Should we wait for a better deal?
Dear Heather: I have seen a lovely property that meets our needs and falls within our price range. Should we make an offer or, with the market being so soft, should we wait to see if a better deal comes along? — Buyer
Dear Buyer: I would advise not to wait for a better deal and here’s why: the economy is beginning to show some green shoots and mortgage interest rates are still low. Prices are still below where they were seven years ago.
House prices are attractive, transactions are up and inventory is slowly starting to diminish. Rents can be higher than mortgage payments in some cases.
So it makes sense to think about buying a property. But some homebuyers, like you, are still wondering if they should wait for a better deal.
There are valid arguments for both waiting and jumping in the market; either choice has its risks. If you don’t buy, prices can go upwards from here.
You’ll pay more in rent and when you decide to buy, homes that you could afford now may be more expensive and possibly out of your range. If you do buy a home prices could go down, which will put you underwater longer — possibly with an expensive asset that’s harder to sell.
But consider this, what if you buy and prices go up? You’ll accumulate instant equity, a savings account of a kind.
Would you feel just as weighed down by owning a home if it were appreciating in value instead of losing value?
There are no guarantees that home prices will turn in your favour. Bermuda’s market can rise or fall based on its economy but there is one truth that never changes; you’ll never know if you could have had a better deal unless you commit to making one.
At least, perhaps, run the numbers. Document what you spend in rent versus what you can afford as a house payment. As a general rule of thumb, the banks work on a 50 per cent loan-to-debt ratio. That means that you should spend no more than 50 per cent of your income on your mortgage payment, taxes, house insurance and other debt, ie car loan, credit card payments, etc. Factor in other costs, such as moving, commutes, schools, and, of course, your down payment.
Buying a home isn’t just about the money. It’s about lifestyle, safety, comfort, security and easy access to the people and amenities you want to be close to.
You have to do what’s comfortable for you and your family, whether that’s remaining on the sidelines or buying a home. But here’s a tip, if you buy a property in a good neighbourhood that meets the needs of your household and budget, chances are that you’ll be pleased with your decision for years to come.
• Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 25 years. If you have a question for Heather, please contact her at firstname.lastname@example.org or 332-1793. All questions will be treated in confidence.