So you’ve got your eye on a little condo – you’re thinking its time to get your own four walls, or at least one wall to yourself and three shared walls. But then there’s the prices and the way they’ve been running up up up for the last three years. Wouldn’t you like to get a piece of that action? So how DO you get in to this market as a first-time buyer?
Well, you’re going to need money.
A lot of money.
Luckily for you, there’s no shortage of money out there. Where’s all this money I speak of? The Banks! And they’ll gladly give you a whole bunch of it to you as long as you promise to pay it back over the next 25 years.. or 30 years.. well heck, lets go 40 years, imagine what a condo in vancouver central will be worth in forty years! Billions!!
Also, as you can understand they have to cover the risk of you absconding into the night with your condo, so they’ll charge you a small interest fee to cover that risk and make it worth their while.
So lets say you borrow $300,000 to buy a nice little condo, what do you have to pay back based on a 5% interest rate?.. Over 25 years you’d pay a little over $1750.00 a month to rent that money from the bank adding up to a smidgeon over $250,000 in interest to be payed back on top of the original $300k.
But what if $1750 is a bit much for you to pay monthly? Maybe you’re paying $900 monthly to rent that same condo now and you’re not convinced its worth the extra cost. Never Fear! The banks will work with you. If you opt for a 40 year mortgage you will save tremendously, bringing your monthly cost down to under $1450 with a total interest payment of just under $400,000. This means that as long as you dont have to pay any extra ‘hidden’ fees like property taxes, strata fees, maintenance, heating & electricity, etc, and as long as interest rates never go above %5 that $300,000 condo will cost you a total of only $700,000 over the next 40 years. Thats not much to pay for a condo that will be worth BILLIONS now is it?