It feels like it’s impossible to ignore the price increases on food, fuel, and other important purchases in your life. With the climbing increase of inflation, many feel that it is tough enough to support their homes vs. thinking about a mortgage.
Of course, when things get more expensive, and there are economic changes, that also affects mortgages and home financing, and that’s exactly what we’ve seen happen this year. In an attempt to keep inflation in check, the Bank of Canada has been raising interest rates that have been low for a long time, and it’s been hitting a lot of Canadians in the wallet. Here’s what you need to know about how interest rates affect how much home you can buy and how a mortgage broker can help.
Small Percentages, Big Difference
When most people hear that interest rates have gone up 1%, they probably don’t think too much about it. If you saw a 1% increase in the cost of products, most of the time, you wouldn’t notice it. However, 1% can be a huge change when it comes to the overnight rate.
An increase of 1% interest means you will pay an extra dollar for every $100 you used to pay. It might not sound like a lot, but it could add hundreds to monthly payments, which puts additional financial stress on a household that is already trying to adjust to inflation.
Less House for Your Money
Another problem for would-be home buyers when interest rates go up is that it changes the affordability calculation that is done before you can qualify for financing. To ensure that people can afford to pay for their homes, the Canadian government has a fairly rigid stress test, and when interest rates go up, that means you’ll have a harder chance of qualifying for a mortgage.
Possible Market Cooling
While most of the news about interest rates is not great, there is an upside, which is that it has caused the housing market to cool slightly. That means that homes – even in very popular cities and areas – are selling for a little less than they used to. So, while it may be harder to get a great deal on a mortgage, it is a good time to start thinking about buying a home when the market starts to cool.
A Mortgage Broker Can Help
A mortgage broker is an asset when interest rates are low, but they’re an absolute necessity when they’re high. Mortgage brokers can access all the potential financing options you might qualify for. They can advise you about government home buying programs, and they can even calculate how much of a difference various down payments will make to your monthly expenses. Mortgage brokers have all the tools at their fingertips to help you make the right decision and still get you into the home you want.
If you’re looking to get started on your mortgage journey, or if you already have a mortgage and are considering trying to use the mortgage to your advantage, contact one of our expert mortgage brokers. Our team is ready to help you get into the best mortgage situation possible. You won’t know if you can handle a mortgage until you talk to a mortgage expert. Contact us today by visiting our contact page at https://mortgagebrokeralberta.ca/