Right now in Alberta we have seen better days both on employment and the housing side of things. Why? Well that is a whole new conversation or debate that we don’t need to get into in this blog. For some first time home buyers they are still looking at purchasing their first home. But of course everyone has that one friend or family member that says now is not the time to buy, home prices will come down. You start to think, should I buy? What do I do? Well looking at the numbers is great start. It is very hard to argue numbers when they are in front of you.
Mr & Mrs Buynow are looking at a $350,000 mortgage for their first home. They are looking at amortizing the home for 25 years and looking to take advantage of today’s crazy low rate of 2.39% on a 5 year term. This would make for a bi weekly payment of $775. After just 2 short years of paying this mortgage their remaining balance will be just over $325,000.
Mr & Mrs Waitnsee listened to that friend or family member and waited 2 years to buy their first home. Lets say home prices went down $20,000 and now that exact same house is now $330,000. WOW, what a great deal! It is now 2018 and the Waitnsee’s go to get their mortgage. They find out rates are not at their all time lows like they are now but the rate didn’t go up a whole bunch and now they are looking at a 5 year rate of 2.79% (still a fantastic rate!) Their mortgage payment is $763 biweekly.
So lets break down what we have for differences in our families now that we are in 2018.
Mortgage remaining – $325,000
Rate – 2.39%
Remaining amortization – 21 Years
Mortgage payment (BW) – $775
Rent paid – $0
Mortgage remaining – $330,000
Rate – 2.79%
Remaining amortization – 25 Years
Mortgage payment (BW) – $763
Rent paid – $28,800 ($1,200 per month)
That is a pretty big difference. Not only are the Buynow’s $5000 ahead on their mortgage but they are also 4 mortgage years ahead thanks to a accelerated Biweekly payment. Their interest rate is lower but their mortgage payment is $12 higher because of the higher mortgage start. But guess who will pay more interest in their first 2 years? Even though the Waitnsee’s mortgaged $20,000 less than the Buynow’s, they will pay $1625 more in interest in their first 2 years of mortgage payments. That is the power of a lower interest rate. All of these benefits on the buy now side and we haven’t even looked at the fact that the Waitnsee’s paid $28,800 towards another persons mortgage for 2 years in paying rent.
****This Blog is in no way saying that home prices will be going down or rate are for sure going up. This is for information only****
There are many different ways to set up a mortgage and no mortgage is really the same. Getting a mortgage is an exciting time for a first time home buyer. Make sure you look at all the facts before you decide to buy or not to buy. Use a mortgage broker as they know the many differences in the mortgages.
Thanks for Reading
AMP, Accredited Mortgage Professional
DLC Regional Mortgage Group