Millennials need help with home ownership

millennials and home ownership
Real estate for Millennials can be a daunting topic. So you’re finally ready to talk about that big scary thing that you’ve been avoiding for the last 20-something years: Real estate and buying your first home. READ: Millennials Will Spend Over $200,000 On Rent — Gen Z Will Spend More I know, you’re yelling at your computer: “It’s so broad! So complicated! I’m too young to think about that stuff!” But you’re also a little bit intrigued. I’m not a homeowner, I don’t have a mortgage, and I’m only just now thinking about the idea of moving out. A quick Google search is too overwhelming — too many articles about Toronto’s crazy real estate market, not enough explaining what the heck this whole thing is about! READ: How Long It Will Take Millennials To Save A Down Payment For A Home So, in the quest to become more informed and prepared for the inevitable future of moving out of mom and dad’s place, I sat down with some people to pick their brains on everything they think I should know. I asked everyone from my family to real estate professionals to a first-time condo owner, and discovered what I (we) need to know to get started: My Mom And Dad: Entrepreneurs And Homeowners Of 22 Years 1. Thoroughly check the market. Make sure you’ve researched the area where you’re looking to buy (or rent). Is there a subway station nearby for accessible transportation? Or a highway to get to work? When the time comes for kids (I had to remind her I was 22), is there a choice of good schools? Basic things that will make your life easier. 2. Compare the prices of similar spaces: A one-bedroom and one-bath located on King St. may be far more expensive than a one-bed, one-bath located somewhere with less of a demand. READ: Toronto Introduces Home Sharing For Seniors And Broke Millennials 3. Also, when looking into the size of your space, make sure to take into a account whether or not it can accommodate for your life. Think ahead: Will you have a boyfriend, or a dog joining you? Will there be room for you all? 4. Look for places with utilities and amenities included in the price: like gas, heat, water, and electricity. These are the ones you’ll need for basic living, so make sure to inquire and if they’re included, that could be a bonus. Next, you want to think of the luxury amentities: a free gym, pool and if parking is included or not. 5. MAKE SURE YOUR MORTGAGE RATE IS LOW. What’s a mortgage rate? The rate of interest your mortgage lender (usually a bank) will charge you. *More on what an actual mortgage is down below* Brother: Entrepreneur, Actively looking To Rent Downtown Toronto 1. “Simply put: rent, don’t buy.” (This was a sentiment echoed by many disgruntled Millennials who simply can’t afford to buy a place in Toronto’s current market.) 2. Rent equals one week’s pay. He acknowledges that general rule of thumb may not be entirely realistic in Toronto’s current market, but he said it’s still a good rule to live by. READ: Millennials Choosing Cryptocurrency Over Real Estate 3. Make sure to do the math. Think about renter’s insurance (in case you burn the place down making mac and cheese), rental price, what you’ll need for first and last pay, and whether you will you need someone to co-sign. A co-sign may be required if you have bad or not good enough credit to rent alone. This is someone who can basically guarantee that you will pay the rent, whether they have to pay it or not. They are just as obligated to pay back the loan as you are. 4. Always try to see the place you’re looking at in the daylight. That way it’s easier to see every single thing, and when you do, make sure to use or touch everything relevant to make sure it’s in working condition. Ask about the appliances, open the cabinets, turn on the taps in the bathrooms, flush the toilet. All that fun stuff your mom told you not to do when you came to open houses. Amit Nofech-Mozes: Portfolio Manager At Dash Property Management, Current-Renter With A Pre-Construction Investment 1. Really understand a mortgage. What is a mortgage? Money that is borrowed from the bank to buy your home that is paid off over a fixed period of time. The bank wants a down payment of usually 20 per cent or more — if it’s between five and 20 per cent, you’re required to get mortgage default insurance in the case you cannot make your monthly payments. This puts you at risk and should be avoided if at all possible. The bank will also charge you an interest rate. READ: An Open Letter To Ontario’s New Premier: Millennials Deserve Shot At Home Ownership Example: If you borrow $100,000 over 10 years, you have to give back $833 a month until the principal amount is paid back. 2. A fixed mortgage is better than a variable one for those on a fixed income, which is perfect for most students and Millennials, because it can’t vary and you won’t be subject to increasing payments that you won’t be able to keep up. While a variable rate that is tied to the interest rate is usually less, it’s way riskier than a fixed rate. 3. Under the challenge for most people is earning enough to generate savings to fund a large down payment. And earning enough to meet the monthly payment without being stretched too thin. READ: Why More Millennials Live At Home — And It’s Not Because They’re Lazy His advice to minimize these challenges? Increase financial literacy skills in the general population and to encourage people to work towards promotion and cut expenses. The more saved every month or paid towards your mortgage, the faster your path will be and when it’s done, you can save up for a retirement rather than banking on your home to retire. Jeremy: Leasing Representative At RioCan And First-Time Condo Owner 1. Be fully cognizant of who built the building, when it was built and who is currently managing. As a condo owner but also as a renter, you can run into a number of problems with elevators, specific units and various common areas if they’re not built or maintained well. 2. If the developer poorly builds a condo, that means higher costs needed to repair or replace various items that are paid for by the condo owners. This could also affect renters because the cost born to the unit owner will often trickle down to the renter. 3. Track common area maintenance fees over the length of the condo operating. READ: Millennials Help Heat Up Toronto Market (With Help From ‘Bank Of Family’)

millennials and home ownership

Despite rising home prices, millennials are still interested in home ownership. Reports from two major banks—CIBC and ScotiaBank—have shed light on what millennials think about buying a home and how they use the Internet to help them become informed buyers.

The findings of the reports show that nearly two-thirds of millennials plan to own a home in the next five years, but don’t have the money for a down payment yet. Ninety-six per cent of Canadians rely on the Internet for information.

Here are some stats: Two thirds (64 per cent) of Canadians aged 18-24 plan to buy a home. Sixty-three per cent want to purchase in the next five years; however, nearly half (44 per cent) say they haven’t started saving for a down payment yet, which is seen as the biggest obstacle. Getting priced out of the market is also seen as having an impact on their ability to buy.

Their plight is a concern for a majority (56 per cent) of Canadians who are sympathetic and believe that millennials should get help to enter the housing market. And 77 per cent say that buying a home today is more difficult for young people than it was for previous generations.

Here are the key findings from the CIBC poll:

  • 64 per cent of Canadians aged 18–34 say they want to purchase a home
  • Sixty-three per cent plan to do so within the next five years
  • 44 per cent don’t have the down payment and haven’t yet started saving for it
  • 54 per cent of millennials say getting the down payment is biggest obstacle.

Other challenges include: Job security and earning enough to afford mortgage payments (53 per cent) and rising real estate prices (46 per cent).

  • 56 per cent of Canadians say something should be done to help young Canadians get into the housing market; while
  • 77 per cent of Canadians say buying a home today is more difficult for young Canadians than it was for previous generations.

Although it may not be easy to get a mortgage, it’s doable. The ScotiaBank poll found that 98 per cent of Canadians rely on the Internet for information, yet 70 per cent still look to advisors for their mortgage advice. So working with a mortgage broker, who can help map out a strategy, may be the key to making home ownership dreams come true, as is putting together a team of experts and advisors, which may include a Realtor and a lawyer.

So get informed and develop a strategy with the help of a team of experts who can help you move toward your financial and home ownership goals, both short term and long term.

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