Let’s be honest, today’s real estate market is a little… unpredictable. Rates are moving, inventory is tight, and clients are more cautious than ever. As a mortgage broker, I’ve been having a lot of real talk with clients lately and one thing is clear: education is everything right now.

Whether you are first-timers, upsizing, or downsizing, here are three things you should keep in mind:

Pre-Approval is No Longer Optional

I know, it’s always been important. But in this market, it’s non-negotiable. Rate holds are tighter, lender guidelines have changed, and affordability is shifting by the week. A strong pre-approval can give you confidence. and give you a competitive edge when making an offer.

It’s Not Just About the Rate

Everyone asks, “What’s your best rate?” But a smart mortgage strategy goes deeper. Should you go fixed or variable? Is there a penalty to break early? What if life changes? These are the questions we need to be asking. Especially now, flexibility and long-term planning matter more than ever.

Bridge Financing & Portability: Plan Ahead

With move-up buyers, timing the sale of a current home with the purchase of a new one can get tricky. The earlier we talk about bridge financing or porting options, the smoother the transaction. No surprises = happy clients.

Bottom line? The mortgage conversation needs to happen early and often. If you’re not working with a mortgage professional yet, let’s team up and we will guide you. We’re not just securing financing, we’re helping you build a future you feel good about.

Let’s make home happen.

The Bank of Canada has just made its latest rate announcement, and as always, it’s a hot topic for anyone involved in the mortgage and real estate market. Whether you're a first-time homebuyer, a seasoned investor, or simply keeping an eye on the market, understanding these changes is crucial.

The Latest Rate Announcement

On June 7th, 2024, the Bank of Canada announced a decrease in its benchmark interest rate by 0.25%, bringing it to 4.75%. This decision is part of the ongoing efforts to stimulate economic growth and support Canadians amid fluctuating economic conditions. While the decrease might seem small, its ripple effects are significant across various financial products, including mortgages.

Understanding Fixed Rates

Fixed-rate mortgages are the most popular choice among Canadian homeowners. With a fixed-rate mortgage, your interest rate is locked in for the entire term of the loan, typically ranging from 1 to 5 years.

Pros:

• Predictability: Your monthly payments remain the same throughout the term, making it easier to budget.
• Stability: You are protected from interest rate fluctuations, which can be particularly beneficial in a rising rate environment.

Cons:

• Potential Higher Initial Rates: Fixed rates are often higher initially compared to variable rates.
• Less Flexibility: If rates drop significantly, you're stuck with the higher rate unless you refinance, which can incur penalties.

Exploring Variable Rates

Variable-rate mortgages have interest rates that fluctuate with the prime rate, which is influenced by the Bank of Canada’s benchmark rate.

Pros:

• Lower Initial Rates: These mortgages often start with lower rates compared to fixed rates.
• Potential Savings: If interest rates fall, your mortgage rate and payments may decrease.

Cons:

• Uncertainty: Monthly payments can vary, making budgeting more challenging.
• Risk: If interest rates rise, your payments will increase, potentially straining your finances.

Adjustable-rate mortgages (ARMs) combine features of both fixed and variable-rate mortgages. Typically, the rate is fixed for an initial period and then adjusts periodically based on market conditions.

Pros:

• Lower Initial Rates: Often, ARMs offer lower rates at the beginning of the term.
• Flexibility: You can benefit from lower rates initially and plan for adjustments.

Cons:

• Complexity: Understanding the adjustment terms and preparing for potential rate changes requires diligence.
• Potential for Increased Payments: As with variable rates, if interest rates rise, your payments could increase significantly.

What Should You Do?

Here are a few steps you can take to navigate this environment:

• Review Your Mortgage: If you're on a variable or adjustable rate, assess how much an increase in rates might affect your monthly payments and overall financial health.
• Consider Fixed Rates: If predictability and stability are crucial for your budget, locking in a fixed rate might be beneficial, even if it’s slightly higher initially.
• Consult with a Mortgage Professional: Personalized advice can be invaluable. A mortgage broker can help you understand your options and choose the best path forward.

The Bank of Canada’s latest rate announcement is a reminder of the dynamic nature of our economy. By understanding how fixed, variable, and adjustable rates work, you can make informed decisions that best suit your financial situation and goals.

Remember, navigating the mortgage landscape doesn't have to be daunting. With the right information and professional guidance, you can confidently move forward, no matter what the Bank of Canada decides next. Stay tuned for the next BOC rate announcement on July 24th.