Rates are going up, prices are going down, the market is going down…the sky is falling!!   In 2008 I started hearing that we have a real estate bubble in Canada and that it will burst when the US Real Estate Market started to collapse.  I heard it again prior to the Winter Olympics in Vancouver last year – clients were not buying thinking that prices will fall after the Olympics are over.  Now I am hearing it again.  No wonder consumers are confused if now is a good time to buy a home or should they wait.

I have a tool that will help you decide if it is a good time to buy now or not.   It is a calculator that simulates different scenarios: if house prices rise or fall, and if rates rise or fall.

Here is an example…

If you bought a home for $400K today with 5% down and at a 4.09% interest rate, your monthly payment will be $1,880.  If by chance the price falls by 5% to $380K your monthly payment will be $1,786 - a difference of $94.  Wow, you are probably thinking, that’s not a bad deal.

However, we do know today that rates are going up, that is a fact.  If rates do go up by .50% and the price does fall to $380K, then your monthly payment is actually going to be $1893, $107 higher than had you offered on the $380K home at the lower rate.

Let’s say the price does not fall and you buy later paying a .50% higher rate. Then you will be paying $113 more per month for the same house.  This also becomes even more expensive should the price rise instead of fall.  A 5% price increase at a higher rate will cost you $213 more per month!

These numbers speak for themselves.  Buying now when rates are low is better than buying later when rates are higher. Your monthly borrowing cost is higher for the same house price or for a cheaper home.

Those who waited, and didn’t buy in 2008 are now kicking themselves because they know that they would have paid less had they bought in that year.

One final note.   Purchasing a home to me is a personal decision.  I have decided to take control of my Wealth, Security, Freedom and Basic Shelter.  I am not going to speculate and time the market and hope and pray that prices will drop.  How do I know it’s going to drop, and when?

I do know that I want Wealth, Security and Financial Freedom.  To me they are very strong reasons to buy.  I would rather buy for myself and my reasons instead of the market speculator’s reasons…they are not even related to me so I am not going to let them influence my decision.

Thanks for reading!

We welcome your questions and feedback.

Bernadette Laxamana’s Mortgage Update – English Version

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