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Stress testing is a risk management tool that tests the ability of borrowers to withstand an interest rate hike. When the Federal Government implemented a stress test in 2017, people started searching for alternative methods to secure a mortgage and different ways to enter the housing market.

For a mortgage application to be approved, the applicant must be able to carry a loan with an interest rate around 5%, even though the actual rate will be lower. This will reportedly block 50,000 Canadians from homeownership and has forced many to become more creative and prudent.

Alternative Lenders

In their pursuit of homeownership, people have been ignoring banks in favour of alternative lenders whose approval process is less stringent and they are not as tied to the Bank of Canada. There’s a lot of value to non-traditional lenders.

People must cast a wider net as they try to secure a loan. The strategy is to meet with different lenders to determine who has the most favourable terms and offers you the best chance at approval. They can offer better rates, and in some instances, are more open to negotiating terms.

Other Options

Mortgage stress testing isn’t going away, in fact, the Government and the Bank of Canada might implement more regulations to stabilize the market and prevent borrowers from defaulting on loans. To counteract this, borrowers can take certain measures to make their mortgage applications more attractive.

A higher down payment and paying down your debt can help your application withstand a stress test. Additional assets can also help. If you are looking to get a mortgage for an investment property, then partner with an experienced person who has good credit and can increase the down payment. Granted, some applications with big down payments will be rejected but it can still make an application more appealing in the eyes of lenders.

There are no tricks to beating the stress test or getting approved for a mortgage in 2018. For those looking to sell their home or enter the market, you need to review your situation with a mortgage specialist and determine if now is the right time. The other option is to simply wait a bit so that you can decrease your debt, increase your salary and assets and present a better application.

Are you thinking about selling your house? If so, you are probably hearing advice telling you to wait until the spring or until the market turns around or to beware of new Government policies which will make it harder. Deciding to sell is a big decision and there are a lot of factors to weigh.

What market factors should sellers review for before listing?

Don’t Rule out the Winter

Yes, the GTA real estate market does heat up in the spring but there is much more inventory. This spring and summer market is more competitive and you might even find that many of your neighbours also waited until the snow melted to list their home.

The winter will give you a smaller pool of buyers but those buyers will have fewer options. Be sure to invest the time or money to shovel your driveway and to winterproof your windows, if listing during the colder months.

The Current Market

The best indicator as to whether you should sell or not is the market. The issue is that the market is open to interpretation and can be difficult to forecast. Sellers need to look at the market locally and review recent sales of similar properties to determine if the circumstances lend themselves to a larger pool of buyers and a potential bidding war.

The best strategy is to speak with an agent who has sold multiple homes in your area within the last 12 months. They will have the best insight as to whether you should list or wait.

Policies and Interest Rates 

How the Federal, Provincial and Municipal Governments in addition to The Bank of Canada intervene in the housing market can have an enormous impact on the sale of your home. Whether it’s the affordable housing act or an interest rate increase or a stress test, measures are often put in place to cool or warm a market.

You need to be aware of the overall state of the market to make an informed choice about if the time is right to sell your house.

Buying a home in the GTA is expensive and too often buyers don’t take advantage of available rebates. There are a handful of rebates that could cushion the costly blow of buying and maintaining a home. Most of them come from one of the three levels of Government and are intended to motivate Ontarians to buy or care for their home in an efficient and responsible manner.

There are rebates for new homeowners, for homes that are more energy efficient and even rebates for homes that feature “smart” technology. Unfortunately, most don’t leverage these rebates mainly because they don’t know they exist.

Purchasing Rebates

In Ontario, homeowners could apply for a GST/HST rebate if they purchased, built or renovated a property. This rebate allows homeowners to recover some of the taxes that they paid towards the purchase. This even extends towards mobile and floating homes.

Prior to closing, the buyer will be saddled with the land transfer tax, which is based on a sliding scale that ranges from 0.5% to 1% based on the price of the property. First-time homebuyers are eligible for a rebate up to $4000. The lawyer should arrange for this rebate to be paid once the property is transferred to the buyer’s name.

Energy Efficiency Rebates

Homes need to be environmentally friendly and leave the smallest carbon footprint possible. To entice homeowners to convert their home to be more efficient, the Government offers rebates for owners who install and employ certain technologies that aid in making a home more efficient.

In 2017, Save on Energy and the Green Ontario Fund started offering a $100 rebate for those who purchase and install a smart thermostat. These modern thermostats allow owners to remotely control the temperature of their home. This technology learns your preferences and analyzes data to automatically adjust. They can also save help money by adjusting the temperature when no one is home. 

Renovation Rebates

Like efficiency rebates, Ontarians could apply for green renovation rebates. The province rolled out a new program where homeowners could receive thousands of dollars in rebates if they complied with renovations that meet certain green standards.

This program offers up to $7,200 in rebates and covers insulation, windows and heat pumps. The rebate can only be paid if the homeowner hires an approved contractor.

Every homeowner should be aware of available rebates and ensure they do everything in their power to receive the money they are eligible for.

As spring approaches, both the weather and the housing market are poised to thaw. The question that buyers and sellers will be asking is whether last year’s stagnant spring market was an aberration or the beginning of a trend.

Early reports from 2018 seem to position the housing market as being more in-line with profitable years like 2013 and 2014. While it’s a bit early to know for sure, the signs do point to this spring being more productive and generating more sales.

Spring Impact on the Housing Market

Spring usually drives property sales due to an increase in inventory as more people list their homes. As well, it’s a popular time for buyers as the new supply offers more options for them to find a home that fits their budget and needs.

Supply can effectively drive the market and the spring typically sees an influx of listings that motivates buyers to get out and shop for their first or next home.

2017’s Stagnant Spring Market

Last spring, the average selling price dropped and there were fewer transactions. The biggest decline was experienced by detached houses. The slowdown could be attributed to the lack of supply or economic factors. In addition, affordability might have been an underlying reason.

The 2018 Spring Market

This year’s optimism could be related to the arrival of new Canadians, many of whom are situated in the GTA and looking to buy a permanent residence. This will drive the market as will the completion of several major development projects. Markets like the GTA tend to rebound due to the population and the constant demand.

It’s fair to assume that the bloated rental market and the high cost of rent might motivate renters to shift course, propelling the market to greater heights in 2018.

It might not be a season of crazy gains but it will wake the housing market from its hibernation and could gain steam through the summer and well into 2019.

The biggest takeaway is that buyers and sellers shouldn’t wait another year. They should start the process and monitor the market in the coming weeks. Contact us today to learn more about the GTA’s spring housing market and to discuss the steps to mortgage pre-approval.