investor advice
// by andrew la fleur
Why the mortgage rate wars ARE
great for condo investors
Low interest rates are great for your bottom line. Low interest rates make a big difference to your bottom line as an investor. How? By helping you pay down your principal faster while also paying less interest. Consider this: on a $300,000 investment condo with 20 per cent down, at a three-per-cent interest rate, you will pay off $34,860 in principal in the first five years of your mortgage and $33,287 in interest. At a six-per-cent interest rate, you would pay down only $24,391 in principal and a whopping $67,739 in interest over the first five years of your mortgage. Buying the right condo, with the right mortgage rate, is a great move. Andrew la Fleur is an award-winning realtor with Re/Max. Andrew’s expertise is in helping investors make money in the Toronto Condo Market. Visit TrueCondos.com/NewCondoGuide for a free gift. Contact Andrew at 416.371.2333 or andrew@truecondos.com
T
he mortgage rate wars are now in full effect. Recently we’ve seen the return of the 2.99-per-cent five-year fixed-rate mortgage, and a huge surprise was when one lender announced an incredible 1.99-per-cent three-year variable-rate mortgage. Wow! So what do the mortgage rate wars mean to condo investors? It’s all good news, that’s for sure.
Low interest rates are here to stay. For the last five years it’s been the same old song from the skeptics: “Yes interest rates are low, but what happens to everyone when rates jump back up to normal?” The reality is that the interest rates are not going anywhere any time soon. The Bank of Canada has recently come out and admitted that rates aren’t going anywhere for the next 1.5 years. The U.S. federal reserve is saying the same thing. No civilized country on Earth is raising interest rates, so why would Canada? The U.S. economy, and therefore the world’s economy, is still sputtering along at a snail’s pace. It’s time to accept the fact that we will be in a low interest rate environment perhaps for the next decade or more. Are you going to sit on the sidelines and wait for higher rates, or are you going to take advantage and act now?
A better economy means more jobs and higher wages, which means more demand for real estate, and thus prices will rise, not fall When interest rates eventually do start to rise, don’t worry. Here’s why: The fears that people have about rising interest rates and a subsequent falling real estate market are irrational. Here’s why: if and when the Bank of Canada raises interest rates, that will mean that the economy is doing better than it is now, not worse. A better economy means more jobs and higher wages, which means more demand for real estate, and thus prices will rise, not fall. Prices fall during recessions, not during times of growth. Rental rate increases may slow down as more people shift from renting to buying in the future, but as a landlord you win either way. Interest rates stay the same and more people will rent driving up your income from rents. Interest rates start to go up and more people will buy, driving up your property’s value.
028 new Condo Guide may 24 - jun 7, 2014