According to an RBC Royal Bank study conducted by Ipsos-Reid in January 2006, 90% of Canadians view their homes as a good investment. For those intending to buy a home in the next two years, detached houses are preferred most by those between age 25 to 54, while age 18 to 24 and 55-plus are the most likely to prefer condos. Strictly from a cash flow standpoint, renting can appear less costly than owning, without the additional costs of house taxes, maintenance and utilities. But, unlike renting, home ownership is a form of investment.
Here are some common concerns of those new to the housing market, and some answers that may pleasantly surprise you:
“I’ll never save enough to make a down payment.”
You don’t necessarily have to. With interest rates creeping up, many first-time homebuyers want to get into the market right away but haven’t been able to save the 5% down payment. A “no down payment mortgage” can allow you to borrow 95% of the appraised property value or purchase price of your new home – whichever is less. This innovative solution provides 5% cash back when you take a five-year fixed-rate mortgage – funds you can use to cover the required five per cent down payment. All you need is 1.5% of the purchase price to cover closing costs.
“Most of my savings are already tied up in RRSPs”
As first-time homebuyers, you can actually borrow up to $20,000 from your RRSP (up to $40,000 per couple) to help buy or build a qualifying first home. You can repay your RRSP in annual installments over 15 years. Contact your local taxation office or bank branch for full details on this helpful Home Buyers‘ Plan sponsored by the federal government.
“What about all the extra costs of buying a home?”
Before you start looking for the home of your dreams, contact your financial institution for free expert advice and to arrange pre-approval for your mortgage.
A pre-approved mortgage lets you know, up front, what you can realistically afford to pay for a home in terms of purchase price, down payment, legal fees and other closing expenses. You’ll know exactly how much you can borrow based on your current financial situation, subject to a formal credit approval and satisfactory property appraisal. And by getting your mortgage pre-approved, your interest rate is guaranteed for 90 days – so if interest rates increase while you’re house hunting, you don’t need to worry!
Choose a mortgage lender that offers the flexibility to adapt to changing situations. Discuss the option of skipping mortgage payments during a tight period, or increasing or paying down your mortgage as your priorities change.
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