The Decrease in The Bank of Canada’s Mortgage Stress Test is Great News
We invited the mortgage experts from mortgagecalculator.ca to talk a little bit about the Bank of Canada's recent lowering of the mortgage stress test percentage rate. Enjoy this great read full of useful information and tips for new buyers and homeowners alike. - REW
Finally, we have a long overdue break for people that are in a position to renew their already existing mortgage or people that wish to secure their first mortgage loan. The Bank of Canada has dropped their mortgage qualifying rate from 5.34% down to 5.19%.
For homeowners and home buyers, this is fantastic news. Though it may seem like a difference of only a few tenths of a percent, the decrease provides prospective buyers a well-deserved leg up financially. Before outlining the immediate benefits to the lower percentage rate, let’s quickly explain how the Bank of Canada’s stress test works.
What is the Mortgage Stress Test?
The stress test that is imposed on a mortgage loan borrower or a mortgage loan renewal/refinancing homeowner is a means of making sure that the borrower can comfortably afford to take on the mortgage loan over an extended period of time. The Bank of Canada doesn’t just want borrowers to prove they qualify for a mortgage loan - they also require new borrowers to pay additional money over a 5-year ‘stress test’ time span. For borrowers that do not require mortgage loan insurance, the lender must charge the borrower either the conventional 5-year mortgage rate set by the Bank of Canada, or, the interest rate that is negotiated by the borrower and the lender with an additional 2% interest added (whichever interest rate is higher).
If the borrower does require mortgage loan insurance, the lender will impose either the conventional 5-year mortgage rate set by the Bank of Canada or the interest rate negotiated with the lender, whichever is higher.
Mortgage loan insurance is sometimes a requirement by a lender as a means of reassurance that the mortgage loan will be paid back in full, in case the borrower defaults on the loan for any reason.
Major Bank Mortgages vs Private Lenders
Something to consider: Only major banking institutions are regulated by the federal government and must impose the laws set by the Bank of Canada. Private mortgage lenders, mortgage brokers and other mortgage related lenders aren’t subject to the same regulations and have far more flexibility when it comes to approving mortgage loans without the ‘stress test’ involved.
If you’re trying to figure out how much mortgage you can qualify for or afford, getting answers to your financial questions is easy when using any of the mortgage calculator tools found at sites like https://mortgagecalculator.ca. Mortgage calculators can also be found on your bank’s website or other real estate websites (for instance, right here on any REW.ca listing page). They’re easy to use, free and can be customized multiple times to narrow down financial information for you.
One of the biggest perks to the decrease in the Bank of Canada’s stress test rate (besides saving money) is that home buyers and homeowners looking to refinance or renew will have the freedom to seek a higher dollar amount on their mortgage loan. That perfect home that caught your eye, but was out of reach financially may be within reach and actually affordable.
An increase of purchasing power for prospective buyers and homeowners offers a dual benefit: Qualification for a higher mortgage loan with a stronger position for negotiating an even better interest rate with a lender. Happy hunting!
Spring often activates the urge to not only get up and go, but sometimes pack up and leave! Before you make a move to move, it's important to refresh yourself on some home-buying basics. One of them is recognizing how the minimum down payment on a home is calculated.
To buy a home in Canada, your minimum down payment depends on its purchase price:
- If your next condo costs $500,000 or less, you'll need a minimum down payment of 5 percent.
- If the condo costs between $500,001 and $999,999, you'll need 5 percent of the first $500,000 of the purchase price, and then 10 percent for the portion of the purchase price over $500,000.
- If the condo costs $1 million or more, you'll need a minimum down payment of 20 percent of the purchase price.
- Note that if you're self-employed or have a poor credit history, you may be required to provide an even larger down payment.
As a current homeowner, you may have built up enough equity to allow you to put down more than 20 percent on your next home. But should you?
While there are many excellent reasons to put as much money towards your new residence as you can, you also don't want to leave yourself "house poor," with little to no discretionary income once you move in.
