First buyers facing an explosive market

With an overheating real estate market, is it possible for a first buyer to access the property?What do those who live in Toronto and Vancouver do, where the median price of a property exceeds one million dollars?How many years should we save to become an owner?Experts from Toronto and from here enlighten us.

5 tips to become a owner

With its low rate of properties for sale and a marked escalation for entry -level properties, the current real estate market is undoubtedly anxiety -provoking for the first buyers.Here are five things to help you become a owner.

Take advantage of a federal government program

The property accession regime (RAP) is well known.It allows you to withdraw sums from your registered retirement savings plans (RRSP) to buy or build a house.The incentive to buy a first property (IAPP), created in 2019, is less so, but can become the ally of many first buyers, maintains Pierre-Raphaël Comeau, Advisor expert in wealth management forPrivate management of Laurentian Bank.

"It is as if the federal government bought your property with you and became a co-owner," he explains.The buyer must have succeeded in accumulating 5 % funding, and the government adds 5 %.Obviously, you can't buy a $ 1 million house.There is a limit.»»

Your total loan should not exceed your annual income four times, which can amount to a maximum of $ 120,000 per year.The purpose of the IAPP program is to reduce the monthly or bihebdomedary payments of the mortgage of the first buyer.The amount of funding may come from a RAP.

“The day you sell, the federal government will take 5 % of the new property value.If you keep the house for several years, you will have to reimburse 5 % of the current value 25 years after its purchase, ”he explains.

Be creative and realistic

In Canadian cities, where the median price of an individual house exceeds one million dollars, the first buyers must be even more determined than those in the great Montreal region to access their dream.It is for this reason that the Toronto Sean Cooper, mortgage broker at Burnyourmortgage.com and author of the Burn Your Mortgage book (burn your mortgage), suggests being creative and realistic.

"Being creative is doing everything you need to save as much money as possible for the funding of your future home.If your parents can offer you a game, it can help, but not everyone is lucky.Your parents may be able to co-shed if they are unable to offer you money, ”says the one who bought his first house when he was only 27 years old, without the help ofhis parents, but by winning an Olympian savings discipline.Sean Cooper also achieved the feat of repaying his mortgage in just three years.

“Setting realistic expectations means that you use your first house as a springboard to the house of your dreams.You probably can't afford it right away, this dream house, but planning, you may be able to buy it one day.»»

Make a valid four -hour offer

If the sellers promote the bidding by giving a date and an hour of time to receive all the offers at the same time, some buyers can try on their side to offer a higher sum than the price displayed, but by giving only four hours to thesellers to accept the offer.This strategy works with sellers who do not want to see around forty visitors scrolling in addition to having to manage multiple offers, or with those who have already bought a house and are stressed.

The first buyers must absolutely have a mortgage preapproduction of a financial institution before starting their shopping.

Whether during an offer valid four hours or an outburst in an escalation, it is essential to keep a cool head.

« Il faut être raisonnable et ne pas être tenté d’offrir 200 000 $ de plus que ce que vaut la propriété, prévient Micheline Lapierre, du Groupe Garcia & Lapierre S.E.N.C. Quand la propriété est vendue trop cher, la banque peut refuser le financement après avoir évalué la maison. »

Climb the property ladder

The first Canadian buyers who can buy a single house at the middle price of 1.3 million in Toronto and 1.7 million in Vancouver are rare.Experts therefore suggest that they start by acquiring a more modest property, such as a condo or a house in entry -level row.

How to substitute Coconut Oil for Vegetable Oil https://t.co/fb0zin1umu

— Greg Hogan Sun Jan 03 17:45:00 +0000 2021

"The purchase of a $ 1 million house is a planning issue.Unless you have a good income of more than $ 150,000 and a large funding, it can be difficult to qualify to borrow enough money to afford this type of house, "said Toronto Cooper.

"So I suggest buying a starting house and accumulating enough capital until you can afford the market for more expensive properties.It’s much easier to buy a $ 1 million house with a 35 % or more background.»»

“The market here in downtown Toronto is completely crazy for turnkey houses.Record prices are affected every week, "said Alex Beauregard, real estate broker at Sutton Group-associates Realty."For the moment, property dedicates have better chances on the slower market of the condominium.»»

Move to a distant suburban

Sean Cooper and Alex Beauregard note that the first buyers have been falling back for a few years to the suburbs.Some even move up to 100 km from their workplace.

