The average interest rate on a 30-year fixed mortgage has remained near historic lows since 2013, but these rates have started to rise. It is important for real estate consumers to understand rising mortgage rates and how these rates will impact your ability to buy or sell a home. To ease Buyers and Sellers anxiety, here is what rising mortgage rates will mean to you. 

*  Higher interest rates, translate into higher mortgage loan costs.

*  Rising rates makes homes more expensive for Buyers, which lowers the demand for home purchases.

*  Less demand impacts Sellers as the price of their home decreases in order to attract Buyers.

*  Rising mortgage rates will not have much of an effect on property value or housing prices, as long as salaries and wages grow accordingly.

In Real Estate, conventional wisdom says that rising interest rates make buying or selling a home more difficult, and decreasing interest rates make buying and selling easier.

For example, if a Home Buyer wants a 4% rate on a 30-year fixed mortgage of $500,000, the monthly mortgage payment would be $2,377. But if the same Buyer only qualifies for a 5% rate on the same 30-year fixed mortgage, the monthly payment would rise to $2,668. A 1% increase in interest raises the Buyer's payment by $291, or roughly 11%. So, what does this mean for homebuyers? As mortgage rates increase, affordability decreases. 

Your credit score will greatly impact the interest rate that you receive on your mortgage. Try and improve your credit score before applying for a mortgage.

Rising mortgage rates also affect Sellers. For example, if the Seller wants to sell the house for $500,000, rising interest rates may decrease the number of potential buyers who can afford the home.

Rising interest rates do have a noticeable effect on the Real Estate Market. Property value and housing prices directly correlate to mortgage rates. Yet, if the economy grows fast enough, rising mortgage rates will not have as great an effect on property value and housing prices. If the economy is strong it allows employers to increase salaries to help compensate for the rising interest rate.

If you are thinking of buying investment property rising rates can be positive. The market for rental properties often increases because fewer people can qualify for mortgages. Rising interest rates reduce property prices, so it can be better to buy during this time. Often, fewer real estate transactions take place as lending standards tighten. Thus, more people will need rental properties until they can afford a mortgage. 

You don’t need to fear increasing mortgage rates, if you are thinking about Buying a home or Investing in real estate. Historically, todays rates are still very low. The annual average for 30-year fixed mortgage rates has not reached 5% since 2009. In 2006, the average mortgage rate was 6.41%; in 1996, 7.81%; and in 1986, 10.19%.

Need Real Estate advice? Don’t hesitate to contact me. I will give you the knowledge, confidence and security, so you can make the right decision on buying and selling real estate.

Since the beginning of COVID-19, more home buyers have been purchasing properties in cabin country. Spending more time at home, and longing for additional space both indoors and out, has sent many buyers into rural markets like the Sunshine Coast, causing sales to skyrocket.

With employer mindsets shifting towards more flexible work-from-home policies, providing home buyers with greater freedom as to where they can live. 

People are looking to get out into the outdoors not just for the summer season, but all year long. A lot of people looking at year-round places where they can live, versus just being able to go away for a few days at a time.

If you’re looking to make your first home purchase in “cabin” country, here are some things you’ll need to know before you buy. 

Consider Property Access and Distance to Amenities

Whether you’re eying a property by the lake or one that’s nestled in the forest, there are many unique settings to consider when buying a rural property. Your location can greatly impact your lifestyle, especially if you decide to live there year-round.

One of the first things you’ll likely need to determine when buying is how easy is it to access the home. If you plan to live at there year-round, you’ll want to ensure the roads to get to and from your residence are well maintained and accessible, especially during the winter. 

How remote your property is will also play a role in your purchase. The recent surge of all-season cottage buyers don’t want to feel too isolated, and want to be fairly close to neighbours in case there’s an emergency.

You’ll also want to consider proximity to basic amenities, such as grocery stores, pharmacies, and hospitals. Most cottage buyers prefer to be within 30 minutes of a small town where these services are available, and up to three hours from a major urban centre. 

