If you’ve been in the market to buy a residential property in the last year or so, you’re well aware of how difficult it has been to get approved, especially for first-time home buyers. Late in 2017 the Office of the Superintendant of Financial Institutions (or OSFI if you don’t like tongue twisters) announced their mortgage stress test. This was done because housing prices were going up and up, with no peak in sight, the Bank of Canada (BoC) was making continued interest rate hikes, and Canadian households were already at record debt levels. The test’s purpose was to make sure that Canadians would be able to keep their heads above water financially, but instead it has blocked many Canadians from even getting into the pool (or river, or lake, or ocean. Take your pick.)
Recently there has been reason to believe that this stress test is no longer necessary. The Canadian economy is softening and is expected to continue in that path for the next two years. Interest rate hikes by the BoC have been put on pause. And many speculators have seen that the test has actually caused more harm than good. 10% of home buyers no longer qualify for a mortgage with the banks. That means first-time home buyers aren’t buying. Which means those looking to sell and move up don’t have anyone to sell to. Same goes for the sellers at the next tier hoping to buy their next property. And on and on it goes. Dominoes. Except all the dominoes are standing still because the banks can’t push the first one over.
So what are you to do? Well, we have some options for two groups of people: those who DO qualify and those who DON’T.
Those who do
The one stream of dominoes that has been falling down all over the place (in a good way) is the rental market. If you’re looking to purchase your next home, it is worthwhile to look into keeping your first home and turning it into a rental. Those who are being denied a mortgage are having to look at rentals instead. Now is a great time to get into this market!
Those who don’t
When you’re trying to keep a roof over your family’s head, few things are as frustrating and disheartening than being denied a mortgage. Whether you are trying to get out of a rental and start putting your hard-earned income toward a home you can call your own, striving to get into a property that meets the needs of your growing family, or trying to find a place that’s more suitable to your life with 50 cats (we’re not judging), being denied can leave you feeling hopeless. We suggest looking into a cosigner. This route often feels awkward for the buyer and risky for the cosigner, but it is a method that works time and time again. Plus, Calgary Mortgage Brokers have access to a lender which will allow your cosigner to be only temporarily on the contract. After one year, he or she will be absolved of any responsibility. Win win!
If these solutions sound like something you’d like to learn more about, contact us today! Don’t put your swim goggles and floaties away just yet. You’ll be swimming soon. Well, you know, as soon as the ice melts.