Mortgage Pre-Approvals for Presale Condos…be careful.

Posted on April 30, 2024April 30, 2024 by markogel@gmail.com

(April 30, 2024)

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Securing a mortgage for a pre-sale condo can be your gateway to homeownership, but it also unveils a slew of potential risks that eager buyers often overlook. The allure of purchasing a property still in construction, with a completion date extending months or even years ahead, can mask the complexities of mortgage qualification. The stakes are high, demanding your meticulous attention to financial readiness and a deeper-than-usual understanding of mortgage qualification criteria. By arming yourself with essential knowledge, you can transform this seemingly daunting journey into a well-informed and successful venture. Here are the key points you need to consider when qualifying for a mortgage for presale condos:

Get pre-approved BEFORE you begin your presale condo tour:

Before you set foot into a presale condo sales presentation center, ensure you know your mortgage qualifying destiny. Once you’re enveloped in the glossy allure of that brand new condo unit, something profound happens to the human psyche. Suddenly, common sense dissipates, and emotions reign supreme. Unbeknownst to you, hours later, having succumbed to intense showroom counseling and the intoxicating allure of presale condo euphoria, you find yourself contractually bound to a significant purchase, often with a mere deposit, sometimes as little as $1,000. Little do you anticipate the challenges ahead. My point? Prior to being captivated by the idea of owning that brand new condo unit, secure mortgage pre-qualification. So when you do find yourself enamored with a particular floor plan, you can rest assured knowing you’re financially equipped to make the purchase or have a well-conceived strategy to attain qualification.

Align with a mortgage broker for your pre-approval:

Access to multiple lenders not only ensures that you’ll secure the most competitive interest rate but also maximizes your chances of qualification by providing access to various qualifying guidelines. Homebuyers often fixate on interest rate quotes and guarantees, losing sight of the essential qualification criteria. Prioritize understanding the mortgage qualification requirements over obsessing about an interest rate, which may become irrelevant by the time the project completes outside the rate-guarantee period. Builder-aligned mortgage specialists may issue vague “pre-approval letters” to fulfill the builder’s objective of meeting project financing milestones. Once a set number of pre-approvals is attained, the builder’s financier disburses funds for construction. Hence, a simple confirmation from a lender on the homebuyer’s pre-approval, often without formal pre-qualification, suffices for the builder’s needs. Remember, once the builder secures enough purchase contracts and pre-approval letters, they receive funds to commence construction, irrespective of the certainty of your mortgage pre-approval. Your deposit and signed commitment to the contract are what they value most. Therefore, ensure your mortgage pre-approval is legitimate and verified.

Qualifying for a mortgage isn’t easy. It entails meeting numerous lender requirements, as well as adhering to various provincial tax and property zoning/title regulations. Partner with an experienced mortgage broker who is well-versed in the latest lending criteria and governmental real estate regulations at municipal, provincial, and federal levels. Top-tier mortgage brokers typically engage in knowledge-based marketing channels such as regular blogging, podcasting, YouTubing, newsletters, or social media campaigns. These channels ensure that the brokers themselves stay updated and possess a higher level of knowledge compared to those who don’t utilize such strategies.

Get a verified mortgage pre-approval:

The term “pre-approval” is thrown around loosely these days, but you need a proper one. That means full income confirmation, down payment verification, up-to-date credit reports, and a comprehensive analysis of current qualification criteria. Ensure your pre-approval covers all these aspects for a reliable assessment of your mortgage eligibility.

Projected Qualification Riders (PQRs):

Presale condo mortgage pre-approvals are different; they include PQRs. These riders account for future unknown variables that could affect mortgage qualification. They introduce additional parameters to ensure your qualification status remains intact, considering scenarios like higher interest rates or lower appraised values. By incorporating PQRs into your pre-approval, you add an extra layer of protection and foresight to your mortgage qualification.

Need a mortgage preapproval with PQR’s? 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!)

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

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Rate forecast pointing to variable rate mortgages and weak Canadian dollar

Posted on April 18, 2024April 29, 2024 by markogel@gmail.com

(April 17, 2024)

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On April 11, the Bank of Canada opted to stay put, leaving their benchmark policy rate steady at 5% (which, by the way, translates to a hefty 7.2% for Canada’s consumer-grade Prime Rate). But guess what? The consensus is growing that their sideline-sitting days are numbered. After the April 11 BOC announcement, the odds of a rate cut at the next scheduled BOC meeting in June were sitting at a solid 50%. But hold on to your hats, folks! After April 16’s Stats Canada CPI release, those rate cut odds spiked up to a whopping 68%. So you can pretty much bet on a quarter-point drop in June, nudging that 7.20% prime rate down to a slightly less suffocating 6.95%. Cue the collective sigh of relief from households across Canada burdened by mortgages and other debts linked to prime rate. And also let’s not forget about the provincial governments, corporations, and millions of small businesses, all of whom are also struggling with interest costs tied to the overnight lending rate.

