Real Estate Talk:
Refinancing vs. selling

Two possibilities that take advantage of low interest rates

By Joseph Marovitch

September 22, 2021

Rarely, in history, has there been a more opportune time to sell for the most money possible.

Earlier in the pandemic, there were almost no homes on the market. The protocols in place made it complicated to arrange a visit. Buyers and sellers had to sign documents stating they had no symptoms and that they had not travelled out of the country in the past 14 days. Gloves and masks had to be worn. Tenants and homeowners had to vacate during the visit and only two or three people were permitted to enter the property. Everything touched during the visit had to be disinfected before leaving. Worst of all, owners were afraid to have strangers visit for fear of being infected.

Two years have passed, and now we have vaccines and vaccine passports. Society is a little looser, and people are going out to events. As the rules relax, there are more homes for sale, not much but a few. There is not enough property for the demand, therefore, we still have many multiple offer scenarios and quickly rising prices.

The question is, does a homeowner sell and buy or refinance while interest rates are low, perhaps use the cash to upgrade and renovate their current home?

We seem to be at the twilight of the pandemic where change takes place. More and more people are taking the vaccine. Those that are not are stuck outside of events until they are safe to be around.

In the next few months, if all goes well, the pandemic may be under control, and we will see more property enter the market along with rising interest rates. The market will settle down, and multiple offers will cease. However, right now interest rates are low, property for sale is limited, and opportunity abounds for selling quickly at a good price.

The question is, does a homeowner sell and buy or refinance while interest rates are low, perhaps use the cash to upgrade and renovate their current home?

Advantages of refinancing and selling

Refinancing
A homeowner can refinance for the next 3 to 5 years at a low-interest rate and use the extra cash to upgrade their home, which will increase the value over the long term.

‘Whatever a homeowner decides to do should depend on their financial requirements and time frame.’

Selling
A homeowner can sell their home now for a very good price and purchase another property also at a very low-interest rate for the next 3 to 5 years. Aside from the increasing value of the property over time, the value will increase as interest rates rise. When interest rates reach 3% or higher, the locked-in homeowner will still have 1.99%. Should they decide to sell, their property will sell higher since the buyer will want to assume the mortgage and its rate.

Whatever a homeowner decides to do should depend on their financial requirements and time frame.

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Next article: The real estate market and passports

State of the market

We just had an election, and the Liberals won. What does this mean for real estate? In the Liberal platform, they have promised to regulate the real estate market by making blind bidding illegal in the criminal code.

This means purchasing a home would be an auction format. Essentially the broker would state to buyers, “I have a $100,000 offer. Does anyone want to raise it?” A buyer says, “Sure, I’ll offer $105,000.” And the next buyer says, “I’ll offer $110,000.” Then some rich buyer wanting the property for their child will offer $150,000, and the bidding goes on. We all get the picture. We are talking about prices that can go sky-high. The wealthiest get the property, like investors and corporations.

‘This change is based on the assumption that brokers are to blame for rising real estate prices through manipulation, not the government with their super-low interest rates, and a pandemic that has kept everyone in their homes for the past two years.’

To make the issue worse, the format of blind bidding would be inscribed in the Quebec Criminal code, not the Civil code. This means sellers and/or brokers can be charged and serve jail time if they refuse to divulge the bids to other buyers.

This change is based on the assumption that brokers are to blame for rising real estate prices through manipulation, not the government with their super-low interest rates, and a pandemic that has kept everyone in their homes for the past two years.

Raise interest rates a notch and see how fast the market normalizes.

Have a great week!

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Feature image: Pikist

Other articles by Joseph Marovitch