A Mortgagenomics perspective into Calgary and Vancouver

Posted on April 14, 2024April 15, 2024 by markogel@gmail.com

(April 13, 2024)

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It’s that time of the year again – the real estate spring/summer market is upon us!

Is your market hot?

The answer to this question will vary across cities in Canada, and there will be further variance within the cities spanning their regions and communities. It is crucial to align yourself with an experienced realtor who specializes in your area. Market conditions have been deceiving and complex in the past few years, and many broad-based real estate economists have found themselves revising their predictions. Stay agile and well-informed by relying on a reliable source of intel. If you require a reference in your area, feel free to reach out, and I will likely have an established contact in your neighbourhood whom I can introduce you to. Meanwhile, here are some statistics on the markets I primarily deal with: Vancouver and Calgary.

VANCOUVER Real Estate Market: (as of March 2024)

The average price of a home in the GVA (Greater Vancouver area) stood at $1,318,687, marking a 4.1% increase annually (close to the benchmark of $1,196,800). The current benchmark price is 29% higher than in 2020 but 5.2% lower than the all-time high of $1,262,600. Essentially, Vancouver is nearing an all-time high, despite its sluggish market conditions and persistently high borrowing costs. The ongoing scarcity of supply and steady population growth will likely maintain prices at or near current levels. Unlike Calgary, Vancouver doesn’t develop new communities; instead, it repurposes older properties into luxurious $2.3M starter homes (yes, I’m serious!). Vancouver’s approach to affordability lacks some crucial variables. Although a new province-wide blanket zoning policy is set to take effect in the next couple of years, substantial market corrections shouldn’t be expected. While supply will inevitably increase, it won’t do so to an extent that significantly affects affordability. Therefore, success in Vancouver’s market hinges on staying adaptable and aligning yourself with industry experts who can provide high-quality information (such as real estate agents and mortgage brokers).

Other notable points about BC:

The province imposes a Property Transfer Tax (PTT), which is due upon completion of a real estate purchase. As of April 1, 2024, the ceiling exemption for first-time homebuyers has been raised to above $500,000. This means that first-time homebuyers can now qualify for a partial PTT exemption on homes valued up to $835,000, with a maximum rebate of $8,000. Previously, the exemption ceiling was $525,000. You can download my award-winning Mortgage Mobile App and utilize the Property Transfer Tax calculator to determine how much PTT you would pay on your property purchase in your area.

If you are a temporary resident or work permit holder, be mindful of the 20% Foreign Buyer Tax and the Prohibition on the Purchase of Residential Property by Non-Canadians Act. Click Here to be redirected to a previous blog post for more information on these two regulations.

CALGARY Real Estate Market: (as of March 2024)

Calgary seems to be on everyone’s radar these days, with Ontarians and British Columbians notably considering the move to Canada’s crown jewel of affordability. Sales in Calgary have surged by 9.5% since last year, and the benchmark price has risen by 10.9% to $597,000 for an average-priced home. Even if you’re experiencing FOMO (fear of missing out), there’s still ample affordable upside from $597,000. If you think you’ve missed out after hearing about many people moving to Calgary, think again (especially if you’re from Ontario or BC, where the move to Calgary offers significant relief in terms of price points)! For roughly $700,000, you can choose between a two-bedroom condo in Vancouver or a 3-bedroom home with an attached double garage and a large yard in Calgary (you can likely purchase the latter for less). What’s not to love about Calgary? It boasts the youngest working demographic in Canada, the sunniest days of any city in Canada, and the unique chinook phenomenon, an anti-winter event. Calgary is continuously expanding and seemingly always constructing new communities en masse. It’s a well-designed city, scalable for increasing population and development (such as the ring road).

Notably, the province of Alberta does not impose a Property Transfer Tax, resulting in significant savings when purchasing a home.

Additionally, the Foreign Buyer Tax doesn’t apply in Alberta. However, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, a federally legislated policy, does apply.

Interest Rates Overview:

Currently, variable-rate mortgages are priced as high as 1.5% higher than fixed rates, and this spread isn’t expected to narrow until June or July. I don’t subscribe to the “higher-for-longer” argument; I believe the Prime rate will begin its descent in June and continue throughout the year. If I were the Bank of Canada, I would also withhold any indication of rate reductions until the actual announcement day. Since the rate hike commenced during COVID, consumer sentiment has been heavily influenced by post-announcement messaging from the Bank of Canada Governor rather than the scheduled announcement itself. The post-announcement press conference holds significant weight as it shapes and influences Canadians’ behavior leading up to the next scheduled announcement. Therefore, expect the hawkish messaging to persist, with the Bank of Canada avoiding overly optimistic post-announcement conferences (hinting at lower rates ahead) for fear of reversing any progress made in preceding months with inflation. The most recent announcement on April 10 has served its purpose; the Bank of Canada has left the overnight rate unchanged, avoiding any unwanted momentum in the spring housing market. However, Governor Macklem hinted at future adjustments, leading many economists and policymakers to anticipate a 0.25% rate cut in June. Not long ago, homebuyers favored variable-rate mortgages due to their qualification advantages; however, today, the opposite holds true. The default qualification method is now fixed-rate mortgages, as they offer higher qualification amounts. Variable rates currently range from 6.20% to 6.40%, while fixed rates can be as low as 4.89%. The end game with interest rates? I believe fixed rates are establishing a new standard as they hover in the high 4’s. Fixed rates are likely to stabilize in this range for the foreseeable future until the spread with variable rates diminishes more significantly. However, due to the intricate nature of interest rate pricing, you can still expect to find numerous rates in the low to mid 5’s. To qualify for special discounted rates, your mortgage typically needs to be large (over $500k), insured (less than a 20% down payment), or within 45 days of closing/completion.

