April 2020 News letter 'What Now'
April 1, 2020 | Posted by: Eric Palmer
Making sense of a changing marketplace
Let me begin with my heartfelt hope that you and your loved ones are in good health.
We are in uncharted territory with the mortgage marketplace continually shifting. Here is a quick summary of common questions to help you make sense of it all.
FOR CURRENT HOMEOWNERS
What do the mortgage payment deferrals mean and how do I access that?
Mortgage insurers and lenders announced that eligible clients can delay mortgage payments. These are 'compassionate' programs for those who are in serious financial straits and unable to make their mortgage payments. You will need to apply to the program, and assistance will be determined on a case-by-case basis so please do not just start skipping payments. If you urgently need this help, get in touch. I can help you find the right channels to apply.
Will the lower Bank of Canada rate help me with my variable mortgage or line of credit?
Yes, your interest rate will also drop. Keep in mind that it usually doesn't happen instantly, and your own rate won't necessarily move in lockstep with the Bank of Canada rate. Ultimately, it's the lender's decision on whether – and how much of – the rate cut will be passed along to the end consumer. Lenders are naturally concerned about liquidity and the potential for an increase in defaults. If you do have a deep discounted variable rate mortgage, you are in a very good position.
What about my fixed-rate mortgage?
If you've got a fixed-rate mortgage, then nothing changes for you right now. The rate you negotiated is guaranteed for the entire term of your mortgage. However, if your fixed rate is a lot higher than the current rates available, then it is still worth calling to see if it makes sense to re-negotiate your mortgage to take advantage of today's rates.
I have some credit-card and/or loan debt that now has me worried.
If you're carrying high-interest credit card debt, and you have more than 20% equity in your home, it can make sense to roll those other debts into a new mortgage. You get one manageable payment, better cash flow, and interest savings.
Events that have impacted buyers include:
1. Obviously, we're seeing not as many listings and home visits are certainly not wise. Most activity will be on hold until the future becomes clearer. Use this down time to get in touch for a review of your situation so you are ready to go when the time is right for you.
2. The stress test changes announced earlier this year that would make qualifying a bit easier for both insured and uninsured mortgages will no longer go into effect April 6th.
3. While rates initially went down at the start of this crisis, they then started to go up. New variable-rate mortgages are no longer being offered at deep discounts to prime.
We all need to take things as calmly as we can, evaluate our priorities, and make decisions that are needed for the long term. Health and happiness to you and yours.
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