Mortgage holders can seize on opportunities to upgrade

    1 of 1 2 of 1

      On June 1, Lorina Serafico, a home-financing adviser with Scotiabank, resumed meeting with clients in person.

      Because of the COVID-19 pandemic, it had been several weeks since she suspended personal appointments at the East Vancouver branch where she works.

      With more than a decade as a mortgage agent, Serafico has served numerous customers, and a number of them have started meeting with her again.

      They’re usually owners of townhouses and condos, and now they’re thinking of upgrading to single-family homes.

      “They like what is happening in the market. There’s more inventory; prices have stabilized; and interest rates are good,” Serafico told the Georgia Straight in a phone interview.

      On March 27 this year, the Bank of Canada slashed its key interest rate—which determines bank lending rates—to its lowest level of 0.25 percent.

      The central bank has kept the rate at that level since that date in a bid to contain the economic fallout from COVID-19.

      “For those who can afford to make adjustments to their monthly budgets when rates start to rise, variable rates are low right now and can translate to monthly savings,” Serafico said.

      She explained that a 10-basis-point difference for every $100,000 of mortgage on variable rate means $100 in interest savings.

      In addition to low rates, there had been no wild fluctuations in home prices.

      Based on documentation by the Real Estate Board of Greater Vancouver (REBGV), current prices have had modest increases compared to last year.

      In May 2020, the benchmark price of a single-family home in the areas covered by the REBGV stood at $1.4 million, which was 2.9 percent higher than the previous year.

      Also last month, a typical townhome was priced at $792,700, a 1.8 percent improvement. Condo units had a benchmark price of $686,500, a three percent improvement.

      A third of Serafico’s clients are first-time home buyers. Some hopefuls have started seeing her for financial advice, and they’re mostly workers in sectors not affected by the pandemic, like health and food processing.

      According to the mortgage specialist, they’re also, typically, individuals who have been saving for a down payment.

      “Now is a good time for them to really look into buying,” Serafico said.

      For first-time home buyers, Serafico usually recommends getting a fixed rate, especially if they have a high-ratio mortgage.

      A high-ratio mortgage means the buyer paid less than 20 percent of the price of the home.

      Because lenders need to be protected, the federal government requires a purchaser of this type to buy mortgage-default insurance.

      Mortage-default insurance translates into higher costs for a home buyer. Insurance is provided by the Canada Mortgage and Housing Corporation (CMHC), a federal Crown corporation, and private companies such as Genworth Financial, and Canada Guaranty.

      Starting July 2020, CMHC will tighten its rules for mortgage-default-insurance applicants, a move seen by some as curtailing the purchasing power of borrowers.

      Genworth and Canada Guaranty are not following CMHC on this path. When Serafico talked to the Straight, she had just finished a webinar with Canada Guaranty.

      “CMHC has the majority of insured mortgages in Canada,” Serafico observed. “They are tightening the rules to limit their exposure to more risky mortgages.”

      As a mortgage agent, Serafico often gets asked when is a good time to buy a home.

      “If a household has the income, down payment, and the credit score to qualify for a mortgage, it is always the right time,” she said.

      According to her, everyone needs a home, whether owned or rented.

      “I consider mortgage payments as a forced savings plan,” Serafico said. “A $500,000 property you bought today will be worth $873,000 in 10 years. That’s an average of 7.45 percent annual increase, beating a medium-risk investment portfolio.”