Emy Flor likes to say one thing to people who ask for her help in borrowing money so they can purchase a home.
“Not everyone needs to buy a home to prove that you have a direction in life or that your future looks bright,” Flor told the Georgia Straight in a phone interview.
According to the Vancouver-based mortgage broker, she asks clients what their ultimate goal is in having a home. If it’s the creation of wealth through home equity that they’re really after, Flor suggests to them that owning a property isn’t the only means to do that.
“There are other ways of investing and I show them, because I’m very familiar with the financial industry,” Flor said.
That may seem surprising, as mortgage brokers like Flor make a living by putting together lenders and borrowers who need money to buy a home.
“If there are no clients, then we get no commissions, right?” Flor said. “The only thing that I have is my integrity. If I’m going to lie to them and then later on, after a year, they encounter difficulties, I didn’t give them the best service.”
Flor owns a condo, and she also buys stocks and invests in mutual and segregated funds.
An analysis by RBC Global Asset Management Inc. shows that Canadian stocks are more effective in generating wealth than real estate. Looking at data from 1993 to 2018, the study indicates that a $300,000 investment in the stock market over that 25-year period would have resulted in an end value of $2.4 million.
By comparison, the same initial outlay in real estate would have gotten the investor a return of $1.17 million in Toronto or $1.12 million in Vancouver.
Commenting on this analysis, Robin Gullason, vice president and lead strategist of the Toronto-based Harbour Group of RBC Dominion Securities Inc., noted last March that although some investors “think real estate is key to building wealth”, data indicate that a diversified approach is vital.
“The returns from equities came with more volatility, but we think that is offset by the fact that stocks are significantly more liquid than housing with typically much lower transaction costs,” Gullason wrote.
A 2007 study from the Centre for Urban Economics and Real Estate at UBC provides a caveat. According to that paper, “only renters who are highly disciplined, savvy investors are able to match the wealth that owners can accumulate simply by making their mortgage payments.”
“If they meet these criteria, in the best scenario for renters, they can accumulate over 24 percent more wealth than owners in Edmonton, Halifax, Montreal, and Regina, and they can accumulate at least as much wealth as owners in Ottawa, Vancouver, and Winnipeg,” states the study, titled Are Renters Being Left Behind? Homeownership and Wealth Accumulation in Canadian Cities.
However, the document, which examines data from 1979 to 2006, also notes that renters in Calgary and Toronto “cannot on average over our study period match the wealth achievable through homeownership”.
Flor has been in the mortgage industry since 1995, starting as a specialist with RBC. She was a bank auditor in the Philippines. She said she likes to present different options to her clients so they can weigh each according to their financial capacity.
Flor noted that ultimately it’s the prospective homebuyer who decides what will work best.
“They know their budget,” Flor said. “Ours is just paperwork. But do you really have enough? It’s because there are also piano lessons and hockey games for the kids that you have to pay for.”
An August 2019 paper by Statistics Canada shows that many Canadians are willing to take on debt in order to own a home.
According to the document, titled Homeownership, Mortgage Debt and Types of Mortgage Among Canadian Families, mortgage debt represented two-thirds of the overall increase in debt for families from 1999 to 2016.
“In recent years (2012 to 2016), mortgage debt was responsible for 100% of the increase in total debt,” the paper states.
For Flor, the best part of being a mortgage broker is getting involved in people’s dreams of homeownership. “It’s a great deal for them that it becomes a reality,” Flor said.
The Straight also asked for Flor’s take on a number of things for this Best of Vancouver issue.
Best use of home equity
“Pay high-interest loans. If you get a mortgage at an interest rate of 2.69 percent and your car loan is seven or eight percent and your line of credit is at 21 percent, pay everything else and just have one amount, which is your mortgage.”
Best way to get a GOOD rate When renewing a mortgage
“Stay with your lender. Try to negotiate with them and see what they can offer.”
Best way to prepare for unforeseen changes that may affect your mortgage payments
“Put aside as much money as you can. Try to save enough to carry you over for six months.”
Best way to save money for a home purchase
“I would advise people to invest in RRSP [registered retirement savings plan]. It’s hitting two birds at the same time. You can use your RRSP for a down payment for a home and defer some of your taxes.”