In Quebec, the first buyers of the great Montreal region now opt for the second and even the third crown, with cities like Joliette, Sorel, Marieville, Saint-Antoine-sur-Richelieu, Contrecœur and Saint-Jérôme.

However, before choosing to settle so far, buyers must calculate the journey time towards the workplace, the cost in petrol and maintenance of the vehicle or the cost of public transport ... unless you changeemployment or plan to spend the rest of his professional life in teleworking.

> (Re)lisez notre dossier de la semaine dernière

How many years before you can buy?

Seeing the prices climb up, do you despair of being able to become a owner one day?We have asked Pierre-Raphaël Comeau, Advisor to Harming Management for the private management of Laurentian Bank, to calculate in how long a university graduate could succeed in buying a property without being brought to eat pasta alldays.

For the purposes of the exercise, we have chosen the fictitious case of a academicist who has just won a position in the public service and who will therefore have a fairly stable income throughout his life.This finishing could, for example, be a teacher, whose annual income starts at around $ 46,000.

It was from a standard budget established by the Cooperative Association of Family Economy (ACEF) on the South Shore that Pierre-Raphaël Comeau developed his scenarios.According to ACEF data, someone who begins his career after his university studies spent an average of $ 100 per month to savings.

The race for the 5 % fund

At this rate, it will therefore take 125 months, more than 10 years, to this ending to accumulate funding for a property of $ 250,000.This sum is far behind the current median prices of $ 690,000 in Montreal, $ 465,000 in Laval and $ 475,000 on the South Shore.

By planning to buy for two, the graduates will take 100 months, or more than 8 years, to save the $ 20,000 funds in order to buy a property of $ 400,000.It's a safe bet that prices will have climbed again by then.

Obviously, if the two new teachers decide to fully press the savings accelerator, avoiding having a big car loan and credit card debts, they could get ahead of the deadline.By sparing each $ 500 per month, thanks for example to the hospitality of their parents, they could obtain their funding of $ 20,000 in just 20 months, or 1 year and 8 months.

"The best financial vehicle for this type of savings is CELI while waiting to reach a tax level which is worth it to an RRSP," advises Pierre-Raphaël Comeau.

In this case, we are not talking about a academicist who has a study debt.According to the most recent available data from Statistics Canada, 50 % of Quebec graduates who obtain a baccalaureate finish their studies with a debt which amounts to an average of $ 16,000.With such a burden, the project to buy a property is postponed for several years.Unless of course practice extreme savings like Toronto Sean Cooper who managed to buy a house for two years after obtaining his university degree and repay his mortgage in three years.

The real test

By progressing in his analysis, the Advisor expert in wealth management noted that putting funds is not the main obstacle to access to property."Even if a finishing obtains his entire funding as a gift from his parents, which brokers call the Love Money, he will still need sufficient annual income to pay his mortgage," he said.

The first buyer must therefore successfully succeed in the resistance test in order to obtain funding from a financial institution.

To determine if a borrower has the means to buy a home, mortgage lenders use, among other things, the gross debt damping ratio (ABD).It corresponds to the percentage of the monthly household income devoted to housing costs and must not exceed 32 %.

If a young teacher wants to buy alone with the current interest rates of 2.09 %, he will be able to afford a property of $ 400,000 in 14 years, a property of $ 350,000 in 11 years, one of $ 300,000In 6 years and more reasonable at $ 250,000 in 4 years.

Pierre-Raphaël Comeau, Advisor expert in wealth management for the private management of Laurentienne bank

For two, however, the dream becomes reality much faster.With an interest rate of 2.09 %, the two young public service employees will need a total annual income of $ 78,638 to buy a property at $ 400,000, which, in theory, is possible fromHiring, but will also have to meet the condition of having been in post for two years.

Even if the interest rate increases to 4.09 % and the total annual income required leaps to $ 93,938, they will still qualify for funding after two years of service.In all cases, they must have the 5 %funding.

"The price of the houses has risen very quickly, which means that the setting of funds is certainly important, but the annual income to support the purchase is even more than ever," observes Pierre-Raphaël Comeau.The current market also means that the first buyers must concentrate their desire to buy according to the space they really need.If they want a house of $ 400,000, the first buyers will probably need two income to finance it.»»

Taking into account the annual wages related to their position, two new teachers who manage to save $ 500 per month could hope to buy a property of $ 400,000 after having finished their studies ... unless they are repaying theirstudy debts.