Dear David,
We bought our house at the peak of the market in early 2022. Our mortgage is coming up for renewal this spring, and we expect the payments will go up by about a thousand dollars per month. My partner and I have good jobs and we put down a large down-payment when we purchased. The property suits us well and we can afford the larger payments, but it’ll be cheaper for us to rent than to continue owning. Our Realtor told us that if we sold our house now, we could be as much as $100 thousand in the red. What are our options? Should we walk away and declare bankruptcy? – FED UP
DEAR FED UP: For a short period of time in late 2021 and early 2022, the real estate market peaked, both locally and across the country. Back then it seemed like buyers and sellers were both suffering from FOMO (Fear of Missing Out). Seller’s couldn’t wait to see how much someone would pay for their house, and buyers were feeling immense pressure to get into the housing market before they were priced out. To put things in perspective, the average selling price of a house in Waterloo Region in June 2020 was around $600 thousand. The average price crested at about one million dollars in February 2022, and for the better part of this year has been hovering in the high $700 range.
After a series of interest rate increases, we are finally seeing some relief from the Bank of Canada. Interest rates have started to decline in recent months, and I expect within a year or two, we’ll likely see them dip back to pre-pandemic levels. I recently heard the expression “you date the rate, but marry the house”, and I truly believe it applies in your case. You have great jobs and can afford your monthly payments, and if your mortgage hadn’t been coming up for renewal in the spring, you probably wouldn’t have even asked your agent what your house is worth today.
Everyone needs to live somewhere. Because your house is a good fit, there is no real incentive to move. I suggest that you settle in and stay put. We will likely see several positive things come into play over the next few years as the market settles: interest rates will likely return to more affordable pre-pandemic levels, and housing prices will increase once again.
Because the affordability of your monthly payments is not a major concern, I suspect you are able to make higher payments but are not happy about it. All things considered, I don’t think this is the time to take drastic measures. Personally, I would not be locking in for five years at the moment, but you might want to wait out the next few months and see where interest rates settle. A short one-or-two-year term might be a great solution for now, give your mortgage specialist a call to discuss.
PRO TIP: If you think back over the last ten years, the best decisions you made were probably geared towards long term success. Fortunately, you’re not in financial crisis. Take a step back, explore your options, and seek advice from those in the know before making a life-changing decision. #Advice #AskDavid #TheNegotiator
David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Call or text today for your free home evaluation! 519-577-1212.
