Should I buy a property now?

Hi! Welcome to my blog about health and wealth.

This time it about buying a property.

We are going to talk about the interest rate and financial aspect of purchasing a home.

The biggest concern when buying a property is the interest rates.

Current prime interest rate, October 8th,2023, is 7.2%.

If we put this in to a reality, then things are easier to understand why the interest rate is a concern.

Current PEI average price of single family houses sold are about $400,000.

These houses in average have 3 bedrooms and 2 bathrooms.

20% down payment on $400,000 will be $80,000.

Mortgage will be $320,000 and 7.2% interest rate will give us $2,280.98 monthly interest payments.

Now, depending on the financial institution, amortization period, and mortgage term, the interest rate will vary.

It can be lowered, and it is your duty to find the lowest rate.

I am not a mortgage specialist, and these numbers are just to simulate the transactions when purchasing a property.

To purchase a single family 3 bed 2 baths in PEI, you need to make $2,280.98 a month.

Just to pay the bank.

There are other bills, like grocery, heating, electricity, taxes, car, insurances, and internet.

Each family will be different, and having a child or children will make these numbers change drastically.

Just to simulate the situation, two adults and two children (age between 0~11), $1,608 each month will be needed just for essential needs.

The number is based on the basic unit rate of social assistance program in PEI.

The government would have calculated the very basic cost of living in PEI per person, and I used the number.

It comes to then minimum of $3,888.98 is needed each month to have a place and basic needs to be met.

This does not calculate extra costs like property taxes, water and sewer, maintenance costs, etc.

Realistically, you will need to earn about $5,000 dollars each month to live comfortably, if you have to buy a house.

Remember $5,000 dollar is after tax not before tax

Due to this reason, it is cheaper to rent a $2,500 apartment, and not worry about extra costs.

The problem is a landlord when renting, and that is another topic itself.

There are many factors contributing to the reason why you should buy a house, but financial capability is a hindering factor.

My recommendation to a purchaser is that buy it if you really need it, and if you can purchase it.

Getting a pre-approval will help you to know the limit, and save time and efforts.

Using a first time home buyer program is another possibility to reduce the down payment and getting a place.

Mortgage payment amount will increase though.

Not necessarily a good choice in terms of amount of interest payments.

If you have money which is needing to be spent or make a large down payment to significantly reduce the mortgage payment, then this is the best time to purchase a property.

Waiting a little may bring the price down on a property, but it would not be exaggerated like Toronto or Vancouver.

These are informational purpose and should not be treated as legal, medical, or professional advices. Please ask your medical doctors or local experts about their advices.

#stressed #interestrate #realestate #shouldibuyornot #buyifyouhavemoney #waitifyoudonthavemoney #preapproval

Sources

“Daily Digest.” Bank of Canada, www.bankofcanada.ca/rates/daily-digest/. Accessed 9 Oct. 2023.

“Mortgage-Calculator-Result.” Canada Mortgage and Housing Corporation, www.cmhc-schl.gc.ca/consumers/home-buying/calculators/mortgage-calculator/mortgage-calculator-result?mc_PurchasePrice=%24400%2C000&mc_DownPayment=%2480%2C000&mc_AmortizationPeriod=25&mc_Interest=7.2&mc_Frequency=1. Accessed 9 Oct. 2023.