The Learning Centre:
Attention (aspiring) homeowners:
The top 3 reasons why NOW is the time to buy
If home ownership (or selling and buying a new home) is on your list of resolutions for the New Year, you may want to consider closing the deal before the ball drops January 1st.
With recent interest rate hikes, a cooling in the housing market, and further changes to mortgage rules on the way for 2018 – there’s no doubt about it. Now is the time to lock in your home-buying purchase before the going gets tough, or a little more uncertain in the year ahead.
The top 3 reasons why NOW is the time to buy:
#1: THE MARKET IS (CURRENTLY) SOFT
According to the Canadian Real Estate Association (CREA), Canadian home sales are currently 11% below records that were set back in March of 2017. That’s good news if you’re currently in the market to buy because now you’ve got the upper hand (over the sellers).
However, like good old Canadian weather, things can change without notice. If you wait too long, you may risk the tables turning to favour the seller once again.
#2: OSFI CHANGES ARE COMING JANUARY 1ST
The upcoming rule changes by the Office of the Superintendent of Financial Institutions (OSFI) means all borrowers, regardless of down payment, will have to pass a mortgage ‘stress test’. This means that even if you manage to make a down payment of 20% or more, you’ll still have to qualify for the Bank of Canada’s benchmark rate (currently 4.89% at the time of this article) or contract rate—plus 2% (whichever is greater).
As an educator, you probably appreciate examples—so here’s how this new ‘stress test’ will impact affordability:
- Let’s say you’re mid-range on the pay grid and you have a partner/spouse where, combined, your annual family income is $100,000
- Under current rules: with a 20% down payment (assuming a 5-year fixed mortgage rate of 2.89% amortized over 25 years) you can buy a home worth approximately $725,000
- Under the new rules being introduced January 1, 2018: you will need to qualify for a mortgage rate of 4.89%, no matter what the current mortgage rates are—which reduces your buying power by roughly 20% (and that $725,000 home will have to be swapped out for one that’s within the $570,000 range)
If that kind of difference in price affects the type of home you had set your sights on for next year, you’ll want to aim to get your home-buying paperwork signed, sealed, and delivered before this year’s end.
Read more about the OSFI mortgage rule changes, here.
#3: INTEREST RATES COULD RISE AGAIN
In the months since you were off enjoying the summer there have been two interest rate hikes by the Bank of Canada. Those hikes have made credit more expensive in the latter half of 2017, particularly for variable rate mortgages tied to the prime rate (which tracks the central bank’s overnight lending rate). At the same time, long-term interest rates continue to steadily creep up. So if you’re the type of person that prefers to ‘err on the side of caution’ where interest rates are concerned, now could be the time to lock in at current rates before they climb again.
Could you afford a rate hike? Find out using our Mortgage Payment Calculator.
Perhaps one of the main reasons holding you back from moving ahead with a home purchase is not wanting to be locked into a contract if financing falls through?
Well, you don’t need to worry because the ability to request ‘financing conditions’ gives you up to 5 days to secure the home-buying loan. If financing comes together, you move ahead with your purchase as planned. If not, you can pull out knowing there will be no consequences or penalties.
Get a jump on YOUR home purchase before the end of the year with a mortgage made exclusively for education members.
No matter where you are on the pay grid or how much pension income you’re collecting in retirement, Educators Financial Group can work with you to provide the right mortgage solution that falls within your needs and budget.
Have one of our Agent-Directors contact you about our educator-specific mortgage solutions.
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The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.