Advice Valued More than Ever

It used to be a lot easier to understand mortgages.

But since January 2016 alone, we’ve seen:

• Minimum down payments increased to 10% for any portion of a mortgage above $500,000
• Restrictions on refinancing
• Rates become much more dependent on:
  • loan-to-value (because of changes to default insurance)
  • amortization
  • credit scores
• A stress test required for all insured mortgages, using the 5-year posted rate
• A stress test required for all uninsured mortgages, using the higher of the 5-year posted rate or 200 bps above the borrower’s contract rate

First-time buyers can’t be blamed if this onslaught of mortgage changes makes their head spin. That’s why the following stat is both remarkable…and not.

CMHC’s recent Prospective Home Buyers Survey found that 80% of first-time buyers plan to rely on a mortgage broker to help them navigate the home financing process.

We don’t have this intention statistic from prior years, but normally just over half of newbie buyers use brokers.

Clearly, good mortgage advice has never been in higher demand, whether it’s delivered online or face-to-face. And one source of advice isn’t enough. Talking to one broker is rarely as fruitful as talking to two, or to a broker and a banker.

And, of course, some of the most objective advice these days is online. All rate quotes you get from commissioned mortgage advisors should be verified on an honest rate comparison website. We know a good one if you need a referral.

Two More Stats of Note

CMHC’s survey also revealed that:

• 70% of first-time buyers are likely to buy with a down payment of less than 20%
  • That’s quite a different picture than the one Mortgage Professionals Canada paints in its fall survey. It said that first-time buyers make average down payments of  21%. If all this is true, there’s obviously a significant skewing of the numbers by the minority of first-timers with hefty down payments.
• 68% of first-time buyers are concerned about the possibility of interest rates increasing during the remainder of their amortization period
  • That compares to 62% of previous and current owners.
  • Fear of higher rates in the future continues to explain why 5-year fixed rates dominate term selection in this country.