Is This the Best Time to Buy Your Dream Home?
- Olu Olu
- Sep 25, 2024
- 3 min read
It depends! When considering the best time to buy a house, several factors come into play, such as monitoring interest rates, assessing housing market trends, understanding the balance of supply/ demand and your personal financial situation. Evolving mortgage policies and governement incentives can also affect affordability, so staying informed is crucial. But most importantly, ensure your financial readiness by maintaining a good credit score, steady income, and enough savings to keep you going after the home purchase.
FAVOURABLE MARKET ANALYSIS
Mortgage Rates Are Easing: The Bank of Canada’s policy rate has gradually decreased, with most forecasts predicting it will settle around 2.25%–2.75% for the rest of the year. Five-year fixed mortgage rates are now in the 3.7%–3.9% range, making borrowing more affordable than in recent years. It also helps that homeowners are now allowed to chose a 30-year amortization effective August 1, 2024.
Home Prices Are Stabilizing: According to Canadian Real Estate Association (CREA), home prices and sales volumes are somewhat stable with a forcast for an increased activity level by next year 2026. This may provide a window of opportunity for some prospective homebuyers. See more details in the graph and table below.
BUT ARE YOU FINANCIALLY PREPARED?
Even though the macroeconomic outlook is positive, buying a house will likely be the single biggest purchase of your life. Therefore, it is crucial to properly assess the cost implications to ensure a less stressful outcome. Below are some of the main cost elements to consider:
Down Payment: Typically 5-20% of the home’s price, depending on the mortgage type.
Closing Costs: Fees for legal services, land transfer tax, inspections, and other administrative expenses, typically 1.5-4% of the purchase price.
Mortgage Payments: Ongoing monthly payments based on the loan amount, interest rate, and amortization period.
Property Taxes: Annual taxes based on the property’s assessed value, paid either monthly or annually.
Home Insurance: Protection against damage or loss, typically required by lenders.
Maintenance and Repairs: Ongoing costs for upkeep, repairs, and renovations.
Utilities: Monthly costs for water, electricity, gas, and other essential services.
Homeowners Association (HOA) Fees: For condos or homes in specific developments, there may be additional fees for shared services or amenities.
WHAT CAN YOU DO TO BE PREPARED?
✅ Build a Strong Down Payment: Aim to save at least 20% of the home’s purchase price to avoid mortgage insurance (CMHC premiums). Start by setting up a dedicated savings account or utilizing tax-free savings options like a TFSA.
✅ Improve Your Credit Score: A good credit score can help secure lower mortgage rates. Pay off outstanding debts, avoid late payments, and keep your credit card balances low to strengthen your credit profile.
✅ Get Pre-Approved for a Mortgage: Mortgage pre-approval gives you an idea of how much you can borrow and locks in an interest rate for up to 120 days. This makes you more confident and prepared when making offers.
✅ Budget for All Costs: Beyond the down payment, factor in closing costs (legal fees, inspections, land transfer tax), moving expenses, and property taxes. Make sure you have at least 1.5-4% of the purchase price for these expenses.
✅ Set Aside an Emergency Fund: Unexpected repairs or financial changes can arise after purchasing a home. Having three to six months' worth of living expenses saved can protect you from financial stress.
✅ Take Advantage of Government Programs: Use programs like the First-Time Home Buyer Incentive or Home Buyers’ Plan (HBP) to withdraw from your RRSP without penalty for a down payment.
✅ Understand Your Monthly Affordability: Calculate your monthly budget, including mortgage payments, property taxes, insurance, and utilities, to ensure you can comfortably afford your home. ✅ Stay Up-to-Date: Keep in touch with you financial advisor, real estate agent, mortgage broker and other professionals to keep abreast with market trends and opportunities. Also do your due dilligence by leveraging reputable information sources and platforms.
Contact us today to ensure you're financially prepared to buy that dream home🏠!
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