Red hot real estate markets have seen home prices rise exponentially in Southern Ontario’s most populated regions, including Toronto and the GTA. Coupled with the added barrier of the Government of Canada’s 2018 Stress Test, this has left many young Canadians priced out of the market.
While it’s undoubtedly harder for millennials to enter the Canadian housing market in recent years, it’s certainly not impossible to do so – quite the contrary! With a plan in place, some knowledge, research, and discipline, millennials can make that first home purchase, sooner rather than later.
Are you a millennial looking to make your first home purchase? Use our millennial homebuyers’ guide to help you on your way to achieving homeownership:
Pay Down Your Debt
Millennials face extra barriers in relation to homebuying, with one of the biggest barriers being student loan debt. In Canada, the average postsecondary student graduates with a debt of $28,000. With entry-level salaries leaving little room for saving, many millennials are forced to choose between paying off their debt and saving for a house.
It’s very difficult to save money for a home purchase if you’re weighed down by debt – that’s why it’s wise to draw up a debt repayment plan and stick to it, so you can pay down your student loans, as well as any other high-interest debts (including credit cards) before you can attempt to save for a down payment on a home.
Save, Save, Save!
For most Canadians, a home will be the biggest purchase they will ever make. It goes without saying that in order to make such a substantial purchase, you will need to do some considerable saving.
A 2018 CIBC survey stated that 94 per cent of Canadians aged 18-37 who rent or live with family still dream of owning a home, but 76 per cent haven't started saving, or have accumulated less than a quarter of their down payment.
That’s why it’s important to start saving early, make use of a budget to see where you can cut unnecessary expenses. Track your spending using a notepad or a smartphone app so you can see where your money is going, and make any necessary adjustments to your spending habits.
Getting Pre-Approved for a mortgage helps you in multiple ways: first of all, it can help you find out what your house hunting budget should be. Plus, it also helps to show sellers that you’re a solid buyer, who has done their due diligence.
While getting pre-approved doesn’t guarantee that you will get the mortgage amount, it certainly helps give you credibility as a potential buyer – which gives you an advantage in a competitive real estate market.
Shop Within Your Means
Once you’ve been pre-approved for a mortgage, you can begin the exciting process of house hunting. That doesn’t mean that you should go ahead and max out your budget, however. Shopping within your means is the best way to stay within budget, so you can ensure your future home doesn’t burn through your entire house-hunting budget – or worse, put you in debt.
If you’re a house hunting for your first home, you’ve most likely accepted the reality of the situation – with this first home purchase, you’ll probably have to start small. Most first-time homebuyers can’t afford their dream home right away, which is perfectly normal.
Instead of a detached or semi-detached home in the city, you may only be able to afford a townhouse or condo in the suburbs. Making these kinds of compromises in terms of location and size is a normal part of being a first-time homebuyer. Remember: everyone starts somewhere, and just because this first home may not be your “forever home,” doesn’t mean that you can’t make the best of it!
Don’t Skimp on the Inspection
If you’ve put an offer on a home but are competing with multiple other buyers, you may choose to forgo certain conditions in your offer to make it more favourable for the seller. Often, the first condition that a prospective buyer will forgo is an inspection. While, this may seem like an easy way to make your offer stand out, it’s rarely a good idea. Your lack of inspection could help you get the house, but may leave you with a slew of unexpected – and expensive – issues down the road.
Even if you’re purchasing a newer home, it’s a good idea to do an inspection in order to protect yourself from unexpected problems that could end up costing you much more money than an inspection would have.
If you’re in a multiple offer situation, instead of forgoing the inspection right away, you can make your offer more attractive by doing a pre-offer inspection, which would allow you to eliminate the inspection condition from your offer.
Don’t Let Stress Get to You
Finding homes, going to showings and open houses, negotiating offers and filling out all that paperwork can take a toll on a homebuyers’ well-being. House hunting can be a stressful time – but it doesn’t have to be.
While a certain amount of stress is normal, and there’s no way to turn this into a completely anxiety-free experience, there are things that you can do in order to help minimize stress. As the old adage goes, hope for the best, but prepare for the worst, so if things don’t go your way this time around, you’re ready to move on with the process. Keep calm and level-headed, so you can make decisions using logic and critical thinking, rather than emotions. Finally, remember – there are plenty of other houses on the market, and your perfect home is out there waiting for you!
After Your Purchase
Get the Right Insurance
Your offer has been accepted – congratulations! After you’re done popping the celebratory champagne, take some time to think about how you can protect your new home with insurance coverage.
At Desjardins Insurance, we have a wide variety of home insurance policies tailored to your unique needs. Get a quote today to see how easy it is to protect your new home with Desjardins Home Insurance, or speak to one of our licensed insurance advisors, who will take you through the process step-by-step.
Take Care of Closing Costs
Don’t forget about closing costs! Many house hunters forget about the extra expenses that come with buying a home – namely, the closing costs, which include a home inspection fee, a deposit, a land transfer tax, legal fees and more. Closing costs can be anywhere from 1.5 to 4 per cent of the purchase price of a home, so be prepared to take care of these costs once your offer has been accepted.