Every borrower wants the lowest interest rate. Who doesn’t? But as mortgage broker Nisha Lalwani explains, rock bottom doesn’t always mean the most advantageous deal.
“The lowest interest may not be the best,” Lalwani said in a phone interview with the Georgia Straight.
According to her, a good rate will vary for each individual, depending on their goals and long-term plans. A borrower’s personal circumstances could also change, like a new job that entails moving.
“Life happens,” the Metro Vancouver–area mortgage broker said.
When shopping around for mortgages, Lalwani advises prospective home buyers to read the fine print. Products called no-frills mortgages, which offer slightly lower rates, don’t provide the flexibility found in most loans.
“It comes with certain restrictions,” Lalwani explained.
These include higher penalties when paying the mortgage off sooner, such as breaking a typical five-year term. There may also be limits to the borrower’s ability to make extra payments.
Lalwani likewise noted that a no-frills mortgage may not allow a homeowner to refinance. This means taking out a new loan at a lower interest and paying off the existing one.
“You can only break this mortgage if you sell [the home],” she said.
According to Lalwani, the interest-rate difference between this product and a standard mortgage is only about 0.10 percent.
However, a no-frills mortgage that may not work for some might be good for others.
Lalwani explained that borrowers who are attracted to this deal are usually first-time home buyers. They are sensitive to interest rates, and they want the lowest rates.
They do not intend to break the term of the mortgage, because they do not see themselves moving to another house anytime soon.
“They plan to stay in the house,” Lalwani said.
Lalwani has been a broker since 2011. She is with the Canadian Mortgage Experts company, which is with Dominion Lending Centres.
More than $40.4 billion in 2020 home sales through August
Realtors and mortgage brokers like Lalwani have been busy over the summer. Home sales have been reaching new highs, as demand suppressed by the COVID-19 pandemic in the spring started surging in May.
In August, 10,172 homes sold across B.C., representing a 42.8 percent increase from the same month in 2019.
The value of home transactions in the province from January to August 2020 totalled $40.4 billion. That’s 15.8 percent higher than from the same period last year.
Lalwani observed that because of restrictions on travel, recreation, and other discretionary activities brought about by the pandemic, people generally have more savings. They are also working at home and found themselves wanting more room to accommodate office use.
Together with low interest rates that have been prevailing since March this year, Lalwani said these things spurred home-buying.
On September 9, the B.C. Real Estate Association (BCREA) released a paper explaining why the province’s housing market posted a strong performance amid the COVID-19 health crisis.
The document, titled “The Unusual World of Pandemic Economics”, noted a number of the things Lalwani has observed.
The paper stated that “without stores open to shop at, without vacations to take, and perhaps with some added precautionary savings, the second quarter of this year saw an extraordinary increase in household savings rates”.
It also pointed out that job losses impacted mostly low-wage earners, while those in the upper income brackets were not affected as much.
“The asymmetric impact of the recession helps to explain the strength in home sales, but also has serious implications for already troubling trends in inequality and housing affordability,” the paper said.
The BCREA forecasts that with interest rates remaining low and the province’s economy on track for recovery, a strong demand for homes will continue onto 2021.
That will surely keep Lalwani busy. Because of her multicultural background, she connects easily with different communities.
Lalwani is of South Asian ethnicity, and was raised in the Philippines. Her father came originally from the city of Jaipur, in India’s state of Rajasthan, and moved to Manila in 1975. Her mother hails from Bangalore, in India’s Karnataka state.
Lalwani was one year old when she arrived in Manila. Her parents are still there. She speaks Hindi, Punjabi, and Filipino, the national language of the Philippines that is based on Tagalog.
Her spouse is also of South Asian heritage, and he was born and raised in the Philippines.
“I find myself fortunate,” Lalwani said. “My background and the diverse culture in Canada enable me to make the most of my ability.”