Sometimes it takes a village, this seems to be the theme of 2018.
With the new stress test imposed in January 2018, the increase in the qualifying rate and interest rates in general, we have seen that more clients are either looking to their families for support with down payment or adding another applicant to the application to help qualify.
I think it’s relative in today’s world to talk about the options available to buyers today. The two hurdles facing buyers today are; coming up with the down payment and qualifying at the Bank of Canada bench mark rate.
So how are buyers combating these challenges?
Over the last few months the sources of down payment have increased from being just savings and RRSP’s to a combination of savings, RRSP, investments and gifts.
We have seen a significant increase in RRSP and gifts. With qualifying rules a little tighter, instead of waiting longer to purchase a home, we are finding that many clients will now have a portion of their downpayment gifted.
It’s important to note if you are using gifted down payment, you will require a letter from the person gifting your down payment (normally accepted from direct family member). This gift letter must be filled out on the lenders gift letter (this will be provided to you from your broker), the letter states that the gift is non-repayable.
Another way buyers are getting in homes a little faster is by adding another applicant to the mortgage application. It’s happened in the past that a mother or father will be added to the mortgage application to help a child qualify. In some cases, we are seeing that more and more parents are stepping in to help their children by adding themselves to the new mortgage application if a gift is not an option. In most cases, these parents have excellent credit and bring in additional income with little liabilities: this is the best kind of applicant.
If you take anything away from this post today, it should be that you need a mortgage broker to help you navigate the mortgage waters more than ever. Mortgage brokers have solutions outside of what the banks provide. There is a solution that is right for everyone and we can help you find that.