Let's discuss what makes sense for you, and also go over any changes in the real estate market since the last time you moved. Give us a call - we'd be happy to help. 778-363-0839
Check list for first time home buyers in the Okanagan - see link below!
Discover What Buyers Will Pay in Today’s Market
It’s easy to look up how much money you have in your savings account or the real-time value of your stock investments. But determining the dollar value of a home is trickier.
As a seller, knowing your home’s worth helps you price it correctly when you put it up for sale. If you price it too high, it may sit on the market. But price it too low and you may be losing out on a good chunk of money (nobody wants that!). For buyers, it’s important to know a home’s worth before you make an offer. You want your offer to be competitive, but you don’t want to overpay for the property.
Even if you’re not a buyer or seller right now, as a current homeowner you might just be curious about the value of your home. Keeping track of your home’s worth year over year helps you understand the trends in your market. So when you are ready to sell, you can take advantage of a good window of opportunity.
The good news is, a trained real estate agent—who understands the nuances of your particular neighborhood—can determine the true market value of your property … and at no cost to you!
THE THREE TYPES OF HOME VALUES
When you start the process of buying or selling a home, you’ll frequently hear the words appraised value, assessed value, and true market value. It’s important to know the difference between each one so you can make better, informed decisions.
A professional appraiser is in charge of determining the appraised value of a home. These appraisals are typically required by a lender when a buyer is financing the property. And while the lender is the one requiring this information, the appraiser does not work for the lender.1 Your appraiser should be an objective, licensed professional who doesn’t have allegiance to the buyer, seller, or lender—no matter who is paying their fee.
The number the appraiser comes up with (the appraised value) assures the lender that the buyer is not overpaying for the property. For example, imagine a seller lists a home for $400,000. They reach a deal with the buyer to sell the home for $375,000. However, if an appraiser evaluates the property and determines that the appraised value is actually $325,000, then the lender will not lend for an amount higher than that appraised value of $325,000.2
When figuring out this number, an appraiser will compare the property to similar homes in your neighborhood, and they’ll evaluate factors such as location, square footage, appliances, upgrades, improvements, and the interior and exterior of the home.
The assessed value of a home is determined by your local municipal property assessor. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.3
To come up with this value, your assessor will evaluate what comparable homes in the neighborhood have sold for, the size of your home, age, overall condition, and any improvements or upgrades that have been made. However, most assessors don’t have full access to your home, so their information is limited.
Assessments are done annually to determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. So, if the assessor determines that the value of the home is $300,000, but the county uses a 70% multiplier, the assessed value of the home would be $210,000 for tax purposes.4
If your assessed value isn’t as high as you envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes. If you’re interested in appealing your property tax assessment, let us know. We offer complimentary assistance and would be happy to help you build your case.
True Market Value
True market value is established by your real estate agent. It basically refers to the value that a buyer is willing to pay for the property. A good real estate agent is an expert in determining true market value because they have hands-on experience buying and selling properties. They understand the mindsets of buyers in your market and know what they’ll pay for a desirable house, townhouse, or condo.
As a seller, knowing your true market value is important because it helps you choose how much to list your property for. It can also help you decide if you want to make any improvements to your home before putting it on the market. Your agent can help you figure out which updates and upgrades will have the biggest impact on your true market value.
WHAT’S THE DEAL WITH ONLINE CALCULATORS?
When figuring out your home’s value, you might be tempted to see what popular real estate sites like Zillow, Redfin, and Trulia have to say. When you use an online calculator to determine your home’s value on these sites, it is just an estimate. It’s not an actual appraisal or the “true market value.” These sites all have their own algorithms for coming up with their estimates. For example, Zillow comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” 5
These online estimates can be a great starting point for opening up the conversation with your real estate agent about your home’s worth. But even Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site says that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.”
Having an agent involved in this process is essential because they understand the market better than a computer ever could. They’re showing property in your city every single day, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has most likely worked with all of them, so they understand what every segment in your market is specifically looking for.
