Cost avoidance when buying a house
There is a constant debate about whether it’s better to put 20% or more down on a home or if you have 5% down ready, that you should jump into home ownership. We don’t believe there is truly a right or wrong answer to that. The change in your monthly payments between the two options is typically minimal, especially with your first home, remember, these payments are spread out over 25 years
There are some things to consider given our market now though. Ottawa typically has very steady and conservative growth, 1-2% per year is what we usually see. This year we have seen growth of 5-8% in monthly statistics (July 2016 vs July 2017). That could mean that the home you once had your eye on could jump from $325,000 to $351,000, an added cost of $26,000 for waiting.
Another important factor is the interest rate. It wasn’t long ago that it was possible to get interest rates as low as 2.0%, the interest rates today posted by Ottawa Mortgage Brokers for a 5 year closed mortgage is 3.34%. We don’t foresee dramatic hikes in interest, but we do believe these are the lowest they will be over the next 5 years. What will an extra 0.5% of interest do to your mortgage payment?
The last point to consider is where your money is going now. Are you paying high rent and not able to put large amounts aside for savings? A home can be like a savings account, especially for people who can easily live within a budget, but have a hard time putting money into a savings account. There are aspects that are similar to rent, money you won’t get back, like condo fees, taxes and interest. However, the equity that you’re building, especially in a strong market like Ottawa, will be waiting for you when you sell your home.
It’s important to have trusted advisors to go over all of the scenarios with you when making this decision. Our team is dedicated to making sure you make the most of your money and that you’re making the right investment decisions for your 2yr, 5yr and 10yr plans in real estate. Have a question about this? Get in touch with us to make sure you’re on the right track!
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