It’s All About The Property.

When your mortgage application goes through the approval process, they are not only looking at you, but also the property in question. In fact, sometimes when an application is denied it has nothing to do with you, and everything to do with the property.

To improve your chances of success when it comes to financing, there are three main things to consider:

1. The type of property
2. The location of the property
3. The usage of the property

Let’s take a look at some of the specifics for each of these considerations.

Type of Property

There are various types of properties when it comes to home ownership – detached houses, semi-detached, condos, townhouse, duplex, carriage or heritage home. Depending on the type of property you have chosen, there may be specific considerations.

Condominiums

When it comes to condo properties, the lender (and potentially the insurer) will consider the age of the building. In addition, they will look at maintenance history (or lack thereof), as well as the location for marketability. Some lenders may have stipulations that limit themselves to buildings with a certain number of units, or past a certain age.

If the condo you wish to buy is lacking a depreciation report, has a low contingency fund or large special levies pending, these will be red flags for the lender. Any of these situations will require a more thorough review. These items should also serve as strong considerations for you as it indicates the management (or lack of) for that condo building.

Additional Units

If you are looking at a property with additional units, it is important to consider that buildings with over four units, are considered a ‘commercial’ property and would be evaluated on that basis.

Heritage Homes

Whether registered or designated, heritage homes require a more detailed review and often come with special considerations for financing.

Leasehold or Co-op Properties

These properties also have specific requirements, particularly when it comes to the maximum loan-to-value which means they will require a larger down payment. These types of properties also typically call for additional documentation, and may have varying interest rates.

If you shift from a standard condo to a lease-hold property, your down payment amount will likely change. If you want to move to a small rural town or a small island, there will be fewer options. In addition, you may have to pay a higher rate as well as provide more documentation on the property.

Location Considerations

You’ve heard it before – location, location, location! Location matters just as much to the potential homeowner as it does the lender. Some things to keep in mind when it comes to location include:

Potential Resale Value

If the location limits the potential resale value for the building, lenders may not provide financial approval on that property. This is due to the increased risk if the borrower defaults. In that case, the lender may not be able to foreclose the property and get enough funds back due to the low resale. That said, some lenders may allow these properties but they might reduce the loan amount if the building is located outside of a major market area, or they may add a premium to the interest rate.

Rural Considerations

For properties with water access only, or with no access to municipal utilities (heat, water, electricity, sewage), there will be additional requirements to assess lender risk. These requirements might include: Insurance coverage, water testing, septic tank inspection, seasonal access and condition of the property.

Transfer to Another Province

It is also important to note that if you purchase a home in one Province and are transferred or move to a different province, some lenders won’t be able to port the mortgage due to being provincially based.

Usage Considerations

The use of the property can include things such as personal, investment, recreational, agricultural and also consider previous activities. A few things to keep in mind are:

Condominiums

If you are looking at purchasing a condo on a property that has either a commercial component in the building (such as shops on the first floor), or allowable space in the unit for businesses (live/work designation), you may have limited lender options. In some cases, lenders will avoid these types of properties at all costs, while others may require approval from the insurer (i.e. CMHC).

Renovation Required

If the property requires renovations, the extent of the upgrades, as well as the property value will be taken into consideration.

Previous Grow-Ops

Homes that previously existed as grow-ops, have special lending options. These typically come with higher interest rates and costs due to decreased value.

Rental Suites

For owner-occupied homes that contain rental suites, it is important to consider potential rental income. If the house is purchased for investment, rental income is automatically considered. This can result in a different interest rate than simply an owner-occupied dwelling. In these cases, the rental income can also increase the resale value of the property. However, an appraisal of the property must be conducted and reviewed to ensure the condition. This will also uncover whether any renovations were completed to add value.

Second Properties

Purchasing a second home for recreational use will require a review to determine if it is seasonal or year-round access.

Before you begin your home search, it is best to discuss your future plans with a Dominion Lending Centres Mortgage Professional. This will ensure you receive accurate information to understand the specific requirements your potential property might require. Seeking expert advice early on will also give you ample time to find the right fit! This will also ensure you can submit a full financing review before subject removal on a purchase.

written by my DLC marketing team

This is so crazy important to understand…… pre-approval and rate holds are different and most times this speaks to ONLY holding your rate. You are NOT officially approved. Get in the know and check this article out.

Rate Holds Explained.

If you shopping for a home, or have worked with a mortgage professional in the past, you’ve most likely heard of rate holds before. If not, it is something that every potential homeowner should be aware of. This is especially true for the application process as it has some great benefits for active shoppers.

If you are not familiar with the term, a ‘rate hold’ refers to locking in a specific mortgage rate for a limited period of time. This is offered through most lenders, assuming you are a potential client looking to purchase a home and need a mortgage. They are not eligible for individuals that are refinancing their mortgage, or looking to transfer it to another lender.

If you qualify for a rate hold, there are a few things you should know – from restrictions to benefits! The first and most important is that rate holds are typically only offered for a period of 90-120 days. So, once you have created your mortgage application with a broker and submitted it at the interest rate that best suits you, that rate will be protected for 90-120 days while you shop.

A rate hold is not a commitment. It does not force you to work with that lender, or the mortgage broker who submitted it. It also does not affect your future chances of receiving approval down the road. Instead, it simply guarantees that rate for you, if you find a home you want to purchase and sign the mortgage agreement before the rate hold is up.