HOW AN AGENT FINDS YOUR HOME’S TRUE MARKET VALUE
So, how does an actual real estate agent determine true market value? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:6
- Neighborhood sales - Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for and what they have in common with your house.
- The exterior - What does your home look like from the outside? Your agent will factor in curb appeal, the style of the house, the front and backyard, and anything else that impacts how the house looks to everyone walking and driving by.
- The interior - This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
- Age of the home - Whether you have a newer or older home affects the number your agent comes up with as part of their assessment.
- Style of the home - The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
- Market trends - Because a local agent has so much experience in your market, they have their finger on the pulse of your area’s trends and know what buyers are willing to pay for a property like yours.
- Location, location, location - This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.
A computer algorithm simply can’t take all of these factors into account when calculating the value of your home. The reality is, nothing beats the accuracy of a real estate agent or professional appraiser when it comes to determining a home’s true market value.
YOUR AGENT IS THERE EVERY STEP OF THE WAY
Determining a home’s true market value is a real estate agent’s forte. If you’re a seller, your agent will help you find your home’s market value so you can list it at the right price.
For buyers, your agent will help you determine the value so you can come up with a fair offer. Your agent can also set up a personalized home search on the Multiple Listing Service (MLS) for you so you’ll receive emails of listings that meet your criteria. This will help you see what’s out there in your city and how properties are being priced.
Get a Complimentary Report With Your Home’s True Market Value
Curious about your home’s true market value? Call us 778-363-0839 to request a free, no-obligation Comparative Market Analysis to find out exactly how much your home is worth!
- Chicago Tribune -
- SFGATE -
- ValuePenguin -
- Movoto -
- Zillow -
- Realtor.com -
f you’re a current homeowner, or in the market to buy, you’re probably curious about the latest trends in home design.
Sellers who make strategic updates before listing a property can generate increased interest from buyers and, in some cases, a premium selling price. And buyers should consider which features of a home will need updating immediately (or in the near future) so they can factor renovation costs into their overall budget.
Even if you have no immediate plans to buy or sell, we advise our clients to be thoughtful about the colors, materials, and finishes they select when planning a remodel. Making over-personalized or unpopular design choices could hurt a home’s value when it does come time to sell. And selecting out-of-style or overly-trendy elements could cause your renovation to feel dated quickly.
To help, we’ve rounded up eight of the hottest home design trends for 2019. Keep in mind, not all trends will work well in every house. If you plan to buy, list, or renovate a property, consult a professional who can help you realize your vision and maximize the impact of your investment.
1. WARMER PAINT COLORS
White and grey aren’t going anywhere, but expect to see warmer tones and more earthy neutrals popping up in 2019. Cold whites are being replaced by warmer, softer whites. And warmer tones of grey have become a popular alternative to the cooler grays we were seeing earlier in the decade. Dove grey—with a lilac undertone—is a particular favorite with designers this year.
Sherwin Williams chose Cavern Clay, a warm terracotta, as its 2019 color of the year, while Behr selected Blueprint, a mid-tone blue. Benjamin Moore’s selection is Metropolitan, a sophisticated grey.
If you’re preparing to sell your home, consider a light, neutral paint color. Neutral colors provide a blank canvas upon which a buyer can envision placing their belongings, and lighter colors make a room appear larger and brighter.
2. MIXED METALS
Don’t feel limited to using one metallic finish throughout your home—or even throughout a single room. Designers are mixing metals in 2019, and their favorites include copper, brass, pewter, gunmetal, and matte black.
Experts suggest picking one metal hue to dominate your color palette and a contrasting tone to complement it. If your room has a warm color palette, choose a warm-hued primary metal, such as brass or copper. For cool palettes, choose a cool-toned metal, like pewter or stainless steel. You can also experiment with mixing finishes, such as polished and hammered copper.
From faucets to cabinet pulls to accent pieces, swapping out your old or dated fixtures is an easy—and relatively inexpensive—way to modernize your decor. Mixing metals adds depth and gives your room a more curated look.
3. OUTDOOR ELEMENTS
Bringing outdoor elements into the home can help warm up a sterile space. And natural materials can soften a modern design esthetic.
