Thanks to the CMHC, lenders are allowing homeowners to defer their mortgage payments during the COVID-19 crisis. The agency says about 10% of the country’s homeowners have accepted the offer.
However, it’s not a free break; in most cases, those loans will continue to generate interest while on pause.
“You have to remember [that interest] pays for a senior’s GIC or an employee who lost their job,” says Jake Abramowicz, a broker at the Ontario-based firm Mortgage Edge.
If you’re looking to save money long term, refinancing would be a smarter move. Abramowicz says anyone with rates over 3% should definitely look into refinancing. Online quotes for five-year fixed mortgages are as low as 2.29%.
“Rates are far lower today, and the savings will potentially make up the penalties and costs” of breaking your current mortgage, he says.
Improve your financial well-being
It's a lot harder to shop for a home during a pandemic — asking your realtor to swing the webcam around the kitchen isn't the same as standing there — but with challenge comes opportunity.
“For homebuyers who wanted a correction and a balanced market where you can make a conditional offer and avoid a bidding war, here it is,” says Abramowicz.
As welcome as that correction might be, it only goes so far. He warns that prices will remain flat in cities where the supply remains low, and bidding wars are still possible on properties listed at below-average prices.
To save money, the key is taking advantage of rock-bottom rates when you get your mortgage.
“Rates will remain low for a while. Think 12 to 18 months. The last thing that we'll see go up are rates because the Bank of Canada knows how extremely tepid the economy is. A 0.25% increase will send shockwaves to people's budgets,” Abramowicz says.
Renters on the hunt
Like homebuyers, renters won’t be forced into the usual snap decisions when searching for a place. Empty homes should remain on the market for a reasonable span of time.
“If you’re willing to rent from a virtual tour, it’s probably a good time to move,” says Ben Myers, president of real-estate advisory firm Bull Pen Research & Consulting Inc.
“With less vacancies that would’ve been snapped up in hours or before the landlord could even list it, there’s more opportunity [to find a home].”
Renters might even be able to find price breaks, depending on their location.
“In Toronto, I wouldn’t be surprised if rents go down 10%, but it will be short-term. The next five to six months could see a decline, but as soon as the market starts to recover, demand will go up again,” says Myers.
He expects the same to happen in other high-demand areas like Vancouver and Montreal.
However, in provinces like Alberta and Saskatchewan, the coronavirus could combine with nose-diving oil prices to shock the housing market even further.
Myers says rents are already falling in those commodity-driven regions. In a recent report penned for Rentals.ca, he points out that Calgary rents dropped by 5% in February compared to the same time last year. In Regina they fell 14%, and in Saskatoon they fell 17%.
If it’s difficult to find a lower rental price in your area, consider pushing for incentives such as a month or two of free rent.
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Renters staying put
You may be able to get some relief as well, though not through official means.
If you’ve lost work, your best option is to reach out and see whether you can negotiate a lower rent until you’re back on your feet. Myers says many landlords are compassionate and willing to listen.
“The worst thing you can do is say nothing,” says Myers.
Formally, though, you’re still on the hook. Even if housing tribunals are on pause during the pandemic, skipping payments without permission could end in an eviction order.
For that reason, it’s a good idea to get any new agreement with your landlord in writing, just in case.
You won’t have as much competition during the ordinarily hectic spring season, but you’ll still want to think hard about listing your home for sale over the coming months.
“I don't think you should be selling right now unless you absolutely have to,” says Abramowicz.
“It is much harder to show your property and get the right buyer in, plus financing could become an issue and your deal could fall apart.”
If you’re in financial trouble, try deferring your mortgage or tapping into a home equity line of credit or the Canada Emergency Response Benefit (CERB).
Once the economy picks back up, unemployment trends down and more buyers are at the table, then consider listing.
If you’re buying to flip, you may want to reconsider unless you have enough mental stamina and capital to withstand the pressure.
Contractors are either on hold or working slowly to comply with public health measures. Add in months of backlog, and it will take a lot longer to renovate and unload a fixer-upper.
However, turnkey properties will be easier to rent immediately and ready to sell once the market bounces back.
Either way, Abramowicz says you should have enough cash in reserve to hold the home for at least two years if you have to.
The experts say first-time landlords buying in the current market should have a cash reserve handy for three to four months in case you can’t find tenants right away.
And don’t assume home values will increase in two to three years to make up for any income shortfalls. “Think of a 10-year window instead,” Abramowicz says.
Myers says existing landlords who have the budget should make upgrades as an incentive for renters.
A luxe granite countertop, remote-control ceiling fan or fresh window coverings will stay in your possession once the tenant leaves. Plus, renovations that improve a rental property’s value can be claimed on your tax return.
If you’re handy, feel free to make fixes sooner than later. Otherwise, wait for social-distancing rules to ease and it’s safe to welcome contractors into your home again.
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