Throughout the pandemic, many individuals are wondering if it is a good time to buy a property. Ultimately, each person’s situation is different, but here are some tips that can help you on your journey:
Build a healthy down payment
- Utilize your RRSPs – If you have RRSPs, there is an opportunity to leverage these funds to help with your down payment of your first home. Just keep in mind, you will need to pay it back.
- Leverage a gift from family – Many family members understand the difficulties with getting on the property ladder. If you ask for help now, there’s a possibility that family will support you, as this could be a good time to get in the property game given the low-rate environment.
- Develop a side business/job – Even though we are within a pandemic, there are numerous virtual jobs and businesses available to run within your spare time or on the weekends. These types of opportunities will help you to build additional income. Some Canadians have been able to grow their income through driving Uber, tutoring virtually, being a virtual assistant, or offering their services through the platform Fiverr.com.
- Sell items that you do not use – Everyone has items that they no longer use or have never used. Utilize platforms such as Facebook, eBay, Kijiji, and other social media forums to sell these items.
Optimize on bargains for your first home, rather than buying new
- Be ok with used goods – As you are purchasing your first home, there is always a desire to buy all new furniture and goods you desire from Day 1. Try to avoid this temptation and save as much as you can for your down payment and consider pacing out major purchases, looking at second hand or used goods through online platforms, and/or reaching out to relatives to see if they have items they no longer want. People understand the struggles of settling into your first home, so many will be willing to help. Once you are settled in, take time to save up and decorate your home slowly and when you can afford it.
Consider your life circumstances to set realistic expectations for your first home
- Buy a starter home – Buy a home within your means. Focus on affordability, not keeping up with the Joneses.
- You are on the property ladder now: Every dollar you put into paying the mortgage principal down will increases the amount of equity you hold within your home. You will be able to own more of your home faster by purchasing a more affordable home first.
- Gain financial breathing space: Buying an affordable property with a small and manageable mortgage means you are borrowing less, and your payments will be less. With the rates at an all-time low as well, this means you keep more of your take home pay and you will be able to enjoy life a little more versus being stretched if you bought your dream home now.
- Future investment potential: Look at your first home as a possible future investment property, one that can generate another source of income when you decide to upgrade to your next home or even during retirement.
- Down payment for your dream home: From your very first mortgage payment, you are improving your equity within your home. The equity you are building in your home, coupled with the potential increase in the value of your property, will allow for growth in your future down payment for your dream home. This will help you to obtain your dream home sooner and more importantly, you are less likely to be financially stretched.
- Buy and rent part of your home – Find a property where you can live in one area while renting out another part of the home to someone else. This enables you to use the rental income to help cover off your expenses while paying down your mortgage faster. Within the current environment, there are a lot of Canadians looking to rent, and this will become an immediate source of income for you. This will also provide some financial breathing room for you as you settle into your first home and learn how to manage your finances as a new homeowner.
- Buy a house with someone else – Purchase a property alongside a sibling, friend, colleague, or another relative. This can provide potential benefits to both of you. Here are some advantages that people consider when taking this approach:
- Becoming a homeowner – If all parties have the objective to purchase their first home, this is a great option. Each party will learn the skills of managing a home (financially and physically) while potentially benefiting from any house price appreciation, which could be used as a down payment on your future purchase. Alternatively, if one of you really likes the house, one party can buy out the other person, allowing both parties to win.
- Additional income stream – If all parties have the objective of adding another source of income, buying a property with someone else reduces your individual down payment burden, but still allows you to generate that income stream (albeit at a lower level than if you purchased a property alone). There is also value in having the option to either live in the property or renting it out to generate income.
The tips within this blog are here to guide you as you explore options to buy your first home. Nothing within this blog is to be considered advice in any shape or form. If you require tailored advice, it’s recommended to connect with a mortgage specialist, by clicking here now.
To help you through this process of trying to find the right lender with whom you can discuss your home purchase needs, click on our link below to search, compare, and discuss your requirements with a lender of your choice.