Is it the right time to buy a house in Brampton? That’s a question many people are asking themselves right now. The Coronavirus has certainly changed the game in terms of Brampton real estate.
“There are fewer home buyers and sellers in the real estate market due to COVID. This may actually help you as a home buyer, depending on your perspective,” says Sean Cooper, Bestselling Author of Burn Your Mortgage.
In this article we’ll look at the factors to consider when deciding whether the right time to buy is now. Those factors include your job situation, home price drops, low interest rates and fewer bidding wars.
Is it the right time to buy a house in Brampton? The Contributing Factors
The timing on purchasing a home in the greater Toronto area depends in part on whether COVID-19 has had any affect on your finances. However, there are a lot more factors outside of the pandemic to consider.
Your Job Situation
Nearly 2 million jobs were lost in April 2020 amid the ongoing coronavirus pandemic. If you were one of the unfortunate people who lost your job, you’ll want to land a new stable job before you even consider entering the Brampton housing market. It’s hard to make the monthly mortgage payments when you don’t have a job. Mortgage lenders probably won’t offer you very good mortgages rates if you’re unemployed and your credit score has taken a hit.
“Most lenders won’t allow you to use the CERB to qualify for a mortgage. You’ll more than likely have to go with an alternative lender with higher rates and fees if you don’t have a stable job,” says Cooper.
Even if you still have a job, if you’re worried that you could be part of the next round of layoffs, it’s probably best to not purchase a home right now. The last thing you’d want is to lose your job in the middle or a mortgage approval or just after you get the keys to your new home.
Home Price Drops
Each year someone seems to be predicting that home prices will fall off a cliff. While it’s possible that could happen, so far the so-called experts have been wrong.
The real estate market is a long term investment. When you buy a house, you should expect to be in it for the long haul. It’s best not to get overly concerned about minor fluctuations in home prices. Even if there was another great recession and home prices were to drop by 10 percent or more, if you’re planning to stay put 10 years or longer in your home in Brampton, this doesn’t really matter to you.
Despite COVID-19, the average home price in Brampton is up 10 percent year-over-year. With less competition in the market, if you were looking to buy, now could be the time.
Low Interest Rates
Low interest rates are another reason why you might want to consider buying a home buyer right now. Mortgage rates are at or near a record low. A lower interest rate on your mortgage means a lower mortgage payment and less spent on interest over the life of your mortgage.
The lower mortgage rates have made it easier for home buyers to qualify for a mortgage. The mortgage stress test is based in part on the posted mortgage rates of the big banks. With posted rates down, this is giving for home buying power to first time home buyers and others looking to get into the real estate market.
Just make sure you don’t take on too much mortgage debt. Although the stress test is supposed to protect you from doing that, it’s still a good idea to plan for when mortgage rates will be higher since it’s not realistic to assume rates will be this low forever.
Set your housing budget as if interest rates will rise. How would this affect your household budget? Interest rates will go up at some point, so it’s important to know how you’ll handle it.
Selling a Home
The process of selling a home is a lot different in a COVID-19 world. In the pre-COVID world real estate agents could hold open houses to help drum up interest in a property. However, due to social distancing requirements, open houses are no longer allowed in most places in Canada. This means that realtors have to get a little more creative.
“Virtual tours have become a lot more popular during the COVID pandemic. You can view Toronto real estate properties from the comfort of home,” remarks Cooper.
Although you may not be comfortable putting in an offer on a property you’ve just seen virtually, at least you can see what it looks like ahead of time. If you really like it, you can book an appointment with your realtor and see it in person.
Fewer Bidding Wars
One of the benefits of COVID (if you can call it that) is that there are fewer bidding wars in the real estate market in Brampton. Most people probably wouldn’t be selling their home during COVID if they didn’t have to. Likewise, some home buyers aren’t in the real estate market right now due to an unstable job situation or for health and safety reasons.
Fewer buyers in the market means that there are likely to be a lot less bidding wars on properties in Brampton. This improves your chances of getting a property at a fair price instead of overpaying for the homes sold in the area.
What about closing costs?
Just because you’ve saved the minimum down payment, it doesn’t mean now is the right time to buy a home. Besides the down payment, you’ll also have to cover closing costs. Closing costs are the so-called hidden costs of real estate.
Based on recent market reports, you can expect the average price to be anywhere between 1.5 percent and four percent of a home’s purchase price on closing costs. That means on a $400,000 condo, you should budget up to $16,000 (four percent) towards closing costs.
And contrary to popular belief, you’re responsible for the closing costs. Your mortgage lender won’t cover them. If you haven’t saved enough to cover closing costs for a home in Brampton, you might consider delaying your home purchase until you’ve saved up enough or speaking to a mortgage broker and looking into a cashback mortgage.
“Cashback mortgages can be great if you don’t have enough money saved for closing costs. You can use the cashback towards closing costs and other expenses when buying a home,” says Cooper.
Are you still asking yourself “Is it the right time to buy a house in Brampton?” If so, let us help you. Give a call today so we can get a better picture of your finances as a whole. We can then help you set up a plan of action.
If you’re looking to buy Canadian real estate, check out our tips for first time home buyers article.