First-time homebuyers: What you should know

September 16th, 2014 by admin

According to a recent poll by the Bank of Montreal of 2,000 individuals, the average first-time Canadian home buyer is 29 years old and expects to be able to make a down payment of $48,000 on a $300,000 home. Linda Nguyen expands on these findings in her article for The Globe and Mail. 

Nguyen notes that there is significant price variance by region. For example, buyers in Atlantic Canada expect to spend an average of $202,000 on a first home, followed by Quebec ($224,000), then Ontario ($326,000), British Columbia ($384,000) and Alberta with ($406,000). 

Speaking with Nguyen, BMO mortgage professional Laura Parsons emphasized that, given how important purchasing a home is, people need to make sure they are financially prepared.

In fact, Erika Rawes, of Wall St. Cheat Sheet, explains that financial oversights are some of the main mistakes first-time homebuyers make. Establishing a budget and meeting with a lender to find out how much you can be approved for are the first steps homeowners need to take. These steps help cut down on the problem of overspending. 

She adds: "it's always better to lean towards a lower amount, rather than a higher amount. You do not have to use the entire amount you're pre-approved for. Once you know how much you have to work with, then and only then should you start your house hunt."

Rawes also cautions against "counting chickens before they hatch." That is, you should use your current income, not the future salary you anticipate, when calculating your mortgage rate. While many of us can anticipate, within good reason, that our economic situation will improve the next year, there's no guarantee, and therefore it's better to be safe. 

Parsons of BMO similarly instructs first-time buyers to be prepared financially and be realistic. She suggests that it's never too early to start the planning phase for buying a home. Individuals can start plans even before they're ready to actually purchase a home. 

Forty-six per cent of those surveyed by BMO reported that they would choose a fixed mortgage rate, compared to 20 percent who would opt for the variable rate. 

In addition, the study found that the average first-time buyer plans to pay off their mortgage within twenty years. Twenty percent hoped to complete payments before that mark. Meanwhile, 31 percent told BMO that they did not know exactly when they would be able to stop making payments.

When buying a new home, you will also need to obtain insurance. For more information about home ownership and insurance, contact Fundy Mutual. Our experienced team of home insurance brokers will assist you with your needs.