Learn About Rural Infrastructure and Home Winterization

Unlike a city or suburban home, rural properties don’t always share municipal services. Instead, you will have to get familiar with the rural infrastructure needed to independently manage your home’s water, heating and sanitation utilities. 

Buyers need to be aware of the types of systems their home uses. Some properties feature dug or drilled wells, and source water from nearby rivers and lakes. Make note of how the home processes sewage, like through a septic tank, which is stored on-site and underground. 

If your plan is to live at the cabin all-year round, it’s vital your home is properly winterized and can withstand the cold. Make sure the home is well insulated in the walls, pipes and roof, and make sure the heating source is efficient for the size of the property. Be sure the cabin can also supply water in the freezing months with the help of a defrost line into the well or a heat trace that will keep the pipes from freezing.

It’s not uncommon to get zero service bars in rural areas either—be sure to confirm you can receive reliable mobile phone and internet service at the cabin, especially if you’re working remotely.    

Cell and internet service are obviously very important, especially for people that are doing a lot of work from home. Find out what areas may not have good service.

Calculate Cottage Insurance and Upkeep Costs

Just like any home, cabins come with a range of maintenance costs, though some of these expenses are unique to rural areas. 

You’ll want to factor in long-term upkeep expenses, like keeping the driveway in good condition so it’s easily accessible. Your property may be on a septic system, which will require pumping every three to five years depending on its size and usage, which also contributes to maintenance costs. When looking at a cabin property, examining the health of any trees and their orientation towards the house—cutting down sickly shrubs can get expensive. 

When it comes to financing your property, there are a number of factors that will contribute to your insurance rates, such as your distance from local fire stations, if your home is elevated from nearby water, and even how often the home is occupied. 

The mortgage lending process will also look a bit different from what’s involved for your typical city or suburban home. If your home meets the standards to be a primary residence, you may be able to put down a 5% mortgage deposit, though some lenders could request 25% in some cases. Hence, it’s crucial to understand the different implications for each rural mortgage provider. 

There’s a lot of things to think about, therefore, by enlisting my help as a local realtor I can ensure you have the most up-to-date advice.  

When we think about buying and selling real estate, it’s easy to overlook that, in many cases, the property being sold is a rental property that likely has tenants. In fact, with a majority of households in Canada owning their homes nearly one-third of all homes in Canada are rental properties. 

While most real estate transactions are pretty straightforward, different rules apply when a rental property is concerned. Let’s look at the different scenarios you might encounter when buying a rental property that has tenants.

Scenario 1: You Want To Keep The Tenant(s)

This is the simplest scenario and has the least impact on timing and conditions of the sale. No matter if the tenant has a fixed-term or periodic tenancy (month-to-month), once the sale closes they will fall under your responsibility as the new lessor (a.k.a. landlord). In most provinces, any fixed-term lease will revert to a periodic tenancy automatically when it expires.

You may be asking, “Do I need to sign a new lease agreement?” While it’s not mandatory to sign a new lease, The rules in the Residential Tenancies Act (RTA) will always apply, regardless if there is a contract or not. If the parties sign a new lease, the landlord can change the terms ONLY if the tenant agrees and if the changes comply with the rules stipulated in the RTA.

Scenario 2: You Wish To Occupy The Home Or Rent To A Family Member

There are two ways this works, but in both scenarios it’s important to clearly state your intent to occupy the home or assign it to an immediate family member (parent, spouse or child)—this does not apply to extended family or close friends—as part of your purchase agreement.

The tenant has a lease that has not come to term: 

The tenant’s lease remains protected until the end of the fixed term. Therefore, landlords need to ensure the buyer is aware they must comply with the existing tenancy agreement. This means you must assume responsibility for the tenant and serve notice to end the tenancy no less than the minimum period required by law before the end date of their fixed-term lease.

If you need the home vacant at the time of purchase, then the sale can only close on the last day of the tenancy, and the current owner is responsible for providing notice. Notice must be given according to the laws of the province or territory in which the home exists. 

