101 Series- 4 Strategies to Deal with today’s Uncertain Housing Market – Ask a Vancouver Mortgage Broker
4 Strategies to Deal with today’s Uncertain Housing Market
If you are a bit worried or concerned how to deal with today’s volatile housing market, here are 4 strategies you can use to help you feel more confident and feel more at ease.
1. Live in your home for at least 10 years.
Housing forecasters are predicting everything from a softening in the housing market to a sharp decrease in home prices. There are also those who believe that housing prices will just keep rising well into the foreseeable future. Most of these predicators center around what is being forecasted for the both the near term and the medium term.
So, this means that if you are planning to stay in your home for the next 10 years or more than you will have a better chance of seeing the current volatile economic market make a recovery from any declines and you begin to see an improvement which will also have a positive boost of house prices rising once again when things improve.
It might take a bit longer in larger markets like the Vancouver or Toronto housing market, but if you look at the last major recession of the late 1980’s when the housing market did pick up, it took off like the proverbial rocket.
From a market perspective, even if prices do fluctuate and home price increases don’t occur as dramatically as they recently have been doing so, you will still be able to build equity in your house simply by paying down your mortgage over that 10 year time frame
2. Prepay your Mortgage in Lump Sum Payments
Any money which you pay towards your mortgage payment which is above and beyond your regular mortgage payment is immediately applied to paying down your outstanding principal. Over time this will also raise the equity you have in your home and reduce the amount of overall interest you will pay for the remaining portion of the life of the mortgage.
It doesn’t matter if you can’t make a big prepayment as the majority of lenders will allow you to “double-up” your payments. This means that you can add an extra payment in any month that it is financially convenient for you to do so.
There are some lenders who will even allow an extra payment as small as a $100. And, what about your tax refund? If you’re not too sure what to do with it then consider using it as an additional prepayment towards you mortgage.
3. Save for a 20 % Down Payment.
There is no question that this is a tough task for anyone to do. The average Vancouver detached home was valued at $1.116 million dollars in April of this year. This means that a mere 5% down payment would cost you $55,800 dollars while a 20 percent down payment would run you at a whopping $223,200 dollars.
If you did have the ability to save up the 20% down payment then it would be to your advantage because you would automatically have a significant amount of equity built into your home. On the other hand, if you can only manage a 5% down payment, and if prices to drop you could end up owing more than the actual market price of your home.
Additionally, if you can manage to save the 20 percent down payment then you have the added advantage of not having pay for mortgage insurance which is generally added on top of what you have to borrow if your down payment is less than 20%. This would save you additional money on the interest you borrow.
4. Get a 10-year Mortgage.
Although a 10 year mortgage costs more than a 5 year mortgage, the advantage of getting a longer mortgage will give you added long term protection as the international economy continues to crawl out from it current global economic mess. You also won’t have to worry about re-qualifying if lenders become increasingly nervous later on. You’ll be covered for the entire decade which should be adequate enough time for the world economy to stabilize and begin a period of prosperity.