The real estate market is more competitive than ever, with home prices continuing to rise in major cities. In fact, a recent TD survey found 19% of new homeowners in cities such as Vancouver and Toronto listed their fear of being priced out of the market as a top consideration before making buying their homes.
Further, prospective first-time buyers are concerned they’re rushing the process of buying to avoid missing an opportunity (20%) and being pushed out of the market (13%), as well as buying too fast in order to win a bidding war (18%).
“There’s more to consider beyond purchase price, interest rates and the monthly mortgage payments,” says Marc Kulak, associate vice president of Real Estate Secured Lending, TD Canada Trust. “It’s essential that buyers do their homework, considering, 40% of first-time buyers are worried they don’t understand the full cost of ownership.”
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One thing homebuyers should understand before making a purchase, he adds, is the difference between their set budgets and the mortgages for which they qualify. A mortgage pre-approval can help buyers shop with confidence, but they should also assess how much they can afford each month along with ongoing expenses, such as groceries, transportation and meeting long-term savings goals.
“First-time homebuyers should save for the largest down payment they can afford, even if that means waiting to buy,” says Kulak. “With a down payment of at least 20%, buyers can also save on mortgage insurance premiums upfront.”
Read: Pay mortgage or save? Help young homebyuers decide
One way for buyers to maximize their down payment is to take advantage of the Home Buyers’ Plan, which allows Canadians to borrow up to $25,000 each from their RSPs for their first home. This plan wasn’t tweaked in the 2016 federal budget, despite expectations that it would be.
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Home market fears overblown, says developer
Would change to home buyers’ plan help clients?