20 Apr COVID-19 FAQ
With COVID-19 creating a whole new reality for the real estate sector, it’s only natural that people are seeking clarity. After all, clients need to understand this fluid environment in order to make decisions about their own lives. We appreciate how confusing this situation has been, and we’re here to help.
In order to address as many concerns as possible, we’ve put together an FAQ based on the incredible range of questions we’ve been receiving:
My lender is allowing for deferred mortgage payments as a result of the pandemic. What does that mean and should I take advantage?
Some lenders, mainly big banks, are deferring mortgage payments for up to six months. While it can be a helpful option in a bind it should be used only as a last resort. Deferred payments are not free money. You have to repay it and you’ll be paying interest on top interest, so long term it will actually cost you more. Sometimes else to consider is how deferred payments will potentially impact your credit. Will your credit report indicate that you’ve missed a mortgage payment? That payments were deferred? Or that your mortgage balance is increasing? These are all things that could hurt you in the future if your credit is impacted and the truth is there isn’t much clarity on these points yet.
That said, if you’re hurting and you need to have the extra space in your budget then it’s an option to seriously consider; this is the type of situations these programs are design for. But keep in mind there are often other options we can look at that may help you without hurting you in the long run. We can consolidate your debt and look at ways to lower your monthly payments. So please reach out to us before deferring a mortgage payment so that we can make sure it’s truly the last option on the table. Our goal is to find a solution for you that has no downside – remember we work for clients, not lenders. YOU are our priority.
Can I expect the monthly payments of my variable rate mortgage to decrease because the Bank of Canada cut its overnight lending rate?
It depends on your lender but most don’t decrease your payment automatically. What happens is that your payment will stay the same but you’ll actually be paying more of the principal loan and less interest, so you’re effectively paying off your mortgage faster.
Some lenders will allow you to lower your payment to your contractual amortization, but if you’re able to afford the payments as is I would keep it that way; you’ll pay it off faster and pay less interest in the long term.
I’m in the process of getting a mortgage? How will I be affected?
If you’re currently in the process of obtaining a mortgage you generally won’t be impacted by the COVID-19 situation. That said, banks are very busy right now so the approval process may take longer than usual. If you’re a real estate broker I would advise you not to indicate a seven-day clause to secure financing in the contract. It depends on the lender but given the current climate it can be hard to get approved quickly.
We have to be cognizant of the fact that banks are going through a challenge of their own as this situation is new for everyone. That said I’m confident that banks will continue delivering, we all just need to be somewhat patient.
I’ve just been laid off in the midst of applying for a mortgage, what do I do?
With so many people experiencing interruptions to their income and employment, banks may ask for an updated pay stub to double check an applicant’s employment status. That doesn’t mean that they’ll automatically refuse your deal if you’ve been laid off. Banks are flexible in the sense that they’re looking to lend money. They’ll make a judgement call based on your individual situation. We’ve seen many instances where lenders have made an exception for individuals with solid track records but who are temporarily laid off due to the COVID-19 pandemic. They judge these situations on a case by case basis, so just be honest and we’ll find solutions for you.
The Bank of Canada has already cut rates three times, could it happen again? If so, what are the implications?
The overnight rate is standing at 0.25%. Could it go down to zero? Yes. Some countries in Europe are even negative. I think it’s a safe bet that it will go down more and stay low for some time. The intention is to keep borrowing costs low and ensure that people are able to afford their payments. The Government is trying to bring down lending costs in order to help people stay afloat in this situation until we flatten the curve and find some clarity. I’m confident that the Bank of Canada will keep rates low for a while and I would not be surprised at all by another rate cut.
How do I ensure I’m taking advantage of these lower rates?
Mortgage rates actually went up slightly in recent days but are still very low. If you are looking to obtain a mortgage I recommend acting quickly because rates change on an hourly basis. People should have their documentation ready; the main information is critical – copies of identification cards, pay stubs, and tax assessments from last year, for example. Orbis brokers can then evaluate your file and present you with options tailored to your specific situation. We’ll work together to go over the pros and cons of each option and help you take advantage of current low rates.
I’m was already preapproved for a mortgage and planning to buy a house before COVID-19 happened. Should I proceed or wait it out?
I still think the Montreal market is solid. It was a sellers’ market before and now it’s becoming a little more of a buyers’ market compared to a month ago. But the reality is people still need homes and a place to live so they’re still buying homes and condos.
We’re seeing steady deal flow and I’m confident not only in the Canadian real estate market but especially in the Montreal market. I believe that long term we’ll be very strong. This is a short term hit for sure, but long term it’s a stable investment. If you were planning to buy I would proceed.
How can I close a transaction with zero in-person meetings?
We’re getting this question from real estate brokers and clients alike. It can absolutely be done. We’re able to close deals while respecting the incredibly important social distancing measures currently in place. All of our forms can be filled out and signed digitally. Credit checks can be done virtually, and lenders present us with their offers digitally. It’s very doable; in fact, we’ve been doing this efficiently for a long time so we we’re in a good situation to adapt to the current climate of no client-facing meetings.
As for appraisals, we no longer need physical visits. Appraisals are being waved often, and when one is required drive by appraisals are being offered where the appraiser will examine the exterior of the home but then study photos of the interior and documents in order to determine its assessment. This is true not just for purchases but also refinancing as well. If an appraiser doesn’t have enough information online they’ll do a Facetime appraisal, examining different areas of the home through video conference.
Everyone is adapting as needed to the current situation. Being able to be flexible is key to keeping the real estate sector going, and everyone is doing their part to ensure that it’s done efficiently. Even notaries are now able to do virtual closings.
It’s amazing in a way, you can now essentially buy a house from your living room.
The Federal Government has announced that it’s expecting to buy a substantial amount of mortgage bonds. Why is that?
They’re buying mortgage bonds to put liquidity in the market. When the Government buys mortgages off of the banks it frees them up to lend more money. It’s a strategic move. They didn’t do this as much in the downturn of 2008 but they’ve been much more reactive this time around by injecting money into the economy to keep money flowing and rates low. It’s all to help banks lend money and keep costs low, both of which are key for us moving forward.
This situation is confusing to me, what can I do?
We get this question daily. I truly believe we can help clients navigate the situation. We’re on the ball, up-to-date, and we’re regularly walking our clients through things. Everything is changing quickly and we understand the confusion people are feeling. We’re able to explain everything and work to clarify changes to lending policies, and so on.
Our ultimate goal is to growth clients’ wealth long term and ensure that they’re optimizing their mortgage product, all while delivering service that’s second to none. If you have questions or want to discuss your individual satiation don’t hesitate to call us.