Unless you’ve been living under a rock in the past few days, you will have seen and heard about the BoC Interest Rate increase of a full basis point or 1%. As unexpected as it was, it was truly out of necessity due to inflation. That being said, IMO, could the BoC put the wheels in motion earlier for interest rate increases due to the fever pitch in the real estate market, absolutely! Now, they are playing catch up. This is truly going to knock some buyers out of the market and revise the wish list for others in their purchase. Purchasing power has drastically been affected; however, I’ve always had the authentic and transparent conversation with my clients about being approved for, as an example, $1,000,000 but spending, max, $700-$800,000. I guess I’ve always been a ‘rainy day’ kind of person, expecting the unexpected and being prepared. So, spending less than what you’ve been approved for allows for extras like curtains or new appliances or replacing a roof that you were expecting to replace so quickly. Being mortgage poor is never a good place to be. Paying someone else’s mortgage in rent, also not good. If you can afford $3000/month in rent and you are pre-approved for a mortgage at $2400/month, why would you continue renting? I received a fantastic mortgage payment calculator from Jordan Lee at The Vine Group, what a great idea this is. This calculator allows you to play around with amortization, include insurance premiums (if your downpayment is less than 20% as an example), and run different scenarios based on the price of a property or the interest rate increasing. Click on this link to access - https://www.vinegroup.ca/payment-calculator. Have that conversation with Jordan or your lender directly. Increased interest rates means you are qualified at an increased rate, drastically impacting what you can afford. Example, on a variable interest rate mortgage, with the additional 1%, your costs would increase $50-$55/month for every $100K borroweed. On a $500K mortgage, your monthly increase would be $275, on $1mil mortgage, a rough increase of $550/month. At the end of the day, you are the one paying your mortgage, not me, not the lender, not the bank. Reach out to me, always open to a conversation over coffee.
Jordan Lee can be reached at 416.451.8057 or Jordan.firstname.lastname@example.org