Want to discuss further? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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Is your Mortgage Prep-Approval Verified?

Posted on April 11, 2024 by markogel@gmail.com

(April 11, 2024)

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Mortgage pre-approvals have become a hot topic of late, particularly the accuracy and validity of them. With so much at stake in Canada’s cut-throat real estate market, prospective buyers have misleadingly been sent to the market believing that their mortgage pre-approvals are intact and verified. But the fact of the matter remains – many mortgage preApprovals (as we know them today) are essentially unverified and highly unreliable.

Whether you’re dealing with your banker or a mortgage broker, set the bar high and make sure the following points are accounted for within your mortgage preApproval, otherwise you might be in for an 11th-hour shock.

Request a verified mortgage pre-approval from your mortgage broker

A verified mortgage pre-approval means that the application has been underwritten. Many mortgage pre-approvals are unverified and underwritten only when a live offer is presented – this defeats the sole purpose of a mortgage “pre-approval”. Underwriting for mortgage qualification involves meticulously scrutinizing applicant documentation while adhering to stringent lending criteria to assess whether the candidate aligns with an acceptable risk profile for the lender. It’s a complex process, and is often unintentionally misleading as many applicants perceive mortgage qualification as a one size fits all type of outcome. What you may deem as obvious and safe, a lender may view as risky and unacceptable. A verified mortgage pre-approval offers a precise conclusion about your borrowing capacity and essentially eliminates all the uncertainties of mortgage qualification.

Multiple qualification scenarios should be included in your pre-approval

For example, let’s say you have an unspecified amount of debt. There should be a qualification scenario with the debt factored in, and another scenario without the debt. Or perhaps you would like to see an additional scenario that displays how much more you would qualify for with a co-signer. Regardless of how many scenarios you are curious about, don’t hold back in requesting them! If your mortgage broker is annoyed with your requests, then find another.

Interest rates

Both fixed and variable interest rates should be included in a mortgage pre-approval. And equally important, the maximum qualification amount should be displayed for each. In todays interest rate environment, variable rate mortgages yield lower qualification amounts than fixed rates.

Terms and Conditions

This is an absolute must. Whether you agree or disagree with them, the conditions need to be displayed openly in the pre-approval document. Acknowledging your restrictions and limitations ensures that you are swift and efficient throughout your shopping and negotiating phase.

Request touch-ups to your pre-approval

Don’t be shy to inform your mortgage broker if things have changed throughout your property search. For example, if you’ve been pre-approved based on $2,500 annual property tax estimates but are finding that the range is actually $1,800, inform your mortgage broker and have them adjust the qualification accordingly. This difference will result in a higher qualification amount.

Substance

Your pre-approval should contain at least 500 words and various mathematically derived tables and scenarios. The document should be dense and loaded with information.

Availability

Lastly, your mortgage broker should be available outside standard banking hours. Purchasing a property is a dynamic experience, and the pursuit of it is often in the evenings and weekends. Your mortgage broker should be available (within reason) to service general inquiries and emergencies regardless of the time and day.

Do you have a verified mortgage pre-approval? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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Survival Guide for First-Time Home Buyers in Canada

Posted on March 24, 2024March 25, 2024 by markogel@gmail.com

(March 24, 2024)

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In Canada’s ever-evolving real estate landscape, first-time homebuyers are constantly grappling with the ongoing challenges of affordability. Rather than dwell on the perceived unfairness of the market, I’ll instead share insights gained from my extensive dealings with this group. Firstly, I’ll reveal the common mortgage qualification struggles they encounter. Then, I’ll delve into the common approaches and evolving strategies of first-time homebuyers that are proving successful in today’s challenging market.

Depending on which part of the country you reside in, you are likely well-versed in Canada’s challenging real estate landscape, so I’ll keep this list abbreviated and precise. There are a few major challenges that first-timers have to contend with in Canada’s largest and most active markets: Vancouver, Toronto, and Calgary:

Large Down Payments

Vancouver and Toronto are by far the most challenging real estate markets in Canada, especially for first-time buyers. With price trajectories still elevated and no signs of heading in the opposite direction (not substantially anyway), down payments remain the number one challenge for first-time homebuyers. The minimum down payment required to purchase an owner-occupied principal residence in Canada is 5%, but only up to a purchase price of $500,000. Any portion of the purchase beyond $500,000 (and less than $1M) requires a top-up down payment of 10%. And finally, for properties valued at $1M or greater, the minimum down payment escalates to 20%. Gifted sources of down payment (proceeds from direct family members) continue to be a key component in the overall qualification of first time home buyers in Canada. In summary, here are some tiered minimum down payment examples: for a $400,000 property the minimum down payment is $20,000, $65,000 for a $900,000 property and for a $1.1M property, $220,000.

