After a year of rising interest rates, many Canadians are concerned about affording homes during this upward trend. High interest rates may mean paying more for your mortgage, but if you’re a prospective homebuyer, don’t lose hope! There are several ways to a buy a new home with a higher mortgage rate.
How Interest Rates Affect Your Mortgage
To understand how interest rates affect your mortgage, you have to understand what you’re really paying when you make a mortgage payment. A certain percentage of your mortgage payment contributes to the principal loan—that is, the amount you borrowed to purchase your home. The remaining amount pays the interest you’re accruing on that loan over time.
Interest rates are set by the Bank of Canada and vary over time. When interest rates rise, your potential mortgage payment also increases, since you’ll be paying more interest on the principal loan.
Higher interest rates may mean you can’t afford to take out as large a mortgage, and in some cases, it may price out prospective buyers altogether. But don’t give up! Thankfully, there are ways to own a home with higher interest rates.
How to Own a Home with Higher Interest Rates
Increase Your Down Payment
The most straightforward way to combat higher interest rates is to increase your down payment on your prospective home. You may also consider other ways to increase your cash upfront, such as paying for renovations or upgrades before move-in. If your mortgage option offers it, you may also pay discount points, which are upfront fees that you can pay to lower your rate and payment.
Consult your mortgage broker for advice on whether increasing your cash upfront makes sense for your situation.
Enter a Rent-to-Own Agreement
If you’re struggling to qualify for a mortgage due to higher interest rates, a rent-to-own agreement may be the way to ensure that you can own the home that fits your needs. A rent-to-own arrangement works by allowing you to live in your new home as a tenant while you save for a down payment to purchase the home at the end of your term.
Our Rent to Home Solution was designed to help prospective homebuyers navigate the complicated process of owning a home. If higher interest rates are preventing you from owning a home, consider applying for our program, where our experts will help you every step of the way towards achieving your dreams of homeownership.
Increase Your Budget
Increasing your monthly budget seems like the obvious solution to higher interest rates, but the obvious solution isn’t always the easiest or the wisest. Before deciding to increase your budget, take into account your spending and savings goals and consider whether they align with a larger monthly mortgage payment.
While you consider raising your budget, you may also discuss whether it makes sense to use a higher budget to purchase a newer home. New homes often come with manufacturer warranties, energy-efficient builds, and other features that may ultimately lower your monthly costs by saving you money on expensive repairs and upgrades.
Pave the Way to Homeownership with JAAG Properties
Your journey to homeownership doesn’t have to be forestalled by higher interest rates. Our Rent to Home Solution can help you own your home faster by allowing you to live in your home while you save up to eventually own it. Apply online today or contact us for more information on how we can help you own your home sooner!
