As we continue to come through a pandemic, there are signs that home values will continue to be strong into 2022. Whether you’re struggling with debt, buying your first home, or doing renovations to your existing home, here are some important ideas for you to consider in 2022 as it relates to real estate.
More people in greater consumer debt: Look to improve cash flow
As families grow, and children get involved in sports and extracurricular activities, it’s really difficult to budget for this. We’ve worked with several families who have strong income and job stability but feel like their income hasn’t kept up with the cost of living.
Even if you don’t have any children and are a single-income household you can find it difficult to keep up!
The accumulation of credit card and line of credit debt is a challenge that erodes your wealth and will also impact the available cash you have after each pay cheque. Because mortgage rates will be stable in 2022, investigate consolidating this debt into a mortgage. In some cases, there will be a penalty on the mortgage, but in most cases the penalty is offset compared to the higher interest rates on credit cards. Doing this early is important before rates go up in the last half of 2022.
Changes in the attitudes of home ownership allow for more opportunities in real estate investing
The average age of home ownership is increasing because of the need for good credit, job stability, and a down payment to qualify for a mortgage. I recently read that in the last 3 years the average age of owning a home has increased from 30 years to 33 years. Most people go to post-secondary education – this means that after college or university you’ll rent for almost 10 years. If you’re not ready for homeownership, renting is the option.
The opportunity of purchasing real estate as an investment has never been better, but it’s difficult to find properties that produce net income. Building a team of real estate professionals is super important if you plan to purchase a rental property. You should also let family, friends, and neighbours know that you’re considering purchasing a rental property as the opportunity of a private purchase may present itself. Keep in mind that you can always access the equity in your home to purchase the rental, but most lenders do require other investments to qualify for the purchase.
First-time home-buyers look at co-housing as a financial solution
Jumping from renting or living with parents to home ownership comes with additional costs. Not only is there the mortgage payment, but the other expenses such as property taxes and utilities can limit the price of the house you can afford. Co-housing, which includes renting rooms in your home is now common, and a good alternative to deal with the additional costs of home ownership. If you’re considering this option, you’ll want to know how the tenancy act impacts you as a landlord, as some of the protection offered to landlords normally wouldn’t apply in a co-housing situation.
Retiring with mortgage debt: what to do?
We’re working with more individuals who approach retirement with mortgage debt. The most common scenario is that they’ve helped their own family get into a home, or unexpected expenses in the past required the individual to access the equity in their home through a refinance later in life.
The sandwich generation also still finds themselves helping their children launch into adulthood but also taking care of elderly parents. If you’re looking for advice on how to move into retirement, while still having mortgage debts – this is a conversation worth having, even if retirement is years away. It could include looking at a secured line of credit instead of a mortgage or possibly looking at the option of a reverse mortgage.
Mortgage rates may rise this year – weigh your options on fixed versus variable rates
The price difference between variable rates and fixed rates is just over a one percent difference. The Bank of Canada may change its overnight lending rate in the Spring of 2022 depending on the pandemic. In the meantime, it’s important to review the pros and cons of variable-rate mortgages with your broker and determine which option suits you the best given your financial profile.
As always, we’re here to help you navigate any questions you have on mortgages and debt repayment. Get in touch with The Mortgage Centre Guelph today for a 15 minute one on one consultation!