Yes, I know, new rules and regulations, rates on the rise, prices too high, etc. Keep in mind, what you hear, see, read, in the media or elsewhere is largely composed of “opinions”. Look at the facts and form your own opinion. One important fact is that home ownership has always been a great choice for so many Canadians, in many, many ways. The prospect of homeownership continues to look attractive in 2018. Sure, I’m a mortgage broker and I am supposed to say this. But, I am also a home owner, and was once a first-time buyer. In fact, I purchased my first home when rates were astronomical. Yet, it still proved to be the best investment I ever made. If you’re considering a home purchase soon, buying still has a lot of advantages over renting.
It’s still very early in the New Year. Let’s have a look and see why purchasing a home is still a great thing to consider this year.
Cash is King
Renting is expensive and becoming more expensive. Landlords are obviously having to purchase more expensive homes and are aware of the economy. In most cases, from a monthly savings perspective, you’re better off buying and paying a mortgage. According to the Ontario Real Estate Association, the average home in Ontario costs $586,208 as of December 2017, if you do the math with an amortization calculator, that comes out to a mortgage payment of $2,020 on a mortgage with a 30-year amortization at a 3.19% interest rate.
Now, that’s for an average priced home. Could you find a less expensive home, or perhaps a home that as sub-renting capabilities?
Also, according to CMHC, the average payment for monthly rent in Toronto was $1,404 for an average 2-bedroom apartment. A single-family home would obviously be higher than this. So, if comparing apples to apples, you could conceivable saving money each and every month by owning over renting and paying your mortgage, rather than your landlords.
Buying could make sense for you. If saving for a down payment is the obstacle, there are low down payment options. Putting together a plan to save for a down payment and closing costs is a wise choice.
For as little as 5% down payment, plus closing costs, you could become a homeowner, depending on your price range and circumstances.
Interest Rates Are Increasing
Rates have been on the rise over the last several months. There are several factors at play here, and I will not get into the many factors that affect mortgage rates. However, the Bank of Canada and what they do with the prime lending rate does play a major role.
Essentially, if they think prices are rising too quickly (inflation), they can raise interest rates which makes the cost to borrow money more expensive, but the money you do have is worth more. If they need to stimulate the economy, they will lower interest rates, to encourage Canadians to borrow funds for things like cars and homes.
Interest rates could not have stayed as low as they were forever because inflation would eventually get out of control. Thus, the recent increases to the prime lending rate.
Interest rates are holding below the 3.5% range for now and if you’re in the market, it’s a good time to take advantage before rates go up.
Increased Home Prices
We have all seen the historic price increases in Real Estate over the last few years. Great news if you are a homeowner.
Not so great if you want to purchase a home.
But, we have seen the prices trail off over recent months and in some areas, the prices have actually come down.
However, if you’re in the market for a home, it might be a good idea to get preapproved and start shopping as soon as possible before prices go up, rates go up, or both.
Lots of Product For First Time Buyers
There are many builders that focus on first time buyers, whether this be in the condo market or freehold. A little research will go a long way. Further, there are many areas with resales that are located and priced just right for the first-time buyer.
Home Sweet Home
There is no place like home, especially when it’s yours. A huge reason to buy a home at any point in time is just the fact that it would be yours. When you own your own home, it opens up all sorts of doors for you, both financially and emotionally. This you cannot possibly experience as a renter.
Remember this. Each time you make a payment on your home, a substantial portion of the payment will go towards principal. It’s your money. Your forced savings plan. You gain equity and come closer to full ownership each and every month. That’s something you don’t get paying rent. Not to mention the gain in value should real estate prices continue to rise over the years.
Not only do you gain ownership, but your house is an investment. You can take cash out for things like renovations or to boost a retirement or college fund. The more equity you have, the more you can turn into cash.
If home ownership in 2018 is something you are considering, rates are still low. It remains a great time to buy.
Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.
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