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<\/figure>\n\n\n\nPhilip Sanchez, Independant Mortgage Broker<\/strong>Steve Valli\u00e8res, Director of Mortgage Development for the National Bank of Canada<\/span><\/strong><\/em><\/p>\n\n\n\n
Currently, mortgage rates are on everyone\u2019s mind.<\/p>\n\n\n\n
We turned to our network of trusted mortgage specialists to provide some insight for you to get started on your decisions around this important dynamic in the Montr\u00e9al real estate market.<\/p>\n\n\n\n
Independent mortgage broker Philip Sanchez, and Steve Valli\u00e8res, Director of Mortgage Development for the National Bank of Canada, join GREENPRINT to share their knowledge and perspectives.<\/p>\n\n\n\n
1: Variable v. fixed rates? What is the difference between the two? Which do you recommend to buyers?<\/b><\/p>\n\n\n\n
Philip Sanchez: <\/b>As the name states the Variable rate could change during the mortgage term based on the fluctuation of the Bank of Canada\u2019s the Prime rate (usually the rate is determined using a discount from the Prime). A variable rate could be converted to a fix rate during the mortgage term at any time without any penalty. Historically, clients with variable rates have come out winning and the penalty could be considerably lower than with a fix rate.<\/p>\n\n\n\n
A Fix rate is locked in for the period or term (usually 5 years) and provides clients consistent and stable payments. A fix rate cannot be converted into a variable rate during the duration of the term without breaking the mortgage and penalties could be considerably higher than with a variable rate.<\/p>\n\n\n\n
As a mortgage broker I provide all the information to the clients, stating the pros and cons of each product along with the different Lenders for them to make an informed decision that best suits their needs. There are many factors to consider including their future plans as well as their risk tolerance. Regardless of the product and Lender they select, clients must be completely comfortable with their choice.<\/p>\n\n\n\n
Steve Valli\u00e8res:<\/b> Les clients qui choisissent leur financement hypoth\u00e9caire avec un taux d\u2019int\u00e9r\u00eat fixe ne seront pas affect\u00e9s par les fluctuations des taux du march\u00e9, et ce jusqu\u2019au renouvellement de leur hypoth\u00e8que. En effet, le taux est fix\u00e9 pour la dur\u00e9e du contrat. Lorsqu\u2019un renouvellement du contrat a lieu, les nouveaux taux entrent alors en vigueur. Les clients qui choisissent un taux d\u2019int\u00e9r\u00eat variable verront leur taux changer lorsque la Banque du Canada confirme un changement du taux directeur. Le taux directeur est influenc\u00e9 par plusieurs variables, telles que l\u2019inflation et l\u2019\u00e9conomie locale ou internationale.<\/p>\n\n\n\n
Ma recommandation est d\u2019avoir une conversation avec votre sp\u00e9cialiste hypoth\u00e9caire et prendre la d\u00e9cision qui r\u00e9pond le mieux \u00e0 vos besoins et votre tol\u00e9rance au risque. Il n\u2019existe pas de formule qui fonctionne pour tous. Les conseils d\u2019un professionnel seront d\u2019une grande aide lors de la prise de d\u00e9cision.<\/p>\n\n\n\n
2: The pre-qualification process is stricter since June of last year. Have you noticed that fewer buyers are pursuing pre-qualification as a result? Is the bank approving fewer files than they were prior to the changing of the qualification rates?<\/b><\/p>\n\n\n\n
Philip Sanchez: <\/b>In the past few years, the Office of the Superintendent of Financial Institutions (OSFI) has changed the rules and criteria in order to qualify mortgage files. The last modification to these rules and criteria were issued in June 2021 and it has become more difficult to qualify. In other words, the same clients with same income and debts would qualify for a lower mortgage amount after June 2021. The Lenders and Insurers have also become stricter during the pandemic especially in certain types of files and industries.<\/p>\n\n\n\n
This is why an elaborate Pre-authorization is so important at this point in time for all parties involved (clients, real estate and mortgage brokers).<\/p>\n\n\n\n
Steve Valli\u00e8res:<\/b> Au contraire, je remarque que les clients ainsi que les professionnels de l\u2019immobilier qui les assistent dans leurs recherches reconnaissent davantage l\u2019importance que les acheteurs soient pr\u00e9approuv\u00e9s pour leur financement. Le march\u00e9 immobilier actuel est tr\u00e8s comp\u00e9titif et avoir en main une pr\u00e9approbation d\u2019une institution financi\u00e8re peut parfois vous avantager lorsqu\u2019une promesse d\u2019achat est d\u00e9pos\u00e9e. Il est vrai que quelques changements apport\u00e9s aux r\u00e8glementations ces derni\u00e8res ann\u00e9es affectent la capacit\u00e9 d\u2019emprunt de certains de nos clients, mais l\u2019objectif des banques demeure d\u2019assister un maximum de clients \u00e0 r\u00e9aliser leurs r\u00eaves d\u2019acquisition de propri\u00e9t\u00e9. Encore une fois, la bonne prise en charge et pr\u00e9paration de votre sp\u00e9cialiste en financement assurera que vos attentes sont r\u00e9alistes et qu\u2019il n\u2019y aura pas d\u2019impr\u00e9vu au moment de la demande d\u2019approbation de votre pr\u00eat hypoth\u00e9caire.<\/p>\n\n\n\n
