Mortgage rates for homes can often be a challenge for most home buyers to afford. Not only do mortgage rates cause stress for the buyer, it can seriously affect the real estate agent as well. Mortgage rates often change year to year, and the rates depend on the buyer’s credit, the value of the home being purchases and the amount the buyer is willing to pay. Here are some of the following ways, both positive and negative, changes in mortgage rates and rules can affect the real estate agent, and their sales commissions.
1) Mortgage rates can be too high: mortgage rates are sometimes too high for a buyer to afford. If the buyer cannot afford to pay the mortgage from month to month, the house they intend on purchasing will no longer be an option. However, if mortgage rates are too high, homes often go down in price significantly because buyers cannot afford their mortgages. When the houses go down in price, the buyer can then afford to purchase the home. Yet, the seller may refuse an offer for purchase because they will think they deserve more money for their house. All of these situations can cause a sale to fall through, meaning the agent’s commission is compromised.
2) Harder to get lending: changes in government laws make it harder for banks to give mortgage to buyers. The bank is usually the factor that determines the rate of the mortgage. The mortgage takes into account the value of the home being purchased, the buyer’s credit and how much the buyer has for a down payment. As well, the recent change in amortization periods from a maximum of 30 years down to 25 years means that some potential homebuyers can no longer afford a mortgage.
4) The agent does not make any money: mortgage rates that are too high often result in low sales for Canadian real estate agents because their clients cannot afford the mortgage on a home. This affects the overall sales for the agent for the year, and their income made from commissions.
5) When the supply is low, the demand becomes low: if mortgage rates become too high for the home buyers too afford, then the supply of homes being sold will decrease for two reasons: one, the buyers cannot afford the mortgage rates because they are too high, and second, if the buyer puts down an offer for sale, the seller can refuse the offer because it is too low, resulting in no purchase for both the buyer and the real estate agent.
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