The Canadian Home Buyer Mistake You Need to Avoid
Your home is probably the single most valuable item you will ever purchase. Not only will it be the most expensive item you will probably ever buy, but you will also need to spend a lot of additional money on upkeep, renovations, etc. On top of that, it’s quite possible you’ll live in it for five, 10, 20, or even 30+ years.
With so much at stake, it’s important to be as well-informed as possible before you sign the dotted line and lay out the welcome mat. That includes finding out what kind of mortgage you want to consider (fixed or variable) and how much you qualify for. It also means considering current interest rates.
In early 2013, Canada’s big banks were offering five-year fixed mortgages with interest rates of 2.99%; by Labour Day, they were near 3.89%. With mortgage rates on the rise, many first-time home buyers fear that affordability will be out of reach.
That doesn’t mean you should jump into the markets and buy a home just because interest rates are on the rise. But that’s exactly what many Canadians are doing! Fearing the end of low mortgage rates has sent Canadian home shoppers into a buying frenzy.
Using their near-record low pre-approved mortgage rates, home buyers sent Canadian August sales up 50% in some regions. The Toronto area experienced a 21% year-over-year sales jump in existing home sales; Vancouver was up 52.5%; Calgary, 27.5%; Victoria, 20.7%; and Edmonton, 9.9%.
Despite the recent rise in interest rates, it’s important to remember that five-year mortgage rates are still well below their historic average. Because the Canadian and U.S. economies and monetary policies are closely linked, it’s also good to remember that Canada’s mortgage rates run closely with the U.S. housing market. In January 2008, before the U.S. housing market crashed, the interest rate on a Canadian five-year fixed mortgage was 5.89%.
It might be tempting to jump onto the property ladder to take advantage of near-record low interest rates, but in an excited market, there is also the temptation to overpay for a house just to lock in at a low rate.
There’s more to consider when it comes to buying the home of your dreams than just interest rates. While it’s a major issue, it shouldn’t be the only thing you factor into the equation.
That’s why it’s important for first-time home buyers to work with a respected lender that has their best interest at heart—one that has a proven track record of helping clients successfully navigate the world of home financing.
Whereas banks and other lender institutions will only recommend their own financial products, the independent agents at Canadalend.com will search all of Canada’s banks and lenders, looking for the mortgage best suited to your budgetary and lifestyle needs.
We want you to achieve both your short- and long-term financial goals! At Canadalend.com, we’ll do everything we can to ensure you make the most informed decision possible—one that puts you on a stronger financial footing.