Mortgages on Fire

Tracy Head • June 15, 2023

I sat down to write my column and there were two themes from the last few weeks that jumped out at

me. Mortgages on fire is a bit tongue in cheek. The two things that have been a theme in my conversations lately are how the fires throughout the province are affecting both the housing market and the purchase process, and how pre-build purchase files are feeling a bit like we need a whole team of firefighters to bring them across the finish line.

Purchasing a pre-build unit can be both lucrative and very stressful. When I say pre-build, I refer to

buying a home from a developer that has not yet been built. You choose your floor plan and color scheme, make a deposit to the developer, and wait for the project to be built.

I have seen pre-builds with completion dates ranging as far out as three years down the road. The

lucrative part I referred to is that (as a general rule) real estate increases in value over time. If you buy a unit now, it may be worth considerably more by the time the project is finished and you take

possession.

In the olden days (say two or three years ago) the time to completion wasn’t a big issue. Interest rates

were lower and people qualified for more borrowing power than they do today. Some people invest in a pre-build intending to sell it closer to the time the project is complete. What they are doing is selling their contract to a new purchaser. This is called assigning the contract, or if you are the purchaser you are buying an assignment of the original contract for a higher price than the original purchase paid based on current market value of the home.

Over the last few months I’ve seen clients in tough spots as their home is nearing completion and they

no longer qualify for financing with traditional lenders. After years of dreaming about their new home clients are suddenly facing much higher payments than they planned for when they initially signed their purchase agreement. In some cases they have had to come up with additional down payment in order to complete their purchase.

On the other end of the spectrum I’ve worked with several clients who have faced delay after delay of

the completion of their new build. During the height of the pandemic this was attributed to supply chain issues and challenges finding trades to actually do the build. Over the last few months I’ve seen stories on the news and seen a few cases of developers who are facing financial challenges, which then drags out the completion date even further.

If you are considering purchasing a pre-build, I cannot stress enough the importance of doing your due diligence. Research the developer. Does the developer have a strong reputation for building quality homes and completing them on time?

More importantly, do your homework with respect to your financing. Don’t purchase something at the

top of what you qualify for anticipating that everything will be status quo two or three years from now.

Shop at a lower purchase price and save as much for your down payment as possible between now and closing.

If you are buying a pre-build, please make sure you have your ducks in a row and have a backup plan for your financing … just in case.

Back to the other part of mortgages on fire. With such an early start to the fire season this year, I expect we are in for a challenging summer.

If you are purchasing a home, one of the conditions you have to satisfy for your lender is that your home is insurable and that you have adequate insurance in place.

If a fire flares up close to the home you are purchasing, you may have a difficult if not impossible time

trying to coordinate home insurance. As a rule, insurers require that the home you are buying is a

certain radius or distance from an active fire in order to provide an insurance policy.

In order to protect home buyers that are not able to finalize their home purchase due to an active fire,

realtors ensure that there is a force majeure clause in the purchase contract.

According to google, force majeure is a contractual clause intended to protect the parties from events

outside normal business risk. The clause may be used to manage the risk of unforeseeable future events that could impact a party's ability to complete its contractual obligations.

I’m dealing with this right now with clients that are buying in Chetwynd (not far from Tumbler Ridge).

The first thing I checked was that their contract included the force majeure clause.

Regardless of the time of year you are purchasing this clause is one you should look for in your purchase agreement.

As a reminder, if you haven’t already claimed your Home Owner’s Grant, take a moment to do that. It

takes less than five minutes to complete the online form.

< Older Post Newer Post >

Tracy Head

Mortgage Broker

GET STARTED

Is this the right time to buy a home?

