A Complete Guide to Getting A Mortgage in Victoria

So you’re ready to get on the property ladder and end the unforgiving cycle of renting – that’s great! Now all you need to do is find a property you love and secure a mortgage. Sounds complicated? It can be… but we’re here to simplify the entire process.

In our complete guide to getting a mortgage in Victoria, you’ll discover:

How mortgages work in Victoria
Why it’s the right time to buy a home in BC
Some fantastic tips for securing a mortgage deal that suits your needs
Common mortgage mistakes to avoid

Let’s get straight to it.

Understanding the Basics of a Mortgage

In an ideal world, you’d be able to tap into your funds and buy a property. Unless you’re one of the ultra-lucky people, you’ll need a mortgage.

Mortgages can be challenging for first-time buyers, but even seasoned property owners might struggle.

What is a Mortgage?

A mortgage is a loan that enables you to purchase a property outright and pay the outstanding amount—plus interest—back over an agreed-upon period.

As long as you make these repayments, you’ll gradually build equity in the property.

To access a mortgage, you’ll need a down payment, which is usually at least 5% of the home’s value. However, higher down payments often unlock better deals as the lender has more security.

Types of Mortgages Available in Victoria

If you’re buying a home in Victoria, there are plenty of mortgage options available, but the one you choose depends on your eligibility. Let’s take a look at each in more detail.

Fixed-rate vs. Variable-rate mortgages

Many people choose fixed-rate mortgages as they’re more predictable. Once you enter into an agreement with the lender, your interest rates won’t change until the term ends. While these agreements are popular, variable-rate mortgages also offer some benefits.

With the Bank of Canada’s interest rates continuing to fall, variable-rate mortgages might offer more savings. Of course, there’s always a chance that they’ll increase during economic difficulties.

Short-term vs. Long-term options

Mortgage terms vary and usually depend on your down payment, credit score, and the type of arrangement you’re eligible for. Short-term mortgages have better interest rates, but the monthly payments are often higher, while long-term arrangements are easier to manage.

On the downside, a long-term mortgage results in higher interest rates overall, so it’s vital to consider your financial future before making a decision.

Special programs for first-time buyers

First-time buyers in Victoria, BC, can access a range of special programs that make homeownership more affordable. They include:

The Home Buyers’ Plan
CMHC Programs
Tax Credits
Down Payment Savings Plans

Discover your options as a first-time buyer.

Victoria’s Real Estate Market Overview

As with all property markets, Canada has witnessed fluctuations due to the lasting effects of COVID-19. As the economy continues to recover, we’ve seen positive effects, including decreasing interest rates.

First-time buyers have access to incentives, which make purchasing a property more affordable.

While there’s no way to say what the future will hold, there’s every reason to believe things will continue improving.

Victoria’s Housing Market Trends

According to Remax CA:

2024 is a buyer’s market for people in Victoria, BC.
Single-detached houses are the most active property type.
The area’s most sought-after neighbourhood is Saanich East.

How Mortgage Rates Are Affected by the Victoria Market

It’s important to remember that mortgage rates can be unpredictable, as the market depends on certain conditions to thrive.

These conditions include:

Supply and Demand: A thriving property market manages to achieve a balance, but high demand levels can result in higher prices with limited properties.
Economic Conditions: The local economy’s strength will also define mortgage rates. When things are booming, there’s an increased demand for mortgages, which can dictate borrowing costs.

4 Steps to Secure a Mortgage in Victoria

So, if you’re ready to take the plunge and purchase a property, it’s time to secure a mortgage. While the process can be stressful, decreasing interest rates and a continuously recovering property market means you have plenty of options.

1: Assess Your Financial Situation

Before signing a legally binding agreement, it’s vital to consider your current financial situation and whether you can afford a mortgage. Lenders will assess your credit score, and applicants with good to excellent ratings can access better deals.

In most cases, you’ll need a 5% down payment, but contributing a higher amount means it’s easier to find a mortgage lender.

Another thing to think about is long-term affordability. Sure, you might be able to afford a mortgage initially, but can you manage the monthly payments?

2: Get Pre-Approved for a Mortgage

It’s always a good idea to seek pre-approval before looking for properties, as it lets you see how much you can afford and can make you a more attractive prospect for sellers.

For example, if other people make an offer on a property, the seller might accept your application if you have pre-approval.

To get pre-approved, you’ll need to:

Prove your income
Show details of your employment
Have personal identification
Let the lender review your credit report

3: Choose the Right Lender

One thing that often trips people up is deciding whether to apply with their bank or use a mortgage broker.

There’s no right or wrong answer here, as it depends on your preferences, but banks can be beneficial if you’re a long-term member and want to apply quickly.

Mortgage brokers are the best choice if you want to compare rates and find an agreement that meets your needs.

Reputable mortgage brokers have access to a network of lenders who work with people from all backgrounds.

If you’re a first-time buyer or struggled with debt in the past, a mortgage broker can match you with suitable lenders.

4: Finalize Your Mortgage Agreement

Now for the exciting part: finalizing your agreement and moving into your very own property! Before you sign on the dotted line, remember to look at the terms of your proposed deal, including the interest rates and repayment period.

Some brokers will be able to secure better rates based on your needs. Finally, remember that the down payment and monthly repayments aren’t all you need to factor in.

Mortgage closing costs and legal fees are other expenses that can limit mortgage affordability.

First-Time Homebuyer Programs in Victoria

As a first-time buyer in Victoria, you have access to programs that can help you become a homeowner and leave the thankless cycle of renting behind you.

The following programs are based on your eligibility, so remember to speak to your broker before applying:

RRSP Home Buyers’ Plan: If you’re buying your first home, you can withdraw up to $60,000 from your RRSP and won’t have to deal with any tax penalties. The maximum amount used to be $30,000, but the government increased it to help potential buyers secure a deposit.
First-Time Home Buyers’ Tax Credit: If you’re a first-time buyer, you can access tax credits, which decrease the amount of tax you need to pay when purchasing your first home.

Common Mortgage Mistakes to Avoid

Getting a mortgage for the first time can be an exciting experience, but it’s also easy to get carried away. Remember, it’s a massive financial decision that can impact your future, so weigh up your options and avoid the following mistakes.

Overborrowing

Consider what you can afford in the long term. Yes, a company might offer you a larger mortgage than expected, but this also means your repayments will be much higher.

Think about whether your financial circumstances are likely to change and choose a mortgage that you’re comfortable managing.

Ignoring Interest Rate Fluctuations

Fixed mortgages are more predictable, which means that borrowers have long-term peace of mind. If you decide on a variable-rate mortgage, remember that nothing’s guaranteed. Interest rates might be low initially, but that doesn’t mean they’ll stay that way.

Think about your current requirements and choose interest rates that align with your financial circumstances.

Skipping a Professional Financial Advisor

Hiring a professional financial advisor might seem unnecessary, but it can often unlock better rates. Mainstream lenders have strict eligibility criteria, but specialist mortgage companies often choose to only work with brokers.

By working with a professional, you can plan for the future and find a mortgage that aligns with your goals.

Book a Consultation With A Victoria, BC Mortgage Broker

As you can see, there are numerous things to consider when applying for a mortgage, but once the hard work is over, you can enjoy settling into your new home. At Prime Mortgage Works, we make it easier for buyers from all backgrounds to find the right mortgage deal.

Whether you have a bad credit score, are a first-time buyer, or want to upsize, our professional brokers can help. Please contact us today with any questions or to start your mortgage application.