Homebuyers “comfortable” with level of mortgage debt: study
81 per cent of recent homebuyers are “comfortable” with the level of their mortgage debt, reports Canada Mortgage and Housing Corporation.
In fact, more than two-thirds of them plan to pay off their mortgage early, CMHC says.
Great idea. Even with today's relatively low mortgage rates, it's really tough to find an investment that’s guaranteed to yield a higher after-tax return than you'd get by paying your mortgage down.
But not everybody actually gets around to it.
Which means with the prospects of higher interest rates, servicing rising debt could become more difficult for those homeowners who’ve been a tad optimistic about their future prospects, warns TD economist Benjamin Tal.
“The start of the tightening cycle will find a highly leveraged consumer with a debt-to-income ratio approaching a record-high 150%. This is 40% above the ratio seen the last time the Bank of Canada started to hike.”
He’s not alone in predicting trouble ahead. Last month, CMHC nearly doubled the amount that it has socked away to cover mortgage insurance claims, a signal that it expects many more Canadians to have trouble making their mortgage payments.
Among other things, that’s also what prompted the federal government to recently introduce new rules, making it harder for some borrowers to qualify and limiting the amount of equity homeowners can extract when refinancing.
This presents a dilemma for prospective homebuyers, says Edmonton columnist Ray Turchansky: “Should they join an anticipated rush to purchase homes now and lock in at low rates, although housing prices could climb immediately with a blip in buyers during this period?
Or should they wait for the frenzy to die down, expecting house prices to be lower in 12 months than they will be in three, even though mortgage rates will be higher a year down the line?”
A major consideration should be whether you think you can handle lower mortgage rates now in this recovering economy better or worse than you would be able to handle higher payments a year from now when things look a little brighter, he says.
Are rising rates impacting your housing decisions? Are you one of those who'll be paying off the house a bit quicker?
By Gordon Powers, MSN Money
Posted by: Jan-Michael | May 4, 2021 11:22:19 AM
Rates changing are always something that needs to figure into planning !
BUT, banks need Consumers (us) just as much as we, as consumers need banks! We need to not be afraid.
Bankers are trained to approach the loan meeting as though "they" hold all the cards and many consumers are somewhat intimidated as they approach a bank for a loan. It's like, "Hey, we need help, sir?" But really, the bank needs the consumers help, too. And what the Banks loan out, is mostly not their money, but money the banks are holding for consumers (us). As we know from the last 12 months, banks did not manage their businesses as well as many consumers managed their personal incomes.
We, as consumers want one meeting and to get it done as quickly as possible. We would do well to approach the bank before we have decided on a new car, house or renovation, etc. By being able to just explain what we want and listen to the banks offer, we could just do as businesses do and that is set a date for a second meeting. We can let the bank know the date! The bank is not going anywhere and when we can say to banks, "we have been talking to other banks to get a sense of different rates", we feel more in control, which is the way it should be, anyway!
Plan ahead is what I am doing!
Posted by: don | May 4, 2021 2:00:24 PM
I wonder how many homebuyers were "comfortable" with thier level of mortgage debt in the US before it all fell apart? I also wonder how many would still be "comfortable" with their level of debt if they missed 2 paychecks.
Posted by: marv | May 6, 2021 5:48:09 PM
just remind yourself what happened to our comfort zone in the 80,s
Posted by: jim | May 6, 2021 5:58:10 PM
how many of you remember the dollar deal ! people were selling there mortgages for a buck if you qualified you took over the other persons mortgage! They walked away with no bad credit hanging off they shoulders it may or may not have been a good deal !
Posted by: May Robertson | May 22, 2021 9:34:24 PM
One good way to pay off your mortgage sooner, and so save loads on interest costs, is to use up your Annual Principal Balance Prepayment Privilege as much as you can.
This privilege typically vary from a low of 10% to a high of 20% per year, depending on the lending institution and/or the mortgage product.
If you are unable to locate your mortgage agreement, then by all means ask your lender directly by phoning their toll-free call centre, or call in at a branch bank; or contact your mortgage broker to find out how frequently and what minimum $ amounts are permitted.
You will be pleasantly surprised that many lenders will allow you to pay off as little as $50 -$100 each time at their branch bank or as a mail-in cheque; and all without having to wait for the anniversary date to come around.
So the next time you have that spare $50 or $100 in your back pocket, think about dropping in at your branch bank to put it towards your Principal Balance repayment ! - email@example.com
Posted by: Savings Calculator | Oct 26, 2021 9:19:54 AM
This site is good information and i about comfortable with level of mortgage debt study your thought is nice A major consideration should be whether you think you can handle lower mortgage rates now in this recovering economy better or worse than you would be able to handle higher payments a year from now when things look a little brighter, he says.