Property Transfer Tax

On top of the minimum down payment tiers, Ontario and BC additionally incorporate substantial Property Transfer Taxes that are due upon completion of the purchase. Here is how much you can expect to pay as a first-time homebuyer for an average-priced condo in Toronto ($695k) and Vancouver ($827k); in Toronto $12,275 and in Vancouver, $6,540 (these figures are as of April 1, 2024 when BC’s new Property Tax rules come into effect). Click on the following links to be redirected to the respective provincial jurisdictions’ property transfer tax calculators: British Columbia, Ontario. There are indeed First Time Home Buyer exemptions and rebates, but they are only available up to a specified purchase price. In BC (effective April 1, 2024), purchases up to $500,000 will receive full exemptions and purchases between $500,000 and $860,000 will receive partial exemptions (Click Here to be redirected to the Property Transfer Tax Calculator of one of Vancouver’s leading legal real estate firms). In Toronto, you are eligible for a full rebate ($4,475) for purchases up to $400,000, but for the rest of Ontario, that rebate is decreased to $4,000 up to a maximum purchase price of $368,333. And finally, there’s Alberta… where there’s no property transfer tax to speak of!

Lack of Inventory

You might be all good on the qualification front but find that the availability of listings in your region is either limited or diminishing. This only hinders the purchasing cycle further as your mentality morphs from innocent-dreamy-property-shopper to fierce-analytical-viking-buyer. Tight markets create stress and force you into situations you haven’t financially prepared for. In competitive markets, it is especially critical to align yourself with top-tier mortgage brokers, real estate agents, and lawyers.

High-Interest Rates

On top of current elevated rates, many forget that a 2% stress test method is applied when qualifying for a mortgage in Canada. Interest rates are definitely on the decline, but prospective homeowners need to stay light on their feet in anticipation of a potential counteraction that the real estate market will heat up as rates begin their descent. Many prospective homebuyers are “rolling the dice” in today’s environment accepting short-term pain (in the form of still high interest rates) for long-term gain.

FIRST TIME HOME BUYER STRATEGIES AND TIPS

INTEREST RATES

When it comes to interest rate selection, there are two camps; short-term fixed and variable. Both are sound approaches, but for first-time buyers, the fixed-rate approach seems to be the prevailing choice simply for the reason that it generates the best return for your qualifying amount. Although the outlook for variable rate mortgages is promising, the current rate of prime in Canada (7.20% as of the date of this article) significantly diminishes your qualifying amount. At the moment, the rate variance of a variable and fixed-rate mortgage could be as high as 2%, which equates to a qualification difference of up to 15%. For example, an applicant with a $100,000 annual income would qualify for a $408,000 fixed-rate mortgage, but under the higher variable rate, the maximum qualification would decrease to $365,000.

DOWN PAYMENTS

Currently in Canada, the minimum down payment is 5% up to a purchase price of $500,000, then 10% on the balance thereafter up to $999,999. For purchases that are $1M or greater, the minimum down payment threshold is 20%. For down payments less than 20%, qualification criteria are rigid and non-negotiable (your qualification amount should be similar to virtually every lender in Canada). However, for down payments that are 20% or greater, qualification guidelines loosen considerably and qualification amounts vary significantly from lender to lender. Interest rates are negotiable regardless of the amount of your down payment, but qualification amounts are only negotiable when down payments are 20% or higher. Acceptable forms of down payment: own sources and gifted proceeds (from family members). Proceeds from borrowed sources are not acceptable forms of down payment (i.e., personal line of credit).

CO-SIGNERS

Co-signers are becoming increasingly common amongst first-time home buyers in Canada. An important thing to note about co-signing is that it doesn’t have to be a forever thing (for the co-signer). As soon as the primary applicants can show evidence that they qualify for the mortgage on their own, the co-signer can be removed. This could be enacted at any time throughout the life of the mortgage. Ask your mortgage broker to provide exit scenarios for your co-signer; this will make all parties more comfortable with the transaction.

TRY TO PURCHASE A PROPERTY WITH A RENTAL SUITE

This might be difficult in some markets, but if possible, give this some serious thought. A property with a rental suite could offer a pleasant qualification boost for a first-time home buyer. For example, with a $100,000 annual income, you could max out with either a $400,000 property without a rental suite, or you can explore property types with rental suites in the $600,000 range. Both outcomes are possible, but the latter receives an additional qualification boost as the rental income of the suite provides additional eligible qualifying income.

VERIFIED MORTGAGE PRE-APPROVAL

With so much at stake in today’s highly competitive market, it is critical to align yourself with a top-tier mortgage broker. Just as an athlete prepares for a championship game, a buyer should also enter a market fully prepared and informed. One should expect the following to be included in a pre-approval:

