Getting a Mortgage in Vancouver BC – What you Need to Know?
Real Estate Landscape
Average real estate prices in British Columbia are the highest in all of Canada, with a benchmark of $669,452 as of August 2018. Of the cities within B.C., Vancouver is ranked highest in both cost and number of residentially owned properties, boasting a $1,083,400 benchmark as of August 2018.3 Vancouver is home to nearly 45% of all the residential buildings owned in the province of B.C., with more than 41% of these properties being single-detached homes.[2]
Prices may be high, but for the first time in years, Vancouverites are seeing a decline in buyers, which has reflected directly on market price. Statistics published from the Real Estate Board of Greater Vancouver show a 36.6% decrease in sales for August 2018 against last year at the same time. This includes a full 6.8% decline since July of 2018, only one month before.[1]
Although the benchmark price in Vancouver saw a 4.1% increase since summer last year, the loss of interested buyers has caused a decrease in benchmark prices by 1.9% from May 2018 to August 2018, making it an attractive time to buy.1 For the first time in nearly 6 years, Vancouver is seeing more affordable housing, and with less Vancouverites hunting for property, it’s the perfect time for newcomers and first time home buyers to haggle with disheartened sellers.
Benefits of Living in Vancouver BC
The prices are high, but there are reasons so many Canadians flock to Vancouver to buy. Vancouver is fortunate enough to experience a temperate climate, which reflects four distinct seasons with milder winters than most of Canada. A huge industrial port, Vancouver is a thriving economical hub with a diverse cultural population. Brimming with art, architecture, and expansive natural beauty, Vancouver draws tourists and home buyers in large numbers every year.
The Vandusen Botanical Garden, Richmond Olympic Oval, Capilano Suspension Bridge, Vancouver Museum of Anthropology, Bloedel Conservatory, and Vancouver Art Gallery are just a few of the attractions of the city. Vancouver is also the home of Stanley Park, with 405 hectares of land, a 22km walkway, pools, beaches, and hundreds of species of natural wildlife. A glittering gem of oceanic beauty and thriving greenery nestled against the bustling metropolis creates the perfect home for even the most dedicated naturalists.
Another reason newcomers are flocking to Vancouver, is because the city is brimming with life. And making efforts to preserve and restore the earth through The Greenest City Action Plan. The GCA is an initiative put in motion by mayor Gregor Robertson to make Vancouver the greenest; most sustainable city in the world. By focusing on waste management; the city’s carbon footprint, and the fostering of various ecosystems, the city hopes to succeed in its goal by 2020, making 2018 an excellent time to get in on the ground floor as a new Vancouverite.[4]
New Mortgage Rules
In the past, home buyers unable to put up a down payment of 20% or more were made to pass a “stress test” before big banks would lend. As of January 2018, however, the Superintendent of Financial Institutions (OSFI) implemented the rule that all borrowers must pass the stress test; 20% down payment or not. This has put the most strain on first time buyers who have no collateral or financing from the sale of a separate house.[5]
The stress test is used to ensure borrowers can continue making payments even if interest rates increase in the future. Borrowers test their ability to pay by using a fictional scenario where the housing cost they are considering is lent at the posted average. Or 2% more than the current bank offer, whichever is highest. The cost of the house is assessed using this fictional interest rate and compared with your yearly income, property taxes, potential property insurance. And if it’s decided that you can’t afford the home at that rate, the bank denies the mortgage loan.5 These new stress test rules make it particularly tough in Vancouver’s expensive housing market to find financing through mainstream banks. Fortunately, this has created a rise in non-traditional methods of funding and alternative lending resources.
Why You Should Work with a Broker
Mortgage brokers are essential when shopping for a new home in Vancouver. Between the costly housing market and the changes to the stress test for mortgage approval; it’s difficult enough to find financing without having to deal with competitive banks on your own. A mortgage broker works for you, not the lenders, giving you the upper hand when it comes to choosing a mortgage provider.
The best Vancouver mortgage brokers understand the current financial climate in metro real estate better than a standard bank. Unlike banks which deal with a variety of financial services, mortgage brokers specialize in mortgage financing; and help clients find and apply for mortgages daily.
Tips for Getting a Mortgage Approved
Your mortgage broker will help walk you through the steps for your mortgage applications. But in the mean time, here are some ways to improve your chances of success.
The Bigger the Down Payment the Better Your Chances
When you apply 20% or more toward a down payment for a house you not only pay less in additional monthly payments; you also gain favor with the lender as a secure borrower. Consumers who apply less than 20% toward their down payment are required to obtain default mortgage insurance. This protects your lender; should you default on the loan. Borrowers who don’t require insurance are less of a risk and are more likely to be approved.
Make Payments on Time
Even those with seemingly impeccable credit scores might have a mark or two against them if they’ve been late on a payment. When you apply for a mortgage, lenders run a credit check. And can see all the missed and late payments which turn up in your credit history. By keeping your credit score in tip top shape through timely payments. And no scrapes with collection agencies your chances are better for mortgage approval.
Choose One Long Term Job Over Many Short Ones
While it’s fun to try new things from time to time, having stable employment proves to a lender that you’re dependable and not expendable at work. Lenders want to know that borrowers will continue to pay off their debt; and many short-term jobs on a resume or employment history check make you appear flighty and unreliable.
Pay Your Taxes Come Tax Season
Paying yearly taxes is part of being a Canadian citizen. You might be wondering what taxes have to do with real estate. While your taxes mostly go toward public funding for schools, hospitals, libraries, road work, and other local priorities; they reflect on your ability to follow the law, pay what you owe, and manage your money. These are all things registered Canadian lenders look for in a mortgage candidate.
Wondering what else you can do to better your chances at mortgage approval? Talk to a professional brokerage service today and learn more about what makes an application successful.
Resources:
- Real Estate Board of Greater Vancouver. (August 2018) Metro Vancouver market highlights August 2018. Retrieved on September 29, 2018
- Statistics Canada. (2017) Canadian housing statistics program, 2017 (revised data). Retrieved on September 29, 2018
- The Canadian Real Estate Association. (2018) National price map. Retrieved on September 30, 2018 from https://www.crea.ca/housing-market-stats/national-price-map/
- City of Vancouver (2014) Greenest city 2020 action plan – the city’s sustainability plan. Retrieved on September 30, 2018
- Evans, P. (October 17, 2017) OSFI sets new mortgage rules, including stress test for uninsured borrowers. CBC News. Retrieved on September 30, 2018.
