How does a first time buyer get into the Toronto real estate market today?
I hear it so often these days. “How can a first time buyer afford these prices in Toronto?” and “How does a first time buyer get into the Toronto real estate market today?”
According to the latest stats from the Toronto Regional Real Estate Board (TRREB) the average sales price of a home in the GTA is $839,363 which is up 15.4% from a year ago. With the low amount of houses currently for sale it is estimated that prices will continue to increase throughout the year. What is a first time buyer to do? Is the dream of home ownership just never meant to be?
Not at all! What I tell everyone is just to get into the market and the only way to do that is take the first step and adjust your expectations.
This might not be what you were hoping to hear but think about it. You can’t just jump to being the CEO of a company (unless of course you own it), you have to work your way to the top! Same goes for real estate. Get into the game first then work your way up to the home of your dreams.
Follow my simple formula below and you’ll be in your home in no time!
1 Stop paying rent.
Do you realize when you are paying rent you actually are paying the mortgage? It’s just not your mortgage, it’s your landlord’s. I understand the challenge today can be putting together the downpayment for a home but, the more you pay a hefty rent for your home the harder it will be to save money for a large downpayment. End the vicious cycle and put whatever amount you can together and move towards paying money towards your own mortgage. This will build up your own equity in your own home. Maybe you end up buying a condo and living there for a couple of years but at the end of the day, all the money you paid towards the mortgage was your mortgage and all the equity you built up in your condo belongs to you! Not your landlord.
2. Take advantage of 3 Government Incentives available for First Time Home Buyers.
Withdraw money from your RRSP. The Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 from your registered retirement savings plan (RRSP)’s tax free. If you are part of a couple you can each contribute $35,000 for a $70,ooo amount to go towards your down payment! The money does have to be paid back but over the course of 15 years.
CMHC (Canada Mortgage and Housing Corporation) has The First-Time Home Buyer Incentive program that allows you to borrow 5 or 10% of a home’s purchase price to put toward your down payment. Essentially a shared mortgage that gives you additional money to put towards your own down payment. This in turn lowers your monthly mortgage payment making homeownership more affordable! You do have to pay this same percentage back (interest free) when you go to sell your home.
Land transfer tax rebates, which refund some or all of the land transfer tax paid as part of your closing costs. Unfortunately buying a home does mean you have to pay land transfer tax at closing. But, as a qualifying First Time Home Buyer you do not have to pay land transfer tax on the first $368,000 of the purchase price of an eligible home. The maximum amount of a home purchase over $368,000 is $4,000 which will help in reducing your overall closing costs.
3. Get pre-approved for what you can afford.
Stop worrying about the average price for a home in Toronto and find out how much home YOU can afford to buy. This is crucial. Once you are pre-approved to go house shopping you may realize you might not be able to afford the typical detached 2 storey 3 bedroom home in your favorite neighbourhood. But, you can buy a starter home which could mean a modern condo in a trendy new neighbourhood in your price range. Have you checked out New Toronto or Mimico? They offer some really great options!
This is really your first step to home ownership, the first rung on the ladder so to speak. In order to get to your dream home you need to get into the market first. So speak to your bank, a mortgage broker or get in touch with me to find out how much home you can afford today.
4. Look at all of your options.
As with any homebuyer realize you may not get everything you want in your new home. It is really hard to find a home that is 100% of everything from your wants and needs list. But, I can get you pretty darn close most of the time. Adjust your expectations and work with what is on the current real estate market because the real estate market won’t adjust for you.
Let’s say you are looking for a 1 bedroom + den condominium in a particular neighbourhood but, there are just not many available or they keep getting into bidding wars and you lose out. Instead of trying to compete with the same buyers for the same condos, try looking at larger 1 bedrooms instead. If the value of the property is there, it doesn’t matter if it is a 1 bedroom or 1 bedroom + den. It will still appreciate and increase in value over time.
Look for other factors that will determine an increase in value such as the right location, a well run building that has great amenities and features. Sometimes being the smaller unit in the building is really an asset if the other units are selling for much higher prices! You just need to keep it all in perspective.
So now it’s up to you. Do you want to get into the housing market today and buy your first home or are you just going to sit and watch the rest of the buyers do it?
Take the first step. Please take advantage of a complimentary buyers consultation with me. and let’s get you into your new home.