When it comes to this situation, The lease must be respected regardless. In this situation you could open a discussion with the tenants and try to find a monetary compensation that they are comfortable breaking the lease agreement for, so that all sides are happy.

The tenant’s lease is month-to-month: 

The same minimum notice requirements apply in this case, though notice can be given immediately once the terms of sale have been satisfied. If you require the unit empty, the sale can only close after the day on which the tenancy ends.

Scenario 3: You Wish To Demolish, Renovate Or Repurpose The Property To A Non-Residential Use

This is often where things can get difficult, especially if due diligence has not been taken to prepare ahead of time before ending a tenancy, or if the work is not completed within a reasonable timeframe after the tenancy has ended.

Generally, if a plan is in place to demolish the home, if the home requires substantial renovations that require it to be empty, or if it’s being converted to a non-residential use, longer notice times can be expected. The notice period is anywhere from two months to a full year, depending on the province.

In the case where a multi-unit building is replacing the original rental unit, or where renovations are concerned, the tenants have the right to move back into the unit once the work is completed. Or the landlord and tenant may agree to end the lease early.

In some cases the landlord may be required to pay moving expenses, or to compensate the tenant, depending on the province and number of units in the property.

Scenario 4: The Tenant Is Paying Below Market Rent

When a tenant has been residing in a home for many years, rent often falls below market, causing the only downside for a buyer when they wish to keep a tenant. As years pass, property values, taxes, and mortgage rates rise, increasing the overheads for landlords and narrowing profit margins. 

Most provinces set annual limits for rental increases to limit abuse, though the premise is that a landlord risks losing a good tenant if they unreasonably raise the rent. A landlord must follow a minimum notice period, and if they have good reason to increase the rent beyond the guidelines, they can apply for permission from their provincial landlord tenant board. 

Rent may also be increased beyond the guideline amount if it’s justified by investing in improvements or renovations to the property.

Residential Tenancies Acts Resources

While there are many similarities from province-to-province, notice periods and restrictions on ending tenancies can differ greatly. For British Columbia rules and regulations please see: 

https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02078_01#section49

Most of us are naturally inclined to purchase a house based on a pure gut and heart reaction. “It feels like home.” Right? However, finding that “feeling” can be an exercise in patience and frustration, just like dating. Here are 10 questions that can help guide you in finding your ideal home match.

Are You Low Maintenance?

Take a look at a potential house and its property. Are the gardens filled with perennials? How big is the lawn? What’s the roof warranty? A metal roof can last up to 50 years while asphalt shingles will need to be replaced every 10 to 20 years in areas that experience heavy snowfall and rain. Is the house constructed with a resilient material like Hardie board? Insects, weather and curious woodpeckers can make quick work of a log or wood home and require ongoing maintenance. 

 Are You Quiet?

Spend some quality time at the house and observe traffic at different periods of the day. Do the neighbours have a barking dog or young children who love their trampoline? Are you close to a firehall where sirens will be a constant soundtrack? Are there train tracks nearby? Are you on a major bus route? At an intersection? Beside a restaurant with outdoor dining? Get to know the neighbourhood and everything nearby.

Are You Warm?

While gas fireplaces are instant and convenient, they can also be inefficient depending on their age and BTU rating. Wood-burning fireplaces will require the care of a chimney sweep and a little lumberjack labour but are undeniably romantic. Pellet stoves have a high combustion and provide one of the cleanest burning fuel options but can pose an issue if you lose power (unless you have a battery back-up) as they still rely on electricity.

Propane and electric heat (baseboards, forced-air furnace) have their pros and cons with delivery fees and time-of-use rates. Boiler systems are commonplace in older homes but new technology has modernized the traditional radiator’s appearance and efficiency.

And don’t forget about heat loss —are the windows new? Do they need to be replaced? The R-value of a house’s windows and insulation can make for a cozy night or give you the shivers.

Are You Flexible? Willing To Grow?

