Mortgage Rates: Should You Rent Or Buy?

It’s no news that the big banks, headed by RBC but swiftly followed by Scotia, BMO and TD, have slashed their fixed five-year mortgage rates earlier this year, on the heels of fallen funding rates. 

Now the word on the street is the growing concern about the upshot anticipated higher rates will have on home buyers who have signed up for bloated mortgages on unusually low lending rates. 

Does this mean Canadians without deep pockets, that is mostly everyone, will soon be better off renting than buying?

How close are we to this boiling point?

As of now Bank of Canada forecasts mortgage rates going up, but only slightly in the short-term. 

More specifically, one-year interest rates are expected to hover at 3.24% in the first quarter of 2015 and then edge up to 3.60% in the fourth quarter. 

Five-year mortgage rates are seen inching up to 5.14% in the first quarter from present 4.99%, and increase to 5.65% in the fourth quarter. 

In other words, the low interest rate epoch may soon be closing in on us. 

The accepted truism in our society is that we should buy real estate which, for most of us, means taking out a mortgage, in lieu of renting because it’s a meaningful investment over the long run. 

But despite the historically low interest rates, the skyrocketing prices and maintenance fees – coupled with the anticipated rise in interest rates – are forcing many potential home buyers to postpone or rethink buying a home. 

And don’t forget that mortgage experts generally agree you should spend no more than about 30% of your household income on housing outlays. 

Bearing all this in mind, many potential home buyers might be better off renting for a while and putting their saved money into another investment that could earn more in the long run. 

You might be one of them. 

“I wish I’d known!” - 4 Tips for a Mortgage for First-Time Home Buyers

It would be nice if life came with an instruction manual… But it doesn’t. So when you’re looking to buy your first home, it can be easy to become overwhelmed with questions over this confusing process. Here are 4 tips for getting a mortgage for first-time home buyers. These are the “I wish I’d known” instructions that previous homeowners have found out… the hard way! Learn from their mistakes!

Tip #1: Be credit-rating savvy

Great mortgage rates are largely influenced by your credit rating. The better your credit, the better mortgage rates you may get on your mortgage. Therefore, if you are a first-time home buyer who is thinking of getting a mortgage, even if it’s a few years down the road, start working on your credit today. The effort you invest now could save you a lot of money in the future.

Tip #2: Get pre-approved

Too many “newbies” start by looking for their dream home and then when they go to get their mortgage, they discover that it’s out of their price range. Start by getting pre-approved and that will help you know exactly how much you can afford.

Tip #3: Don’t just focus on the interest rate

A great mortgage for first-time home buyers is not just one with a low interest rate. There are many components to a mortgage that you need to consider. Interest rate is one, of course, but so it your term (how long you’ll be paying your mortgage off) and the frequency payments are also a factor.

Tip #4: Remember closing costs!

This can be the most shocking mistake of them all because a mortgage for first-time home buyers is only the first step. There are additional costs – not associated with the mortgage – that are required for closing. These including home inspections, lawyers fees, moving costs, and more. Be prepared to pay for these costs as well!

First time home buyer? Congratulations! Make sure you follow these 4 tips to help you navigate the complex world of mortgages more easily.