If you’re a homeowner in Canada, you’re probably well aware of the fact that the housing market in the country has been on a bit of a roller coaster ride in recent years. Prices in some cities have skyrocketed, while others have seen a more modest increase. With that, you may be wondering “what happens to my mortgage if the housing market crashes?” Let’s take a look.
What are the potential impacts on mortgages from a housing market crash?
A housing market crash can have a range of potential impacts, both on individuals and on the broader economy. Some possible impacts of a housing market crash could include:
Loss of wealth
If property values decrease during a housing market crash, homeowners may find that the value of their homes is less than the amount they owe on their mortgages. This can result in a loss of wealth, as homeowners may be unable to sell their homes for a profit or refinance their mortgages.
Difficulty selling or refinancing
In a housing market crash, it may be difficult for homeowners to sell their homes or refinance their mortgages. This can make it difficult for people to move or to access the equity in their homes.
Increased default rates
If property values decrease and homeowners are unable to sell or refinance, there may be an increase in default rates on mortgages. This could lead to foreclosures, which can have a negative impact on homeowners and their communities.
Reduced access to credit
In the aftermath of a housing market crash, lenders may be more cautious about lending money. This could make it harder for people to get approved for new mortgages, which could slow the housing market and make it harder for people to buy homes.
Economic downturn
A housing market crash can have broader economic impacts, as the housing market is often a key driver of economic growth. A crash could lead to a slowdown in the economy, which could have negative effects on employment and consumer spending.
How to protect yourself from a housing market crash
There is no surefire way to completely mitigate the risks of a housing market crash in Canada. However, there are a few things that individuals and investors can do to help protect themselves from potential losses in the event of a crash. For example:
Diversify your investments
Don’t put all your money into the housing market. Diversify your portfolio instead. You can invest in a variety of assets like bonds or stocks. This can help reduce your overall risk and protect your wealth in the event of a crash.
Be cautious when buying property
Before purchasing a property, carefully consider the local housing market and the potential risks involved. Don’t over-leverage yourself by taking on too much debt, and be prepared for the possibility that property values could decrease.
Stay informed
Keep track of economic conditions and the state of the housing market. This can help you make more informed decisions about your investments and help you anticipate potential risks.
Work with a mortgage broker
A mortgage broker is one of the best people who can help you navigate the complexities of the housing market, even if it experiences a crash. Here are a few ways that a mortgage broker can help you during a housing market crash:
- Find the best mortgage rate. A mortgage broker can help you compare rates from different lenders and find the best mortgage rate available. This can help you save money on your monthly mortgage payments, which can be especially important if property values decrease during a housing market crash.
- Negotiate with lenders. If you’re having difficulty making your monthly mortgage payments or need to refinance your mortgage, a mortgage broker can help you negotiate with your lender. A mortgage broker can help you understand your options and work with your lender to come up with a plan that works for both parties.
- Access a wide range of mortgage products. Mortgage brokers have access to a wide range of mortgage products from different lenders. This can give you more options to choose from and help you find a mortgage that fits your needs, even if the housing market is volatile.
- Stay informed. A mortgage broker can keep you up to date on economic conditions and the state of the housing market. This can help you make more informed decisions about your mortgage and help you anticipate potential risks.
The Bottomline
A housing market crash in Canada can have significant consequences for homeowners with mortgages. If the value of your home decreases significantly, you may owe more on your mortgage than your home is worth. This situation is known as being “underwater” on your mortgage. This can make it difficult to sell your home or refinance your mortgage. It’s important to be aware of these risks and to carefully consider your options if you are concerned about a potential housing market crash.
If you are worried about the impact a housing market crash might have on your mortgage, it’s a good idea to speak with a financial professional. Premiere Mortgage Centre can help you understand your options and make informed decisions about your mortgage and financial future. Don’t hesitate to reach out to us for more information and guidance.
