Transitioning
from renter to homeowner is one of the biggest decisions you’ll make throughout
your lifetime. That’s why it’s essential to surround yourself with a team of
experts – including both a mortgage and real estate professional – to walk you
through the steps to home ownership, answer all of your questions and concerns,
help you decide what kind of home you can afford and get you pre-approved for a
mortgage.
With
interest rates still hovering around “emergency” levels – low rates never
before seen by our parents (or even our grandparents) – now is an ideal time for
first-time homebuyers to embark upon homeownership.
Down
payment
The
main reason many renters feel they can’t afford to purchase a home has to do
with saving for a down payment. But there are many solutions available today
that can help first-time buyers with their down payments.
Many
lenders will allow for a gifted or borrowed down payment. And of those lenders
that will not provide this alternative, many offer cash-back options that can
be used as a down payment.
Better
yet, there are programs available from some financial institutions where they
will offer a “free down payment” or a “flex down”. Of course, you will end up
paying about 1% more in your interest rate, but the program will help you get
in the homeownership door and start accumulating equity earlier. You must,
however, stay with the original lender for the full initial five-year term or
else you’ll have to pay the down payment back.
And if you’re part of a couple making
a home purchase together, you can each withdraw up to $25,000 from your RRSPs
Educating
and coaching
There’s
an endless amount of information available to prospective homeowners – through
the Internet, friends, family members and anyone willing to voice their opinion
on a given subject. What you really need, therefore, is education and coaching
as opposed to being bombarded with more information.
Speaking
to me in order to obtain a pre-approval prior to setting
out home shopping can help set your mind at ease, because many first-time
buyers are overwhelmed by the financing and buying processes, and often don’t
know what it truly costs to purchase a home. Real examples can go a long way in
showing you what it costs to buy a home in your area versus what you’re
currently paying in rent. For instance, if you are currently paying $1,250 per month, with that same payment (including taxes) you could afford to buy a
$250,000 home (OAC). And assuming real estate values increase 4.5% per year over the
next five years, you would have accumulated over $100,000 in equity in
your home. If you continue renting, however, this $100,000 has generated
equity in your landlord's home.
If this has got you thinking that now really is the right time to stop paying your landlord's mortgage for him, please contact me. I'll work with you to figure out how much you can comfortably afford, and if necessary I'll help connect you with other professionals I know and trust to guide you in making the transition from renter to homeowner!
