Things You Should Know BEFORE Buying Your First Home
When it comes to the Canadian real estate market, you still have options…even though it seems harder and harder to get into it.
Buying a home in Canada can be tough. After decades of underbuilding, our country is now facing a housing shortage. With fewer homes to go around, real estate costs have risen sharply in many cities—making them some of the most unaffordable real estate markets in the world.
It’s not impossible for Canadians to own their own home, even if they don’t have an eight-figure inheritance to play with. Nearly 70 per cent of Canadians own their own home, and that figure is rising each year. Here are some tips on how to join them.
Before you start looking at houses, you will want to get pre-approved for a mortgage. This means that a lender has looked at your credit history and income and decided they are willing to lend you enough money to buy a home.
What you want to avoid is finding the perfect house and then finding out there is not enough money available through a bank loan to pay for it (in which case, the seller can keep your deposit and sue if you do not complete the purchase).
Did you know you can increase your purchasing power with a rental suit?
One of the easiest ways to score more house on your current paycheque is to look for properties that come with rental units, such as a basement suite, backyard tiny house or spare bedroom to put an international student. Many of our lenders offer an 80% rental offset if you plan on renting out a portion of the home to a tenant for market value. This can significantly increase your purchasing power when qualifying you for a mortgage.
Why not leave the city?
One of the most striking demographic shifts of the COVID-19 pandemic was that it prompted thousands of Canadians to flee cities in search of a better life in the countryside. Unable to work from home due to poor internet connections, people fled to places like Powell River where they could buy a house for less money than in Vancouver.
Pad that downpayment
Putting down a big down payment will help you get a good mortgage and lower your monthly payments, so if you can scrape together enough money for a sizable down payment you’re likely to be better off long term. If you want a big wedding, you might want to think about cutting back on other expenses so that you can afford it.
A longer commute comes with additional hidden costs! Keep this in mind.
The further out you go, the more home you’ll be able to buy. But if you’re looking at a home that will significantly increase your commute time, that should also be factored into the purchase price. If you save $100,000 off the purchase price of a home but now have to commute an extra 90 minutes per day, over a 20-year period that’s an extra 7,500 hours spent commuting – earning just $13 in savings each hour.
Buy with family or friends!
If you can’t afford a house in the neighbourhood of your choice, consider going in halfsies with a friend who has similar housing needs and wants. Some lenders will accommodate this with what are known as “mixer mortgages.” It’s also important to enlist the expertise of a lawyer to draft up a formal agreement between the two parties which will have you a ton of headaches down the road should the relationship go sour.
A rock bottom interest rate should be your priority…the best mortgage for your needs and situation should be!
Mortgage rates are low right now when you look back at the last 30 years, and so many Canadians have taken out mortgages that the Bank of Canada is scared that even a modest rise could precipitate a wave of foreclosures. Interest rates breached 20 per cent as recently as the 1980s, and while this is an extreme case, you should plan to be able to handle higher mortgage payments without going broke.
Buying a neglected home has always been one way to get into the market…but it comes with risks.
If you want to buy just outside your price range, look for a house that’s a little rough around the edges. But buying a derelict home can trap you in an endless quagmire of expensive renovations. To avoid this pitfall, look for a house with “good bones” – the framing, roofing, plumbing and electrical are all in decent shape, but cosmetic stuff like paint, flooring and countertops need attention.
Make it personal. Why not write a letter to the owner.
A heartfelt and well-targeted letter can help cut through the legalese of a real estate sale. The struggling single mother who bought a home against the odds may want to pass it to a woman in a similar situation. The handyman who renovated the property himself may like the idea of passing it to a do-it-yourselfer who’s going to continue his legacy. This human touch can be the deciding factor especially if there are other offers on the property.
How can Ahmad, mortgage specialist at AskAhmad.ca and the Total Mortgage Source 360 Team help you?
Ahmad and his team are industry experts on mortgages. They offer excellent customer service and pride themselves on their ability to help you find the right mortgage product for your needs.
We can offer you some of the most competitive interest rates and mortgage products available because we have access to Canada’s leading lenders, including banks, mortgage firms, trust companies and private lenders.
Total Mortgage Source 360 FSRA#12151 – Each office is independently owned and operated
Ahmad El-Farram, Mortgage Agent #M21005249
The Mortgage Centre at Total Mortgage Source 360
Your Local Aurora/Newmarket Mortgage Agent
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