By Tracy Head • October 4, 2025

Is this the right time to buy a home? Who has your best interests at heart? Buying a home can be either an incredibly exciting experience or a very stressful time. Or it can be a combination of both. Part of the challenge can be committing to the decision to move forward with buying a home. How do you know if you are ready? How do you know if this is the right time to buy? I love working with first-time home buyers. I particularly love when they reach out well ahead of time to do their research and get their ducks in a row. I have been working with one such young lady. She has been watching for the right home to pop up. She fell in love with one of the listings that she viewed and moved forward with an offer. She reached out to her investment advisor to make arrangements to move the funds she needed for her deposit from her investments to her bank account. Oddly he did not reply to her three phone calls nor multiple emails. She was forced to walk into his office to deal with this. When she got there he essentially told her she was foolish for buying a home. She should leave her funds in her investments and continue to save with him. She agonized for a few days and ultimately collapsed her offer. He told her that this house, over the long run, was going to cost her $1,000,000. The purchase price was $650,000. The total of the purchase price plus interest over the long run seemed like an astronomical sum. He persuaded her that she would be better off continuing to rent and that at the end of the same time period she would have over $1,000,000 in her investment account. That’s all well and good in theory. In the meantime she still needs a place to live. And there are no guarantees as to what investments will do over time, nor what property values will do. I did some math to see what this actually looked like long term. We have to make some assumptions that the financial advisor is good at what he does and that her investments will do well over the long term. As a rule real estate appreciates over time and rent increases over time. That being said, here is the math I did. Making some assumptions that the mortgage rate stays the same and your rent never increases: $2400 rent per month x 360 months (30 years) = $864,000 $2833 per month mortgage payment x 360 months = 1,019,880 (monthly payments / I suggest you go bi-weekly to pay off quicker) At the end of 30 years renting you have nothing to show for the $864,000 you’ve paid out. At the end of 30 years paying your mortgage you will have a home free and clear – normally real estate increases in value over time so in theory it will be worth way more than what you’ve paid. If you wait another year to buy $2400 x 12 = $28,800 towards someone else’s mortgage. Here’s the wild card. If you choose to rent and choose to invest in a portfolio instead of buying, even if your portfolio is worth $1,000,000 at the end of the same time frame you need to subtract the $864,000 you paid in rent. This leaves you with a net gain of $136,000. If you had purchased a home, your payments of $1,019,880 would be offset by the value of the home you purchased. In this case, assuming no change in value, you now have a home worth $650,000 paid off. The wild card to run these comparisons is how much you need to invest monthly to accumulate the $1,000,000. Either way, you are making this payment on top of your rent payment. Another wild card of course is what property values and investment portfolios do over time. We know rent will continue to increase and mortgage rates will change but I think it warrants looking at this from another perspective. I am not a proponent of aggressive scare tactics so was disappointed in how this advisor handled his conversation with her. Some people are more cautious with their financial plans and I appreciate that. Being certain about your long-term goals will help you navigate the path forward that suits your own situation. Make sure you have trusted people in your corner as you make these big life decisions.

Reverse Mortgage Solutions

By Tracy Head • September 22, 2025

For every problem there’s a solution. Sometimes more than one. It seems like there is an ebb and flow in the types of mortgage products clients choose. Over the last few years I have definitely been fielding more inquiries about reverse mortgages. Although they are becoming more widely accepted, reverse mortgages had a lot of bad publicity. The negative press I’ve seen relates to the American housing market where predatory lenders were taking advantage of vulnerable seniors. Reverse mortgages in Canada are highly regulated so that this does not happen. For some clients it takes a while for them to wrap their heads around reverse mortgages as an (or the best) option for them. Particularly in the Okanagan we see many clients who are house-rich but cash poor. Or at least have limited income to cover their day-to-day living expenses. Sometimes even when the clients recognize that a reverse mortgage is the right plan for them their families or children have objections. When I am working with clients and we are looking at a reverse mortgage as an option I always invite them to include their families / children to our conversations. Often clients are too embarrassed to share with their children exactly how dire their finances are. Sometimes clients can’t get past the stigma of refinancing via a reverse mortgage because all their lives they have worked hard to make sure their mortgage is paid off. Cliché as it sounds, times have changed. The cost of living has risen far quicker than increases to pension income. A friend of mine shared a conversation he had with reverse mortgage clients and their children. The children were vocally opposed to their parents moving forward with a reverse mortgage. Paraphrasing a bit but it went like this: “The way I see it” he said “after completing a thorough review of your parents’ finances, we have three options. Downsizing isn’t an option as they are already in a condo. Number one, they carry on with the current mortgage that they can’t afford. Their expenses come to about $2,000 per month so you can each transfer them $1,000 per month to help cover their payments. Number two, your parents can sell and move in with one or the other of you. Third, we take a closer look at a reverse mortgage to see if that helps them stay in their home without any financial help from you.” Apparently there was a very long pause. After a more thorough conversation about the pros and cons of a reverse mortgage and answering more questions the family did indeed feel a reverse mortgage was the best option for their parents. If you (or your parents) are thinking about a reverse mortgage make sure you take your time and ask all the questions you need to so you are confident moving forward. I have seen reverse mortgages have a profound impact on quality of life for many of my clients. I did not used to be a huge fan of reverse mortgages but have to say I am using them more often to help clients enjoy their retirement years without losing sleep trying to figure out how to cover their expenses.