The Kids are Alright
You could call them the "comeback kids" - the legions of first-time homebuyers who might lead the rebound of the Canadian real estate market.
The mostly 20- and 30-something buyers are entering the market armed with government incentives, great financing, and lots of lower-priced homes to walk through.
Dreams of mortgages replacing rent cheques are popping up across the country among newlyweds and recent grads, and it's about time!
It's been quite a few years since the younger generation has found the home buying experience this accessible. No need right now to face the financial and emotional stress of bidding wars, no jostling with the crowds at open houses, no settling for the smallest, least attractive house in the neighbourhood.
This is the kind of financial help that first-timers can get right now:
- A new First-Time Home Buyers' Tax Credit that will provide up to $750 in tax relief when purchasing a first home.
- An increase to the Home Buyers' Plan withdrawal (from RRSPs) limit to $25,000 from $20,000 (and up to $40,000 for a couple)
- The withdrawal from the RRSP is also tax-deductible. Young homebuyers can use their tax refund to repay their RRSP, or do some renovations to their new home, by grabbing some of that renovation tax credit.
Get your Financial House in Order
Sandra Rinomato, host of the HGTV show, Property Virgins, blogs some interesting, and very modern, advice to first-timers getting their financial house in order prior to the purchase:
"You should check your own credit on a regular basis to ensure that the information posted is accurate and up to date, and to ensure that you are not a victim of identity theft," Sandra writes. "When it happened to me I was able to thwart the efforts of the criminal by putting a notation on my bureau... A good credit score could get you better interest rates."
Sandra has just published the book, Realty Check: Real Estate Secrets for First-Time Canadian Home Buyers.
She adds, "Mortgage specialists will assess your debt load and virtually create a mortgage solution for you based on your assets, credit history, income, job potential and other factors."
Hiring a mortgage broker could turn out to be a worthwhile investment for real estate neophytes, if the results of a recent study are any indication. The First-Time Homebuyers' Monitor survey, conducted by Genworth Financial Canada, in late 2008 found that only 25% of newbie home buyers got a B or better in a short knowledge test about mortgages, home buying terms and concepts.
And fewer than 1% of respondents answered all 10 questions correctly, indicating a deep lack of understanding about credit rating, mortgage term, variable or fixed interest rates, amortization, mortgage default insurance, debt service ratio.
Regardless of their financial wisdom, or their psychological skills at coping with debt, you can expect to see lots of eager first-time homebuyers driving slowly past the signs on the lawns in your neighbourhood this spring.
Are you a first-time homebuyer? What are your biggest concerns right now? give me a call or send me an email.