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If there was any doubt about the investment gains of taking out a principal mortgage, refinancing, or taking out a second mortgage, recent Ontario real estate statistics can confirm that there is no better time than at the moment.
Factors have merged to create the perfect storm in the realm of real estate. We are seeing unprecedented low mortgage rates on both variable and fixed mortgages ( although the fixed rate have increased slightly over the past few weeks but still very low), increases in the average price for properties throughout the Province, and housing sales that are creating bidding wars pushing sale prices up even further.
If you are looking to refinance your primary mortgage, rates have never been lower. If you want to take out an additional mortgage on your home to buy a rental/investment property or want to take out a primary mortgage to snap up houses that have tremendous resale value, do not hesitate.
Location, location, location has always been the golden rule in real estate, now we can add timing to the list. Investment is about seizing an opportunity. Opportunity is very much contingent on timing and in real estate, this holds.
Ontarians are certainly seizing real estate opportunities and the numbers reflect this trend. Early February reported by Statistics Canada revealed that household mortgage debt increased by 7.4% by the end of 2020 compared to the same time in 2019 which increased the total mortgage debt held by Canadians to $1.66 trillion.
The Ontario Real Estate Association has also recently reported that the average price of a single-dwelling property in Ontario has increased by 13.5% from this time last year and January 2021 saw house sales in Ontario hit a new sales record.
Residential sales activity reported through the Multiple Listing Service (MLS) in Ontario numbered 13,885 units in January of this year which represents an increase of 29.5% when compared to house sales at the same time last year.
What Types of Lending Options are out there?
Many may be surprised that banks are not the only option available for those looking to obtain mortgage financing. You may have heard stories of applicants being turned down because of demanding criteria and the mortgage stress tests that must be passed to obtain bank mortgage financing.
Yes, it has become more difficult to secure mortgage financing through a bank but other lending options exist under the alternative lending space, B Banks, credit unions/trust companies and private lenders all encompass alternative lending. Let’s look quickly at the three types of lenders that Ontario has available for the Ontario homeowner.
A Lenders - Major Banks/Prime Lenders. The bank's base mortgage loan eligibility is primarily on excellent credit score, credit history and an easily demonstrated employment income. These type mortgage loans offered by the banks represent long-term 25 years to 30 years amortization. There is much more to the qualifying conditions and the option of 25 years or 30 years amortization, so my advice would be to speak to a mortgage specialist to know the full details.
B Lenders - Also known in the industry as B Banks or Alternative lenders. These lenders have a less stringent qualifying guideline, when the prime banks turn away borrowers, these same borrowers would qualify with an Alternative lender, 99.9% of the time. That being said, a mortgage transaction varies which mean different qualifying rules apply, so a purchase transaction would have different rules than a refinance transaction. Again, my advice would be to speak to a mortgage agent/broker to know your options. Alternative lenders are accessible through a broker/agent (brokerage) and this can vary as well as some brokers/agents may only have access to a few alternative lenders whereas another broker/agent will have access to much more. The advantage of this is that the broker/agent will have multiple streams of lenders to shop and negotiate terms for their clients to therefore offer the best option to their clients. Alternative banks give hope to clients that are declined by the prime banks, it also creates competition in the mortgage industry, good competition which can only benefit consumers overall.
C Lenders - These lenders are private lenders that can be individuals or through a corporation. There is no qualifying per se when it comes to private lending. When borrowers cannot qualify with a prime lender or B lender, a private mortgage can be the next best option. Location of the property, and amount of loan being requested (based on your property value) are the two main factors for a private lender. Credit is still looked at and income but poor credit does not mean the lender will decline, even with no income a private lender will still give an approval. Borrowers that turn to private lenders must understand this fact; they are considered high risk from the lender standpoint; higher the risk, the higher the cost of borrowing. The advantage must outweigh the disadvantage (rate, lender and brokerage fee). Each borrower’s situation is different, a genuine mortgage agent will assess their clients' situation and advice and guide them as to what is best and what will truly help them now and down the road. I believe private lending is very important in our mortgage industry, it helps thousands of clients each year when they get declined from the banks and how it helps varies from client to client.
If you are looking for a mortgage to purchase your 1st or 2nd property or looking to do a refinance or just simply to take equity out of your property, knowing your options should be your first step. Consult a mortgage agent/broker to clarify and answer all your questions, review your credit and financial situation and advise you.
I can certainly help you look at all options based on your situation; with access to multiple lenders (all three type lenders in the industry), + extensive mortgage knowledge & exceptional service, you can be confident that you will be well taken care of to meet your mortgage goals.