If your family is planning to grow (dog, child or in-law suite?), will the house permit expansion? Is there an unfinished basement? Is it possible to add another bathroom? A detached garage? Main floor laundry? Will there be space for the art studio or kitchen island you’ve always dreamed of?

Are You Outdoorsy?

Is the house located near trails? Dog parks? What exposure does the house have? North-facing windows can pose a challenge, but there are certain plants that will thrive. Will you see the sun rise or set? Is there enough storage or space for a shed, deck and/or hot tub? Are the trees surrounding the house healthy?

Are You Financially Sound?

Is the house in a desirable location? A home in a gentrifying neighbourhood or bedroom community will likely increase in value but buying a boat access-only property or three-season cottage can hamper resale value. Consider budgeting for costs like monthly condo fees, parking, commuting, grass cutting and snow removal, septic pump outs or the cost of replacing aging appliances.

 Are You Charming?

What’s the story behind the house? If it’s a heritage home, visit your local city hall to investigate the archives. A growing interest in schoolhouse and church conversions has helped preserve history while providing a reliable rental income for the savvy entrepreneur.

Are You A People Person?

Does the house realistically meet your entertainment requirements? Is there a room for the kiddos and their PlayStation? Will the dining table seat the entire family? Is there space to put in a pool? Pool table? How many guest bedrooms?

Are You Stable?

The foundation is where everything began. If you’re considering an older home, invest in a structural engineer for the house inspection. Be aware of erosion and high-water levels with lakefront properties. Check basements and ceilings for signs of leaks and mould and chimneys for integrity (and bats!).

Are You Willing To Change?

While a house may appear 100% perfect after the first starry-eyed visit, there will be inevitable changes that you’ll want to make. Are they possible? What can you sacrifice? What are your non-negotiables? Are they cosmetic changes (paint, lighting) or beyond-the-budget renovations?

Today’s mortgage rates are attracting new buyers into the real estate market. Low rates make your mortgage payment more affordable and drive up the demand for local real estate.

If you’re a first time home buyer, don’t let the house hunting FOMO push you into making any of these costly mistakes.  Here are some common mistakes you can avoid.

Mistake #1: House Hunting Before You Have The Mortgage Figured Out

There is no harm in searching online or checking out your local real estate, but if you go out and start seeing homes before you have strong financing, you are setting yourself up for disappointment. The house you see today could be sold tomorrow, so it doesn’t make any sense to fall in love with a home before you have financing. Make sure you know your budget and that you’ve spoken with your mortgage broker to get a preapproval for the amount that fits your lifestyle.

Mistake #2: Talking To Only One Mortgage Lender

Today’s mortgage rates are historically low, but that doesn’t mean that you should trust the first mortgage lender that comes to mind. You should do some homework and connect with a mortgage broker who can help you get approved for the best mortgage. Remember that the mortgage rate is just one part of the total cost of buying a home, and different lenders provide different levels of service and have different fees. Find a licensed professional that you are comfortable working with.

Mistake #3: Forgetting About Closing Costs

Purchasing a home has several other costs that won’t be as clear cut as the house price that you agree on with the seller. If you forget to budget for closing costs, you could run into a very stressful situation. Thankfully, first time home buyers can take advantage of rebates on Land Transfer Tax and other programs. However, the other typical closing costs include appraisals, lawyers’ fees, title insurance, and fire insurance. Every scenario is a little different, but plan to set aside 1.5% of the house purchase price for closing costs as a rule of thumb.

Mistake #4: Waiting For The Perfect House

Not to say you shouldn’t be picky for a house you love, but if you delay getting into the market while you wait for the dream home to hit the market at your price point, then you could be worse off financially. There is an opportunity cost to not being able to grow your equity. If you wait a couple of years while you search endlessly, a house that you liked may go up in price while you watch from the sidelines. Consider the benefits of building some equity for a few years until you have enough for the home you love.

Buying a home is one of the most significant financial transactions you will make. Don’t go it alone! I have helped many first-time homebuyers go through the process.

If you want to learn more about how to get into the real estate market as a first time homebuyer, contact me Nancy Bergman.