Your Mortgage Questions Answered: A chat with Patricia De Fina, Mortgage Specialist, TD Bank

Making the decision to buy a new home entails more than just finding the perfect house. Before we even begin the search, I recommend my clients see a mortgage broker or their bank for a pre-approval. This helps set the budget and parameters for their search. Mortgage brokers and real estate agents share a common goal – helping clients find and finance the right property.

I often get questions regarding mortgages, rates and alternative financing from my clients. More recently, with mortgage rates as low as they are, many clients are wondering if now is a good time to apply for a new mortgage preapproval? Of course, the process of buying a home or getting a mortgage in the current state of the pandemic will be far from ‘normal’, but, is that a good thing, or bad? 

So, let's talk to the experts. I sat down for a chat with Patricia De Fina, Manager, Mortgage Mobile Specialist, TD Bank, to get an update on the mortgage market and answer some burning questions about new mortgages, refinancing and interest rates.  

Interest rates are at an historic low, do you think they can continue to drop? 

We now have a five year fixed rate at 1.99 percent that's the lowest it's even been in Canadian history. The Bank of Canada reacted to the pandemic by slashing the key interest rate three times in March and have announced that they will not increase the overnight lending rate for the next year and a half.  With rates now being at an all time low we are uncertain of what could happen in the forcible future. Rates could go drop further or go up, I don’t believe we will be in a position where rates are at 5% Anytime soon. Overall, the bank believes the impact of the pandemic on the global economy has peaked. 

What’s coming across your desk the most? Are you still doing pre-approvals? 

We are very busy with pre-approvals, since the real estate market is in high demand, I’m working with a lot of clients looking for pre-approvals.  With the real estate market being so competitive, clients want to feel confident in making a firm offer on a property by having a pre-approval. Depending on your situation these low rates could mean huge savings.

It’s a great opportunity for anyone who has a mortgage coming up for maturity or is looking to buy a house. I’m also seeing a lot of refinancing right now as people want to take advantage of the low rates, it’s an opportunity for some homeowners to refinance and consolidate debt

Many homeowners are considering refinancing their homes to take advantage of the low interest rates. What should they know before they apply? 

Refinancing is one of the best ways to save money.  If a client wants to refinance their current mortgage, I recommend talking to your lender about the penalties involved to break the mortgage and determine whether it is worth it or not. A home equity line of credit is another option to take advantage of the low rate.  The cost of borrowing with your home equity line of credit is much lower than the rates of visas, unsecured lines of credit and other loans.  Homeowners should know that the qualifying rate for a home equity line of credit is slightly higher than the rate we use to qualify clients for a mortgage.  

What is the mortgage stress test and how does it work?

The mortgage stress test requires banks to check that Borrowers can still make their payments at a rate that’s higher than they actually pay. It is a gross debt service ratio and total debt service ratio calculation ie. clients need to have enough income to support existing debt, requested debt and then some. It’s important to speak to a mortgage specialist to find out what you qualify for. 

How does the bank determine what I can afford? 

Banks rely on the stress test, to determine what a client qualifies for based on their income and debt levels. 

What is the difference between a variable and a fixed rate? Would you recommend a fixed or variable rate? 

A fixed interest rate mortgage is where the interest rate remains the same until the mortgage comes up for renewal. A variable rate mortgage means that the interest rate of the mortgage will fluctuate throughout the term.  It is determined by the bank of Canada’s prime lending rates.  

My opinion on a fixed or variable rate would depend on the client’s situation. When the variable and fixed rates are remarkably close, most economists would say that it doesn’t make sense to take a variable rate mortgage. I recommend locking into a low fixed rate with today’s offers. This changes If you think you will be selling the property or discharging the mortgage before the end of the term. In that case, a variable interest rate would be a better option as the penalties are generally significantly less than a fixed rate mortgage.  

Any predictions or advice for people looking to get a mortgage in the new year, 2021?

The state of Canada’s mortgage and housing market for 2021 will depend on a wide variety of factors, particularly the state of the overall economy, unemployment, as well as the development of treatments or vaccines for COVID-19.

The best thing that individual borrowers, or prospective borrowers, can do is to do whatever they can to keep their employment stable, and not let their debt spiral out of control. Beyond that, shopping around for the lowest possible mortgage rate continues to be one of the best ways to save money on an upcoming purchase or mortgage renewal. Give me a call , I would be happy to help.

For more information on mortgage approvals or if you have more questions , please feel free to reach out to Patricia De Fina at  Patricia.defina@td.com