No wonder, the prices of real estate in Canada are going up. The reason behind this trend is – an abrupt increase in Immigration over the last few decades. Inflation is no more a secret now, and as a result, interest rates are also increasing. In this situation, if you are planning to buy a house, here are a few tips to follow when buying a house at a higher mortgage price.
Opt for a short-term strategy
According to the Bank of Canada, by all means, Bank is seeking to lower inflation to 2%.
Since it is expected that there may be a drop at the end of 2023 or at the start of 2024. I suggest making a short-term strategy.
Alternatively, fixed rates are expected to move faster. Hence, as soon as inflation starts to drop, bonds will go down.
We must not forget that every time the population increases by more than 1%, the real estate market rises by 3%. Now, as the population rises by 1.5% in 2022, the housing market is expected to have a 5% increase in property prices.
Market Research
Thoroughly research the real estate market in the area you plan to invest. Look for trends in property prices, rental demand, job growth, and economic indicators. Understanding the local market dynamics will help you make informed decisions.
Affordability and Cash Flow Analysis
Rising mortgage rates can impact the affordability of properties. Conduct a cash flow analysis to ensure that you can cover your mortgage payments and other expenses while maintaining a positive cash flow.
Lock-in Interest Rates
If you’re obtaining a mortgage, consider locking in your interest rate to protect yourself from further rate increases during the application process.
Consider Fixed-Rate Mortgages
If you have a long-term investment plan, consider opting for fixed-rate mortgages. These provide stability as the interest rate remains the same throughout the loan term, shielding you from rising rates in the future.
Negotiate Purchase Price
In a rising mortgage rate environment, sellers might be more willing to negotiate on the purchase price. Use this opportunity to try to secure a better deal.
Monitor the Economy
If you have a long-term investment plan, consider opting for fixed-rate mortgages. These provide stability as the interest rate remains the same throughout the loan term, shielding you from rising rates in the future.
Review Financing Options
Explore different financing options and lenders to find the best terms that suit your needs. Shop around for competitive rates and loan products.
Factor in Exit Strategies
Consider various exit strategies, especially in case you need to sell the property in a changing market. Be prepared for different scenarios and have a plan in place.
Seek Professional Advice
Consult with a financial advisor or real estate expert who can provide personalized guidance based on your financial situation and investment goals.
Remember, rising mortgage rates can affect the affordability of properties, but they don’t necessarily mean the real estate market is not a good investment. A well-researched and strategic approach can still yield profitable opportunities even in a changing interest rate environment. Our advisors are happy to answer all your questions and help you make the best buying or selling decision.