Home prices have continued to rise in 2017 in the lower mainland of BC much the same as they did in 2016. However, in the last couple of months we have seen prices flatten a little. Inventory is still low however, we are seeing more buyers sitting on the sidelines waiting to see what happens. For those of you that own a home already, the opportunity for a mortgage refinance is available with the rise in prices we have seen.
It’s at this time that people can take a breather and look at their situation and see what can help them financially down the road. In regards to a mortgage refinance, one opportunity that exists is that you can use the equity in your home to either pay off higher interest consumer debt or do renovations to their home. If you have credit cards that are charging you double digits in interest rates or consumer loans that cost 5% – 6% in interest a mortgage at 3.0% or less may make sense at this time. For refinancing your home the maximum equity you can take out is 80%. With the increase in market prices this will give people the opportunity to do this that previously couldn’t as they had borrowed more than 80% of the value of their property. We can help you with this in increasing your first mortgage with no penalties or obtaining a second mortgage for you where we leave your first mortgage intact.
If you own a home already, the appreciation in value of your home may give you the opportunity to upgrade to a bigger home. With prices increasing there is the opportunity to sell your home and get enough equity out to come up with a substantial down payment for a new purchase. In this current market we are seeing many people that are able to do this with 20% or more down. This saves them money on the CMHC insurance premiums whereby they couldn’t do this a couple of years ago. In a declining market this is of course more difficult as it may be hard to sell your property for enough to pay off your mortgage, pay your real estate fees, and then come up with a down payment and closing costs for a new purchase.
The downside of upgrading to a bigger home in this market is of course that you are overpaying for your new home. However, you are also selling your home for more than ever as well. The reality is in any market that you sell and buy is that you can never time things solely to your own advantage. Everything is either up or down.
A major problem right now if you are going to sell is what will you buy? There is limited selection on the market and competition for it. This means you need to go looking for properties with a preapproval in place and still be prepared to bid more than asking in some situations. There is also the pressure to write offers without subjects. This of course can be fairly risky as no lender will give you a firm approval until after you have written an offer. Then, if you fail to obtain financing afterwards, you will forfeit your deposit and can be sued for failing to fulfill your contract.
One last possibility is using the equity in your home to refinance it to purchase other investments that will earn you more money than the cost of the interest you are paying. This could be used to invest in RRSP’s/other investments. The equity could also be used towards purchasing a rental property. Keep in mind that in purchasing a rental property you should be looking for something that will either appreciate in value in the long run or has a positive cash flow each month. Any equity take out for investment purposes should be part of a balanced financial plan as it does carry more risk when you are leveraging your home to purchase other assets that do not carry a guaranteed return.
If you need any advice on your personal situation please contact our office at 604-556-3893 or email at [email protected]
For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.