Real estate: Is this summer the time to buy?

A small increase of 0.25% for a $300,000 home means $540 more in interest per year! Buying a home: rate hikes and the unexpected. A must-listen if you're thinking about buying! Ashleay Dollard speaks to Sébastien Mc Mahon about her recent experience.

Ashleay: Welcome to iA Financial Group's "In Your Interest!" podcast, where our goal is to share with you the essentials of economic news and its impact on your finances. My name is Ashleay, and this week we're switching roles, right, Sébastien?

Sébastien: Yes, we are. So let's talk about real estate.

Ashleay: Yes.

Sébastien: There's a lot of things to say. But recently you went through a transaction, so we might seize the opportunity here to have, you know, something that's very relevant and that's recent as an experience. So maybe just before we start, just to explain, the context has changed quite a bit since the buoyant market of 2021 and early 2022, let's say, before interest rates started to rise. Remember that until March 2022, let's say during the pandemic and up until March 2022, rates were at 0.25%, so at rock bottom. They went up by 4.5% since then. Now we're sitting at 4.75%. And each quarter percent increase costs about $15 more in interest per month per $100,000 of capital. Of course, doing the math on the radio is not easy. So, if we summarize that it's 18 increases of 0.25% that we've seen since March 2022, that's about $270 more per month on interest per tranche of $100,000. For a $300,000 mortgage, it's about $9,720 more in interest only per year. That's quite a shift. So investing in, well, buying real estate in 2021, 2022, the interest cost wasn't really a consideration. Now it's more of one. So how did you navigate through your recent purchase?

Ashleay: Right. So a fully case of it wasn't planned, but we saw it and we fell in love with it. And it's important to note that we are planning to rent it, right? So that makes a big, big change in the information that I'm going to be giving you. And of course, note that I am not a professional. This is just what I have seen in the past few weeks. So one big thing that I hadn't thought of is that most of these extra fees, so anything that would be interest rate related or, you know, your notary, things like that, they're all income tax deductible if you're renting out the property. So that is very interesting right there. It kind of scares you a little bit less when you think of, you know, five something percent interest rates. Then also you do have to put down a 20% upfront payment on the property, especially if it's not for your immediate family. If it is for your immediate family, then you can put only 5% if you're renting it to a brother or a mother or things like that. Um, it's also important to note that notary fees are a little bit higher. In this case, for example, mine is a condo in a six-space building and so the fees are a little bit higher. There have been multiple changes in the past year to anything that they would have to look into. So, that kind of changes everything also. But don't forget, it's income tax deductible, so it's not too worrisome. I do think, though, there are a lot of positive points because even if interest rates are high, this might actually play in your favour. If you've been saving up like we always encourage our listeners to do, of course, it might be possible to get a really nice deal because a lot of people aren't buying right now due to the expense of the higher interest rates. And so you might be able to deal something interesting on that front. You can always remember to shop around for rates as well. Most of the time banks are trying to find, you know, new clients. And, you know, especially if it's something that you're renting, kind of like I'm going to be doing, it's interesting to have a specific account for everything that would be related to that property because as I was saying, a lot of things are income tax deductible. So one of the things that you can think of is if you're putting that 20%, the down payment, maybe you can put it on a credit margin if you have good credit. And that way anything that would be fees that would be related to that credit margin, they can be income tax deductible. So you're not putting your equity out there and you're using that advantage to your advantage. And then, yeah, always look around because like I was saying, banks are always trying to find new clients. So, you know, we've been offered iPads, we've been offered $500 cash, you know, getting the notary paid. So shop around, look for things. And the first purchase is always the hardest. It's kind of like buying your first house. But once you're in that zone, once you have it and you have that equity, you can kind of build on that to start building an empire, as one might say.

Sébastien: Okay, so there's an empire in the future. So, you need a plan.

Ashleay: Yes.

Sébastien: You need help, and you need to stick to the plan.

Ashleay: Yes, exactly.

Sébastien: Okay. All right. So, and you know, anyone can do that.

Ashleay: I think so. I mean, I don't, you know, we make good salaries, but we're not, you know. Yeah, I think we're the normal laypeople of this world. So I think we can be a good example.

Sébastien: Yeah, yeah, yeah. All right. So, thank you. Thank you for sharing this. And once again, thank you everyone for listening. I hope you enjoyed this episode. If you did, please share the content. Always, it's free, but we like to believe that it pays to listen. So thank you. If you have any questions, you can always find the podcast on Apple, on Google and or on Spotify. Have a great day and we'll see you again next week.

Ashleay: See you soon. Love this podcast? Want to know more about economic news? Follow our "In Your Interest!" podcast available on all platforms, visit the "Economic News" page on or follow us on social media.


Sébastien has nearly 20 years of experience in the public and private sectors. In addition to his roles as Chief Strategist and Senior Economist, he is an iAGAM portfolio manager and a member of the firm’s Asset Allocation Committee. All of these roles allow him to put his passion for numbers, words, and communication to good use. Sébastien also acts as iA Financial Group’s spokesperson and guest speaker on economic and financial matters. Before joining iA in 2013, he held various economic roles at the Autorité des marchés financiers, Desjardins, and the Québec ministry of finance. He completed a master’s degree and doctoral studies in economics at Laval University and is a CFA charterholder.

Sébastien Mc Mahon

Vice-President, Asset Allocation, Chief Strategist, Senior Economist, and Portfolio Manager

This podcast should not be copied or reproduced. Opinions expressed in this podcast are based on actual market conditions and may change without prior warning. The aim is in no way to make investment recommendations. The forecasts given in this podcast do not guarantee returns and imply risks, uncertainty and assumptions. Although we are comfortable with these assumptions, there is no guarantee that they will be confirmed.

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2024-04-18 12:32 EDT
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