I am always amazed when I read these types of articles. More often than not, the couples they interview are in very good financial positions and have a number of options when considering to purchasing real estate. Yet, every time advisors advise them to wait and buy later. Save more money for 4-5 years and then consider buying once you have a LARGE savings built up, around 25%.
Why is this the only solution given? Especially when dealing with a volatile product such as real estate? Waiting 4-5 years could do good, however, considering the market were in, buying in 1-3 years might be a better use of your money should prices drop and interest rates remain low. By sticking with a 5-year buying plan, thousands of dollars in built up equity could be missed. By not looking outside the 3-bedroom house dream and considering a smaller unit, say a condo, potential ownership could be postponed for longer than hoped. What if prices don’t lower, interest rates get higher and mortgage rules change again. I always believe there is some “extra” value in entering the market with a lower cost investment to start. Refinancing options can give opportunity to use the equity when you are ready to upgrade, while possibly keeping your first property as a rental.
I urge couples and individuals to take a serious look at your financials. Understand that timing is important, but to take advantage of it, you also need to be watching the market. A plan that doesn’t involve watching and understanding what’s happening in the market and how interest rates are changing, is a plan that could potentially cost you.
Work with a financial planner and a mortgage professional so you have an expert working with your best interests in mind. Consider filling out a mortgage application, even if you feel your not ready to buy now, it will get you an idea of what you can afford. Do it again in a year or year and half. Review what has changed and learn how theses changes effect your buying power. By doing that simple step, you will be able to identify when the time is right for you to purchase, taking into consideration your current income, down payment, expected mortgage approval, and the market prices.
…”Although their income will more than double once Carrie begins working, “we don’t feel we can buy into the Vancouver real estate market because the costs are still astronomical,” Jordan writes.
They are looking for a three-bedroom house because they are planning to start a family at some point.
“We’re dead set against moving to the fringes of the city just to afford a house,” Jordan writes. “We’d rather rent than give up our lifestyle.”
Their question is twofold: What should they do with the down payment money they have saved – proceeds from the sale of their previous house plus savings – until they can afford to buy; and how long must they wait before they take the plunge into the high-priced Vancouver real estate market?”…Read More.