Buying a Condo in Vancouver, A Word of Caution
Condos are selling like hot cakes in Vancouver right now. New developments allow investors to secure a brand new unit for a deposit as low as $5,000. The intention of this blog post is not to talk about the risk of an interest rate hike or a condo market downturn. The intention is to remind investors to plan for a day three years down the road when the unit will be completed and mortgage financing will be required.
The only initial requirement from an investor is the $5,000 itself. Even if low interest rates persist three years from now, an investor will still need to qualify for a mortgage upon completion. Many unplanned events can occur that can put mortgage qualification at risk. Examples include a marital breakdown where spousal payments are required, a job loss due to an economic downturn, or a business contraction, especially if you are self-employed or a small business owner.
Banks and lenders generally require personal and business tax returns for the last two years as part of the process of assessing credit worthiness. If your business has been slow, steps will need to be taken to ensure you qualify for the mortgage. This is also the case for existing property owners who are expecting to renew their mortgage – the renewal is not an automatic process. Property owners with weak incomes have been caught off-guard when trying to renew their mortgages – even in this low interest rate environment.
The main point is that is if your business is weak, find ways to turn it around now. Successful qualification for mortgage financing is based on the last two years of your income. Don’t wait until your new condo unit is built to think about this or it will be too late.