Are you looking to buy a house? Wondering if it’s the right time? Every homebuyer has the same apprehensions about ‘timing’ when buying a house. Many try to time the purchase, hoping to get the best mortgage deal or take advantage of a dip in real estate prices. You’re right to research your purchase timing. The truth is it can be difficult to predict. There will rarely be a perfect time to buy a house but here are things to consider to make it the best timing possible.
When is the right time to buy a house?
The right time to buy a house, boils down to many factors. Some are within your control, while others are more dependent on the market, or even the time of year.
When you can afford a larger down payment
The best time to buy a house is when you can afford it. After all, a house is a large purchase and not one to be made on a whim. Of course, you don’t need to buy the house outright. Unless you have the means to do so, you would need to take out a mortgage to afford to buy a house. However, what you must do is wait until you can pay a significant down payment. This has several advantages. One of the main benefits of paying a larger down payment is you can take out a smaller mortgage to buy your house. You may also find that you will have more options in terms of real estate as well. A larger down payment will automatically make it a better time for you to buy a house.
When the real estate market is favourable
The real estate market can often be a big factor to consider when buying a house. Like all markets, the real estate market is governed by the forces of demand and supply. If there is a great demand for homes in a particular area, but a relatively low number of houses available, we say it is a seller’s market. This means that the real estate prices are increasing or already high and the seller has the advantage. They can charge higher amounts as more people will be willing to buy the house from them. If one buyer does not agree or cannot afford the set price, another very well may. At other times, it may be a buyer’s market. This means that the prices are low, and you as a buyer have an advantage. Such a situation usually arises when there is less demand for houses and many houses are available. At such a time, sellers may be willing to accept a lower price than quoted to close the deal.
Apart from demand and supply, certain other factors could also affect the real estate prices in an area. These include proximity to good schools, how secure and safe the area is, whether crime rates are low or high, the types of people that live there, etc. Knowing about new developments in the area your desired house is in and keeping an eye on real estate market trends will help you to buy your house at the right time. Bear in mind that broad real estate trends may not be enough to go on, as real estate trends could be localized too.
When you’re getting a good deal on your mortgage
A good deal on your mortgage could make all the difference when you must decide when to buy a house. With a decent credit score and enough saved up for a significant down payment, you should ideally be able to get a good deal on your mortgage. What does a ‘good deal’ mean, though? A favourable mortgage is one that doesn’t have a very long repayment loan, has a relatively low interest rate, and does not come with any penalties if you should choose to refinance it or pay it off early. Let’s look at why these are important.
- Loan repayment term: The longer your loan repayment period or term, the more you will end up paying towards your mortgage. Even if a long repayment term means that you pay a smaller amount each month or every two weeks, over the course of time, you will effectively pay a much larger amount. This is because you are charged interest on your mortgage for the entire term. A short repayment term means that you will pay less in interest and more towards your principal loan amount.
- Low interest rate: Mortgage interest rates could be fixed or variable. A fixed mortgage or home loan interest rate means that you will pay the same rate from the beginning all the way up to the end of your loan term. A variable interest rate means that the mortgage interest rate will fluctuate based on the prime rate. If the prime rate goes up, so will your mortgage interest rate. If the prime rate goes down, so will your mortgage interest rate. A good mortgage deal would be one in which you get a lower-than-market fixed interest rate.
- Penalties: Most mortgages come with penalties, often hidden in the fine print. Before you sign on the dotted line, you should always check about the penalties that may be enforced in case you choose to pay off your mortgage early. The reason penalties can apply is because the lending financial institution would be facing a loss as they will not earn as much interest as expected on the mortgage. However, as a borrower, it is best for you to finish paying off your loan as quickly as you can, to save money on interest.
As you can see, getting a good deal on your mortgage will save you thousands in the long run. One way you can get a good mortgage deal is to go mortgage shopping. Mortgage shopping is when you apply for mortgages or show you’re interested in taking out a mortgage at multiple banks or financial institutions and let it be known that you are looking around. In a bid to secure the deal, you may find some very favourable offers being made to you.
When you have long-term plans to stay in one location
Why buy when you can rent? One reason is that in some cases real estate can be a great investment. However, if you’re buying a house for yourself and your family to live in, you should only buy it when you are ready to put down roots in one place. Buying a house is an investment for sure, and once you do buy, you’re pretty much tied down to that geographical location. Of course, if you need to move, you can always sell your house or rent it out, but that comes with its own hassles. Before you buy a house, know the area is where you want to live for the long term. Take into consideration your lifestyle and needs, as well as those of anyone who may be living with you. Sure, you’ll never know when your life will change. COVID-19 has taught us that lesson in many ways. However, the wisdom still holds that you need to plan a house purchase and that purchase should align with your larger goals and life situation.
When it’s a good season to move
Now that we’ve covered the weightier factors about when you should buy your house, it’s time to dive a little into the practical side of things. When is it literally a good time to buy a house and move in? The answer is in the fall. While spring and summer work as well, the fall presents the most ideal climate to move and set up a house. So, you should plan your house purchase such that all your shifting and setting up happens during fall. If the house you’re buying needs months of renovation, you can time your purchase in the summer. Or if you can move in right away, purchasing in the fall is a good option. Obviously, winter is not a great time to either go house shopping or to move in as you would have to deal with all the snow and cold.
When is the wrong time to buy a house?
Just like there are right times to buy a house, there are wrong times too. Here is a short list so you won’t fall into the trap of buying a house at the wrong time. Never buy a house when…
- You have poor credit: You won’t get a good mortgage deal. Work on building up your credit instead.
- The house you want is out of your budget: Save up till you can afford it or get a mortgage that supports the purchase.
- You’ve just made another large purchase: This may signal you as a risky borrower and affect your mortgage deals.
- You’re buying because you ‘should’ and not because you want to: Buying a house is not an item to be checked off a list, but a huge investment and purchase. Don’t feel it is expected of you at a certain age or life stage.
- When your future is uncertain: As we’ve covered above, your plans for the future should be considered when deciding the right time to buy a house.
We hope you now have a better idea about the right time to buy a house. As you can see, there are many factors to consider. Whenever you do decide to buy a house though, our mortgage specialists are always ready to help you get a good deal on your mortgage or to buy your dream house. We wish you all the very best in your house-buying endeavours.