Renting and wondering if now’s the time to buy?
By Kathy Schmidt, Broker/Owner, Schmidt Realty Group Inc.
It’s an understandable dilemma these days! Higher interest rates might be preventing you from stepping into the market, but what you may not realize is you’re already effectively paying 100% interest to your landlord!
Think house prices are too high? The rental market is even worse — with no relief in sight.
Smart buyers will look further down the road than just the next few months or even the next year. Some forecasters suggest that interest rates are nearing their peak and will start to come down in mid 2023. This means the pressure on prices will likely ease and today’s good deals may be a thing of the past. While it’s true that you’ll have to qualify based on a higher rate today, if you go with a variable rate mortgage your actual payments will be lower than the payments used to determine how much you can borrow. By going with a variable open mortgage, you can plan to lock in rates when they come back down, securing both a great rate, and a great price on that condo you’ve been eying!
Here’s an example: #54, 1650 Towne Centre Blvd
If you purchased this two bedroom condo with two parking spots for $235,000 at a mortgage rate of 4.25% for 25 years, with a 5% down payment, your monthly mortgage payment would be $1252. If you add condo fees of $388, monthly taxes of $175 and an annual HOA fee of $120 you arrive at a monthly cost of $1825. Compare that to renting a two bedroom in Terwillegar for $1600 or in Windermere for $1735. For $90 to $225 more a month you’re owning your own home! You’d have your own front door, a garage and another spot to park in behind. You can put down roots, get to know your neighbours, paint your walls, have a pet, and have no fear that your landlord will decide to sell next time you want to renew! If your property value increases just 1% a year for the next 5 years, it could be worth $246,987. As a homeowner, you’ll get to keep that increase in the value of your property, tax free! Otherwise, that gain in value would all go to your landlord. Ouch!
When interest rates come back down, if you can secure a rate of 3.0% your payments would be just $1719! Oh and by the way, there’s a rumour that rental rates are going up… Click here for more info
Most borrowers will end up paying a discounted rate, vs the posted rate*, but this graph is still very useful to put today’s rate increases in perspective. *6.14% posted rate vs 4.34% discounted rate at Aug 31… Click here for more info
And on a lighter note… Make sure your purchase is pet-friendly so you don’t have to do this!
Let me connect you with lenders I trust and help you figure out if now is the right time for you to get out of the renting rut. If it doesn’t make sense for you, I’ll let you know that too. Let’s chat!