Is it really the end of home ownership in Canada? We don’t think so…
Is it really the end of home ownership in Canada? We don’t think so…
“For generations, middle-class Canadians have been sold on the promise of homeownership. The promise was always flawed. Today it’s simply broken.”
The affordability of home ownership in Canada can be influenced by various factors such as housing market conditions, interest rates, government policies, and regional economic factors – and yes, the last year has been particularly challenging; with interest rate hikes, soaring housing prices, and a lack of inventory, without mentioning inflation on absolutely everything, including the essentials i.e. gas, food… but this is cyclical, and things will even out, they always do.
The secret to home ownership, in our opinion, is to start somewhere, get into the housing market, purchase a property, it does not have to be your forever home, just a home that belongs to you – look at it as an investment that you live in.
We often hear, “I am waiting for the right conditions to get into the housing market”. Again, in our opinion, “don’t try to time the market, it’s time in the market” that pays.
We had a client this week, a first time home buyer, who has been renting for 10-years already. He couldn’t believe either; he was thinking about all his rent money that had gone to pay down someone else’s mortgage.
This client wants to purchase a property. He has a decent income, a good credit score, low debt, and enough saved to make a decent down payment, and have enough left for closing costs.
Our advice to him was to simply purchase a property, hold it, and let time work its magic. Even if he could afford something more expensive, we recommended not to buy a property that would leave him house poor – you know, a life of ordering take-out once a week, and playing Fortnite, because you can’t afford to do anything else!
In the early stages of the loan, a larger portion of the payment goes toward interest, while the portion allocated to principal gradually increases over time. Typically, it takes several years (often around 7-15 years) before the interest paid on a mortgage equals the capital paid.
Using the equity in your home, combined with the appreciation of its value over time, provides you with the option to upgrade to a better home. If upgrading to a better home is your thing: using the equity in your current home gives you funds necessary to make a down payment on a new, better home. The increased down payment will help you qualify for a larger mortgage, or afford you a more expensive property.
Repeat this process until you find yourself in your forever home. Yes, it takes time, but as mentioned earlier, you need to start somewhere, and why not now.
Try not to get emotionally attached to your home, think of it as an investment. Remember, in Canada, you do not pay capital gains on your principal residence, making it by far the best investment you can make.
If you are happy with the home you already have, try to aggressively pay down your mortgage. Imagine the day you are mortgage free. In most cases, you can rent for less than being in a mortgage free house. And again, this is a tax free asset that continues to appreciate over time – creating significant wealth.
If you want to see if you can qualify for a mortgage, call us, Fred and Martin Mortgages. We will happily run the numbers for you, and if possible, pre-qualify you for a mortgage. It’s free, and could or make you thousands.
Fred and Martin