Still a Good Market to Upgrade Your Home

The biggest benefit in a down market is that it’s the perfect time to upgrade your property. Whether you want to move from a condo to a house or just need another bedroom now is the time to make the move.

I’m not saying that we’re in a down market; house sales in the Victoria area are going strong. However, we are experiencing prices that are still down from when the market was at its peak a couple of years ago. There is the side of the argument that says wait until prices go up so you can get maximum dollars for the property you own now. The flaw in this logic is that if you wait for the value of your home to go up so will the prices of what you want to move to.

The most over-looked part of the equation in real estate purchasing is the impact the interest rates have over time. Current rates are as low as they’re going to go, the Canadian government has said that they won’t raise rates until June of 2010 but we know what the promises of politicians are worth. They may not be able to keep rates down for any number of reasons but the bottom line is they will go up.

So let’s have a look at the impact of the interest rate on a mortgage. On a $500,000 purchase with 10% down, a 25 year amortization at a 5% annual rate with a 5 year term, your mortgage will cost $105,317.13 in interest in those first 5 years. That’s just interest; it does not include any money which is paid to the principal (with these terms $51,716.21 goes to principal).

If we take that same purchase and increase the annual rate to 5.5% (only ½ a percent) you’re now paying $116,149.45 interest in the first 5 years – that’s an increase of $10,832.32!

As you can see interest rates have a huge impact on what your home actually costs. I know this is all very dry and not very exciting but when you consider that upgrading your home now could get you what you need and save you more than $10,000 in the next 5 years it’s really worth weighing your options.

All calculations were done using the mortgage calculator at http://www.diane-richardson.com/MortgageCalculator.ubr and are used as an example only. For mortgage information please contact your lending agency or a mortgage broker.

To make a comment about this blog or to request a no-cost market evaluation of your home contact Diane Richardson at 250.588.3861 or email: drichardson@macrealty.com.