There’s so much media hype and so many sensationalized headlines grabbing our attention from every direction.
Let’s cut through some of the noise around interest rates and buying a home.
Obviously you can’t even begin your home search without knowing what you are able to spend. This CRUCIAL first step involves having a conversation with a qualified mortgage professional.
I don’t know about you, but every day I’m bombarded with offers for a new credit card, an increased credit limit, and, no doubt if I were in the market right now to buy a home I would be inundated with interest rate offers.
It’s important to realize and truly understand that these offers coming from a financial institution (aka The Bank) are all the same sh*t.
The smiling friendly people that you connect with at your bank have no differentiation between selling you a credit card with a 20% interest rate or a mortgage with a 5% interest rate. They are salaried employees hired to hit a monthly sales quota and sell products to make the bank money, not to help you make major financial decisions about your present and future.
I’m not discrediting anyone out there working hard to make a living, I just want you to understand that the bank is there to earn a profit from YOUR hard earned money in any way they can.
We’re all brainwashed to chase the lowest rate because hey, who doesn’t want cheap money!? But what you’re saving in the short term could cost you big time in the long term. As with everything in life, a mortgage contract comes with conditions and this is where it’s important to read the fine print.
For example, what if you get a great low rate and something comes up where you need to refinance to leverage the equity in your home, but the terms of your mortgage don’t allow for that. The only way you can break your mortgage is to sell.
Or what if you are forced to sell early due to a job relocation and in order to do so you need to break your mortgage early, and it comes with an enormous penalty that eats away all of your hard earned equity.
Buying a home is something to be taken seriously and designed with your current and future wealth goals in mind. This starts with building the right team of professionals who have YOUR best interests at heart.
So before you go bouncing around from bank to bank shopping for the best possible rate remember that by doing this you’re:
1. Eroding your credit score, and;
2. Red flagging yourself for when lenders look at your file.
Buying a home ideally should be treated like starting a small business - think of it as the blueprint for success tailored to your unique home buying goals.
Start with the end in mind. How long do you want to live in this home for?
At the end of this timeframe will you keep the property as part of your real estate investment portfolio or will you sell it to move up in the market?
With these two questions in mind what areas are you focused on?
Will these areas support your goals?
More importantly, will these areas support your lifestyle?
A home still needs to be a home!
Do you have the right team in place to help you achieve your goal of owning real estate?
A mortgage broker who can shop around for you and find you the best terms that suit your life goals?
A good realtor who understands the complexities of the current market and can educate you about recent sales, rents, zoning and growth projections, and guide you through the process?
An insurance agent who can ensure that you are properly covered, especially in a condo purchase?
A trusted home inspector who can point out any major upcoming expenses that may not be obvious to the eye?
Remember, interest rates are only a tiny fraction of the equation. Once you’ve established the direction you want to go in then you can structure your mortgage accordingly to avoid costly penalties which could end up saving you thousands of dollars more than you would by just getting a low rate.
Now that you’ve got a plan in place it’s time to grab your favourtie pair slip on shoes and let the search begin!
