Analysis sheds light on difficulties brokering in Vancouver

Analysis sheds light on difficulties brokering in Vancouver

Analysis sheds light on difficulties brokering in Vancouver

The median Vancouver household costs 11 times the median household income, making the city’s real estate market North America’s most expensive.

An analysis by Simon Fraser University adjunct professor Andy Yan relied on 2016 census data to make the determination.

“It’s the gap between number one [on the list] and number two that was really interesting. You have Vancouver at [a ratio of] 11 and then Los Angeles effectively at nine and then everyone kind of follows afterwards. And those other cities in that grouping from nine to eight are some of the most vibrant cities in Canada and the United States,” he told Livabl.

The median home price of $800,220 is 11 times the median household income of $72,662.

Affordability coupled with B-20 rules going back to 2016 have made brokering a mortgage in the city extremely difficult.

“It depends on the reach you have as a mortgage broker, the quality of your client and the opportunities you have as a broker with respect to lender options,” said D’Arcy Henneberry, president of MortgagePal. “Is the client putting less than 20% down? If so, they’re restricted to the insured market where you have prime lenders with insured mortgages, otherwise if you have at least 20% the options are nearly endless. You have alternative lenders and private lenders, so there’s the opportunity to qualify for a larger mortgage in the Vancouver market through those alternative approaches.”

Borrowers relegated to the insured market have a couple of options, one of which is stepping back and saving 20%. Not everybody is that patient, though.

“Their options are limited if they’re putting less than 20% down,” said Henneberry. “They have to qualify within the ratios of 39:44 using the benchmark interest rate, or 2% higher than the contract rate—whichever is greater—and that does reduce their qualifying ability compared to a few years ago before the markets changed when we could qualify on a five-year fixed term at the contract rate. The difference there is approximately 20% depreciation qualification, so those individuals do qualify for a larger mortgage amount, but the opportunity for them would be to bring on a trusted individual, such as a family member, to help co-sign and qualify for the mortgage.”

While not every lender allows it, provided the applicant brings on a co-borrower and put them on title as 1% owner, they’ll qualify.

“There’s also the opportunity to bring on a co-borrower putting them on title as a 1% owner and helping them qualify as well,” continued Henneberry. “Not all lenders will allow that if they’re not living in the property, but there’s a fair amount of lenders out there who will allow a co-borrower to come on title as a 1% owner and then we use 100% of their income to offset their portfolio and the surplus of income goes to qualify the applicant.”

 

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