Request a verified mortgage pre-approval from your mortgage broker. A verified mortgage pre-approval means that the application has been underwritten. Many mortgage pre-approvals are unverified and underwritten only when a live offer is presented – this defeats the sole purpose of a mortgage “pre-approval.” A verified mortgage pre-approval firmly calculates your maximum purchasing power and eliminates any unknown variables.
Multiple qualification scenarios should be included in your pre-approval. For example, let’s say you have an unspecified amount of debt. There should be a qualification scenario with the debt factored in, and another scenario without the debt. Or perhaps you would like to see an additional scenario that displays how much more you would qualify for with a co-signer. Regardless of how many scenarios you are curious about, don’t hold back in requesting them! If your mortgage broker is annoyed with your requests, then find another.
Interest rates. Both fixed and variable interest rates should be included in a mortgage pre-approval. And equally important, the maximum qualification amount should be displayed for each.
Terms and Conditions. This is an absolute must. Whether you agree or disagree with them, the conditions need to be displayed openly in the pre-approval document. Acknowledging your restrictions and limitations ensures that you are swift and efficient throughout your shopping and negotiating phase.
Request touch-ups to your pre-approval. Don’t be shy to inform your mortgage broker if things have changed throughout your property search. For example, if you’ve been pre-approved based on $2,000 annual property tax estimates but are finding that the range is actually $1,800, inform your mortgage broker and have them adjust the qualification accordingly. This difference will result in a higher qualification amount. The increase could be marginal, but every dollar counts in a competitive market.
Your pre-approval should contain at least 750 words and various mathematically derived tables and scenarios. The document should be dense and loaded with information.
Lastly, your mortgage broker should be available outside standard banking hours. Purchasing a property is a dynamic experience, and the pursuit of it is often in the evenings and weekends. Your mortgage broker should be available (within reason) to service general inquiries and emergencies regardless of the time and day.

Download my amazing Mortgage App…it’s loaded with calculators and tonnes of useful information!

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Download my award winning Mortgage App on your phone

Email: gelo.m@mortgagecentre.com

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The key to qualifying for a single-family dwelling in Vancouver – the basement suite

Posted on March 8, 2024March 24, 2024 by markogel@gmail.com

(March 7, 2024)

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Qualifying for a mortgage in Vancouver, renowned as one of the most exorbitant real estate markets globally, presents a daunting challenge for aspiring homeowners. With prices soaring sky-high and stringent lending criteria, many find themselves hitting a wall in their pursuit of a single-family dwelling. However, there exists a game-changing secret often overlooked: leveraging the qualifying income potential of a basement suite, a hidden gem that can significantly boost your mortgage pre-approval amount.

Regardless of whether you intend on leasing out your basement suite or not, it’s important to know that simply having one within your property can significantly increase your eligible mortgage amount. You can use the market rental income it could generate as eligible qualifying income! Over the years, I’ve encountered countless applications where applicants were under-qualified because the market rental income of a basement suite was not accounted for. In some instances, the variance was as high as 20% between a pre-qualified mortgage using basement suite income and one without the extra added rental income boost.

What is it about the basement rental suite that packs such a powerful punch?

Dollar-for-dollar rental to qualifying income ratio:

This means that every dollar you generate in rental income equally translates to one dollar of qualifying income for the mortgage. Just this alone is enough to put many applicants in the black when it comes to mortgage qualification. For example, with a combined annual family income of $240,000, you would qualify for a mortgage of $1.5M, so with a 20% down payment, your purchase price would max out at $1.875M. On the other hand, if your current mortgage provider shortchanged your qualification by not including the rental suite income, you would qualify for a mortgage of approximately $1.3M, reducing your purchasing power to a price of $1.625M… that’s a 15% variance! Be sure to ask your mortgage provider if rental suite income is included in your mortgage pre-qualification; it could be a game-changer.

Determining the qualifying rental income:

This is a moving target and can change significantly from one property to another. From the onset of your mortgage pre-qualification, your mortgage provider may use an arbitrary estimate for monthly rental income, but feel free to do your own research and provide more precise values to your mortgage broker; this will make your mortgage pre-qualification more accurate and reliable. The market rental value will ultimately be confirmed once you have narrowed down a property and are in the financing conditions stage of the offer acceptance process. At this time, the lender will request an appraisal and the market valuation will be included in the appraisal report. Alternatively, if there is a tenant in place at the time of the purchase that you will retain, you will be able to use the existing lease agreement as your qualifying rental income.

Tax Benefits:

Not only will the rental income contribute to your mortgage payment, but it will also create some tax advantages associated with the rental suite. Inquire with an accountant to explore any potential tax benefits associated with renting out a basement suite.

Are you maximizing your preQualification with basement rental income? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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I bet you didn’t know this about the RRSP First Time Home Buyer Plan

Posted on March 3, 2024March 4, 2024 by markogel@gmail.com

(March 2, 2024)

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Canada’s RRSP Home Buyer Plan (HBP) is one of the most common sources from which Canadians withdraw funds to secure their down payment on a new home. If you are considering taking advantage of this program, here are the key points to be aware of:

