely to default on their mortgages. That’s why you will be required to purchase mortgage default insurance if you put down less than 20%. 

It’s important to note that some lenders offer discount rates for borrowers who put down less than 20% – because the required default insurance protects them from any potential loss. However, the cost of CMHC or private mortgage default insurance will typically exceed any interest savings. You'll also have to pay interest on that insurance if you add it to your mortgage. The bottom line: you’ll save money in borrowing costs if you can afford a larger down payment.

Fortunately, there are a couple of government-initiated resources designed to help eligible first-time home buyers with a down payment, including:

  • Home Buyers’ Plan (HBP) – Buyers may withdraw up to $35,000 (tax-free) from their Registered Retirement Savings Plan(RRSP). The money must be used to build or purchase a qualifying home and repaid to the RRSP within 15 years.
  • First-Time Home Buyer Incentive – Buyers can take advantage of a shared-equity mortgage with the Government of Canada. Essentially, the Government will put 5% or 10% towards your down payment, interest-free, in exchange for a limited equity share of your property. The repayment is due in 25 years or when you sell your home. 

I’d be happy to discuss these and other programs, tax rebates, and incentives that might help you increase your down payment.

5. Weigh interest rate options.

All mortgages are not created equal, and some may be a better fit than others, depending on your priorities and risk tolerance. For starters, there are several interest rate options to choose from:1

  • Fixed — You’re guaranteed to keep the same interest rate for the entire length of the loan. Many buyers prefer a fixed rate because it offers them predictability and stability. However, you’ll pay a premium for it, as these mortgages typically have a higher interest rate to start. And if rates fall, you’ll be locked into that higher rate.
  • Variable — Your interest rate will rise or fall along with your lender’s prime rate. You can choose either an adjustable or a fixed monthly payment. However, if you opt for a fixed payment, the amount that goes towards principal and interest each month will fluctuate depending on the current rate. Variable-rate mortgages typically offer lower interest rates to start but run the risk of increasing.
  • Hybrid – Can’t decide between a fixed or variable rate? Hybrid mortgages attempt to address that dilemma. A portion of the mortgage will have a fixed rate and the remainder will have a variable rate. The fixed gives you some protection if rates go up, while the variable offers some benefit if rates fall.

What’s the best choice if you’re looking for the lowest mortgage rate? The answer is…it depends. If mortgage rates don’t rise much higher, or drop back down in a couple of years, you could win by opting for a variable rate. However, if they continue to climb, you may be better off with a fixed rate.

Keep in mind that the spread between variable and fixed rates has narrowed as rates rise.  However, it's still easier to meet the stress-test requirements for a variable mortgage, since the threshold is lower. So, your choice may be limited by your ability to qualify.

6. Compare loan terms.

A mortgage term is the length of time your mortgage agreement is in effect. At the end of the term, a mortgage holder will need to either pay off their mortgage or renew for another term.

There are three major types of mortgage terms:

  • Shorter-term – These can range from 6 months to 5 years, and they are the most popular type in Canada. Borrowers can choose between a fixed or variable interest rate.
  • Longer-term – These are longer than 5 years but generally no more than 10 years in length. Longer-term mortgages are more likely to feature fixed-interest rates and hefty prepayment penalties.
  • Convertible – Offers the option to extend a shorter-term mortgage to a longer-term mortgage, typically at a different interest rate.

Which loan term offers the lowest rate? A shorter-term mortgage will typically feature a lower interest rate than a longer-term mortgage. However, the rate on a 1-year or a 3-year mortgage could be higher or lower than a 5-year mortgage depending on the current economic climate and whether it’s fixed or variable. 

Many lenders offer especially attractive rates for 5-year mortgages due to their popularity. But to find the best rate, you’ll need to compare your options at the time of purchase or renewal.

7. Get quotes from multiple lenders.

When shopping for a mortgage, be sure to solicit quotes from several different lenders and lender types to compare the interest rates and fees. Depending upon your situation, you could find that one institution offers a better deal for the type of loan and term length you want.

Ideally, you should begin this process before you start looking for a home. If you get pre-approved for a mortgage, in most cases, you can lock in the mortgage rate for 90 to 120 days. This is especially important when interest rates are rising.

Some borrowers choose to work with a mortgage broker. Like an insurance broker, they can help you gather quotes and find the best rate. They’re paid a commission by the lender, so it won’t cost you anything out of pocket to use a broker. However, make sure you find out which lenders they work with and contact more than one so you can compare their recommendations.

Don’t forget that I can be a valuable resource in finding a lender, especially if you are new to the home buying process. After a consultation, we can discuss your financing needs and connect you with loan officers or brokers best suited for your situation.

8. Ask for a discount.

When shopping for a mortgage, don’t be afraid to negotiate. In Canada, it’s commonplace for lenders to discount their advertised interest rates, which are called posted rates. And in many cases, all you have to do is ask. Of course, the strength of your application will come into play here – so don’t neglect strategies 1 through 4 above.

Keep in mind that interest rates aren’t the only thing on the table. You can negotiate other contract terms, as well, like prepayment options and rebates. And if you get a great offer from one lender, you can leverage it by asking your preferred institution to match or beat it.

Getting Started

Unfortunately, the rock-bottom mortgage rates we saw during the height of the pandemic are behind us. However, today’s 5-year fixed rates still fall beneath the historical average — and are well below the all-time peak of 20.75% in 1981.

And although higher mortgage rates have made it more expensive to finance a home purchase, they have also ushered in a more balanced market. Consequently, today’s buyers are finding more homes to choose from, a better value for their investment, and sellers who are willing to negotiate.

If you have questions or would like more information about buying or selling a home, reach out to schedule a free consultation. I’d love to help you weigh your options, navigate this shifting market, and reach your real estate goals!

Testimonials

  Marion's warm and personable style is complemented by her dedication to detail and to outcome. Any enterprise I have undertaken with her has been not only a pleasure but a resounding success. Marion brings a special quality to all of her endeavors and I look forward to working with her again and again.

Jane Allison, Manager Community Partnerships, Hamilton, ON, The Hamilton Spectator

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