Buying a home today…at today’s prices, would have a home owner paying less per month than if that home owner bought a home 25 years ago…at 1987 prices!
I was recently at a real estate symposium and we were discussing the affordability of homeownership in today’s market. We were talking about current purchase prices vs. historic low interest rates and it took us back to a time when interest rates were not so favourable for the average home owner.
I told a client the other day that if he bought a home today at today’s housing prices, he would still be paying a lower monthly amount than if he bought a home 25 years ago at 1987 prices. Reluctant to trust my math skills, I had to prove it to him on a scrap piece of paper.
Bought a home in 1987
$250,000 – Purchase price
20% down payment ($50,000)
$200,000 – Mortgage amount
10% – 1987 interest rate
25 year amortization
Monthly payments = $1788.98
Bought a home in 2012
$500,000 – Purchase price
20% down payment ($100,000)
$400,000 – Mortgage amount
3% – 2012 interest rate
30 year amortization
Monthly payments = $1682.42
As I finished writing $1682.42 on the paper and he glanced back at the 1987 figure, he asked me to check my math.
If you are contemplating whether to stay in your rental or jumping on the housing ladder, you should look at these numbers again. We have never seen interest rates like this in history and may never see them again. Your opportunity is now!
If you live in the Burlington, Oakville, Hamilton or Toronto areas and would like to talk about housing affordability, I would be happy to meet with you to discuss your options. We can see how affordable homeownership can be. Be sure to ask about my First Time Home Buyer AIR MILE Promotion.