When interest rates started rising last year, many people in the Lower Mainland and Fraser Valley decided to postpone their next home purchase. That instinct is understandable, but Envision Financial Senior Financial Advisor Avi Singh says it may be short-sighted.
“It’s important to keep a big-picture mindset. Over a 30-year amortization period rates are bound to rise and fall, but the value of your home may rise overall. Today’s higher interest rates may make that purchase a little more expensive at first, but if you get a shorter-term mortgage you can reassess in a year’s time and potentially get a better rate.”
The housing market can change quickly — prices have held steady most of the winter, but the moment interest rates stabilize, prices may increase more rapidly. For those selling their first home at the same time as they purchase something larger, now might be that Goldilocks moment.
“If your condo had a peak value of $650,000 and you’re only able to sell it for $630,000, it’s tempting to focus on the $20,000 you lost out on. But if you’re also purchasing a single-family home for $1.3 million when it might sell for $1.5 million when the market improves, you’re actually saving $180,000 overall,” Singh says.
Explore options to maximize your home’s value
Those happy in their current homes who locked in at lower rates have been wise to leave their mortgages alone until rates drop or their term expires. For those who need to refinance, out-of-the-box solutions can help borrowers access more funds, improve monthly cash flow or avoid high fees.
“It still stuns me how much flexibility we have at our disposal to help get members into their dream homes. There are a lot of different tools to choose from,” Singh says.
You may not want to pay the penalties associated with breaking your mortgage contract, but if you’re struggling with higher costs, you may be able to pay some bills by taking equity out of your home for a second mortgage. For those with credit card or line of credit debt, consolidating into a single mortgage offers big savings — even with mortgage penalties. If you’d like to borrow against your home’s equity but know that the mortgage process will take too long, your financial institution can look at your bigger financial picture and possibly lend using a simpler product.
“With many lenders, the relationship stops the moment your mortgage is funded, but we continue to follow up — especially through volatile times like we’ve had over the past year,” Singh says. “I’m not chasing numbers or sales targets, I’m chasing relationships. You may qualify for a large mortgage, but we’ll also consider your kid’s education or your own retirement. It’s a more holistic approach.”
The home you want doesn’t have to wait
If the current interest rate environment has you rethinking your plans to move forward with a new home purchase or refinancing, it doesn’t hurt to assess available options.
“A great example is rental income. Some financial institutions only take 50 per cent of your rental income into consideration, but depending on a few factors such as declaring it on your taxes, we can use 100 per cent of that rental income. Our lending centre is right here in Langley, which means these decisions are more of a conversation — with more flexibility.”
Learn more at envisionfinancial.ca/borrow/mortgages.