3: Have you noticed an increase in refinancing among current homeowners?<\/b><\/p>\n\n\n\n
Philip Sanchez: <\/b>I have definitely noticed an increase in refinancing among current homeowners, not only at the time of the mortgage renewal but also before the end of the term which involves breaking the mortgage term. Breaking a mortgage requires paying a penalty however some lenders charge significantly less in penalties than others. In the past 2 years property values have increased considerably therefore many clients were able to refinance their properties and came out winning with a lower rate, even after paying the penalty. Clients use the proceeds from refinancing for different reasons such as: renovations, consolidate debts, purchase of a car, secondary home, or a rental property.<\/p>\n\n\n\n
There is a product available which I believe is extremely underutilize and I suggest it to clients that wish to renovate after they have purchased. Some Lenders will allow to finance the renovations and improvements at the time of purchase. By doing this the clients do not have to get into additional debt after their purchase with credit lines, personal loans or credits cards which carry a much higher interest rates that a mortgage loan.<\/p>\n\n\n\n
Steve Valli\u00e8res:<\/b> L\u2019augmentation importante de la valeur des propri\u00e9t\u00e9s ces derni\u00e8res ann\u00e9es a certainement fait en sorte d\u2019augmenter le nombre de propri\u00e9taires qui d\u00e9sirent refinancer leurs propri\u00e9t\u00e9s. Ceci leur permet de r\u00e9aliser plusieurs projets tels que des r\u00e9novations, des investissements ou simplement pour rembourser des engagements de cr\u00e9dit \u00e0 plus haut taux d\u2019int\u00e9r\u00eats. Les banques s\u2019assurent toujours d\u2019octroyer le financement en consid\u00e9rant une valeur de propri\u00e9t\u00e9 qui est repr\u00e9sentative du march\u00e9 actuel. Plusieurs clients optent pour la r\u00e9novation versus la vente et l\u2019achat d\u2019une nouvelle propri\u00e9t\u00e9, consid\u00e9rant le nombre tr\u00e8s limit\u00e9 de propri\u00e9t\u00e9s en vente actuellement.<\/p>\n\n\n\n
4: What path(s) do you suggest for first time buyers, who have a more limited budget, and are hoping\/assuming that focusing on saving more money before buying is the way to go? Should they wait and save, or should they strike sooner than later? <\/b><\/p>\n\n\n\n
Philip Sanchez: <\/b>My strategy is to pre-authorize clients in order to determine if they qualify for a mortgage as well as the maximum amount. Based on the current market and the lack of inventory I would say that in most cases it is better to make the purchase sooner rather than later (especially if criteria and rules change again and the OSFI makes it even harder to qualify like they did in June 2021). Initially I will ask if there is a possibility that family member is able to help them in form of a Gift or as co-signer\/co-owner. Other times I will explain that perhaps it is better to lower their expectations in terms price, type of property, location, etc.<\/p>\n\n\n\n
In the past year I have dealt with several files where clients gave up on their ideal single-family home and opted for a condo and at the end, they were extremely happy they modified their expectations. Additionally, I set up the purchases in such a way that clients would be able to sell their condos with a minimal penalty and hopefully a have greater down payment and in a better financial situation to reach their ultimate goal of a single-family home.<\/p>\n\n\n\n
In a particular case clients were paying less for the mortgage loan with more square footage in their new condo than they were paying in rent for their apartment!!<\/p>\n\n\n\n
Steve Valli\u00e8res:<\/b> L\u2019immobilier demeure un investissement long terme int\u00e9ressant pour la majorit\u00e9 des gens. Devenir propri\u00e9taire est un objectif pour plusieurs et la pr\u00e9paration devient d\u2019autant plus importante consid\u00e9rant l\u2019environnement actuel du march\u00e9. Je sugg\u00e8re que les clients d\u00e9terminent leur budget selon leur situation financi\u00e8re et professionnelle actuelle, et mettent en place, avec l\u2019aide d\u2019un conseiller financier, un plan d\u2019\u00e9pargne pour l\u2019accumulation d\u2019une mise de fonds. Parfois, on r\u00e9alise qu\u2019on est plus proche de la mise en \u0153uvre de notre projet que l\u2019on puisse imaginer). \u00c0 mon avis, attendre que le march\u00e9 ralentisse ou que les prix diminuent peut nous faire manquer de belles opportunit\u00e9s. Ayez une conversation franche et r\u00e9aliste avec votre sp\u00e9cialiste ainsi que les personnes impliqu\u00e9es dans le projet, puis sollicitez les services d\u2019un courtier immobilier qui saura bien vous accompagner dans vos d\u00e9marches. Un bon entourage professionnel assure un beau succ\u00e8s de votre projet d\u2019achat.<\/p>\n\n\n\n Philip Sanchez, Independant Mortgage Broker<\/strong>Steve Valli\u00e8res, Director of Mortgage Development for the National Bank of Canada<\/span><\/strong><\/em><\/p>\n\n\n\n<\/figure>\n\n\n\n