February 12, 2013

Strategies To Consider For 2013

Whether you are buying a new home, refinancing or simply renewing, there is much to consider if you are in need of a mortgage in 2013.

In no particular order, what will be important to you in the coming year are the new mortgage guidelines, the transition from HST back to GST/PST on April 1, housing price trends and interest rates.

Kevin Lutz, regional manager, mortgage specialists, Royal Bank of Canada

New mortgage guidelines could affect you

There is no doubt that the new B-20 mortgage guidelines introduced by the federal government are having an impact on the way financial institutions lend money. This latest move by the federal government – its fourth since 2008 – effectively turns back the clock to the pre-2004 state of affairs, resetting mortgage lending rules to more prudent, if conservative, standards.

The rule changes are broad based and include the amortization reduction to 25 from 30 years for borrowers without a 20-per-cent down payment. First time homebuyers have been affected the most by this change since many do not have 20 per cent to put down in order to avoid the rule. Low ratio homebuyers with 20 per cent or more to put down, however, can still ask for a 30-year amortization. As for the other rule changes, most borrowers are not affected, and those who are affected will find there is a minimal impact. If you already have a mortgage, be careful before altering its terms as some policies are being grandfathered. I would suggest that you work with an experienced, knowledgeable and reputable lender before making any changes to your mortgage.

Home prices and interest rates

In addition to new lending guidelines, there are various reasons for softening housing prices in Vancouver. On the flip side, this presents a good opportunity for motivated buyers. Price trends are as favourable as they have been in a long time and interest rates remain at or near record lows. Keep a close eye on interest rates, however, as increases are imminent. At this point, 2013 looks like a good year to be in the market for a new home. According to RBC’s most recent housing survey, home buying intentions among Canadians remain strong but many are waiting for the right time to jump in. Forty-five per cent of British Columbians surveyed say the current housing market is a buyer’s market, in which buyers have the advantage because the number of houses available exceeds the number of buyers, which is well above the national average of 38 per cent.

Lenders are in competition for your business

A slower real estate market means fewer new mortgages so lenders are very eager to compete for your business. My advice has always been to comparison-shop the mortgage options first, then your interest rate. There is more to mortgages than just great rates, so be careful of restrictive options due to ultra-low interest rate offers. Make sure you are getting a mortgage that gives you peace of mind with flexible options, allowing you to pay down your mortgage fast.

Ready to make a move in 2013?

Start by asking yourself: Can you find the house you’ve been looking for? Are you ready to make the leap from renting to owning in 2013? Your mortgage specialist will offer you professional advice for financing your home and making it fit within your financial goals. Your realtor will offer you professional advice for finding and acquiring the right property at the right price.

Follow Kevin Lutz on Twitter @RBCKevinLutz.

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