With mortgage concerns cited as one of the first hurdles encountered by home buyers, professional advice is always key in providing a better understanding of the current state of the market.
That’s why we’ve turned to Patricia Collins – one of Vancouver’s top mortgage brokers – to answer a series of vital mortgage-related questions:
What are the most important things a first-time home buyer should keep in mind before taking on a mortgage?
Tip #1: Get pre-approved early, and get a plan. I am biased, but you should always speak to a mortgage broker. They are free to speak to, will provide and explain all of your options (not just one bank’s) and will help you formulate a plan. This makes the whole process far less stressful because you’ll actually understand and take part in your decision making, and you’ll be confident making your offer when you find the home you want to buy!
Tip #2: Make sure you’re ready! It’s a big commitment and most likely will take all of your savings. I don’t think you’ll regret it and it’s a forced savings plan going forward, but it’s a big leap. Make a budget for yourself, and know how much per month you are willing to spend on your mortgage payment. How much you can qualify for is often a very different number than the size of mortgage you should take on. You want to be a happy home owner, not stressed to the max and unable to join your friends for dinner.
Tip #3: Take care of your credit – most people underestimate the impact of forgetting to pay your phone bill or a Bay card with $15.00 owing. These things add up and can get in the way of you obtaining the best and lowest rate mortgage available. Pay your bills on time, and keep each credit card usage below 70% of its maximum and you’ll be gold!
When buying a home, how much would you advise the minimum down payment to be?
Ideally home buyers can come up with 20% or more as this means they won’t pay an insurance premium, but in today’s market, this is often not a possibility for purchasers. For first-time home buyers, they have been faced with paying high rent and living costs while trying to save a down payment. If they can save 5% to put down, that allows them to enter the market and their new mortgage payment is often lower than their rent payment was. They will now be building equity with that same money that they were giving away to someone else, and it’s their very own home! My advice in this market would be to just get in…
How much do you think mortgage rates will increase in the upcoming years?
I always hesitate to say much on this as I’m not an economist, but I always make sure my clients are prepared for an eventual rate climb and are taking advantage of the rates while they are as low as they are right now. I’d certainly love to have a crystal ball! The general consensus is that the only direction that they can go is up, but no one expects a crazy jump anytime soon.
Do you think Vancouver’s housing market will finally start to cool off in the upcoming years?
Always a hot topic at any Vancouver dinner table – anyone in the market hopes not, and anyone hoping to enter the market is secretly praying for it every night! The market here is different than anywhere I’ve seen – it’s a limited supply in a highly desirable location –parents want their children to go to school here, they want to park their money here, and it’s a bargain for foreign investors. It’s a unique live/work city with a great lifestyle and outdoor environment, so as much as we all complain about the prices, we are all still willing to pay them for our piece of the paradise.
Will reverse mortgages gain more traction in the years to come?
They are already gaining traction. With an aging population who are living longer, most people have not tucked away enough to support their desired lifestyle for as long as they now need to. There is a lot of misinformation out there regarding reverse mortgages, but they make a lot of sense for a lot of people.
For any home owner over the age of 55, these products allow them to obtain either a lump sum amount (to purchase a snowbird property, to renovate, to provide a down payment to their children), or a monthly amount that supplements their income (helping to cover medical costs, in-home care, general lifestyle). These mortgages do not require income or good credit, as there are NO payments that need to be made. That’s a huge load off of a senior or widower – they don’t want to be worrying about mortgage/LOC payments, or requalifying at that stage of their lives.
Contrary to what most people think, using a conservative 3% annual increase in property value and 15 years into a reverse mortgage, there would still be more equity in the home than when the mortgage began – allowing the retiree to live comfortably without emptying all of their other pockets, and still leave what they had hoped to behind for their family.
About Patricia Collins:
Voted one of the Best Mortgage Brokers in Vancouver, Patricia is an Accredited Mortgage Professional (AMP) and a member of both the Canadian Association of Mortgage Professionals and the Mortgage Brokers Association of B.C. A former teacher and business analyst, she believes in the importance of clearly understanding your options and is passionate about supporting her clients throughout the financing process and their life transitions.