December 25, 2013
If you are thinking about buying a home, don’t wait much longer. Mortgage rates have dropped to an all-time low, but like anything are not guaranteed to remain where they are forever. Above all else, securing a solid rate for your loan is one of the most important factors to consider.
It’s Not All About Property Value
Many buyers place far too much emphasis on property price and value. They set a budget for how much they can afford, and that is what they focus on until the deal is closed. Property price and value are extremely important elements in the home-buying process, but if you are truly concerned about how much you spend, you should not ignore the interest rate.
Remember It’s a Loan
You certainly can’t go looking at homes that are tens of thousands of dollars higher than the amount you have been approved for by your lender, but during the process it is wise to keep in mind that buying a home involves taking out a very big loan. And it is in those couple of numbers after the decimal point of your mortgage rate where the real spending or saving comes in. Even a one-quarter point difference in the interest rate can translate to thousands over the life of your mortgage. This is especially true for buyers locked into 30 year terms.
Independent Brokers are the Way to Go
As of now, the best rates in the country are being offered by independent brokerage firms vs. the larger commercial banks, with some 5-year terms loans boasting an ultra low rate of 3.29%. These figures are extremely low, and have many people questioning whether they will go any lower. This is what residents needs to take notice of; although the rates could very well drop a few more points depending on the housing market, it would not be wise to gamble at this point and hold out in hopes for this to happen. Getting financed now is a very wise decision and could potentially save you a lot of money in the long run.
As mentioned above, the interest rate is a crucial element in how much you actually spend during the process of paying for your home. Just because the amounts are spread over a few decades doesn’t mean you didn’t pay a lot more than you had to.
Buy Now While You Can
The economy may be healthy at this point, but investors are not taking their chances. Since a number of people have invested in government bonds, this is what has caused the rates to plummet to their current status. Economists are predicting rates to decrease even further, but it is important to remember that the market can change instantly. Interest rates can go up just as quickly as they go down, which is why buying and refinancing now is recommended. According to Robert McLister, editor for Canadian Mortgage Trends, “No one foresaw a few years ago that rates would potentially making new lows, and that just speaks to how difficult it is to actually time the mortgage market…anything can happen” (Mendleson, 1).
Crossing your fingers for a lower number and refraining from signing those papers is probably not in your best interest (no pun intended). The one thing that can be said with certainty is that buying a home trumps renting in most scenarios. All the money you spend each month towards housing costs will be going towards something you can call your own. 5, 10, 15 or 30 years may seem like a long time to be in debt, but a mortgage is definitely one you want to have.
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