Unlike last year, interest rates are terrifying; they can turn your mortgage payment from a molehill into a mountain. But what if I told you now is a great time to buy a house. No, I'm not crazy; let me lay it out.
Interest rates were increased to help slow down the housing market to keep housing prices under control. This has worked; we are still seeing houses go over asking but not to the extent we were in 2022. This comes from the borrowing cost being more expensive in 2023 vs 2022. The Bank of Canada's plan is working, and houses are selling closer to the list price. And here's the rub.
When you purchase your house, you're locked into that price. If you bought it for that amount, you don't get to go back and renegotiate that price. But you know what does change throughout owning your home? Your mortgage rate every term, you get to renegotiate your interest rate. Remember the total duration of your mortgage has multiple terms within it. Let's say you have a 25-year mortgage, meaning you agree to pay back the money your lender lent you in 25 years, but within that agreement, you have these little terms. These terms are little chunks of time that you agree to an interest rate to pay for borrowing the money (variable rate is a bit different but still a similar idea). At the end of these terms, the lender will ask if you want to renew; remember, they want your business, and you're the customer. Ask them if they have a better product for you. Or even shop it around to other lenders; the savings in interest might be more than the penalty to change lenders.
With all that said, if you can handle a few years of higher mortgage payments, you'll get yourself more houses for your dollar. When it comes time to renew your mortgage, interest rates might be closer to the pre-pandemic levels, well ahead of the game, and on your way to your dream home.
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