With the most recent Bank of Canada rate hikes, along with the rising gas and food costs, we’ve already started to see an impact on buyers’ purchasing power and cash flow.
As rates continue to rise until inflation is relaxed, many home buyers will face higher qualifying rates and monthly payments this year. Fortunately, Pineapple is here to help guide you through these changes by presenting you with solutions and opportunities in a rising rate environment that will help you get into the market sooner and with a mortgage you can afford.
Let’s take a quick look at what some of these solutions are today.
Finding a home you love vs. getting into the market
If you were one of the many buyers priced out over the past few months, there’s been no better time to buy than now. There are lots of choices, less competition, more minor bidding wars, and more opportunities to add in conditions for an inspection or to secure financing.
Skipping The Stress Test
The current stress test rules have pushed the qualifying rate closer to 7% for a fixed-rate mortgage. So if you struggle to qualify based on these higher rates, you might want to consider an alternative mortgage option. Some lenders do not have to follow the Federal government’s rules where you might pay a little more monthly, but their qualification measures are far more flexible.
Consider Private Mortgage Options
Suppose satisfying mortgage conditions are an issue, and you need something more flexible beyond alternative mortgage options. In that case, a private mortgage might help those needing a smaller loan. Current rates have made private options more attractive, with a slight difference between alternative and private rate options from many lenders in this space.
Look At Smaller Markets Outside The Core
In key markets like the GTA and Vancouver, it’s challenging to find a home under the $1 million (which requires a 20% down payment, by the way). So you might want to look outside of the core to smaller markets where there are opportunities to find homes under the million-dollar threshold in which you can try and qualify at a minimum of 5% down payment (depending on the price and your financial situation of course).
Shorter Fixed Rate Options
The 5-year fixed is the most popular option, but it’s not always the lowest rate option or most flexible. There are 2 and 3-year mortgage options available that have better rates and lower penalty fees if you decide to break your mortgage earlier to take advantage of a rate drop in the future.
Consider A Townhome vs. Detached Home
If you’re looking for something more significant than a condo, but the detached home prices are out of reach, townhome prices have recently softened. Get more space than a condo (maybe even a backyard and driveway) and help financially position you faster to buy your forever home next.
Co-ownership or inlaw suites
Yes, you can buy a home with friends or other family members. You will qualify based on your combined income and down payment, as well as your assets and debts. Just remember to speak with a lawyer to draft a legal agreement that will protect your interest in the property.
Get Ready To Buy Next Year
If you’re not yet there financially, now’s the best time to start planning for next year. Pineapple agents have access to budgeting tools to help you prepare.
Let’s get you home
A Pineapple mortgage broker can help you put a buying strategy in place that will securely position you for the future. Let’s get started; contact us today.