So what is going on in the Toronto housing market?
I’ve been an agent for 16 years and this is by far one of the most interesting markets I’ve been a part of.
There are buyers that want to buy
There are buyers that want to wait longer
There are sellers that do not want to sell
And sellers that do want to sell at a market value price
And somewhere in the middle is the market that is floating in no man’s land.
Despite that, the one thing we have on our side is history, and there are tactics and strategies that have been used in the ‘real estate past’ which can be used today to help both buyers and sellers.
The question is: does your agent know about them and how to properly use them to help you with what you are trying to accomplish.
Thankfully I work with an amazing mortgage broker, Lena Ohanjanians, who is extremely client focused, knowledgeable and can think outside the box when it comes to putting deals together.
With the rising interest rates, people are looking for ways to close a deal, or make a move while minimizing the cost. Here are 3 alternative ways to look at financing your next property or, if you are a seller and needing to sell and property isn't moving, different ways to market your property that might attract more buyers and ultimately get you a higher price. NOTE: This is not intended to solicit buyers or sellers currently under an agreement with another agent. This is meant to provide information so you can either speak with your existing agent or if you are not working with one, find one that is going to be knowledgeable in these ways to help you achieve your end goals.
These are not widely known in the industry so Lena and I wanted to share them in hopes of helping you move forward with your home goals.
If you prefer videos, you can watch this whole blog here on my youtube channel
Here are the 3 alternative ways for you to buy or sell in today’s Toronto real estate market.
Porting:
What is it? This is when you own a home with a mortgage, purchase a new home and move the existing mortgage from the old home to the new home
Benefits: no penalties for breaking your current contract, and currently, it means holding onto a lower rate you secured in the past few years.
What’s involved - The approval process is the same as if you were obtaining a new mortgage. The difference is, you must stay with the same lender and keep the same contract you currently have.
Who should you be speaking with - Your Mortgage Broker or the professional you worked with to get the initial mortgage. Banks and Lenders have some slightly different porting terms and conditions, so get the details of your options before you make an offer.
Assumptions:
What is it? This is when you sell your home and the buyer takes over your mortgage contract. These haven’t been super popular in the past 15+ years because of declining interest rates.
Benefits: For the seller, they can avoid paying a penalty which they would otherwise pay if breaking the contract after selling and not buying again. They could also secure a higher price for their property if their rate is low, and it also means payments could be more affordable for the buyer. The Buyer also has a chance to secure a historically low rate in this current higher rate market.
What’s involved: It’s a mortgage application process through the Lender/Bank that currently holds the mortgage
Who should you be speaking with: The Bank/Lender that currently holds the mortgage. Get the mortgage number and Lender contact details from the seller’s agent so you can contact the appropriate department
VTB:
What is it? This is where the seller extends a buyer a mortgage either in 1st or 2nd position. It’s more common to see them as 2nd mortgages for some portion of the sale price
When is it used? This type of mortgage is typically arranged if the buyer isn’t able to qualify for the mortgage amount required to take over the entire property.
Benefits - the seller retains equity in the home and earns interest on their investment but is able to sell the property and extract the majority of the equity. They will continue owning a portion of the equity until the new owner is able to pay off the VTB.
What’s involved - If you are a buyer: seek counsel from your Lawyer and the seller's Lawyer on registering the VTB. Provide details of the VTB to the primary lender so that it’s disclosed as a 2nd mortgage will be registered on title. The primary lender will need to include the payments for the VTB in the qualifying calculations for the 1st mortgage.
Who should you be speaking with: Lawyers and your Mortgage Broker or Financing Agent. Not all Lenders allow for VTBs. Ensure your Broker or Financing Agent is aware you plan to take a VTB To ensure this is acceptable to the Lender arranging the primary financing for your purchase
As we go into an unsure 2023, we (your home buying or selling team: meaning your agent and your mortgage broker) need to look at different ways to achieve what you are looking for. If you are a buyer or seller it’s in your best interest to be working with an agent and mortgage broker who is well versed in this different techniques & that you fully understand what’s involved.
Check back soon as I have 3 more segments on mortgages that are sure to blow everything you once thought about them out of the water.
