It is the time of the year when mortgage brokers are busy and this usually means a strong fall season is upon us real estate brokers, but I would not count my chickens before they hatch - this year. It seems the re-fi or in layman terms the refinancing option is quickly becoming the choice of many and maybe the majority soon. When talking with mortgage brokers it seems more and more clients are deciding to re-fi their existing properties instead of selling and moving on up. The low interest rates usually entice those with room on their mortgages to upgrade their homes by buying a new home but more and more people are taking out money to update their current home.
In the past few weeks I have had people choose to upgrade their homes instead of buying since they do not want to be saddled with a larger mortgage. Instead they are draining the equity on their homes - paying of debt - then doing upgrades to make it seem like they are re-investing in their home. This way they can keep up with the Joneses by doing a refresh on their home and pay down their debt. You would think by draining out all the equity they would be paying just as much as buying a new home but when you amortize the money over 30 years it is just a little bump in their monthly budget. If they max out their line of credits and do the renovations then it is easier to afford since they just pay the interest and not the principle which will come back to haunt them once they get back into debt.
I talk to mortgage brokers and they say 8 out of 10 people are refinancing instead of selling their home which slows down the real estate market but will all come to a head when the interest rates rise and the banks stop lending. I also spoke with a friend who called their credit card company looking for an increase and after being denied they asked why and the supervisor said your credit is great but the company is not increasing anyones credit at this time. That seems like a red flag to me. Credit card companies are playing it safe and banks are lending out cheap money - what is coming next?
Recession is the next word that will be blasted all over the media in the coming months but Canada will probably skirt it once again since our lending practices are still conservative even though our debt ratios are the highest they have ever been. Trump’s wars with the Chinese and anyone else he tweets about will cause havoc in the near future. So before he screws it all up for everyone get all you can before the purse strings are tightened and we have to ride the wave of a recession that will hit the world but we will be able to ride it - just without room to breath!