Kofsky Mortgage

Strategies To Consider When Purchasing Your Home

All the signs are pointing that we are in a heating up housing market. Buyers are coming and are looking at homes. Last month’s Canadian Real Estate Report shows over a 60% increase in sales since April. According to sources this is due to ‘pent up demand’ and since the housing supply is currently still lower than usual we can expect prices to continue to increase and competition to remain fierce.

We are likely in for a busy and hot housing season in the Fall.

If you are thinking about jumping into the market and you want to make sure you put the best foot forward. I highly suggest you consider all your housing and financial goals. It is a big step so it is best to look at your own priorities before you move forward. In addition, you will want to strategize before your next purchase. Here are a few things to consider:

1. Get A Real Pre-Approval

A lot of buyers are out shopping for homes only with a limited pre-approval from a calculator found online. This tool only provides a 100 foot view of your finances and can only estimate what you may qualify for. A fully verified pre-approval is a more sophisticated process, the lender will need to review your income levels, employment, down payment sources, credit score and other important factors.

To add more to this process, you may qualify for the loan but the property may not be. The lender also wants to ensure that the property is worth the price you are willing to pay. It is all to common that the property doesn’t tick their boxes and decline the advance the funds you need. This is unavoidable in the buying process

2. Fear Should Not Be Part Of The Equation

If you are only interested in buying now so you don’t get shut out in the future. I understand that, I do; however your buying decisions should never be based on fear. There are many cases of people buying at the top of the market or with extremely stretched budgets and this can come back to hurt you.

If your employment changes, or your hours are reduced or something serious comes up, you will want to be able to safely navigate those treacherous waters. At times these scenarios can lead to a second job, payday loans and potentially bankruptcy.

3. Have Breathing Room In Your Budget

If you are looking to purchase with a minimal down payment and you are really stretching to get there, it is important to remember you still have additional closing costs and potential issues with the home after you purchase. Homes develop problems over time; that’s in the nature of buying property. It is inevitable that you will have a leak and other maintenance.

Just be sure you have resources available to handle the inevitable extra costs that come with home ownership. Those resources might be in the form of additional savings that you’ve set aside or you might want to create an extra ‘rainy day’ fund for repairs by setting aside part of your monthly income to handle these kinds of expenses.

4. Is a 20% down payment the right choice

One of the main purposes of buying a property with 20% or more down is to avoid the default mortgage insurance provided by the Canada Mortgage and Housing Corporation (CMHC) or the two private insurers (Genworth and Canada Guaranty). If you purchase a home over a $1 million, it will not be eligible for default insurance. 

Depending on the size of your mortgage, the cost of mortgage default insurance will add another 2.80% to 4% to your mortgage. For a mortgage of $500,000, for example, an additional 4% will add another $20,000 to your mortgage amount but with a five year term (25 year AM) and a rate of 2.5%, the extra 20,000 adds $90 to your monthly costs. So it is up to you regarding what is more important at this stage of your home buying journey. If you purchase a home with default insurance, the rates are better because the risk of default passes to the mortgage insurer.

5. Think About Your Future Too

Buying a home is not just for today but also for the future as well. If your plans change over the course of the next few years how will those plans affect your current home?

Are you planning on having kids? Will you be able to fit in a daycare budget too? Will you need to have one person at home? Will your career potentially change in the next year or two? Renovation plans? Let’s not forget about COVID-19. That was a huge and unexpected twist for people and their families.

It is important to consider these potential outcomes before you purchase your next property. You will need to enjoy not only today but also the future in your home.

6. Have industry experts in your corner

Some people choose to purchase real estate without an agent but this is for the advanced folks in the real estate industry. I highly recommend that you not only find yourself a great realtor but also the right one that works for you. During this time, ensure you have a great mortgage broker on your team as well. If this is your first purchase and you have never gone through the process having someone who is knowledgeable about the market and leading you through the process could take a big weight off your shoulders and make the process a little bit easier.

If you need a partner that can guide you through this process, please give me a call anytime at 604-202-9913. I am happy to work together with you and find the best mortgage solution for you.