With the buying frenzy from last year now over buyers are contemplating whether or not to buy a home with the higher interest rates, higher payments and lower prices. Last year was the opposite of where we are today so you need to take the time and see if it actually makes sense to buy now or not. Below are two examples of how you can run the numbers for a particular property.

Scenario #1 – House priced at $1.5 million last year now selling for $1.2 million this year.

2021
Price:  $1,500,000
Down Payment:  $300,000
Mortgage:  $1,200,000
Interest Rate (approx):  2.0%
Payment:  $4435/month

Nov 2022
Price:  $1,200,000
Down Payment:  $300,000
Mortgage:  $900,000
Interest Rate (approx):  5.5%
Payment:  $5110/month

In this example, the payment based on todays’ current rates and lower prices would be approx. $675/month higher than it would have been under the scenario from last year. This amounts to $40,500 in total extra payments over the 5 years ($675 x 60). However, in this example the price reduction of $300,000 far exceeds the extra amount made in payments.

Scenario #2 – House priced at $1.1 million last year now selling for $950,000 this year.

2021
Price:  $1,100,000
Down Payment:  $220,000
Mortgage:  $880,000
Interest Rate (approx):  2.0%
Payment:  $3255/month

Nov 2022
Price:  $950,000
Down Payment:  $220,000
Mortgage:  $730,000
Interest Rate (approx):  5.5%
Payment:  $4145/month

In this example, the payment based on todays’ current rates and lower prices would be approx. $890/month higher than it would have been under the scenario from last year. This amounts to $53,400 in total extra payments over the 5 years ($890 x 60). Again, in this example the price reduction of $150,000 far exceeds the extra amount made in payments.

First of all, with rates being higher this year you need to determine if you can afford the mortgage payment based on the scenario you are looking at. This is the first and most important thing to consider. Next you need to run the numbers and see what the home was worth last year. You can then determine what the difference is between the higher payments versus the reduced price.

We can run any scenario for you to determine whether or not it makes sense for you to buy in this market or not. Just send us an email or give us a quick call and we can run the calculations for you so you can make the best financial decision for yourself.

If you need more information regarding mortgages or if you need any advice on your personal situation please contact our office at 604-556-3893 or email at alex.kotai@ymscanada.ca.

For more information on our mortgage products and your preferred Abbotsford Mortgage Broker please visit our website at www.ymscanada.ca.