Homeowners are increasingly looking for ways to incorporate these materials throughout their home. Especially popular right now: stone, copper, concrete, and wood. From concrete showers to agate stone tiles, designers are finding unexpected ways to bring the outside in.
One notable exception: granite countertops. Engineered quartz—a combination of ground quartz and resin—overtook natural granite stone as the most popular countertop material in 2018. This durable, low-maintenance, highly-customizable product has won over homeowners and designers alike.
4. ALTERNATIVE APPLIANCES
Stainless steel has been the industry standard for years, but the market is trending toward variety and fresh alternatives. Homeowners have more options available than ever to personalize their kitchens with vibrant colors, black stainless, or modern white appliances. Another favorite? Integrated appliances that blend seamlessly into cabinetry. Built-in column refrigerators, which allow you to customize the design and size of your freezer and refrigerator, are becoming a “must-have” in high-end homes.
Advancements in technology have also brought a new wave of appliances to the market. Induction cooktops are replacing commercial gas ranges as a gourmet favorite. And french door ovens and steam ovens are also gaining in popularity—especially ones with smart features you can control from an app on your smartphone.
5. COLORFUL KITCHENS
White will always be a classic choice, but color is finally coming back to kitchens. More homeowners are choosing cabinets in alternative neutrals like black, cream, and grey, along with colorful options like green and blue. Also popular? Wood cabinets in stains like warm chestnut and fruitwood.
Two-tone kitchen cabinets remain a homeowner favorite, as well. To incorporate this trend, try pairing darker lower cabinets with lighter upper cabinets or a colorful kitchen island with neutral-colored perimeter cabinets.
6. OPEN SHELVING
Swapping upper kitchen cabinets for open shelves continues to be a popular choice in 2019. It’s a cost-effective update that can make a kitchen feel larger and brighter. However, it’s not a practical option for everyone. Before you commit, test it out by removing your cabinet doors for a few weeks. See how it feels to have your glasses and dishware on display.
Not ready to give up all your upper cabinet storage space? Replace just one or two upper cabinets with open shelves for a lower-commitment but still-updated look.
7. STATEMENT TILE
The ubiquitous white subway tile is finally fading in popularity. In 2019, homeowners are gravitating toward more colorful choices, creative textures and finishes, and alternative shapes. Especially hot right now: hexagons, arabesques, diamonds, and Moroccan fish scales.
Natural stone remains a favorite, including marble, quartzite and river rock. But advancements in porcelain tile that mimics stone, and even concrete, has made it an attractive, affordable, and low-maintenance alternative.
8. SHOWCASE CEILINGS
Once an afterthought, ceilings are taking center stage. While 2018 was all about statement walls, statement ceilings are shaping up to be the darling of 2019. Designers are using bold paint colors, wallpaper, intricate moldings, fabric, and other materials to transform a ceiling into something truly special.
Want to incorporate this trend without going too bold? Choose a classic design, like coffered or wooden beams. Or stick with wood paneling or tin tiles for a more timeless look. Even something as simple as painting a ceiling the same color as the walls can make your space feel more modern.
DESIGNED TO SELL
Are you contemplating a remodel? Want to find out how upgrades could impact the value of your home? Give us a call for a free consultation!
Buyer preferences can vary greatly by neighborhood and price range. We can share the insights we’ve gathered from working with buyers in this market … and offer tips on how to maximize the return on your remodeling investment. And if you’re in the market to sell, we can run a Comparative Market Analysis on your home to find out how it compares to others in the area.
Want to learn more about how to stage your home to sell? Contact us at email@example.com to request a free copy of our report: 10 Staging Secrets From the Pros for a Quick Sale at Top Dollar!
- Decor Mag –
- Gates Interior Design –
- House Beautiful –
- Houzz –
- Invaluable –
- Real Simple –
- Sebring –
Residential Sales down 40% over last year - last years sales were high due to last effort to get into the market due to the stress test coming into play. Prices for residential homes staying about the same.
