Mortgages: The choice of a mortgage provider matters when investing in properties
The ups and downs of the stock market are legendary. However, not every Canadian has the temperament or the patience to be a trader. And that’s why the Canadian property market offers a unique investment opportunity. But, when it comes to financing your property investment, be it through a first or second mortgage – how do you go about finding the right mortgage partner? We’ll do our best to help you make sense of it all!
Property Investment Opportunities
The 2008-09 housing crisis in the U.S. spread throughout the world, leading to one of the worst financial disasters in recent memory. Canadians were not spared either, with property values tumbling, and financial institutions and builders alike staring bankruptcy in the eye. While Canadian home buyers weren’t as adversely impacted as their American cousins, the housing crisis contagion definitely occurred in Canada too!
As a result, some see the existing Canadian real estate environment as offering promising investment opportunities for individuals looking to invest in property. Here’s why:
- Buy Low: After the significant correction in property values following the 2008-09 crisis, Canadian property prices are on the rebound – though not always straight up, but rising nonetheless (as the price chart above shows). And that might spell opportunity to some investors. Getting in when prices are low is always a good strategy
- Sell High: According to Canadian Real Estate Association (CREA) forecasts, the national average price is expected to rise by 2.7% in 2019, with above-average growth forecasted for provinces like Ontario (+3.3%). And that would offer a compelling investment thesis for anyone looking to profit from Canadian property investments. Selling high, as property values continue to rise, is always a good way to lock-in profits
- Spend Less: And finally, with low interest rates still the norm in Canada, property investors who take on a mortgage today will spend much less on their borrowing costs to pay for the property.
When you combine all of these three factors, it’s clear to see why some would think that Canada offers a unique opportunity for anyone looking to invest in property. However, that may not necessarily be the case for too long. The Bank of Canada (BoC) continues to raise interest rates – albeit at a slow pace; while property values continue to climb. While borrowing costs are comparatively low now, with a further rate hike anticipated shortly, those costs will rise as well.
But how would you go about doing so?
As a prospective investment property hits your horizon, the countdown starts towards assessing the property for suitability, and preparing to make an offer. There’s a lot of work involved in property investments, and most Canadian property investors don’t have the time or the patience to shop around for a mortgage.
For what could very well be the largest financial cost (other than the price of the property itself) in any property deal – the mortgage – it is surprising how many investors will always turn to their existing bank or financial institution for financing.
However, we would suggest that you shop around for other potentially less-expensive options before making a final decision. There are firms out there that specialize in investment loans, second mortgages, etc.
Just because you have your first mortgage with one of the Big-Six Canadian banks, it does not necessarily mean it will be in your best interest to stay with them for your second mortgage.
Canadians have access to amazing alternative platforms that weren’t available just a few years ago. Whether it’s a personal loan, a line of credit, a first or even a second mortgage that you are looking for, these platforms can help you find the right provider for your needs. If you wish to leverage a property investment opportunity, then you need to leverage the right mortgage sourcing platform too – and often, sticking with your existing lender might not be the right choice!
Partnerships for Prosperity
One of the ways that Canadians can prosper from property investments is by carefully planning how they finance the purchase of the property. Your mortgage cost is likely to be one of the biggest (if not the largest) cost…and you need to think carefully about how to go about securing that mortgage.
As you consider property investments, finding the right mortgage provider, for not only your first mortgage but also second mortgage if necessary, is of vital importance. Why?
- Working with the right mortgage provider makes sense, because they will understand your unique mortgage needs – be it a first or second mortgage – and will advise you appropriately
- A knowledgeable mortgage provider can often save you hundreds, if not thousands, of dollars over the life of the mortgage, through savvy advice and innovative mortgage-term structuring assistance. The money saved can either be further invested, or applied to paying-down your principal balance – thus leading to even more savings!
- Choosing a mortgage partner who looks at the entire mortgage market, and not just products offered through a single source, will offer you breadth of choice, allowing you to shop and choose a product that meets ALL of your unique property financing needs
- Partnering with a platform that delivers simplicity and speed – in terms of application and approval processing – can sometimes mean the difference between qualifying for an investment, or losing out on the opportunity. This is especially true where there are multiple bidders eyeing the same property, and where time is of essence
Using partners like JustCompare can offers Canadians a way to find the right mortgage provider instantly, while first conducting their own diligence on the type of mortgage they wish to take on.
The JustCompare platform contains a wealth of resources, including educational content and tools – like Mortgage Calculators, that Canadian property investors can use to assess the impact of a specific property transaction on their finances.
After analyzing the financial impact of your mortgage, the online tools do “their thing” – searching through a vast database of mortgage providing partners who can offer the best possible rate. But it goes even further: Along with the best rate, these automated tools also look for the most favourable Terms too! And once you decide which one of the dozen or more providers are offering you the best deal, you can apply for your mortgage seamlessly – all done online!
And that’s where property investors see real value: It saves time, effort and money!
If you, as an individual, tried to use a similar methodology to manually search out, assess and pre-qualify a mortgage provider, it would take you weeks – if not more! And even then, you’d probably just compare two or three of them, at most. Today, if you are looking for a 1st or 2nd mortgage, searching for the right mortgage provider just got easier!
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.