funds held within an RRSP are allowed to grow tax-free, but once you begin withdrawing the funds they are taxable as per your personal marginal income tax rate in the year you made the withdrawal. However, under the RRSP Home Buyer Plan, you can access the funds tax-free, provided you use the funds for the purchase of a property in Canada!
Although you do not pay taxes on the funds, you are required to pay it back over 15 years with the first payment starting in the second year after the year when you made your first withdrawal from your RRSP under the HBP program. For example, let’s say you withdrew $35,000 from your RRSP and used it as a down payment on a home that was scheduled to close/complete on Dec 1, 2024. Your first scheduled loan repayment would begin on Dec 1, 2026.
What are the repayment terms of the withdrawal? At least 1/15 of the borrowed amount must be re-contributed every year.
What happens if you don’t pay the withdrawal back after 15 years? Any portion of the withdrawal that is remaining after the due date will be declared as personal income in your tax return for the year in which the deadline occurs.
The maximum amount that you are allowed to withdraw from your RRSP under the HBP is $35,000 per applicant (as of the date that this article was published). For example, if you are purchasing a property with your spouse, you would each be able to access $35,000 from your RRSP towards the down payment for a total of $70,000.
You must move into the property within one year of purchasing it
a property is considered eligible under the HBP as long as your intent was to move into and reside in the subject property at the time it was purchased. If you resided in the property, but later moved out of it and retained it as a rental property, the 15-year loan period and tax privileges would carry on
Many people think that the HBP is restricted only to “First Time Home Buyers”, but that is not the case. Although the program was initially designed to accommodate to first time home buyers, it can also be used for repeat buyers provided they fulfill the following “first-time home buyer” criteria:
- If, during the current calendar year before the withdrawal (excluding the 30 days immediately preceding the withdrawal) or within the previous four calendar years, you have not resided in a qualifying home (or a property that would qualify if located in Canada) as your main residence, either solely owned by you, jointly-owned by you, your current spouse, or common-law partner (at the time of the withdrawal), you will be classified as a first-time homebuyer. For instance, if you’re withdrawing funds on July 31, 2024, you must not have lived in a home as your primary residence, whether owned solely by you or jointly with your spouse or common-law partner, between January 1, 2020, and June 30, 2024.

For direct correspondence with the Government of Canada regarding the Home Buyer Plan (HBP), call 1-800-959-8281.

Do you have any questions about the RRSP Home Buyer Plan? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

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Emerging Mortgage and Real Estate Trends in BC and Alberta.

Posted on February 26, 2024February 27, 2024 by markogel@gmail.com

(February 27, 2024)

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From all indications, it’s evident that we’ve reached the peak of the rising interest rate trajectory, with the prevailing sentiment in Canada now leaning towards a ‘higher for longer’ stance. Yet, as the economy experiences a slowdown and inflation is primarily fueled by the shelter component—rent and mortgage payments—maintaining higher rates for an extended period poses a delicate balancing act for the Bank of Canada. While elevated rates may facilitate a more direct path towards achieving the 2% inflation target, they come at the expense of federal, provincial, and municipal governments, businesses, and the average Canadian consumer, all of whom are grappling with the burden of exceedingly high debt servicing payments. With Canada’s general consumer Prime Rate currently at 7.20%, the anticipation of relief couldn’t be more urgent for variable rate mortgage holders across the country. With seven interest rate announcements scheduled for 2024 (the next one slated for March 6), speculation abounds as to when the cuts will commence. The prevailing consensus suggests June as the starting point, while a smaller contingent believes relief could arrive as early as April. Regardless, it’s reasonable to expect relief is forthcoming, leaving the only lingering question: when will it materialize? In the interim, the fixed-rate market is adjusting, with prevailing rate sentiment being factored in daily. Stay nimble and vigilant, as fixed rates have already begun their descent.

DISCLAIMER: Rates are coming down, but it will be a zig-zag type of descent. Be prepared for potential fluctuations in rates during your decision-making process. Call right now or schedule a call with Marko Gelo to discuss your options.

Beyond the interest rate narrative, several noteworthy developments continue to exert pressure on the Canadian real estate landscape:

Alberta’s attractiveness for homebuyers seeking affordability and urban living options has surged. In 2023, Alberta set records with the addition of 56,245 people from other provinces and 112,562 from around the globe. British Columbia also set some multi-decade milestones with both interprovincial migration and international migrants. Incoming residents from other provinces declined to a 20-year low as BC saw most of its exodus depart to neighbouring Alberta. However, any loss to other provinces was quickly negated by the +150,000 international migrants that made their way to mostly Vancouver. These population boosts will continue to press demand in both BC and Alberta for the foreseeable future.
inflation has moderated to 2.9%, outpacing consensus estimates (of 3.3%), driven by declines in gas and clothing prices but tempered by substantial increases in shelter costs (rent and mortgage payments).
A generational shift is underway, with millennials surpassing baby boomers in population size, while Gen Z emerges as a formidable demographic force. As of last summer, millennials (1981-1996) surpassed the longstanding demographic leaders in Canada, the baby boomers (1946-1965). Look for this trend to continue to influence the shape and pace of real estate development across Canada. And right on the heels of the millennials are the Gen Z’ers, who are currently on pace to overtake all demographics by as early as 2038.
BC has sounded the alarm bells for housing affordability with its aggressive province-wide upzoning initiative. This initiative essentially allows every residential property to upzone to at least a duplex and as high as a 6-unit multifamily complex, depending on your lot size and proximity to public transportation routes. Calgary is also in the midst of implementing an aggressive zoning revamp of their own. These sudden announcements and aggressive timelines for concepts that are traditionally entrenched with time-consuming approval and study processes give you an idea of how dire the circumstances have become in Western Canada’s housing scene.
Meanwhile, China’s economic evolution presents challenges for global green initiatives, as the nation’s dependence on fossil fuels remains entrenched despite strides towards renewable energy adoption. In 1981, 97% of China’s population was living in poverty. Today, that number has shrunk to 1%. This type of transition is also prevalent in other places around the world like India. This substantial increase in personal net worth from politically unstable and undesirable parts of the world will only increase the flow of immigrants into Canada seeking a higher quality of life for years to come.

