Unlocking Homeownership

How Mortgage Financing Works and Why Now is the Best Time to Buy

Figuring out when it's feasible to buy a home is as difficult as timing the stock market. The first step is understanding your purchase budget. Your lending institution is able to pre-approve you for a mortgage.

For most Canadians, a mortgage is the key to unlocking the dream of homeownership. Understanding how mortgage financing works and how recent rule changes affect affordability is crucial for anyone planning to buy a home. With significant updates coming into effect on December 15, 2024, now is the time to explore the benefits of buying and why working with an experienced realtor can give you a competitive edge in today’s market.

There are many moving parts to choosing a mortgage product. Will you amortize it over 25 or 30 years? What down payment are you able to make? What interest rate and term will you choose? Depending on your financial situation, you may have lots of options.

How Mortgage Financing Works

A mortgage is essentially a loan secured against a property. Homebuyers borrow funds from a lender and repay them over an agreed period—typically 25 years—with interest. Key factors in securing a mortgage include:

• Down Payment: The portion of the home's purchase price you pay upfront.

• Amortization Period: The length of time you take to pay off your mortgage.

• Interest Rates: The cost of borrowing, which significantly impacts your monthly payments.

• Debt-to-Income Ratio: Lenders assess your financial ability to repay based on your income, debts, and monthly obligations.

Beginning December 15, 2024, eligible homebuyers will be able to amortize their mortgage over 30 years. This option reduces their monthly mortgage payment and may increase their purchasing budget.

What’s Changing on December 15, 2024?

The government is introducing a game-changing update to mortgage rules. Starting December 15, eligible homebuyers will be able to amortize their mortgage over 30 years instead of the standard 25 years.

Why does this matter?

1. Increased Affordability: A longer amortization period reduces monthly payments, making it easier to manage housing costs.

2. Higher Purchase Power: Lower monthly payments allow buyers to qualify for larger loans, opening doors to properties that might have been out of reach.

3. Improved Financial Flexibility: Buyers have more room in their budgets for other priorities like savings or lifestyle expenses.

Buying a home has certain advantages that renting doesn't offer. Although applying for a mortgage and the home buying process may be daunting, the short term pain can result in huge long term gain.

Buying vs. Renting: Building Wealth Through Homeownership

Owning a home is one of the most effective ways to build wealth over time. Here’s why:

• Equity Growth: With every mortgage payment, you build equity—a tangible financial asset. Rent, on the other hand, builds wealth for your landlord.

• Appreciation: Real estate generally increases in value over time, giving homeowners a strong return on investment.

• Tax Benefits: Homeowners often enjoy tax advantages, such as credits or deductions, which renters miss out on.

While renting might offer flexibility, it doesn’t provide the long-term financial security that comes with owning a home.

Across Ontario and especially in Toronto, property values have increased significantly in the past 20 years. Currently, the local market is balanced and offers some room for negotiation for homebuyers. As interest rates may decrease over the next few months, house prices may start climbing again, resulting in a seller market where buyers have fewer options to negotiate the list price.

Why Now is the Best Time to Buy

Winter months often bring a quieter real estate market, offering buyers a chance to secure great deals. Once spring arrives, competition heats up, and prices typically rise. By buying now, you can:

• Take advantage of current property values before they increase.

• Lock in favorable mortgage rates and leverage the upcoming 30-year amortization option.

Work With a Realtor You Can Trust

Navigating the complexities of home buying requires expertise and market knowledge. As a licensed realtor, I’m here to help you find the right home at the best possible price. I’ll guide you through mortgage pre-approval, help you identify opportunities, and negotiate on your behalf to ensure your success.

Don’t wait until the spring rush—let’s work together to make your homeownership dream a reality now. Contact me today to get started!

Meet Donald Bilodeau, Mr. Real Estate Toronto. Donald lives in Leslieville, is fluently bilingual in French and English, and enjoys working with sellers and buyers.

Working with Donald

Donald's real estate practice began in 2013, buying, selling and leasing residential and commercial properties across the Greater Toronto Area and the province of Ontario. Working closely with buyers, sellers, and landlords, Donald combines a decade+ of experience, attention to detail, fully bilingual service, and strategy, with a sunny, practical disposition. Clients respond very positively to his full-service approach to real estate transactions, where his clients' satisfaction matters most.

Call or Text Donald Bilodeau, Mr. Real Estate Toronto, at 416-476-3554 or send me an email at donald@donaldbilodeau.com. I want to work with you!

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