A lot has been changing in our lives due to COVID-19. From wearing masks indoors and self-isolating to layoffs and reduced work hours, the pandemic has turned many facets of our livelihood upside-down. With predictions of a second wave coming has the weather gets colder, we may have to adjust to this new reality for the foreseeable future.
Throughout this pandemic, there are many things we can look at and feel despair due to how much has changed before. However, even in such abnormal times, there are possible benefits you could enjoy.
Buying a home during this pandemic may be much easier for you now than ever before.
House Prices During The Pandemic
According to the Canadian Mortgage and Housing Corporation (CMHC), new housing starts are expected to decline by 51 to 75 percent. While fewer new houses often mean higher prices, the organization forecasts housing prices will drop by 9 to 18 percent from reduced economic activity as well as a reduction in home sales.
The CMHC say that they expect housing prices to start to recover around mid 2021, meaning that you could get a home at a much cheaper price between now and this time next year. A nearly 20 percent reduction in price is a rare occurrence in Ontario’s housing market and there may not be another time that they could drop this low.
Remember you do not need a 20 percent down payment to afford a home. Banks and other A-tier lenders can approve a mortgage with less than 20% down payment provided you meet the criteria for mortgage insurance. With overall interest rates so low from the pandemic, buying a home with a smaller down payment is now more sustainable for borrowers than in the past.
With the many lockdowns, restrictions and rules that have become apart of everyday life during COVID-19, fewer people are working and spending money than ever before in recent memory. This has lead to a significant drop in interest rates.
In June of this year many banks and mortgage brokers started offering 5-year fixed mortgages with interest rates under 2 percent. By comparison, pre-pandemic interest rates on a mortgage ranged from 3 to 4 percent.
With such low interest rates being offered by all kinds of lenders in the housing market, monthly mortgage payments are much cheaper than in years past and some analysts are saying we could see them drop even lower as the economy suffers from the pandemic.
With lots of people experiencing less work due to the pandemic, more homeowners are struggling to maintain payments than in previous years. This means there are likely to be more defaults in the housing market and more chances for finding homes at lower prices.
When a homeowner defaults, their property is put under foreclosure or power of sale by the lender.
During foreclosure or power of sale, the lender will sell the home to recuperate their investment as fast as possible. They will not be looking to make lots of extra money on the sale, they want to get their money back. With more homeowners at risk of defaulting, you have better chances of finding a home for a price much lower than in a non-pandemic year.
If you want to speak with a lender directly or learn more about how foreclosure and power of sale work, then click here .
With many people working reduced hours or entirely from home, you have more free time on your hands. If you are thinking about buying a new home, use your extra time to evaluate your finances and plan how you could manage payments on a new home. Preparation is vital for ensuring any purchase you make is sustainable.
Try to map out your current monthly income and expenses.
With this knowledge, you can search for houses for sale and see if you can manage the required mortgage payments. You may need to look outside of urban areas to find good deals, but they are out there.
Speak with a lender and see what kind of homes you can get preapproved for a mortgage on. You may need to look at a wide range of homes to find those that can fit your budget.
It is also prudent to speak with different lenders to compare what they offer and how much they will charge you. Some lenders like banks may have high requirements for credit score and income, others, like private lenders have significantly less requirements but at higher interest rates and fees.
Being aware of what different lenders can offer you and what stipulations come with a mortgage from them is key to making an informed decision. The only way to know for sure is to see what they can offer and compare their payment plans to see with is the most sustainable for the near future.
Buying A Home During The Pandemic
With historically low interest rates and a forecasted decline in housing prices across the country, the cost of buying a home is approaching it’s cheapest in recent years. If you have the capital to get a mortgage during this pandemic, your best bet may be to use it. You can learn more about how the pandemic has affected the housing market and how you take advantage of it at the Mortgage Broker Store. Here you can get advice and a quote for free and speak with local lenders directly. Find out if can take advantage of the unique scenario that the pandemic has presented.
It may not be a pleasant time to be buying a home, but the pandemic’s negative effects on the housing market may work in your favour and help you get the home you need at an affordable price.