For indepth analysis of the market - give me a call and I can share the numbers.
If you're looking to get into the market and need help - Jeanette and I are here to find you a home! 778-363-0839
If you’ve got a mortgage renewing or plan to get a new one this year you probably know that it’s more complicated than it used to be. That said, I have some tips and strategies that can help you get the mortgage you need, tweak the one you have, or help you plan for renewal.
- To get the best deal, you need options. When you go to your bank, you’re talking to one lender. Their best deal might not be THE BEST DEAL (last months article proved that). It’s also difficult to qualify at a bank if you’re self-employed, have past credit issues, or are finding the stress test a challenge. Credit unions, alternative, and private lenders are increasingly needed to help people get into new homes or refinance their current mortgage.
- “What is your best rate”, has become a very difficult question to answer without first having all the information. Mortgage rule changes have thrown mortgage pricing up in the air. Your rate depends on a whole list of factors, which is why you can only get an accurate rate quote after an in-depth assessment of your personal situation. So be careful when checking out discount rate sites as they often over promise before they have the full picture.
- The devil is in the details. People tend to focus on rate, but you can save thousands by making sure you get a mortgage that has fair penalty calculations, allows you to pay lump sums throughout the year, offers the ability to port or move your mortgage should you move, allows you to assign your mortgage to a potential buyer, and ensures you will also be treated fairly at renewal. The small print can cost/save you thousands and we help you understand the differences up front before you are facing an issue.
- An insured mortgage might be a smart move even if you have more than 20% equity. If your mortgage is “uninsured” and you want to switch to a new lender for a better rate at renewal, that lender will qualify you using the “stress test”, which may affect your ability to move your mortgage, and giving your current lender no incentive to offer you the best rate available. It’s possible that you can switch your mortgage to a lower-rate insurable mortgage that has more flexibility.
- Monitor and understand your credit score because the best rates go to borrowers with the best credit scores. Lenders are paying close attention to any warning signals that clients may have trouble paying their mortgage. If your credit slips and your lender feels your risk has increased, you may be offered a higher rate at renewal. We can help you better understand what drives your credit score and how to improve it.
- A rental suite can be a sweet mortgage helper. A home with a rental suite could help you buy a single-family home instead of a condo, get you into that neighborhood you love, or help you offset mortgage payments in the house you’re in so you can become mortgage free sooner, but there are restrictions. Not all suites are eligible and we can help you to understand the differences.
- Plug your biggest money leak. If debt is choking your cash flow and you have enough equity in your home, you may be able to move that debt to a lower-rate mortgage and save thousands. Using home equity to pay down debt is one of my specialties, but needs to accompanied by a plan to avoid the debt growing again!
- Getting your mortgage pre-approved before you go shopping is more important today than ever. It helps you to target the homes you can afford and gives you the confidence and peace of mind to make a strong offer when you find the right property. Don’t assume you have a pre-approval unless the lender has reviewed your last 2 years income tax documents, current pay stub, and 3 months history of your down payment. If they didn’t require these things, you have a rate hold only, and you still don’t know if you qualify.
The New year is a new opportunity to make sure your mortgage strategy is working for you and helping you build wealth. If you want to discuss your personal situation and have me run your numbers, please let me know, as knowledge is power, and having the information will help you make better decisions?
Daryl French, AMP
As we begin another year, everyone wants to know: “Where is the housing market headed in 2019?”
The Canadian real estate market experienced a cooldown in 2018 following years of rapid growth. This left many homeowners and potential buyers feeling skittish. Fortunately, economists expect the market to stabilize in 2019 and continue to appreciate at a more sustainable rate. To help guide you through this shifting landscape, we’ve summarized some of the expert predictions and key factors expected to shape the housing market in 2019 and beyond.
SALES LEVELS WILL STABILIZE
A combination of rising interest rates, provincial policy changes, and a newly-implemented “stress test” requirement for mortgages pushed sales activity to a five-year low in 2018. However, economists expect the impact to taper off over time due to positive economic fundamentals: a strong economy, low unemployment, rising incomes, and rapid population growth.
