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You really SCREWED up... | Surrey REALTOR® explains why waiting to buy a home is a HUGE mistake!

So you have been waiting and scratching and saving up every single penny you have to buy a home in Surrey, BC or surrounding areas. Homes have obviously gotten much more expensive over the last year or 2, and you want to make sure that you put down the absolute biggest down payment that you absolutely can. The problem you have, though, is most people can't save money fast enough in the lower mainland real estate marketplace to make sense to hold off buying when they have the ability to do so. This video today is all about the reasons why you don't want to wait to increase your down payment if you don't have to. And I'm going to show you some very real stats, facts and figures that might change your mind if that was your plan.

Okay, everybody, so you gathered from the intro about what this video is all about. It's about those people who we hear from all the time, those home buyers looking to save up a bigger down payment. So they think that they're going to spend less on a home and less on a mortgage. And the problem is that's many times just simply not true. So often they are completely unable to save money fast enough to make it make sense for them.

And I'm going to show you some numbers today that are probably going to blow your mind a little bit, probably some stuff that you never really thought about. In the Fraser Valley, where I sell the majority of the real estate that we help either home sellers or home buyers transact, which includes North Delta, Surrey, Cloverdale, Langley, White Rock, all those different areas, generally speaking, for a very long period of time, much longer than the 15 years I've been in real estate, the prices tend to go up. Now, of course, there is fluctuations here and there in the market price, just like there is in stocks. 

But generally speaking, you've heard the adage that real estate always goes up. I'm not necessarily saying that that is true, but statistically speaking, if you look long term, it always has gone up. So take that. For what it's worth, we have seen so many home buyers wait to buy a home thinking that maybe the market is either going to go down or they're going to save more money up for a down payment, thus making their payments cheaper. We have gathered some real time data for this video from the Fraser Valley Real Estate Board's Home Price Index tool, which shows the benchmark price of properties, year over year, month over month. 

And we can really compare them to whatever we want. And we're also going to use the historical discounted rates, mortgage rates, as provided by Ratehub. So thank you to Ratehub. And thank you to the Fraser Valley Board for making this possible.

So in January 2021, the benchmark price for a home, and this is all homes, condo, townhouse, detached, everything kind of mixed into one pot was $900,600, with a 20% down payment that was $180,000, roughly with a mortgage amount of about $720,000. And the interest rates at the time were 1.39%. This made your principal and interest payment each month about $2,800. Fast forward to January 2022. The price went up significantly, over $300,000, in fact, to about $336,400. 

Now, your down payment went up quite substantially as well, about $67,000. And your mortgage amount went up a ton as well. But the rates also went up, too. Your principal and interest payment was now almost $4,200, a difference of $1,350 per month, which is pretty incredible. So, obviously, waiting to buy a home from January 2021 to January 2022 was a huge mistake for many reasons. But I don't want you out there in YouTube land that is watching this video to be like, well, Darin, you cherry picked numbers. You picked one of the busiest markets we've ever had. The numbers were available. They matched exactly what you wanted to say. It was an incredibly busy market. 

So, of course, numbers look like that. Of course, the numbers are way up. Of course, we wish we had a bot. Well, let's look back to a year where the start of the year in January was actually at a higher price point than where the following January was, and see what the numbers look like.

Let's go. So in January 2018, the benchmark price for a home in the Fraser Valley was $826,000. Again, down payment of $165,000, with a mortgage of about $660,000. And the interest rates were at about 2.79%, making your principal and interest payment $3,800. Fast forward a year where the prices were actually lower, and not by much, only by about $4,000 or so. 

Your down payment and your mortgage amounts are roughly the same, but the interest rates run up, so your interest rate is about 0.4 to 0.5% higher, and thus your principal and interest payment for a lower price, property is actually higher by about $148 per month. Now, where the math starts to get really interesting is here. So you saved almost $4,400 by not buying in January 2018 and waiting until January 2019. Good for you. The market went down.

That's awesome. For those of you reading between the lines, you will notice that there was an extra $8,895 of interest paid over the course of a five year mortgage, which actually is more than the savings that you paid initially for the home. If you had a bought it in 2018 over 2019. So if we look at the total interest paid over the course of the 5-year loan, if you had taken it in January 2018 at 2.79%, you would have paid $106,434 of interest. I know that number makes you want to puke, but here's a number that's going to make you want to puke even more. 

Take the same home that was actually a little bit cheaper in January 2019, but now you're dealing with an interest rate of 3.19% over the course of 5-years, you are actually paying $121,387. This is a difference of $14,953 in interest. So not only are your additional monthly costs over that 5-years almost $9,000, but you're also paying an additional $15,000 over the course of that 5- years in interest. So for those of you that don't love math, I'm going to stop throwing numbers at you. But what you can see is even in a down market where the homes were worth less at the end of the year than they were at the start, based on the interest rates at the time, the majority of the time you're actually going to end up paying more in the long run for a home. 

I'll tell you, we have ran numbers like this and we used to produce these sorts of graphics each and every month, and each and every month, almost without fail, the cost of waiting to buy ended up burning would-be home buyers. Now, if you're a subscriber, we're going to be releasing these each and every month, so you're going to be able to see the real cost of waiting to buy as time proceeds. But here's a couple of other things for those of you that you might not have considered. There's a few other things for those of you out there that are still waiting to buy and trying to save up that down payment that you might not have considered. Even if all of this other information doesn't convince you, maybe these numbers will. 

One thing that we have not even talked about is the fact that if you are not currently owning something, then you're likely renting something. So you might take that one full year of rent and flush it down the toilet because that is going into your landlord's pocket and not into your house bank account or your equity of the home that you purchased. This also means that instead of having maybe a 25 year mortgage with only 24 years on it, you're still starting at the beginning where you have the full 25 years to go because you decided to wait one year. That point, though, about giving money to your landlord. That's really important. 

And let me show you exactly why. In our example from January 2018, the one thing that you need to pay attention to is the equity you have built over the course of 5 years. In the first year, in your house savings or equity account of your property, you've added over $23,000 to your bank account and in 5 years you've added $122,910. Not a bad savings. So there you have it, folks. 

Waiting and trying to save more money to create a bigger down payment. To have lower mortgage payments almost every time is a fail. That doesn't mean that it's wrong. That is just the reality of the numbers and what it looks like when you wait to get into a property.

 I'm Darin Germyn with the Germyn Group, where we know you've only got one chance to either buy or sell your next home. So we're here to help you get it right.

Watch the full video here: https://youtu.be/oU8IoXJst0E

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https://germyn.ca/buyers-form.html

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The Germyn Group
Darin Germyn PREC* & Adam Howsam
Macdonald Realty LTD
homes@germyn.ca | 604-542-2444 | www.germyn.ca
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