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Buying a Home in Your 20s

If you are a millennial trying to get into the housing market then this post is going to be the only one you need to read. In your 20s, buying a home might seem like a fantasy in todays market, but YOU ARE NOT ALONE. A ton of millennials are considering home buying in 2023 but aren’t sure where to start. There are a few things you need to know before becoming a homeowner, and they are packed with important information to avoid you from making a moving mistake. So keep reading!

 Though home buying can seem daunting, millions of millennials have done it. Millennials are now the single biggest group of homebuyers in Canada!

But is this move right for you, too? Let’s break it down.

 

Are you Eligible?

The first question you will need to ask yourself is are you actually eligible to buy a home? If you have a sufficient credit score, steady income, and enough savings to cover the down payment and closing costs, then the answer may be yes. Also keep in mind most mortgage lenders require a two-year job history to qualify for a home loan. So if you are just starting your career, you might not have enough of an established work history to get financing.

 If you determine that you are eligible, the benefits of home ownership are SIGNIFICANT. Especially when you are younger. A home is a long-term investment, and when you’re younger, you have more time for that investment to grow. If you stay in the new home long enough, you could build serious wealth.

Real estate wealth can be flexible, too because there are so many things you can do with it. Obviously houses appreciate in value so selling it for a profit at a later date is the main reason for success. But you can also turn it into an income -earning rental property when you’re ready to move up or borrow against your home’s value at low interest rates to generate cash

 Homeownership also helps 20-somethings because it means:

  • Consistent, reliable payments — No more annual rent hikes from your landlord
  • More control to customize the property — You can do whatever you want to your home once you own it
  • Tax benefits — Homeownership comes with several potential tax benefits that might lower your tax burden and increase your annual refund
  • You could also save on monthly housing costs. Rents have been skyrocketing in most major cities in recent years, while average mortgage payments are often comparable to or lower than rent in many regions.
  • Finally, you have the option of renting your property on Airbnb or other similar sites to make extra cash as needed.


So how do you go about the home buying process if its your first time? Here is where to start:

 Step 1: Prepare your credit & finances

The best place to start before applying for a mortgage or starting the home search is to start prepping your finances. Preparing these will help you better afford your monthly payment and improve the mortgage rates you’ll be offered.


In order to improve your finances:

Work on your credit score

Start paying down your debts, beginning with your highest-interest ones first. If you have any collections to your name, settle those and make sure your accounts are in good standing.

Cut out unnecessary expenses

You’ll want to have a good cushion in your savings account before purchasing a home, as this helps cover unexpected expenses and gives you the “cash reserves” mortgage lenders look for. Be prepared to reduce your spending wherever possible.

Be prepared for other associated costs

Your mortgage and down payment aren’t the only costs you’ll have when you buy a home. Make sure you’re prepared to pay for closing costs, moving expenses, new furniture, property taxes and more. You will definitely want to have some wiggle room in your budget to account for these.

 

Step 2: Minimize your down payment and closing costs

The old 20% down “rule” isn’t necessarily true, but you’ll still face some serious up-front costs when buying a home. On top of your down payment, you’ll also have to cover closing costs — and those can range anywhere from 2% to 5% of the total purchase price of your home, depending on the lender.

Fortunately, there are ways you lower these up-front costs or at least make them easier to afford. Speak to a mortgage broker to find the best solution for you.


3. Find the right home

The first step in home shopping is to determine what sort of payment you can afford by getting a pre-approval letter. Use a mortgage calculator to find the price range you are comfortable with, and make sure it still leaves enough cash flow to cover your other monthly expenses (unexpected ones, too). Once you have a solid price range in mind, start the search. You should consider working with a real estate agent who is familiar with the area you want to buy in. Once you find the one, you can submit an offer.

Pro tip: have a list of “must-haves” and “nice-to-haves” when touring homes. Bring this list with you on every showing, so you can compare apples to apples

 

4. Get your mortgage lined up

To start the mortgage process, you’ll first need to find the right lender. There are hundreds of potential options — from big banks and financial institutions to fintech firms, credit unions, and more. I highly recommend using a mortgage broker, since a broker can compare different rates for you at no cost to you.

Once all is said and done, you’ll get your keys and the home will be yours.

Also, don’t forget to check your eligibility as a first-time home buyer. The First-Time Home Buyer Incentive is a shared-equity mortgage with the Government of Canada, which offers:

  • 5% or 10% for a first-time buyer’s purchase of a newly constructed home
  • 5% for a first-time buyer’s purchase of a resale (existing) home or
  • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home


There you have it, maybe buying a home in your 20s is not so far away. I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!

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Bank of Canada Raises Rates Again

I feel like it was just yesterday when the Bank of Canada announced its most recent rate hike… unfortunately, yesterday marks the announcement of yet another one. Canadian consumers and businesses are struggling. For the 7th time this year, the bank has raised its policy rate again, in an attempt to curb inflation. In the process, the bank has taken its rate from functionally zero to its highest point since 2008 — its fastest pace of rate hikes since inflation targeting began in the 1990s. 

The Bank of Canada raised its benchmark interest rate by 50 basis points, to 4.25%, though widely expected by economists who were expecting a hike of 25 of 50 points. The prime lending rate at all of Canada's major lenders will now be 6.45% as of this morning. So what does this mean for you? This will increase borrowing costs for anyone with a variable rate loan but if you are on a fixed rate loan, you will remain unaffected.

