LACKIE: Massive mortgages the new normal for Toronto homebuyers


Ten years ago, the mere thought of million-dollar mortgages being the new normal in Toronto would have caused heads to spin.

Once upon a time, the goal was to buy the best house you could comfortably afford and pay it down with the ultimate goal of one day being mortgage-free.

That seems to no longer be the case.

Now that money is cheap and housing is almost prohibitively expensive, the equation has changed.

Buyers today are much more comfortable with debt; in many ways we have had to be. Life is expensive, school is expensive, and entry-level jobs barely cut it.

Debt is largely unavoidable for many.

But from where I sit, doing my best to help buyers and sellers calmly navigate this wild time in real estate, it occurs to me that for many, short of going to the bank and getting a mortgage pre-approval, the financing part of the equation is almost an afterthought to the herculean task of finding a house.

People find finances daunting and scary. And for good reason.

Comfort levels are different. Quite often, landing the house necessitates pushing past the comfortable level anyway. That’s when having a clear grasp of the full implications surrounding the financing matters.

And you’d be surprised at how many people really only activate on this front once they are driven by the adrenaline of having a signed Agreement of Purchase and Sale in hand. Not ideal when you consider how many moving parts there are and how many factors must come together before closing.

I asked Andrew Dreyer, mortgage agent with Outline Financial, what he thought was important for would-be buyers to know, particularly given the strong seller’s market we now find ourselves in:

“Engage a mortgage broker early when you’re thinking of buying or upgrading. Even if you’ve done it before, a good broker will help you with budgeting the transition; they can help you figure out how much equity you’ll have for your purchase, factor in closing costs, and also help you determine whether to port an existing mortgage or start with a new one. When the right house comes along you want to be ready — you want your soldiers (i.e. realtor, mortgage broker) lined up and ready to support you, because the more prepared you are the better chance you have of being successful with your purchase.”

The reality is that more often than not these days, homes are selling in multiple offers, usually considerably over-asking. This can be daunting, particularly when the bank will conduct their own appraisal to see if the property holds up to the price you paid:

“Trust your realtor on the value — not the list price. You won’t have insight into the selling strategy of the realtor on the other end, so yours is your best resource for understanding what a property is worth. They use a comparative sales approach, which is similar to what the bank’s appraiser will use in determining values of properties.”

With the awareness that success in such scenarios typically comes down to offer price, a strong deposit, giving the seller their ideal closing date, with ideally no conditions — in other words, giving the seller everything they want — it’s vital that you do as much of the due diligence as you can up front.

Time and time again, I am struck by how much smoother it is when the client has someone good steering the ship on the financing side.

As simple and straightforward as mortgage financing may seem, it’s not.

The rate you are given isn’t everything. Just as important are the terms and conditions, the extent to which your specific personal circumstances are taken into account, and the back-end work that goes into a seamless closing of the deal.

A good mortgage broker will work just as hard for you as a good agent. And just like a good realtor, you will ideally have no idea of the bumps and hiccups happening behind the scenes.

We may now be in a place where sizable mortgage debt is just the norm, but it’s hard to overstate the extent to which the small details can make all the difference — to both your bottom line and your peace of mind.