The post-pandemic housing market has experienced extreme price and interest rate hikes along with intense biddings wars. Supply chain disruption and low housing supply have created the conditions for a seller-friendly market, leaving buyers to fear a prolonged or worsened imbalance. If you are a buyer in today’s market, you can stay active without making a panic purchase. While you seek the right opportunity for you, place an emphasis on prioritizing your personal finances and increasing your market knowledge so that you can buy a home when the timing is right.
Rate-proof your budget
While you keep an eye on the market, you are watching interest rates closely. Invest some time into “rate-proofing” your budget by considering how much you can afford in the different scenarios of probable future mortgage rates. Test out a range of rates using an affordability calculator, so you have a noticeably clear picture of the effects any potential mortgage rate would have on your monthly costs. Mortgage applications are currently down as interest rates are up, due to the increased unaffordability seen with higher rates. Someone who took a variable rate mortgage before may be struggling to pay their mortgage soon based on the rising rates and increased monthly payments. Keep in mind that new homebuyers and any existing homebuyers looking to secure a new mortgage will now need to qualify under a higher stress-test guideline.
Save up for a down payment
An unwanted delay in the ability to purchase a home could have a positive effect on your purchasing power down the line. Use this time to continue building your down payment. The first thing you should do is to pay off any residual debts you may have, starting with any high-interest credit cards. You cannot save money if you are paying interest to someone else, and if you attempt to apply for a mortgage with too much consumer debt, you are unlikely to qualify. A professional credit counsellor at a non-profit credit counselling organization can review your finances and advise on the best course of action.
Homebuyers today often need to diversify the source of their down payment as prices continue to climb. The first natural source is from saving. Keep in mind that budgets you have been using for the last few years may no longer be accurate or effective due to rising prices. Keep an eye on your spending and do a quarterly audit. In addition to savings, you can withdraw up to $25,000 from your RRSP to buy your first home, and the funds are tax-free if you replace the value within 15 years. A TFSA is another place to save your down payment dollars, as the money grown within the account is tax-free. Now is the time to get your finances ready to go so that you can jump on a home purchase if the opportunity presents itself.
Stay up-to-date and educated
If you are a first-time homebuyer, it is particularly important to become thoroughly educated on the ins and outs of real estate along with the eccentricities of the area you are seeking to purchase in. Know the industry terminology and understand the trends. If you educate yourself, you will feel more confident putting in an offer on a quick turnaround, as we have seen become so common in this competitive market.
Instead of trying to time the market perfectly, consider your own personal timeline. Because the market is unpredictable, it may be more beneficial to focus on buying a house when it is the perfect timing for your life rather than waiting for a downswing. Make sure that fiscally and logistically, you are ready to jump and make an offer when you do find the home that is right for you.