Right now anyone in Alberta can tell you that times are tight. The price of oil has slowed down the whole province. Here are a few things that you need to know if you are looking to talk to a mortgage broker in Alberta about buying a house or doing a re-finance.
With the economy slowing down all of the lenders in Alberta are tightening up. What does this mean? In the past, the requirements to get a mortgage were a little looser but now with everyone knowing the market is not stable and jobs are not as secure the requirements have changed. Why do they do this? All lender are getting tighter with the purse strings as the amount of foreclosures is rising. When a bank or another lender takes on a portfolio of mortgages they are basically depending on everyone to pay their mortgage so that they make money for there shareholders. If a bunch of mortgages go in to foreclosure then they are losing money on those. If people are losing jobs and not making the money they were when the oilfield was booming they have a harder time paying bills and that affects the bottom line, so lenders right now are being a lot more stringent with the guidelines to get a mortgage.
Second: Where you live makes a difference.
Right now in Alberta there are a a lot of lenders that are not lending in any rural areas. The main reason for this is long term property value. In a major center like Edmonton or Calgary the property value will never really tank. It may fluctuate but it will never really bottom out and stay there. When you live in a small town with a no major population base there is a chance that your property value will decrease and never come back up. This is more valid if you live on an acreage outside of towns. This is something to consider when you are buying property as well. In the future if you are looking to sell then your value can fluctuate a lot more on properties outside of major centers.
The factors listed above are also the same reasons that you may not be able to leverage some of the equity in your property. Because of all the reasons above lenders are lending on a lower loan to value equation. To put this simply if you own a property worth 100,000 and you still owe 50,000 on it you own 50% of that. If you are looking to do an equity take out or second mortgage it will depend on where your place is how much you can get. Normally in the city you can get a loan up to 85% meaning you could get a second mortgage for $35,000 but now those percentages are going down. In rural areas people are getting an LTV of %50-%60 because of the risk the lender is taking. This just means that if you are not in a major center you may not be able to leverage all of the equity in your house at this time.
Hope this was helpful. Again, if you have any questions please feel free to give us a call and see if we can help you figure some things about your mortgage in Alberta or British Columbia.