Million-dollar mortgages now common in GTA
Lenders ‘have never seen as many as they have now’
Three decades have passed since the Barenaked Ladies rock band released a song promising to buy their love a house, complete with furniture (“maybe a nice chesterfield or an ottoman”) and a car, if they had a million dollars.
A million bucks may not be what it once was (Ratehub.ca sets today’s equivalent at $1.97 million) but with the average selling price of Greater Toronto Area homes reaching a new record of almost $930,000 in 2020, million-dollar mortgages are increasingly commonplace.
According to a mortgage trends report from LowestRates.ca, million-dollar mortgages in Toronto were “relatively rare” before COVID-19 but brokers have been reporting an increasing number of mortgages in the $1 million to $3 million range since the pandemic arrived.
“There was a lot of expectation that housing prices might suffer and people wouldn’t take on large mortgages because the economy would be down and people would be worried about their savings and their jobs…but it’s been the inverse,” says Justin Thouin, founder and CEO of LowestRates.ca.
“The banks and mortgage brokers we work with across the country are saying they’ve never seen as many million-dollar-plus mortgages as they have now.”
Why? Housing prices in Toronto continue to “increase rapidly” year after year with no signs of slowing down. Other contributing factors include record-low mortgage rates, remote work and increased savings as people funnel money previously spent on commuting, work wardrobes, entertainment and vacations into housing.
At the same time, those uncertain about investing in the stock market view their home as a “safe haven” – not only a place where they spend much of their time but a place that’s a good investment. “
All of those things have come together to create a perfect storm of these million-dollar-plus mortgages,” Thouin says.
But qualifying for a million-dollar mortgage doesn’t necessarily mean it’s a wise idea. “It’s absolutely important to make sure you’re not house poor, despite the fact that interest rates are low and may be low for the next five years,” he says.
Make sure you have an emergency reserve in the event of job loss and consider your ability to afford the things you enjoy, such as dining out, once the pandemic ends.
Will you still be able to comfortably afford your mortgage when interest rates inevitably rise? (Punch your numbers into the company’s mortgage calculator at www.lowestratesca/mortgage.)
“People should definitely keep in mind that the interest rate is probably never going to be lower so they should expect to renew at a higher rate in five years’ time,” says James Laird, co-founder of Ratehub.ca and president of CanWise Financial mortgage brokerage.