A well-informed plan
Transforming a solid understanding of lending processes into a powerful wealth-building tool
Irene Strong was just out of university when she realized she was only a car payment away from being able to manage a mortgage. She got rid of her car, arranged financing on a one-bedroom condo in East Vancouver and never looked back.
When disaster struck a few months later in the form of a major leak, she turned it into an opportunity, staying at her mom’s while upgrading the kitchen and bathroom. When love turned into, “Let’s buy a place together!” she bought a condo in nearby Richmond with the man who is now her husband, renting out her East Van condo. After they married, the young couple leveraged the equity in their rental property to buy a condo in downtown Vancouver, renting out the Richmond and East Van condos.
Finally, they transformed all their equity into a detached view home in Delta just before their second child was born.
Along the way, Ms. Strong grew so passionate about the potential of real estate that she became a mortgage broker and wrote a book on the topic, Own your Piece of the Earth: Everything You Need to Know about Mortgages in Canada’s Major Housing Markets. She believes that a solid understanding of the lending process transforms mortgages into the single most powerful wealth-building tool available to Canadians.
That doesn’t mean it’s all ease and sunshine, she’s quick to say – moving ahead in life always requires being willing to take on some risk. Even with Vancouver’s infamously hot market, timing hasn’t always worked in her favour. The condo markets outside of the Vancouver core were off when she and her husband bought their house, so they sold one for less than they’d paid nearly seven years before.
“It was possible for us to realize the dream of buying a detached home in the lower mainland only because of the equity we’d built through forced savings and rental income.”
While it was a disappointment, Ms. Strong points out that the small loss won’t matter much over the longer term, because they immediately reinvested back in the market. Further, she says, “It was possible for us to realize the dream of buying a detached home in the lower mainland only because of the equity we’d built through forced savings and rental income.”
Despite the uncertainty of rising interest rates and new regulations, she continues to be confident in the future of real estate and has recently refinanced their house to do some renovations and buy another property.
“If you spend a bit of time to get the right real estate and mortgage team – and the right mortgage products – you can do well over the longer term,” she says. “In some cases, very well.”
Potential buyers in the greater Toronto area are also looking toward the longer term with optimism, says Dominion Lending mortgage broker Deepak Bansal. For example, because high prices, rising interest rates and stress tests mean that the Toronto core is increasingly out of reach for many aspiring homeowners, they’re looking further out.
Homebuyers are also looking for more flexible financing options, he says. “We’re thinking outside the box. There are a lot of lenders out there that consider income sources the banks don’t. I think the bigger problem is that many are told they don’t qualify by their bank and get discouraged. Canadians grow up going to their bank directly for all their financing, unlike the U.S., where it’s more common to see an independent mortgage broker first. But we’re starting to see that shift.”
He stresses that one of the benefits of working with a mortgage broker is access to a wide range of lenders, including some of the major banks, as well as credit unions and companies that only offer mortgages (known as monoline lenders). “We also invest the time to put a plan together for our clients: if their credit is not strong enough today, for example, we have the expertise to help them repair it with a step-by-step action plan,” he says.
The key to success is advance planning, says Mr. Bansal. “Start discussing financing with a mortgage professional six to 12 months in advance. Once you have a plan in place, you will feel more comfortable – and you’ll know what you need to do to be able to qualify for that mortgage.”
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