Wondering how you fit in today’s real estate landscape? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

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Interest Rates, Affordability, Zoning, and 2026 FIFA World Cup!

Posted on February 4, 2024 by markogel@gmail.com

(February 4, 2024)

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The first month of 2024 is behind us!

Here’s a summary of how things are shaping up for the rest of the year.

Interest Rates and Market Trends:

If January is an indication of things to come, it’s fair to say that we’re headed in the right direction. Fixed rates have already dropped by a full percent, comfortably placing them in the 5% range over the last few months. However, variable rates are yet to follow suit. Currently, Canada’s Prime Rate has held steady at 7.20% for the past 7 months. After deducting the industry-standard discounts (-0.35% for conventional mortgages, -0.90% for high-ratio mortgages), you’re left with an effective rate of 6.30% – 6.85%. The question arises: why even bother with a variable rate mortgage then? Opting for a fixed rate might seem like a no-brainer, but hold on. Economists predict a Prime Rate drop of at least 1%, possibly more, before the end of 2024… and likely further drops into 2025. The pace of pre-approvals post-Christmas suggests a robust spring market is ahead of us. If this plays out like I think it will, the Bank of Canada (BOC) will sit idle throughout the spring market without any interest rate reductions. Even though inflationary pressures appear to be on the mend, the BOC will likely go the extra mile and allow higher interest rates to take one final bite out of the economy until it finally begins its descent. While some anticipate this drop earlier, my personal opinion is that a drop will not occur until the July 24 announcement, which will be the fifth interest rate announcement of eight for 2024. By July 2024, it will be 28 months since the rapid ascent of 2022 began when Prime Rate in Canada skyrocketed from 2.70% to 7.20% in 17 months.

Will we ever fix the affordability crisis? (Vancouver, Toronto…Calgary)

Is there genuinely a supply issue in Canada? The past decade has seen various government measures aimed at curbing demand, but affordability remains a pressing concern. Despite measures like the Foreign Buyer Tax, the Foreign Buyer Ban, the 2% stress test, and various other mortgage qualification and real estate purchase restrictions, Canada continues to grapple with an ongoing affordability crisis. Immigration is also a contributing factor, and until Canadians start reproducing en masse, importing talent globally remains essential. Canadian birth rates in the low 1s are not gonna cut it and won’t address our low productivity rates as a nation. Let’s face it; Canadians need to get busy and make strides to increase our population naturally, but until they do, expect strong flows of immigration for years to come. It’s going to take at least a decade and lots of shovels in the ground until we see at least a hint of a meaningful market correction. Vancouver will carry on being Vancouver, Toronto will continue to attract the most newcomers, and Calgary (and Edmonton) will increasingly become the affordability poster child until one day it isn’t anymore.

David Eby’s Zoning Initiative in BC: A Positive Step

Finally, something meaningful! This is the scale of magnitude required to get the pendulum swinging in the right direction. It’s about time someone body-checked the municipalities out of their comfort zones (well done, Eby!). In my opinion, this is where the affordability crisis was born. Ridiculous permitting processes, over-the-top studies, and distracting/strategic community town hall meetings. Like, come on, I get it, let people have their say, but we’ve been letting the minority (aka NIMBY’ers) have their way for far too long already. Too much time building bike lanes, charge stations, and other virtue-signalling construction ventures. Let’s build homes again, and lots of them! The more 700-square-foot condos we insert into our communities, the lower the birth rate will remain… time to ramp up construction and start building more of the bigger, family-oriented, missing middle homes (townhomes, row houses)! The province’s new housing legislation slated for 2026 will deliver more small-scale, multi-unit housing to the market. Homes currently zoned for single-family or duplex use will essentially be permitted for three to four units (depending on lot size), and up to 6-units for even larger lot sizes close to transit stops.

FIFA World Cup is just around the corner, will it kick Vancouver’s real estate market into a higher gear?

We’re about two and a half years away from co-hosting the largest sporting event in the universe, the FIFA World Cup. Vancouver will once again be featured on the world stage. With the Foreign Buyer ban set to expire in 2025, it will be interesting to see which anti-foreign-real-estate-demand policies remain in effect leading up to the World Cup. Following Expo 86 and the 2010 Winter Olympics, Vancouver’s real estate market experienced immediate and prolonged upswings. Will the same pattern happen post-World Cup? We’ll have to wait and see. Until then, be light on your feet and stay subscribed to this newsletter to keep at the pulse of everything real estate and financing!

