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Interest Rates Are Rising!

Whenever I have a question about Mortgages, I turn to a trusted professional such as Pat Pelletier, and this is what he had to say about the upcoming rates...


Today, we have heard from 3 major banks that because of pressure in the bond market, they were increasing interest rates on all fixed rate mortgages. On a 5 year term, they have increased by 0.25% or ¼ of 1%.  It is expected that most major institutions will follow suit shortly. So, far, we have not heard that the Bank Prime (which affects Variable Rate Mortgages or HELOC’s) has changed.

The lowest 5 year fixed rates that we have seen in this cycle is the currently available 3.39% fixed for 5 years. It won’t be there for long. Historically and as long as I have been in this business, this is the absolute lowest. I do not expect to see these low rates again.

What does this mean for Buyers?
Naturally, the cost of borrowing will go up and so, therefore, will monthly payments. On a $300,000 mortgage the payments will increase by about $40 a month. Over 5 years, that is a total of over $2,400 which is quite significant.

Buyers will also be affected in their qualification – they will now qualify for less mortgage. A family with gross earnings of $60,000 per year, would qualify for about $20,000 less in mortgage – maybe just enough to postpone their purchase of “the perfect home”.

If you have a pre approval with a certain rate commitment expiry date, and you are close to buying, perhaps now is the time to really find that home. If you don’t have a pre approval in place, please get one now and get a rate guarantee for 90 or 120 days.

What does this mean for Sellers?
This could be a good thing. We have seen in the past on these rate cycles, where when rates go up, there may be a flurry of activity. This may be a good time to meet with your Realtor and make sure you are property priced.

Pat Pelletier
Dominion Lending Mortgages


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What is a pre-sale?

Example scenario: When the developer intends to build an apartment building and applies for financing, the bank will grant financing under certain conditions. One of them will likely be a certain percentage of pre-sales the developer will need to secure before receiving the funds.
It is common practice for a developer to approach several real estate investors and offer them an opportunity to purchase units of the non-existent building at a discounted price, and on good terms.

Once the number of pre-sales is accomplished, the developer goes ahead with the construction, which will likely take two years or longer to complete. During construction, their marketing team offers the remainder of the units for sale at market value to the public.

If you are a RE investor, you know that it is preferable to be buying at the pre-sale prices, not market value prices.

The question is, how do you get the invitation to buy a pre-sale?
In the past many years, investors have made substantial income by buying at wholesale prices and selling at retail prices even before they needed to complete their purchase. I saw many of them lining up and sometimes even camping overnight in front of the sales center to get a chance to buy at lower prices, but not everyone was lucky enough. You needed to be well-connected to get an opportunity, and you had to act fast.

Today is a bit of a different story. Several projects in the Lower Mainland and Fraser Valley offer really good prices and incentives to secure a unit now and complete the purchase two or three years later. The list of incentives varies from one project to the next. Besides attractive prices, you can get low deposit amounts (5-15%), low or no assignment fees, free updates, a mortgage rate buy-down program, extra parking and more.

A month ago, I helped a few of my clients purchase a presale in Surrey that sold out in 2 days, and I know of another good developer that will be offering a few units for sale as well.

If you would like to know more about these opportunities, I would encourage you to call or email me, and I’ll be happy to send you details on those projects.
Kind regards,
Tibor Bogdan
Century 21 Creekside Realty Ltd.
45428 Luckakuck Way #190, Chilliwack, BC V2R 3S9
cell: 604-855-2521
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