Blog Post

What Will Mortgage Financing Look Like In 2021?

Anita Groves • Nov 17, 2020

There is no doubt that 2020 was one for the books. It will be remembered as a year like no other. COVID-19 has caused significant national economic disruption, to say the least. While we’ve seen government intervention, record unemployment, mortgage payment deferrals, record low-interest rates, we’ve also seen continued growth in the housing market.

So what can we expect as we complete the final quarter in 2020 and move into 2021? Well, low interest rates and increased scrutiny on all mortgage applications are most likely in the cards.

Low interest rates

Right now, both fixed and variable rate mortgage rates are at all-time lows. The cost to borrow money for a mortgage has never been cheaper. According to the Bank of Canada, we can expect them to stay low for the foreseeable future. “Interest rates are very low, and they are going to be there for a long time. Canadians and Canadian businesses are facing an unusual amount of uncertainty, so we have been unusually clear about the future path for interest rates.”

And while low interest rates are a good thing for financing property now, unfortunately, they won’t be as easy to access as in previous years.

More scrutiny on mortgage applications

While we don’t expect lender or insurer guidelines to change much in the coming months, securing mortgage financing in a post-COVID economy has already proven to be harder as lenders apply increased scrutiny to each application. Every mortgage application is being looked at more deeply, and additional documentation is being requested to substantiate your application. Lenders are being more cautious about who they’re lending money to.

If you’re self-employed or rely on overtime, bonuses, or picking up additional shifts to make ends meet, securing a mortgage is going to be more difficult for you. As lenders look at a 2 year average for employment, if you took a hit to your income in 2020, that will impact you in 2021. Any type of non-guaranteed income will be more scrutinized.

If the pandemic impacted your employment and you deferred any payments (credit card, loan, line of credit, or mortgage), expect to be questioned. Lenders will ask for your story; they will want to know why you had to defer payments and how you are now in a better financial position.

Unfortunately, one of the common complaints about getting a mortgage is that it is very document-intensive. Lenders want to see a lot of supporting documents for every mortgage application. And moving into mortgage financing in 2021, you can expect even more requests for supporting documents.

Have a plan in place

So while the housing market continues to grow and low rates make it a good time to buy, the best way to prepare for increased scrutiny and documentation on your mortgage application is to plan ahead.

If your mortgage is up for renewal, you’d like to refinance, or you’re planning on buying a new property, the best thing to do is to get started immediately. Getting together your documents will take time; having a plan on what that looks like is the way to go.

I would love to have a conversation and outline all your options. If you have any questions, please don’t hesitate to contact me anytime!

< Older Post Newer Post >

Anita Groves

PROFESSIONAL MORTGAGE BROKER

Download My Mortgage App HERE

Mortgage Options for Older Canadians

By Anita Groves • 24 Apr, 2024

Although it’s ideal to have your mortgage paid off by the time you retire, that isn’t always possible in today’s economy. The cost of living is considerably higher than it has ever been, and as a result, many Canadians are putting off retirement, hoping to make just a bit more money to add to that nest egg. So if you find yourself in the position where you’re considering your mortgage options into retirement, you’ve come to the right place. The advantage of working with an independent mortgage professional instead of a single bank is choice. When you work with an independent mortgage professional, you won’t be limited to an individual institution’s products; rather, you will have access to considerably more options. Here are some options available to older Canadians as they plan for mortgage financing through their retirement. Standard Mortgage Financing If you’ve got a steady income, decent credit, and equity in your home, there is no reason you shouldn’t qualify for standard mortgage financing, which usually comes at the lowest interest rates and best terms. Some lenders use pension and retirement income to support your mortgage application even if you’ve already retired. Reverse Mortgage Financing A reverse mortgage allows Canadian homeowners 55 years and older to borrow money from their homes with no proof of income, no credit check, and no health questions. A reverse mortgage is a fabulous mortgage solution that has helped thousands of older Canadians enhance their lifestyle. Home Equity Line of Credit (HELOC) A line of credit secured to the equity you have in your home is an excellent tool to allow you to access money when you need it but not pay interest if you don’t need it. Many older Canadians like the idea of rolling all their expenses and income into one account. Private Financing If you happen to be in a bit of a tight spot, you have a plan but need a financial solution; private financing might be the answer. Indeed not the first choice for many because of the higher interest rates. However, private financing can provide you with options where a traditional bank can’t. If you have any questions about securing mortgage financing for your retirement, please connect anytime. It would be a pleasure to work with you and walk you through all your options.

A First Home Savings Account (FHSA)

By Anita Groves • 18 Apr, 2024

Dreaming of owning your first home? A First Home Savings Account (FHSA) could be your key to turning that dream into a reality. Let's dive into what an FHSA is, how it works, and why it's a smart investment for first-time homebuyers. What is an FHSA? An FHSA is a registered plan designed to help you save for your first home taxfree. If you're at least 18 years old, have a Social Insurance Number (SIN), and have not owned a home where you lived for the past four calendar years, you may be eligible to open an FHSA. Reasons to Invest in an FHSA: Save up to $40,000 for your first home. Contribute tax-free for up to 15 years. Carry over unused contribution room to the next year, up to a maximum of $8,000. Potentially reduce your tax bill and carry forward undeducted contributions indefinitely. Pay no taxes on investment earnings. Complements the Home Buyers’ Plan (HBP). How Does an FHSA Work? Open Your FHSA: Start investing tax-free by opening your FHSA. Contribute Often: Make tax-deductible contributions of up to $8,000 annually to help your money grow faster. Withdraw for Your Home: Make a tax-free withdrawal at any time to purchase your first home. Benefits of an FHSA: Tax-Deductible Contributions: Contribute up to $8,000 annually, reducing your taxable income. Tax-Free Earnings: Enjoy tax-free growth on your investments within the FHSA. No Taxes on Withdrawals: Pay $0 in taxes on withdrawals used to buy a qualifying home. Numbers to Know: $8,000: Annual tax-deductible FHSA contribution limit. $40,000: Lifetime FHSA contribution limit. $0: Taxes on FHSA earnings when used for a qualifying home purchase. In Conclusion A First Home Savings Account (FHSA) is a powerful tool for first-time homebuyers, offering tax benefits and a structured approach to saving for homeownership. By taking advantage of an FHSA, you can accelerate your journey towards owning your first home and make your dream a reality sooner than you think.