You’ve been house hunting for months when you suddenly come across your dream home: a three-bedroom bungalow with a garage and a walkout patio. If you’ve only managed to scrape together the minimum five per cent down payment, you may be wondering if you should purchase now or wait until later. Purchasing a home will be the single largest financial transaction of your lifetime, so it’s important to make the decision carefully. Here are some things to consider before making an offer.
If you have high-interest debt you might think twice about purchasing a house. If you’re carrying a balance on your credit card, you should concentrate on paying it off before you consider homeownership. When you’re a homeowner you won’t have a choice when it comes to paying your mortgage – if you don’t pay your mortgage the bank will foreclose on your home, so it should be your top priority.
Low Mortgage Rates
Mortgage rates are currently at historic lows. Right now you can get a 5-year fixed rate mortgage at less than three per cent and a variable rate mortgage even lower – at 2.6 per cent or lower. This makes it a great time to take out a mortgage.
It is a good idea to take advantage of low mortgage rates and pay down your mortgage as quickly as possible. Interest rates won’t be low forever – chances are they’ll be a lot higher when you renew your mortgage. Often there’s no better investment than your home.
Many mortgage markets across Canada are considered seller’s market – that means sellers are able to call the shots. In red-hot housing markets like Toronto and Vancouver, bidding wars are commonplace. If you’re going to have to pay an arm and a leg for your dream home, you might think twice about buying now. On the other hand, if home prices keep rising you could find yourself priced out of the market next year. If you’re willing to purchase in an up-and-coming neighbourhood you can avoid a bidding war and get your dream home today.
Stricter Mortgage Rules
Although mortgage rates may be low, it’s more difficult than ever to qualify for a mortgage. The federal government introduced in recent years four sets of stricter mortgage rules designed to avoid a major housing correction. One of the biggest chances is that the maximum mortgage amortization has been trimmed from 40 years to only 25 years on high-ratio mortgages – that means the carrying costs of a home have significantly increased. Before buying, it’s a good idea to draw up a budget ahead of time to see if you can still afford a home with the highly monthly mortgage payments.
A Home is a Good Long-Term Investment
Over the long haul a home is a good long-term investment. Not only is it a roof over your head, you can rent it out to increase your income and pay down your mortgage even sooner. By paying down your mortgage you’ll build up equity in your home and help boost your net worth.