First-Time Canadian Home Buyers Ready Regardless of Market Conditions
The increase of first-time buyers in the recent real estate market has generally been attributed to lower prices and mortgage rates but some experts question how savvy these first-time buyers may be. Obviously, mortgage rates have hit 30 year lows and affordability appears to have returned to many markets across Canada but many first-time buyers may not be fully aware of the market conditions when they set out to buy.
Indeed, many first-time home buyers admit that they have little information about mortgage rules or market conditions. Moreover, many first-time home buyers share a similar quality: they're determined to buy regardless of mortgage rates or prices. These first-timers have been taught that it's never a bad time to buy a home and are entering the market as their personal economic conditions allow it rather than vice versa.
In addition, the vast majority of first-time home buyers, some 74 per cent of Canadians making their first purchase, are amortizing over 25 years or less rather than the current maximum of 35 years. It appears as though these buyers are interested in paying off their mortgages quickly and banks are applauding this trend.
At the moment, there are a number of key incentives for first-time home buyers like the First-Time Home Buyer's Plan, which allows interested buyers to transfer up to $25,000 from their RRSPs to a down payment on a qualifying home. While underutilized, this program can make it much easier to get into the real estate market. In addition, there is the First-Time Home Buyers' tax credit which provides up to $750 in credits that can be directed toward the purchase of a home. Married couples have also been able to direct RRSP funds from gifts to their down payments.
At the moment, lenders are beginning to follow more stringent lending practices and these changes began before the government introduced new lending rules on high ratio mortgages. Buyers with less than 20 per cent down face stricter regulations and all mortgage qualifications are now based on a five year fixed-rate mortgage. Apparently, these changes seem directed at maintaining a stable market as some first-time buyers may not be prepared for increased payments as mortgage rates go up.
Still, some first-timers are being drawn to the market because the cost of owning versus renting is fairly comparable. For example, a typical $300,000 mortgage will have a $1,700 monthly payment while rent for a similar property would hover around $1,200 per month. When you consider a yearly increase of 5 per cent in rents whereas mortgage rates are fixed, the difference is even smaller. The logic that it's better to pay your own mortgage than make payments toward somebody else's mortgage is truer than ever.
While many first-time buyers have shown indecisiveness when it comes to purchasing, most experts will say that it's best to get into the market when you have a viable plan in place. This includes savings for a down payment and a long term affordable budget.
Indeed, many first-time home buyers admit that they have little information about mortgage rules or market conditions. Moreover, many first-time home buyers share a similar quality: they're determined to buy regardless of mortgage rates or prices. These first-timers have been taught that it's never a bad time to buy a home and are entering the market as their personal economic conditions allow it rather than vice versa.
In addition, the vast majority of first-time home buyers, some 74 per cent of Canadians making their first purchase, are amortizing over 25 years or less rather than the current maximum of 35 years. It appears as though these buyers are interested in paying off their mortgages quickly and banks are applauding this trend.
At the moment, there are a number of key incentives for first-time home buyers like the First-Time Home Buyer's Plan, which allows interested buyers to transfer up to $25,000 from their RRSPs to a down payment on a qualifying home. While underutilized, this program can make it much easier to get into the real estate market. In addition, there is the First-Time Home Buyers' tax credit which provides up to $750 in credits that can be directed toward the purchase of a home. Married couples have also been able to direct RRSP funds from gifts to their down payments.
At the moment, lenders are beginning to follow more stringent lending practices and these changes began before the government introduced new lending rules on high ratio mortgages. Buyers with less than 20 per cent down face stricter regulations and all mortgage qualifications are now based on a five year fixed-rate mortgage. Apparently, these changes seem directed at maintaining a stable market as some first-time buyers may not be prepared for increased payments as mortgage rates go up.
Still, some first-timers are being drawn to the market because the cost of owning versus renting is fairly comparable. For example, a typical $300,000 mortgage will have a $1,700 monthly payment while rent for a similar property would hover around $1,200 per month. When you consider a yearly increase of 5 per cent in rents whereas mortgage rates are fixed, the difference is even smaller. The logic that it's better to pay your own mortgage than make payments toward somebody else's mortgage is truer than ever.
While many first-time buyers have shown indecisiveness when it comes to purchasing, most experts will say that it's best to get into the market when you have a viable plan in place. This includes savings for a down payment and a long term affordable budget.
Labels: British Columbia Real Estate, Greater Vancouver Homes
posted by VancouverResidence
