Posted on: 07-04-04 23:10:30
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Originally posted by beautysaloon
Now we're thinking of buying a house again, but don't know if we can get anything brand new for a mortgage of about $1,500 a month. That's the max I want to be able to afford right now and I don't want to go for older housing coz just looking at the state of apartment facilities here I know we're not going to have a pleasant experience with an older house. Any advice?
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$1500 would pay a mortgage of around $265 K ( on a 5 year fixed rate) or a mortgage of more than $280 K if some one takes a variable mortgage. Hence, if you are putting only 10% down you can go for a house up to $290 K to $300 K. Of course, on top of it you would still have to pay property tax (could be up to $300 per month) heat & hydro (up to $200 p.m) and cable & phone etc. However, out of this $1500 you would be paying more than $500 towards your principal amount per month which will be your 'forced saving' and would go towards making your 'equity' in the house. And there is always a chance of house price escalation. While on the other hand whatever you pay in rent, that is effectively gone down the drain. Hence, it is up to you to calculate what is the best scenerio for you.
The interest rates are so low it really makes sense for some one who is paying a high rent to seriously consider buying one's own property.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks for yr response Pramod. We used to have a conventional rate mortgage in the US and this time I'm thinking we'll go for a variable one. But no one knows what interest rates will be like next year, right? So I'm a bit wary. 
Yr advice is good tho, but can anyone tell me what the resale market here is like? We move around a lot, atleast that's been our pattern historically, and I don't anticipate it changing anytime soon. So, if we decide to move again, we'd want to offload the house quick, and absolutely no idea if the real estate market here moves in days or centuries. So that's one reason why we're still paying high rent. What is currently the best suburb to buy and sell property in?
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i am back 
Beautysalon,
From the look of it, the interest rates do not seem to go up in the near future ( say 2-3 years) because of the state of economy. In any case, it is advisable to go for variable rate now since the difference in variable and say 5 year fixed is a good enough cushion to provide for increase in next 3-5 years meaning thereby, chances are that even with the rate going up say after two years, at the end of 5 years you might have ultimately saved on interest or paid just slightly more.
One more good thing is that with a low interest rate, the % of money going into your equity from the very start is quite high - at 4%, it comes to about 36% of your installment, while at 5%, it changes to 31% or so if I remember correctly.
I have been in the same boat, or perhaps worse than yours and I have finally decided it is high time I buy - I have seen the prices of same/similar houses going up from 325k to 425 k in last 3.5 years, and I have personally been in the market for purchase for last 3 years!
But the only thing to remember is:
- a house in a good locality always appreciates more than others, whether it be economic boom or recession, and
- usually, anything above 350-400k even with recent rise in property market takes more time to sell than a property of say about 300k or less, simply because there are more buyers for the same.
My 2 cents (which one? US or CAD?)
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Chandresh
Advice is free – lessons I charge for!!
Quote:
Orginally posted by chandresh
Beautysalon,
From the look of it, the interest rates do not seem to go up in the near future ( say 2-3 years) because of the state of economy. In any case, it is advisable to go for variable rate now since the difference in variable and say 5 year fixed is a good enough cushion to provide for increase in next 3-5 years meaning thereby, chances are that even with the rate going up say after two years, at the end of 5 years you might have ultimately saved on interest or paid just slightly more.
One more good thing is that with a low interest rate, the % of money going into your equity from the very start is quite high - at 4%, it comes to about 36% of your installment, while at 5%, it changes to 31% or so if I remember correctly.
I have been in the same boat, or perhaps worse than yours and I have finally decided it is high time I buy - I have seen the prices of same/similar houses going up from 325k to 425 k in last 3.5 years, and I have personally been in the market for purchase for last 3 years!
But the only thing to remember is:
- a house in a good locality always appreciates more than others, whether it be economic boom or recession, and
- usually, anything above 350-400k even with recent rise in property market takes more time to sell than a property of say about 300k or less, simply because there are more buyers for the same.
My 2 cents (which one? US or CAD?)
Well said Chandresh ji,
The property prices have gone up significantly in the last 3-4 years and are still not showing any signs of slowing down, mainly because of the historic low rates. The rates have been on the lowest for the last 50 years for both variable and fixed rates. As per CIBC assessment today which is posted here (Prime rate predicted to drop to 3.50% & stable in 2005, Weakening Dollar, TSX to 8500 from 8220 in 2002 which is modest, less than 10% growth, unmployment stable for 3 years, Big news on the election and perhaps a minority Government). All this means that there would be not let up in the housing market and at least for this year and next potential buyer should opt for 'variable rate' only which would save them significantly in interest over fixed rate payments. In fact is someone gets a variable rate of say prime - .75% and the payments are set as per 5 year fixed rate, that person would be paying more than 50% towards principal from the very first payment. Hence it really makes sense in buying versus renting ( specially for those people who are paying high rent).
To answer beautisalons question, there is lot of new construction going on in Markham, Vaughn & Brampton wherein you can certainly find something in your budget as per your requirement. Should you need any help or other clarification, you can send me a personal email and I shall be happy to answer your questions.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
thank u guys, this is REALLY helpful advice. I'm going to show it to my husband and hopefully he'll see the light.
sorry about derailing the original thread btw.
thanks again!
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i am back
Hi I guess you have landed there today. I am myself landing in toronto on th 12 of May . Id like to know if the temp accomadation was good. All the best .
