Every summer the real estate market is normally buzzing with activity, but this year is a bit different. The economic trickledown effect of COVID-19 has affected current homeowners and prospective ones in different ways. Stephanie MacMillan, Servus Mortgage Specialist, shares her advice for wherever you're at with your homeownership journey.
Servus Mortgage Specialist, Stephanie MacMillan, answers questions and shares advice whether you’ve deferred your mortgage, are looking to get your first one or wondering about options for your existing one.
1. How does deferring my mortgage impact me in the long term?
Many Albertans faced challenging financial times brought on by the economic effects of COVID-19. For some, deferring their mortgage payments offered much needed relief.
“Initially we had a lot of calls from members who didn’t know if they were going to be laid off,” says Holly. “We reassured them that deferral was an available option but recommended holding off until it was absolutely necessary.”
Deferring your mortgage will impact you in one of two ways, Stephanie explains, “either the length of your term will extend, or your remaining monthly payments will increase.” A deferral is not mortgage forgiveness and so you’ll eventually need to catch back up.
It’s best to speak to an advisor to understand the effect a deferral has on your unique situation. “We have a calculator tool that helps us determine the impact it has on the rest of your mortgage,” says Stephanie. “If you choose to maintain your amortization period (not extend your term) then it calculates the total amount of interest that would accrue on the principal (Servus doesn’t charge interest on interest).”
Talking with an advisor like Stephanie can help you understand factors such as:
- The total amount (principal & interest) that you’ll skip during the deferral period
- The number of additional payments (and months) added to the rest of your current mortgage if you don’t want your payments to increase
- The payment increase needed if you want to maintain your original amortization
Regardless of your individual situation, Stephanie mentions It’s important to note that choosing to defer won’t negatively impact your future credit applications.
2. Am I eligible to apply for a mortgage if I’m currently (or was) laid off due to Covid-19?
Ultimately, you’ll need to provide proof of active employment to successfully secure a mortgage. “In the meantime, we can provide a conditional approval,” says Stephanie.
“Conditional approval would look at all aspects of credit granting criteria with the exception of the employment/income requirement,” she explains. “Then we can review the missing pieces when you return to work or have a set return to work date confirmed by your employer.”
Stephanie has some tips to help you maintain a healthy credit score so your application for pre-approval is as strong as possible:
- Know how much you owe currently (ie. credit card balances) and don’t go over your limits
- Make all your credit payments on time
- Regularly review your credit report to check the accuracy and report anything that’s incorrect right away
3. How do I get a mortgage while practicing physical distancing?
There are options available to support physical distancing if you’re looking to secure a new mortgage. Stephanie says the first step, submitting your application, you can do over the phone or via email.
“Once your application has been approved, in order to submit the necessary supporting documentation (income and employment information and down payment details) you can forward your documentation using our secure email portal,” she explains. “Alternatively, some individuals send us documentation by email that is password protected.”
Eventually, a branch appointment will be necessary. “We’ve implemented personal safety measures for the protection of all who attend the branch,” says Stephanie. “The appointment scheduling is flexible to accommodate individual circumstances and needs.”
4. Is now a good time to take advantage of low interest rates by refinancing my mortgage? How would I know?
According to Stephanie, this is difficult to answer because it depends on your personal financial position. A great way to find out is to have a conversation with a mortgage specialist or financial advisor.
“The market in each community is different,” she says. “It also depends on your individual goals.”
If you’re considering making a change to your mortgage, Stephanie suggests comparing benefits beyond just rates. “Servus has really great things like profit sharing that other institutions don’t offer,” she says.
5. If I’m a first-time home buyer, is now a good time for me to take the plunge?
Stephanie acknowledges that the housing market has slowed down.
“If you’re currently renting, it might be a good time to jump in if you’re able to,” she says. “There are lots of options for your down payment – you can borrow funds or use a portion of your RRSPs.”
The market downturn we’re experiencing is making homeownership equally as affordable, in some cases even more affordable, than renting. That’s good news for first-time buyers.
For more expert mortgage advice, get in touch with a Servus mortgage professional.