In today’s market, it is getting more and more difficult for the average person to find affordable housing. For the first-time home buyer in this market, the decision is important not only as a place to live but as an investment. The whole process can be overwhelming and an uncalculated risk can be financially devastating. Toronto’s market is especially difficult for millennials as a result of affordability, rising student debt and less access to loans.
With recent reports suggesting that home prices are about to rise to twice what the average millenial can afford, and with access to affordable housing now clearly a hot-button election issue, you might assume buying a home is nothing more than a pipe dream. While it’s true the market fluctuates and interest rates change, there are some ways best prepare yourself for taking the plunge into homeownership.
A first step should always be to educate yourself on the process of buying a home so as to limit surprises which can cause headaches or worse your hard-earned money. A solid budget is also key because you have more than rent to worry about. Try to account for regular and interval maintenance and property upkeep in addition to the mortgage. In the event of a change of income or job loss, it’s a good idea to have a three to six month nestegg worth of your home expenses. It also helps immensely to amass as large a don payment as possible to reduce your principal loan. Don’t forget to account for closing costs as well and incidentals like moving or new furniture.
Next you should look at location to consider where you can shave some of the cost. While many young people would prefer living in the core area of a city like Toronto, it may not be practical when just starting out on your career path. With the GO Train system servicing the entire GTA, a satellite town or community may be the best way to get all the features you are looking for without going over-budget. It’s also important not to jump at an easy financial arrangement when the interest rates go down, otherwise risk being stuck with a bill you can’t afford when the rates rise.
In a recent TREB report, the GTA’s strong economy, cultural diversity and internationally recognized quality of life continue to attract newcomers to the region each year. While this will continue given recent attraction of tech companies, the housing supply has not kept up with population growth and has produced more luxury than affordable developments which have led to high demand among millenials.
In the current state of the market, it may be best to save for awhile and keep an eye on the market for signs of improvement. A recent report from the Canada Mortgage and Housing Corporation, buyers should expect more options by 2020 while advising current owners and investors to start dropping their prices and even return expectations, so there may be some hope on the horizon. With the right knowledge and a sound financial strategy, anyone can enter home ownership and protect their investment without going bankrupt.