Although the British Columbia Real Estate Association forecasts that average MLS prices will slightly decline in 2009 and 2010, I still believe now is a great time to buy. Why? Because, amongst others, the interest rates are historically low. People tend to forget that over the course of an amortization period the total of interest paid is close to or sometimes even more than the principal paid. In the table below you will see the effect of a change in interest rates for a $250,000 mortgage with a 30 year amortization.
Interest rate: 4% - Monthly payment: $ 1,188 - Total of interest paid: $ 178,000
Interest rate: 5% - Monthly payment: $ 1,334 - Total of interest paid: $ 230,000
Interest rate: 6% - Monthly payment: $ 1,487 - Total of interest paid: $ 285,000
I’m almost positive that interest rates will go up long before home values will increase again. So if you wait a while to benefit from a decline in selling prices, the advantage most likely will be taken away by an increase in interest rates. Not even to mention that your monthly cost will increase as well. Have you ever considered that with a lower interest rate, you may qualify for a loan you wouldn’t have been able to qualify for half a year ago?
But there are more reasons to buy right now. For one, inventory is high which allows for choice, negotiations advantage and no time pressure. Also, buyers tend to partially renovate or at least makes some changes to the house they buy and the Federal Budget announced a new Home Renovation Tax Credit of up to $1,350 for homeowners who renovate within the next 2 years. For First Time Home Buyers there are even more reasons to purchase now. The same Federal Budget announced a FTHB Tax Credit of up to $750 to help with closing costs such as land transfer taxes and legal fees. Furthermore, the FTHB withdrawal limit from RSSP’s to buy a home is increased from $20,000 to $25,000 a person, which is $50,000 per couple.
And don’t forget about this one. The Province of BC’s Property Tax Deferment Program is now open for everyone who can prove financial hardship. So if you’re eligible, you can have your property taxes deferred for 2 years, which in a lot of situation allows for an additional net spending amount of $200 to $400 a month.
As always, IMHO. Please feel free to comment or give me a call.
Interest rate: 4% - Monthly payment: $ 1,188 - Total of interest paid: $ 178,000
Interest rate: 5% - Monthly payment: $ 1,334 - Total of interest paid: $ 230,000
Interest rate: 6% - Monthly payment: $ 1,487 - Total of interest paid: $ 285,000
I’m almost positive that interest rates will go up long before home values will increase again. So if you wait a while to benefit from a decline in selling prices, the advantage most likely will be taken away by an increase in interest rates. Not even to mention that your monthly cost will increase as well. Have you ever considered that with a lower interest rate, you may qualify for a loan you wouldn’t have been able to qualify for half a year ago?
But there are more reasons to buy right now. For one, inventory is high which allows for choice, negotiations advantage and no time pressure. Also, buyers tend to partially renovate or at least makes some changes to the house they buy and the Federal Budget announced a new Home Renovation Tax Credit of up to $1,350 for homeowners who renovate within the next 2 years. For First Time Home Buyers there are even more reasons to purchase now. The same Federal Budget announced a FTHB Tax Credit of up to $750 to help with closing costs such as land transfer taxes and legal fees. Furthermore, the FTHB withdrawal limit from RSSP’s to buy a home is increased from $20,000 to $25,000 a person, which is $50,000 per couple.
And don’t forget about this one. The Province of BC’s Property Tax Deferment Program is now open for everyone who can prove financial hardship. So if you’re eligible, you can have your property taxes deferred for 2 years, which in a lot of situation allows for an additional net spending amount of $200 to $400 a month.
As always, IMHO. Please feel free to comment or give me a call.
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