 Evan Siddall of Canada Mortgage and Housing Corporation recently emphasized that properties across Canada will depreciate up to 20 percent by the end of 2021.
This is because Canada’s unemployment level is likely to remain dramatically elevated, which will affect property prices since it will force more people to put up the for sale sign. Real estate value is determined by supply and demand. Therefore, a higher rate of unemployment and insolvency means more properties for sale and fewer people able to buy them. Prices will automatically be driven down. Depreciation is closely related to refinancing and something to monitor. How much money you can borrow from a bank or other financial institution depends on property value. Most mortgage lenders will currently offer 80 percent of your property’s value in financing, however, this may be scaled back to 75 percent to mitigate risk related insolvencies and declining property values. If you happen to have unsecured debt and have been contemplating a debt consolidation or refinancing your mortgage, consider what it would mean if your property suddenly lost 20 percent of its value. Could you refinance based on what I just outlined? If your property is currently worth $500,000 and you have a $350,000 mortgage but you need to access $50,000 for debt consolidation or renovations, for example, could you still accomplish this if your property suddenly became valued at only $400,000? The answer is no. If you can't refinance to pay high-interest debt such as credit cards or personal loans, you will have no choice but to keep making interest-only payments until your property value increases again. Ultimately, the point of refinancing is to save money and spare your credit rating. Credit cards bear significantly higher interest, which get compounded daily and become expensive, if not impossible to maintain. Many people who get stuck in credit card debt traps can impair their credit score or sink into default. Therefore, if you can refinance and it makes sense for you to do so, it would be worth your while to take advantage of low interest rates and stable property prices. We could see an unfamiliar environment in the next six months that may seriously inhibit your ability to do so. Sarah A. Colucci Mortgage Agent, Lic. M14000929 Mortgage Edge, Broker 10680 Direct: (647) 773-4849
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 It’s imperative that you protect your credit rating at all costs.
Despite what is happening today, it’s crucial you take appropriate steps to maintain a good credit score during this uncertain time. Credit is your financial life line. Personal loans, car loans, mortgages and credit cards all depend on having good credit, so it’s critical you protect your score. Mortgage Deferrals Many mortgage borrowers have deferred their mortgage payments up to six months to help with the cost of living and taking a pay cut if temporarily laid off. While deferring your mortgage is a mutual agreement between you and your lender, mistakes can happen in the reporting methods. Sometimes, a deferred payment will get reported as a missed or late payment and can negatively affect your score. With any deferral, it’s critical that you get a written copy of the approved deferral and your new mortgage terms (which include a new amortization summary reflecting interest paid on deferred payments). Your lender should either email or mail those forms to you, so you can keep them for your records. If there is a derogatory remark on your credit report regarding your mortgage payments at a later date, you can use the deferral agreement to have your lender OR Equifax and TransUnion make the changes immediately. Minimum Payments If you are unemployed at the moment, you may think you don’t have to make your minimum credit card payments because of the current situations. Unfortunately, unless your lender has specifically stated you do not have to make credit card payments, you will still need to continue to protect your score. By law, you have 30 days after the minimum payment due date to put your account in good standing before they report it to the two credit reporting agencies. Late or missed credit card payments can have a devastating effect on credit and can create challenges when trying to get further loans. Debt Consolidation If you are currently employed but feeling very uncertain about the current situation and the debts you have, consider a debt consolidation. You can merge your unsecured debt into your mortgage loan to create one very low and affordable monthly payment with a substantially lower interest rate. Do you have questions? Call or write. Sarah A. Colucci Mortgage Agent Lic. M14000929 Mortgage Edge, Lic. 10680 Direct (647) 773-4849  Borrowers often wonder why lenders require an appraisal when they are refinancing or if there is a way to skip the appraisal altogether.
An appraisal is a property valuation that considers similar properties that have sold in the last sixty to one hundred and twenty days. Depending on the final appraised value, a refinance application will either get approved or declined. This is because to refinance a property, besides meeting income requirements, a mortgage loan must also not exceed 80 percent of the property’s value. Therefore, ‘appraised value’ is critical in the re-mortgaging process. Fortunately, some lenders do not require appraisals should an AVM support the property’s value. AVM stands for the ‘Automated Valuation Model.’ AVM is a computer program that can provide market analysis, and property value estimates. If the AVM can support a property’s value, lenders will not require a physical appraisal. Appraisals can cost anywhere from $250 to $600 to complete, whereas an AVM is usually $99 and gets subtracted from the net mortgage advance amount. Find out if your property can qualify using an AVM today! Sarah A. Colucci Mortgage Agent Mortgage Edge, Broker 10680 Direct: (647) 773-4849 |
By: Sarah ColucciArchives
February 2021
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