“Far from a sign of trouble, we view this cooling constitutes as a healthy correction that would prevent overheating conditions from re-emerging in parts of Canada such as the Vancouver and Toronto areas. We expect a modest recovery to take shape in 2019,” noted the Royal Bank of Canada in its Canadian Housing Market Forecast. “We see little risk of a downward spiral because demand and supply conditions are balanced in the majority of local markets and expected to remain so over the forecast horizon.”1
What does it mean for you? If you’ve been scared off by reports of a market slowdown, it’s important to keep things in perspective. Policy changes were put in place to cool down an overheated market that had led to increased debt levels, decreased affordability, and historically-low inventory levels. A gradual and sustainable pace of growth is preferable for long-term economic stability.
PRICES WILL HOLD STEADY
Economists expect prices to hold steady this year, rising slightly to keep pace with inflation. While the national average price declined by 4.2 percent in 2018, the Canadian Real Estate Association predicts it will rebound slightly this year by 1.7 percent.2
The Canada Mortgage and Housing Corporation also expects prices to remain high, but stable. “By 2020, demand is expected to continue to shift towards relatively less expensive housing options such as apartment condominiums. This combined with slowing growth in economic conditions will lead to modest average price growth over the forecast horizon.”3
The Royal Bank of Canada agrees, cautioning that “would-be buyers hoping for a meaningful [price] break will likely be disappointed—we don’t expect aggregate prices to fall on an annual basis either this year or next.”1
What does it mean for you? If you’re a buyer waiting on the sidelines for prices to drop, you may want to reconsider. The current sales slowdown has made many sellers more willing to negotiate. Don’t miss out on the most favourable market we’ve seen for buyers in years.
NEW CONSTRUCTION WILL SLOW
The Canada Mortgage and Housing Corporation predicts new home construction will trend down over the next two years from a 10-year high in 2017. “Single-detached housing starts are anticipated to decrease over the forecast horizon. Construction of this housing type will continue to be limited by residential lot availability, but also by elevated price and borrowing costs in some major CMAs that represent an important portion of national starts.”3
However, economists expect the decline to be gradual. According to Fotios Raptis, a senior economist at TD Bank, “a steep downturn in homebuilding nationwide appears unlikely. Canada's population is on the rise, medium-term income growth should remain healthy, and most markets are generally not overbuilt.”4
What does it mean for you? Buyers will continue to have options in new construction. But the decreased rate of supply should help prop up the resale market, which is good news for sellers.
INTEREST RATE HIKES WILL TAKE A BREATHER … FOR NOW
After a prolonged series of interest rate hikes, the Bank of Canada announced in December that it will likely slow its pace of rate increases. “We no longer expect the Bank of Canada to hike its policy interest rate in January. Spring 2019 now appears to be the more likely timing, allowing for the bank to ensure that the growth narrative is back on track,” commented Brian DePratto, a senior economist with TD Bank.5
At the same time, the impact of the mortgage stress test has slowed the pace of new mortgages being issued by traditional lenders. So even as funding costs have risen, banks have been hesitant to raise the 5-year qualifying rate. In its latest Mortgage Rate Forecast, the British Columbia Real Estate Association predicts that the 5-year mortgage rate will hold steady this year—and may even decline in the first quarter.6
What does it mean for you? If you currently have a variable rate mortgage, the bank’s revised policy should offer some welcome relief. And if you thought rising interest rates would prevent you from buying a home this year, you may be pleasantly surprised.
WE’RE HERE TO GUIDE YOU
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home sales and values in your particular neighbourhood.
If you have specific questions or would like more information about where we see real estate headed in our market, let us know! We’re here to help you navigate this changing real estate landscape.
START PREPARING TODAY
If you plan to SELL this year:
- RBC Canadian Housing Market Forecast –
- CREA Resale Housing Market Forecast Update –
- Canada Mortgage and Housing Corporation Housing Market Outlook –
- TD Economics –
- TD Economics –
- BCREA Mortgage –