Want to discuss your financing possibilities for 2024? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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Mortgages, Real Estate, and Life in 2024

Posted on January 6, 2024January 6, 2024 by markogel@gmail.com

(Jan 6, 2024)

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With all the uncertainty these days, it’s easy to succumb to the negative energy amplified by various media outlets like television, social media, and news publications. The year ahead in real estate, mortgages, and life, in general, will be a rollercoaster ride of challenges and triumphs. However, the key to not only surviving but also thriving lies in recognizing the fine line between acknowledging what is out of our control and empowering ourselves to focus on what we can control and influence. Rather than dwelling on the broad spectrum of things we CANNOT control, let’s shift our focus to what we CAN control: our thoughts, finances, and health. These elements form the foundation upon which we can build resilience and drive positive change:

THOUGHTS: Our mindset shapes our reality. Choosing to focus on the positive aspects of life, personal growth, and the potential for improvement can pave the way for a more favourable outcome.
HEALTH: In the pursuit of a prosperous life, our physical and mental well-being must take center stage. Prioritizing health through exercise, a balanced diet, and mindfulness ensures we have the vitality to navigate challenges.
FINANCES: While global economic forces may sway, our financial decisions remain within OUR grasp. Smart financial planning, budgeting, and investing empower us to weather storms and capitalize on opportunities.

A particularly valuable resource in times of uncertainty is the Andex Chart. If you’re not familiar with it, today’s your lucky day! It’s long been described as the document-version symbol of resilience and growth. The Andex Chart is a visual representation of North America’s key financial metrics since 1934. Click here to be redirected to one of the many available online. The chart illustrates the upward trajectory of good fortune, showcasing how, despite valleys and setbacks, the overall trend is consistently upward. This factual analysis will normalize any pessimistic outlook you may currently be fixated on. Whenever you’re feeling down about your finances, net worth, or business, put your reader glasses on and locate an Andex Chart. Just stare at it. It’s a one-page illustrative diagram that includes virtually every relevant financial North American metric and charts it against global events. For example, since 2020, the average inflation rate is approximately 6.2%, but for the 30 years prior, the average never exceeded 2.1%. The last time we averaged 6.2% was the entire decade of the 80s. Despite challenging periods from 1970 to 1990, Canadian stocks rose by about 24%! And all this amid historic negative events (Arab Oil Embargo in the early ’70’s, 22.75% Prime Rate in the early ’80s, and and the infamous Black Monday of the late ’80’s). Pretty crazy, right? Fear not, and have faith in the sacred Andex Chart. It serves as a reminder that the key to success lies in perseverance and a long-term perspective.

Now, focusing on mortgage holders and their journey of survival, evolution, and thriving, we are approaching a period of transition. Some will transition from sub 2% interest rate mortgages to a more long-term average 5% interest rate environment, as a significant number of mortgages are set to expire in 2024 and continue throughout 2025. Others will enter a market intensely contested and surrounded by conditions and outcomes not seen or experienced in decades. So, if you’re faced with a mortgage renewal in the coming year, brace yourself for the shock of new terms. On the other hand, if you’re about to enter the market, you’re committing to today’s reality—higher interest rates, post-inflationary standards, and crisis-ridden real estate supply and affordability issues. A pessimist might say, “pick your poison.” Personally, I’ll be looking at things from an Andex Chart point of view. What is happening at this time is normal, and it will continue to occur in the future. It’s a time to regroup, to adjust, to pivot. It’s not the end; it’s a new beginning. And with new beginnings come new plans and fresh mindsets.

If you’re a mortgage holder renewing at a higher rate, accept that renewal periods are not always optimal times to lock in new rates and terms. However, maintain optimism. Mortgage renewal time is an opportunity to make changes in your financial situation, without penalties. For those anticipating a higher and unmanageable rate, a simple fix may be to increase your amortization. Or, by consolidating substantial credit card debt or lingering personal line of credit balance, you can achieve a drastic reduction in outgoing cash flow. What may seem demoralizing from a mortgaging perspective could be rejuvenating from a personal finance and mental health standpoint. Amortizations and balances can always be managed and improved over time as interest rates and personal income improve.

If you’re entering the market with your first purchase, accept that you may need to adjust your purchase expectations downward, scale back your current lifestyle, improve your employment prospects, or a combination of these. It’s not your fault that you live in an unaffordable market, but going forward, there won’t be any handouts. Commit to a plan to achieve your real estate goals; get pre-qualified for a mortgage and realize where your shortcomings are. Once again, as exemplified by the Andex Chart, your entrance into real estate may appear challenging at first, but with perseverance and a long-term perspective, the challenge will diminish over time.

For current homeowners looking to sell their homes, whether upgrading to a larger home or downsizing to a smaller one, there are crucial considerations in both mortgage qualification and the real estate market. Upgraders should be prepared for a thorough mortgage pre-qualification, accounting for criteria they likely were not aware of when they last purchased a property. This includes the 2% mortgage stress test, minimum down payment thresholds for various mortgage programs (20% minimum for properties exceeding $1M), the elevated interest rate environment, excessive mortgage break penalties, and non-eligible employment (newly self-employed, change in career path, etc.). Downgraders should also be aware that even though they are looking to purchase a property of lesser value, such as a condo, there are other property expenses that could exceed what they were previously accustomed to (strata fees, special levies, etc.).

As we stand on the brink of a new year filled with uncertainties, it’s essential to recognize the duality of our world—the uncontrollable external forces and the empowering elements within our reach. By focusing on what we can control—our thoughts, finances, and health—we not only weather the storms but also contribute to the upward trajectory of our personal and collective destinies. Embrace the chaos, compete passionately, and let the burning desire for improvement guide your journey. In the grand tapestry of life, the trend is, and always has been, onward and upward.

