By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929
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I'm Not Just A Mortgage Agent, I'm A Housing Advocate Helping People Overcome The "Housing Problem."
If the Government won't do it, I WILL!”
As a mortgage professional, it's not only my job to help people get into the real estate market but it's also my job to support and promote homeownership. Therefore, I consider myself an advocate against a struggle arising in the Canadian market for many groups of people including first time home buyers, new immigrants, high-ratio borrowers and so on.
I believe that the group of people who were targeted by the Government in an effort to save the housing market from calamity are not responsible for the crises at all.
The truth is average Canadians are at a very low risk of defaulting on their mortgage yet with the Mortgage Stress Test in place, many aspiring purchasers have had to abandon any hopes of owning real estate.
The Mortgage Stress Test has become nonsensical at this point.
Currently, borrowers must qualify for financing at 2% more than the contract rate or 5.19%, whichever is greater. Originally, the test was meant to stop unhealthy inflation. It was meant to save borrowers from payment shock in an increasing interest rate environment and save the banks from a repeat of the US housing crash in 2008.
The reality, however, has become much different than it was at the time the Government mandated this qualifying measure. The global and domestic economy has forced the Bank of Canada to keep its overnight lending rate low. Additionally, the bond market has also kept interest rates low and even the Bank of Canada itself has stated over and over again, interest rates will remain low in 2020 due to the rise of populism movements like "Trump" and Brexit which have slowed globalization.
In addition to interest rates not climbing which contradicts even having a mortgage stress test, Canadian homeowners have a very low risk of default, as mentioned above. The default rate in Canada is less than 1%.
What's even more concerning than the overkill of the stress test is that the advocates, particularly, CMHC, seem as though they've given up on even promoting homeownership as a valuable asset.
The President of Canada Mortgage and Housing Corporation, a Crown Corporation, has recently stated that it's perfectly fine to rent and homeownership is not the dream everyone thinks it is. He single-handedly downplayed homeownership which is alarming since CMHC's main role is to promote affordability and fair policies which inadvertently support the attainability of homeownership.
My advice is that political failures should never get in the way of sound judgment and of course, reality.
Fact: Real Estate Is Appreciating.
The Government can use tactful words to try and relieve some of the pressures that only shine a light on its own failures but it cannot change the truth about the overwhelming demand for real estate.
If real estate is, in fact, appreciating than that means its a good investment. Plain and simple.
My advice? If there is a property that a borrower can afford, even in a suburb, then they should buy it. Buy it now before inflation gets to it!
The ONLY instance that renting could ever possibly be a better option is if rent is cheap enough that a person could save a substantial amount of money on a monthly basis that would then be compounded in a high-yielding investment account. In reality, rent suffers the same curve as overpriced real estate.
An example of this is the home builders and management companies funding the construction of rental complexes specifically designed to charge "luxurious rental rates." In Toronto, the average priced rental is around $2,400, and that's likely for a one-bedroom condominium that is no more than 600 square feet.
Homebuyers can use programs such as the "Purchase Plus Improvements Program" to buy a home that requires renovation but that will also likely increase in value within 120 days because of that renovation. The program allows borrowers to borrow money, increase their property value and complete the goal of owning desirable real estate.
As an advocate for Home Ownership, I will work to help people get into the market and I will not be afraid to shine a light on Government policy that is overkill. I will not deter people from the dream of homeownership. I will tell the truth. I will show people the numbers, I will run the calculations. I will encourage people to own real estate.
Sarah A. Colucci, Mortgage Agent Lic. M14000929, Mortgage Edge Broker 10680/Direct: (647) 773-4849, www.coluccimortgages.com