Does It Make Sense To Take Out A Loan On The House This Year?
/If you are considering taking out a mortgage this year, there are some things to consider. One of the first things to think about is the current economy and how it is affecting interest rates on mortgage loans. While mortgage rates are a little high, you will have to weigh up whether now is the time to take out a mortgage loan. That being said, you can use higher rates as leverage to get a lower price on the property. Consider your property goals and your financial situation and weigh up the pros and cons of taking out the loan now and hopping on the property ladder.
Consider Interest Rates
The mortgage interest rate is the amount of interest you are charged on the loan against the property. Mortgage rates will vary depending on the size of your deposit, the length of your mortgage term and whether you choose a fixed-term deal or variable rate mortgage. Fixed-term mortgages have a set interest rate that will not change, while a variable rate mortgage has a fluctuating interest rate, based on the Central Bank.
When interest rates are higher, it can be scarier for buyers to commit to a mortgage loan, knowing they will need to pay higher monthly repayments. At the moment, Canadian interest rates are a little high. However, you can position yourself to take advantage of lower interest rates when they fall. You might want to lock in a short-term fixed-rate now and move to a variable mortgage when rates fall in 2023.
Buying Property When Mortgage Rates Are High
Even when interest rates on mortgage loans are on the rise, you can invest in property and make a profit, if you are smart about it. You can actually use high interest rates to your advantage in negotiations.
While you are worrying about high interest rates, consider the fact that the seller knows this and will be worried too. Higher interest rates make it harder for them to sell their property. On top of that, they will be worried that the interest rates will go up again, making their sale even less likely. So, they might want to sell fast and be more willing to meet you at a lower figure.
Think About Your Property Goals
Do you want to buy a home to live in? Or are you thinking of buying to rent, buying to flip the home, or buying a vacation home? Depending on your goals and expected profits, you might decide that taking out a mortgage makes more sense than buying with cash, or not at all.
Buying a rental property is one of the smartest ways to invest your money. Not only are you very likely to benefit from the increased value of the property over time, but you also get a good monthly income from your tenants. Property appreciation is generally expected and the cash flow of having tenants on top of that makes this the most popular goal of property investors.
It Might Make Sense for Your Financial Situation
If you are considering buying your home with cash, think again. It can make a lot more sense to take out a mortgage rather than buy a property outright with cash. For one thing, you may need your cash for an emergency. And for another, when you take out a mortgage this allows you to use the rest of your cash for other investments, thus expanding your portfolio and overall profits.
What’s more, a mortgage is one of the most inexpensive kinds of debt to have. As you pay off your mortgage, you build equity in your home. Then, when it comes time to sell, you will make a profit on the property. You might assume that any debt is bad debt and worth avoiding, but taking out a mortgage actually allows you to get onto the housing ladder, which provides long-term financial security.
As you can see, there is a lot to think about in terms of whether or not you should take out a mortgage loan this year. The slightly higher interest rates right now might put you off, but remember you can use these rates as leverage in property negotiations. Moreover, you can get a fixed-rate mortgage just now and switch to a variable rate when the market changes. Depending on your goals for the investment property, you might decide now is the time to take out a mortgage, or you may consider waiting or paying with cash. The problem with paying with cash is that you might need your cash for emergencies or other investment opportunities.