Now, let’s talk about that rate drop. Sure, a 25-point rate cut might offer some respite, but let’s not kid ourselves—it’s hardly a gesture. Rates are still hanging out in the stratosphere when you compare them to the rock-bottom lows we recently departed from. Remember that swift ascent from 2.45% to 7.20% over the past three short years? Yeah, we’re inching back down, but we’re hardly hitting the reset button with that anticipated dip to 6.95%. The goal here is to get cozy with this new normal and adjust our financial expectations to a more, shall we say, moderate range of interest rates, somewhere between 4% and 6%. And while some folks are shrugging off this adjustment like it’s no big deal, there are plenty who are still struggling to find their footing.

But we can’t forget, there’s a downside to cutting rates, and it’s a bitter pill to swallow. Brace yourselves for the blow to our (already limp) dollar. If you’ve ventured beyond Canadian borders lately, you’ve probably felt the sting of our weak currency compared to the almighty USD and EURO. Trust me, I felt it firsthand while breaking bread with some Americans and Germans in Croatia a couple of weeks ago. They were astonished by the sorry state of our currency, assuming that being part of the G7 club meant we were rolling in dough like the rest of the big shots. Spoiler alert: we’re not. My dinner bill, converted from CDN to EURO, ended up a whopping 40% higher than theirs. Ouch. This got me thinking about our energy sector again, and our stubborn refusal to cash in on it. Just imagine all that powerful foreign currency flowing into our economy if we’d just loosen the purse strings on our resources (i.e. selling to other countries who will actually pay us market value for it). Not only would it cushion our economy from hardship, but it’d also give our dollar a much-needed boost and foot the bill for our ever-growing demands for infrastructure and social services (due to an aging population and explosive immigration). But hey, who needs all that when we can pat ourselves on the back for cutting greenhouse gas emissions by a fraction of a fraction, right? Meanwhile, the rest of the world is snickering behind our backs and snatching up opportunities we’ve casually tossed aside. Take, for instance, when the Germans came knocking, looking to strike a fuel supply deal amidst the Ukraine crisis, and we shrugged them off with our eco-warrior stance. Nice one, Canada. But I digress. Let’s circle back to our limp dollar. Brace yourselves, folks, because when the BOC starts its rate descent (likely in June), our dollar’s taking a nosedive right along with it. Lower rates mean a weaker position in the currency market, especially if we beat the Americans to the punch. Sure, it might give a little boost to our exporting sectors, but it’s going to hit us where it hurts when we’re importing goods from the US and Europe. And you know what that means? Prepare for an extended stay in this elevated-cost era. Now, I’m not saying we’re hurtling toward another inflation apocalypse, but let’s just say it’s not going to be a walk in the park.

So, what’s the bottom line here? If we want to minimize the pain and set a precedent for a real and meaningful recovery, we’ve got some tough choices ahead. We can either dial back on our green crusade and throw our weight behind the energy sector, or we can roll out the red carpet for Canadian entrepreneurs and give them a fighting chance to build international empires (I think we should do both). Because let’s face it, we’re not going to strike it rich peddling Tim Hortons coffee franchises to each other. It’s time for Canada to grab the wheel and take charge, LFG!

I can’t end without any mention of mortgages, so here’s a little something to chew on until next time: variable rate mortgages are making a comeback among Canadians. These days, everyone’s on edge when it comes to locking in their mortgage terms, whether it’s for a new purchase, a refinance, or a renewal. Fixed rates are on the decline, but mark my words—the way down will not be immediate and predictable, but rather bumpy and gradual. Same goes for variable-rate mortgages. So here’s the play: consider a variable rate mortgage with an aggressive discount and ride out the current environment for the next year or so as fixed rates gradually decline (along with prime rate). And when the time’s right, convert your variable rate to a fixed term without incurring any fees or break penalties. A fixed-rate mortgage doesn’t allow for this conversion/swap without incurring substantial break fees. The cost-effectiveness, flexibility, and revolving rate option of a variable rate mortgage place the reins in the mortgage holders’ hands allowing them the freedom to adjust their position in the future.

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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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!

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

Facebook

@markogelo (Twitter)

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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