Do your 2022 new year resolutions include moving and buying a home this year? Start your new year’s resolution ASAP. The housing market is still hot and interest rates are still at record lows. But, who knows if it will stay that way. Last year, homeowners saw around a 30% equity increase from 2020 to 2021. Plus, interest rates are expected to go up, so it’s important to get pre-approved and start your hunt while the market is still hot and ahead of the spring market so you are ready to make an offer when you do find your dream home.
To rent or to own…
A common question every mortgage broker gets is “which one is cheaper.” And my response is always… “well, it depends on the individual”. If you have been saving and budgeting to buy your first home, then owning is normally the best option. Your house will be an investment in the future, whereas when you pay rent, you are “throwing your money away” month by month. However, you may have unexpected costs and expenses as a homeowner like if your house needs a large renovation, or your furnace breaks down. When you’re renting, your landlord is the one that takes care of all those issues and expenses. If you are ready to jump into the market and buy a home you have to realize that owning your own place can have hidden costs that creep up on you. There is a lot to consider when deciding to rent or own a house or condo and a mortgage broker can help you discuss the pros and cons specific to your situation.
Should you buy a condo or house?
Ah, the annual debate about buying a condo, or purchasing a house. There are always pros and cons for both, and you need to evaluate the lifestyle of your family ahead of making this decision. Working with a mortgage broker can help you discuss options and they can show you how much you can afford realistically on your monthly budget, how much your regular monthly maintenance costs might be along with what to expect when it comes to your mortgage payments. You can also check out our mortgage calculator for a rough estimate of how much you can afford ahead of applying for a mortgage. Buying a condo or a house are both good investments so long as you remember that there are hidden costs with each. With a home, you have to mow the grass, maintain your furnace or AC, etc. And, with a condo, you will have condo fees that take care of things like having the roads plowed, having the grass cut even though you don’t have your own lawn. It’s good to discuss these options, pros, and cons with your mortgage broker to help you plan financially for the future while making the best investment at that particular time.
Are there programs to help you buy your first home?
The government has incentives to help first-time homebuyers in Canada afford their first home. The First Time Home Buyer Incentive Program funds 5 to 10% of a home’s purchase price to put towards a down payment on a home buyer’s first house. Simcoe County also has a program called the Affordable Homeownership Program which helps renters with a lower income purchase a home by providing a 10% down payment in the form of a forgivable loan. These are good programs to take advantage of if you qualify for them and your mortgage broker can help explain each program, how to apply and what you will need to qualify for them.
Are you planning on downsizing?
When buying a new home, you need to factor in the location and the needs and wants of your family’s lifestyle. It doesn’t make sense to randomly move to Ottawa when your partner’s job is downtown, Barrie. Okay, that’s a little extreme, but you want to think about the long-term goals of your huge financial relocation ahead of falling in love with a home you want to buy. Another thing to think about is how much space you actually need. Are you planning on retiring soon and want to downsize because all your children left the nest? Are you not working remotely and need a larger office space that is a real space in your new home instead of working at the kitchen table all the time? Advanced preparation and planning are key before you jump the gun and make an offer on a home to ensure you are confident with your decision-making and get the best deal for your house.
If you don’t want to move this year, do you want to do some home renovations instead?
Even if you are not looking to buy a new home, you can still take advantage of low-interest rates if you have plans to renovate but, don’t quite have the funds you need. If you’re planning on selling in the future, renovations will increase the value of your home and in turn your equity. If you’re planning on staying, but need a little revamp to your home, then take advantage of the low-interest rates on mortgages. Refinance your current mortgage and do an equity take-out to loan yourself the money you need instead of going to the bank. A qualified mortgage broker, like myself, can help you find the best rates and mortgage options possible to get you the funds you need. If you are buying a new home, working with a seasoned real estate agent is a smart idea as they can give you suggestions as to what renovations will help boost your house’s selling potential while increasing its value. If you buy a bit of a fixer-upper you might be eligible for a mortgage that gives you a little extra money to put into renovations right away even. There’s more to mortgages than the banks will tell you, so telling your mortgage broker what your plans are, might be the best decision you make.
How are your credit score and your finances?
Figuring out your finances ahead of planning to buy a home is where you should start your home buying adventure. Pay off any existing loans or debts before getting pre-approved for a mortgage. This will bring down your interest rates and your lenders will see you as less of a risk if you have been taking care of your past loans and all the money you owe from your monthly bills. Paying off your debts shows lenders not only that you pay back loans you take out but that you are good at paying them on time too. They are the ones investing in you, so if your credit report shows that you are bad at paying your bills, then they won’t be too excited to give you a mortgage. The minimum credit score you needed to get approved for a mortgage in 2021 was about 620-680. Many banks also now have a credit score checking tool built into their banking app so you can keep an eye on your score without needing to pull an actual report. If your credit score is on the low side, now is the time to work on improving it. You can improve your score by paying your bills on time and paying more than just your monthly minimum payment (paying in full when possible is always the best.) You also want to limit how much of your available credit you use. Try not to use more than 30% of your available credit card limit and you will see your credit score start to creep up. Lastly, it pays to keep track of your finances so you can fix any errors quickly like a missed payment or an outstanding bill. The more organized you are with your finances, the better!
Get pre-approved for a mortgage with a mortgage broker
After you have gone through all of these questions and followed the tips and tricks outlined, it’s time to get pre-approved for a mortgage. That way you know exactly what price range you should be looking at new houses in and then you can start the fun part; hunting for your new home. Working with a trusted mortgage broker, like myself, Darren Robinson is an important step to securing the financing you need along with the best rates possible. Plus, it’s free so why not take advantage of a free service that will help you save money while buying the house of your dreams! You can call me or text me at 705-315-0516 or book a free consultation through my website. It’s time to take the next large and exciting step forward in 2022. Connect with me today and let’s get started.