What you need to know about borrowing during the pandemic
(Reading time: 4:45)
Some would venture to say we have experienced more change in a few short months in 2020 than most have in generations before. We’ve learned to adapt quickly and be flexible. For example, teachers introduced full-time online learning en masse, virtually overnight. Being flexible has allowed educators to help students continue their studies and maintain a sense of normalcy and stability.
“Being flexible and open to change can also ensure we continue to stay grounded and make the best decisions in other areas of our lives, such as finances,” says Educators Agent-Mortgage Specialist Mara Rossi.
How have recent conditions changed how we should think about borrowing?
Here are some helpful tips in the midst of some confusing financial times:
In the middle of purchasing or selling a home now? You will likely close on time, so it’s full steam ahead. At the time of writing this article, scheduled closings are taking place rather smoothly. It’s still a good idea to ensure you are in close contact with your solicitor and mortgage broker/lender. A good plan is to have everything in place at least two weeks in advance of closing. Although there can be some delays, staying on top of things and being proactive will also help your partners, some of whom may be inundated with calls.
Planning to purchase or sell a home? “The real estate market has a very different feeling than the healthier, crazier, housing market before the pandemic,” says Mara. “We are experiencing a greater percentage of listings being cancelled in larger city centres. While prices have not dropped to the same degree, they are still lower than before the pandemic. This is both appealing and a little discouraging for buyers and sellers. In order to help you navigate through the ups and downs, it really helps to have a strong professional support team.”
In addition, social distancing requirements have meant little to no home showings, open houses, or site visits. Most sellers have embraced video/virtual tours to show their homes, however this is not the same as actually walking through a home. Real estate predictions are for a significant slow down to spring’s typically robust market, and for the market to take a year or even more for it return in full swing.
Tips on how to stay centered and weather out this storm
Were you planning to list your home for sale? Take a close look around your home and focus on the little things that didn’t make a difference before, but might in a slower market. If you have more time to tackle all those projects, take advantage of it. Ensure your home is in tiptop condition for when the market opens up. Prepare now, so you’re ready when times are more favourable.
Were you planning to buy? Things have changed. Create a budget (or fine tune your existing one) and look for opportunities to save. Can you use those new-found savings to increase your down payment? This might be a good time to open a special account for savings. Your advisor can explain how a Tax-Free Savings Account (TFSA) can help boost short-term savings, and your Registered Retirement Savings Plan (RRSP) can be used for your down payment if you’re a first-time home buyer.
Is your mortgage maturing, and you’re looking at renewal options? It pays to research your renewal options. Typically, six months in advance of your renewal date is a good time to begin. “Now more than ever, consumers are taking the time to look deeper into their financial needs,” says Mara. “They are realizing how important it is to understand all their mortgage options – pre-payment privileges, lump sum payments, penalties (how they are calculated is critical), and how rates can match the program best suited to your financial needs. It’s more than just looking for the lowest rate. Knowledge is power, so take the time to do the research.” An Educators Financial Group Mortgage Specialist can help you navigate your options.
Refinancing to amalgamate into one, overall lower payment? Refinancing can lower your monthly payments, and help you get mortgage free faster.
If you are considering refinancing now, you may find rates to be more competitive, and present a good opportunity to refinance. Being flexible may ease any financial strain. There are some things to take into consideration. For example, you should understand how much more of the equity in your home you need to use in order to consolidate your debts into one.
Concerned that lower home values could affect your ability to refinance? Your Mortgage Agent at Educators may be able to help. “We often have access to information that can assist as we help you work through your options,” says Mara. “Also, there are lenders still willing to finance up to 80% of the value of your home at this time, so there’s no need to worry.”
Pre-payment penalties are also something to consider. If you are looking to break your mortgage before the end of your term in order to refinance, you could face a penalty you did not account for. Some lenders will integrate the penalty into the new mortgage, helping to ease this potential strain in your plans. This option may make good sense if consolidating would benefit you.
Learning how to utilize mortgage and loan programs can help you navigate your financial decisions and ease stress.
In all the above financing options, being patient and proactive, educating yourself, and being flexible will help you think clearly and make solid decisions. Look to your partners at Educators Financial Group for help in creating a financial plan and making financial decisions that are right for you.
Have one of our mortgage agents reach out to you.
Brokerage Licence 12185