In previous rate hikes this year, the bank made it clear that it would continue to raise its trend-setting rate until inflation came back down. But when will that happen? In its statement on Wednesday, the bank says it "will be considering" whether or not the rate has to go higher in order to bring supply and demand back into balance and return inflation to target.

Economists are predicting one final increase of 25 basis points in January, but the Bank is very close to the end of its tightening cycle. Once the bank changes direction and has to cut its rate in 2023, speculations are suggesting that the housing market will pick up again as the cost of housing begins to slowly increase.

This might be your last opportunity for you to take advantage of the low housing prices before home prices start increasing again. I hope you found this information useful! As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!

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Condo or House?

Toronto has always been a busy, bustling city in Canada. Being one of the best cities in the world, the population here comes from a different mix of culture and background. While some in the city prefer to enjoy the scenic and picturesque view of the lake, others like to be amidst the hustle bustle of the city, like that in the Downtown core. Naturally, this defines their choice of living too. And, when it comes to living, comes the real question- which side to pick – condo vs house?

Looking at condos vs detached homes, there are obvious advantages and disadvantages to both. Ultimately it comes down to preference and what is important to you, so read on!


Ownership

When it comes to ownership, if you live in a condo, you will only own the interior space of your unit and in some cases a parking space/storage locker. Common areas and outdoor space will be owned in common with other owners in your building. You will pay a monthly condo/maintenance fee, which can cover items like heat, hydro, water, pest control, landscaping, building insurance and miscellaneous amenities. A portion of this fee will go into a reserve fund to cover major repairs and upgrades to the building, such as the roof or elevators. In most cases, you (and the other unit owners) will also have to pay a one-time special assessment for “emergency” repairs not covered by the condo fee. This is never fun but be aware that it is a risk for any condo owners.

A house comes with complete ownership and indulges the owner is no issues with issues whatsoever. They own the complete rights of the place and doesn’t evoke any sense of nuisance with the neighbors. Issues of misunderstandings can take place in a parking basement of a condo which can be refrained initially by following rules, but a house is free from issues of this sort. Places like the driveway, the lawn comes under the common property in a condo, and one certainly cannot customize it according to their wish, but maintenance takes care of maintenance involved with that. In houses, it’s all in the owner’s choice to customize or design or set templates for every single area of the house or even the areas outside the house, but again it’s his complete responsibility and hence a few skills and time is required for a house.


Costs

As mentioned earlier, reserve fund fees are a real consideration in budgeting for a condo since the fee you pay will depend on your unit size and can arise unexectedly.

The insurance costs in a condo are slightly less than in a house. A house needs more money for insurance as it includes every area of the house, hence more objects to be insured. In condo, the amenities are typically not owned by residents and so the common elements do not have to be insured by a unit owner. But condo owners are responsible for paying pesky monthly maintenance fees, which includes services of cleaning, checking, servicing, plumber costs, repairs and another day-to-day services that may be required for the maintenance of the building. Whereas in houses, all the responsibility is on the shoulders of the owner and maintenance is costly. The problem becomes even more apparent among larger houses.

As for the cost of necessities, houses acquire and consume a lot of electricity and heating bills as again the single owner is responsible for all of it. In condos, this billing to comes under the condo fees paid by the residents. They also share the load with their neighbours.


Convenience

Toronto is a well-built city with proper division of infrastructure, greenery, and roads. Individuals of today’s world treat convenience as their priority and generally it is important to have a market nearby, school or office or even a day-care.

In Toronto, the condos are mostly located in the heart of the city, next to transit hubs, near parks and located next to the main roads. Most of the condos in Toronto are self-sufficient as they have an indoor supermarket, general stores, and facilities of a gym, and other amenities in the building. Some are equipped with party halls, pools, gaming area, bowling alleys, screens, and courts too. The charges of using this amenity come under the condo fees but it is important to note that there is typically no privacy or enjoyment of the amenities in solace, as they are shared with other owners. Regardless, if you can make the most use of these features, it’s a lot of money well spent for convenience.

Houses at locations like this would cost a fortune and are mostly located inside on the side lanes and not on the main roads. But housing complexes are always built near schools making it easier to commute. Both houses and condos location matters to the investors and its nearly impossible to have the best of both worlds, hence a proper decision among purchasing a condo vs house is a very tough one.


Choosing a Condo

So you think condo life might be best for you. What next?

Deciding on a particular condo building or development can be a tough job. With so many developments in different parts of Toronto, and the options at hand with desired characteristics uncountable, which condo to pick? The first and foremost point is- your budget! The options available to fix condo vs house will always be plenty. The answer lies in- which one can you afford?

Next, the beauty and scenic aspect of the location should be in consideration. However, you shouldn’t forget the fact that the distance of commute plays a major role. Make sure it is close to all your necessities and your place of work.

Apart from these basic points, the developer of the condo also plays a role. It is always a smarter idea to look at the background of the condo’s developer before you make a final purchase. The developer’s reputation speaks a lot about the quality of their construction.


When it comes to investments, condos and homes are both going to appreciate in value, so figure out what is most important to you! I hope you found this information useful. As a realtor specializing in the Liberty Village and Toronto real estate market, I am here to help guide you through the entire buying or selling process. Grab a copy of my FREE Toronto guide by reaching out to me on the Contact page or on my social media. Look forward to speaking with you!

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