Want to discuss what 2024 holds for you? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

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Email: gelo.m@mortgagecentre.com

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The Power of “Addition by Subtraction” in Mortgage Qualification

Posted on November 13, 2023November 22, 2023 by markogel@gmail.com

(Nov 13, 2023)

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We’re all familiar with the concept of ‘addition by subtraction,’ where achieving more sometimes requires letting go of excess. In the realm of mortgage qualification, this principle takes on a unique and powerful meaning.

One common instance of this concept in mortgage qualification occurs when one applicant weighs down the application, leading to a lower qualification amount or, in some cases, a higher interest rate. The circumstances are typically evident but can also be challenging to spot. Consider a standard application profile; a husband and wife, where one carries significant debt impacting their desired property range. In this scenario, the idea of addition by subtraction comes into play by removing the indebted spouse, eliminating the debt from the application and increasing the overall qualification amount. However, removing the spouse also means losing their income, so other factors must align.

Regardless of the outcome in the preceding example, a glaring flaw in mortgage qualification today is the failure to explore potential game-changing qualification opportunities. Many pre-approvals that are generated these days are simply generic; they lack creativity and expansive thought. It is not uncommon to have varying pre-approved mortgage amounts from various bankers or mortgage brokers. In almost all cases, this discrepancy is simply the result of a creative and open-minded mortgage broker identifying additional qualification opportunities within the lenders’ guidelines. Furthermore, as is especially the case with mortgage brokers, the access to additional banks and lenders also provides for more qualification possibilities as qualification guidelines vary significantly from lender to lender.

Another example of addition by subtraction arises when purchasing a new property and relying on income generated from a rental suite or standalone property. When it comes to rental income, lenders vary drastically with their eligibility criteria. For instance, Lender A will allow you to use 50% of the rental income that is generated from your rental property and apply it as qualifying income. But Lender B is offering something different. Rather than applying the eligible rental income to your overall application income, they allow you to use it as an offset to your existing debt load and they further increase the allowance to 80%. As a result, you end up qualifying for significantly more! Although the latter may lead to a significantly higher qualification, it could potentially become addition by subtraction if the lender has a higher interest rate. However, in most cases, the rate premium is negligible compared to the overall benefit of qualifying for the property.

Except for a few straightforward applications, mortgage qualification is a complex process. In highly competitive markets or challenging economic conditions, partnering with an experienced mortgage broker is crucial. The examples mentioned here are just a glimpse of addition-by-subtraction scenarios; numerous others may apply to your unique circumstances. To navigate this complex landscape, choose a mortgage broker with a proven track record of handling challenging files.

Looking for a way to optimize your mortgage qualification? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

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InTheNews: Bank of Canada Holds Rates Steady, What It Means for Mortgages

Posted on October 31, 2023 by markogel@gmail.com

(Oct 31, 2023)

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In the latest episode of Mortgagenomics Canada Podcast, I talked about the Bank of Canada’s recent announcement, dissecting what it means for Canada’s mortgage market. The decision to keep the overnight rate at 5% comes as a huge relief for borrowers and homeowners, particularly those with variable rate mortgages.

The Bank of Canada’s Pause: What it Signifies

On October 25, the Bank of Canada chose to maintain the overnight rate at 5%, thereby also maintaining the consumer grade Prime Rate at 7.20%. This marks the third consecutive pause since July 2023, suggesting a shift in the bank’s choice of inflation fighting tactics. While previously, the primary means of curbing inflation was achieved by frequent quarter point rate hikes, the bank now seems to be prioritizing other economic indicators. They are closely monitoring GDP and employment figures, searching for any signs of unusual economic growth that could further drive inflation. Additionally, they maintain their warning statement about being “prepared to raise the policy rate further.”

This shift signifies a move away from the broad-scope monetary policy methodology, where the primary question was whether to raise or maintain the overnight rate. This change is akin to switching from a big, blunt volume knob to fine-tuning dials, offering more precision and control.

Mortgages in Canada: What to Expect

Many economists are predicting that the era of rate hikes has come to an end, with expectations of a reversal in mid to late 2024. However, continue to be cautious in your approach when it comes time to make a product/term selection. Remember, economist predictions are not always 100% reliable, so continue to stress-test your financial situation and be disciplined in your approach.

When it comes to product choice, I’m a big fan of variable rate mortgages right now (as of the past couple of months or so)…the security of a 1, 2 or 3 year fixed rate just isn’t appealing to me at this time, especially after the recent slew of economic data sets. If you’re unsure what to do, give me a call and we’ll have a short conversation about your circumstance and I’ll tell you what I think. Don’t be afraid, shoot me a text or give me a call, 604-800-9593.

Here’s What’s on My Desk: A Glimpse into Current Mortgage Trends

The mortgage landscape is dynamic, and it’s essential to stay informed about ongoing trends. Currently, there is a mix of files on my desk, ranging from unique challenges to standard transactions:

If you’re concerned about your mortgage prospects or need advice, don’t hesitate to reach out. We’re here to provide transparent guidance and help you navigate your unique financial journey.

Wondering about your next move? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!

Contact Marko, he’s a Mortgage Broker!

604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)

403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)

Call Marko via WhatsApp!

Email: gelo.m@mortgagecentre.com

Facebook

@markogelo (Twitter)