This can be truly beneficial in volatile markets or those with high competition. If you submit your application to a lender for a fixed rate of 2.49% on a five year term, but while you are searching for your perfect home that rate moves up to 2.99%, the rate hold will protect you and allow you to still sign at 2.49%. This can mean huge savings!

For instance, if you are looking for a standard $500,000 mortgage (25 years amortization, fixed-rate, 5-year term), your monthly payments would be $2,237.35 at 2.49% interest. This would jump up to $2,363.67 per month at 2.99 percent. This is a difference of $126.32 per month or $1,515.84 annually; which can really add up on a 25-year mortgage!

Another benefit is that, if the rates go down, it does not stop you from taking advantage of the lower offer. Instead, it protects you from rate increases after you’ve determined your budget and are in the process of purchasing a home.

It is also important to note that, once the rate hold expires after 90-120 days, there is nothing stopping you from submitting another rate hold. It will just be subject to the interest rates as they stand on the day of submission.

Reaching out to a mortgage professional can help you better understand the current rates and benefits of a rate hold. In addition, they can help you find the best option to suit your needs thanks to their connections with hundreds of lenders! Why wait? Contact a DLC Mortgage Professional today.

written by my DLC marketing team

What Does Canada’s Aging Population Mean for the Real Estate Market?.

I’ve got good news and bad news. The bad news is: we’re not getting any younger. The good news is: we’re not going away anytime soon, either, as life expectancy for Canadians is higher than ever before! At least, I think that’s good news—check back with me in 2050 and let’s see how we all feel about it.

Globally, we’ve hit astoundingly high population numbers for people aged 65+, exceeding a threshold of 672 million people (about 8.9% of the total population) in 2019. That’s an increase of more than 500 million compared to 1960 when there were about 150 million people above 65+ globally (roughly 5% of the global population). Oh yes, that’s a whole lot of people.

In fact, it’s only going to get more crowded as the years go by, with the UN estimating that the number of older persons (above 60) is projected to reach 2.1 billion by 2050. And we think it’s crowded now!

This brings us to Canada’s own ageing population: according to Statistics Canada, “seniors are expected to comprise around 23% to 25% of the population by 2036, and around 24% to 28% in 2061”. With a shrinking working population supporting that ~25% segment, the precise economic implications are too varied to be certain of any firm outcome. What is certain is that the older members of our population will need a place to live, which will have a significant effect on Canada’s real estate landscape.

Effects on the Supply of Real Estate

Our ageing population affects the supply of property in the real estate market in several interesting ways. The expectation was that baby boomers would find themselves living in large homes with more space than they needed once they’d retired and their children moved out. At that point, they were supposed to sell their property and downsize to smaller (or less expensive) homes. This influx of property into the market (projected to be half a million homes) would help meet rental or purchase demand, in some cases allowing developers to re-purpose the property into larger, higher density structures (especially in cities).

However, changes to the real estate market may significantly affect how that scenario plays out in reality.

• Small condos and detached or semi-detached townhouses used to be prime candidates for someone looking to downsize. Now, rising real estate prices (especially in cities like Toronto and Vancouver) can make this an incredibly difficult endeavour.
• Millennials (and soon Gen Zs) have begun to move back in with their parents, as they struggle to contend with exorbitant rent prices, lack of steady work, and extremely high property prices. It’s proven economical for them to live at home rent-free (or at least, with a much lower rent) and save their money to put towards buying homes of their own later.

With more reasons to remain in their current homes (such as their kids moving back in with them), as well as high property prices and a lack of suitable options to downsize to, older homeowners are increasingly choosing to hang on to their property. This, of course, delays the timeframe in which their (usually larger) homes will be released into the housing market, which in turn will further exacerbate property shortages.

Effects on the Demand for Real Estate

Our ageing population has implications for the demand side of the real estate market as well. Accessible property, for example, will increasingly grow in demand as people get older. Fierce competition in the housing market has made it difficult for older people to acquire suitable apartments or houses that cater to their needs (such as, ground floor units or accessibility-friendly rental housing).

Affordable, smaller housing with room for live-in or part-time caregivers, especially in close proximity to essential services and infrastructure (health services, public transit, malls/grocery stores, etc.) will become much more desirable as our population ages.

Some of this demand will likely be met by the government, as it works to fund the construction of homes for senior citizens through the Canada Mortgage and Housing Corporation (CMHC). This will prove vital in the years to come, as increasing numbers of modest to middle-income Canadians retire and start being priced out of the normal rental market. However, with Canada’s population projected to increase at a sharp rate until the middle of the century, we’ll need more than just government intervention to address the issue.

Final Thoughts

The effects of an ageing population on Canada’s own future will be far-reaching, but impossible to predict definitively. That’s not to say we don’t have a good idea of what the likely outcomes are—we’ll need more housing, and we’ll need to be able to support older Canadians, to name two—but nothing about the upcoming decades is written in stone. The manner in which our government addresses social security issues, housing crises, and indeed, which government we even have in power will all play a role in securing stability or uncertainty.

Any speculation on the effects of projected population growth figures should be tempered with the understanding that they’re precisely that: projections. Not everyone agrees with the UN’s assessment of rampant increases, arguing that we might see a return to “normal” population levels towards the end of the century instead of endlessly spiraling into overpopulation. But whatever the outcome, it’s important that we’re paying attention.

Published FCT