There are many benefits of homeownership. It creates a level of stability in a person's life and provides a safe environment for children to grow and learn. A home can also have several financial benefits, creating borrowing power for the homeowner and the opportunity to build wealth that can be passed on to children and grandchildren.
Still, many Canadians are sitting on the sidelines because of all the negative news. Others may not have enough extra money to save for a down payment or have other financial difficulties, such as poor credit scores that make it difficult for them to get approved for a mortgage This article will help you overcome these hurdles and take advantage of one of the best times in recent memory to buy a home.
First, how to conquer your fear of a falling market? 1- Stop listening to all the negative news and people. The market hasn't been affected as badly locally as it has in some parts of Canada.The values haven't dropped drastically but sellers are more reasonable and are not over inflating the asking price.There are fewer listings on the market then at this time last year so the good listings tend to go quickly.If you hesitate on a house you like you may find you will have to keep looking because the one you wanted may have gotten away.
2- Concentrate on the positive aspect of the current market such as lower mortgage rates, government incentives and yes, there are some deals to be had out there such as power of sales and some sellers having to sell quickly.
3- Speak with your real estate agent or if you don't have one, speak to a few before you commit to one. Whether you are a first time buyer or you currently own a home, a Realtor will be able to
guide you through the process.You may need your Realtor to give you an opinion of value of your current home so you know what you have to spend if you are moving up.
4- Speak to your lender.Again, if you don't have one you may want to speak to your bank but don't forget to try a mortgage broker as well.A mortgage broker will find the best product for you from a variety of lenders and can usually get you a great rate.If you have a mortgage already you need to find out if and what the penalties are if you break that mortgage.With the interest rates as low as they are some people are stuck with a $10-$15,000 penalty.
Second, how to come up with the down payment? Using a $250,000 purchase price as an example, the following chart shows down payment options available and the amount of down payment needed to qualify for a mortgage:
Type of Mortgage
% Down payment
Amount of down payment required
Conventional
20%
$50,000
High Ratio
5%
$12,500
No Down payment
0%
$0 (Closing costs & impeccable credit scores are required to qualify for $0 down)
Once you have established the amount of down payment you need, you must put a solid plan in place to save this money. Here are a few ideas to help:
Simply start saving by having a pre-determined amount of money transferred to your savings or RRSP account each month.
If you are a first-time buyer, use up to $25,000 from your RSP as a portion of your deposit.
Consider moving to a less expensive rental unit or get a roommate to split the rent and put the money you save each month into your savings account.
Pay off your credit cards or consolidate them to reduce your debt and the interest you're paying.
Consider a part time job and put the income entirely towards your down payment.
Borrow from parents; they may be happy to help.
Cut back on entertainment like movies and eating out, and deposit the money you would have spent into you savings.
Take your lunch to work, start brewing your own coffee in the mornings, clip coupons and use them.
For a two-car couple, consider going down to one car.It seems like a huge sacrifice but you become accustom to it and this can be a huge savings each month.
Call your service providers such as phone, cable, internet, insurance, and ask for a better rate. You'll be surprised how they will reduce your plans by a few dollars a month or credit cards companies will sometimes reduce your interest rates if you just ask.By cutting back on every day expenses you can put more of your earnings away in a savings account. Budgeting doesn't have to mean economy meals and nights in with just a book for company - there are many ways you can cut back without feeling like you are depriving yourself.
Work up your plan vigorously. Many first time buyers are able to save up the required down payment fairly quick. All it takes is some planning, will power and discipline.
