August, 2012 – For many Canadian homeowners, hindsight really is 20/20. The recently-released 2012 TD Canada Trust First Time Home Buyers Report found that despite doing their homework, most homeowners would go through the home buying process a bit differently today.
Of the lessons learned, homeowners say there are three that the top three are:
- Be more thorough when budgeting and accounting for all of the costs of home ownership (60%)
- Make a bigger down payment (60%)
- Buy a home sooner (55%)
“From being more thorough in their budget to exploring their mortgage options carefully, many first time buyers think they could have prepared better for their house-hunt,” said Farhaneh Haque, Director of Mortgage Advice, TD CanadaTrust, in a statement. “Prospective buyers can learn from other buyers’ mistakes. If you think you’re ready for homeownership, do your research and make sure you know as much as you can about the process and on-going commitment.”
Haque offers advice for first time home buyers to consider before house-hunting:
Budget for the hidden costs of home ownership: Home ownership takes a major financial commitment beyond the down payment and monthly mortgage payment. Many first time buyers admit they overlooked some of the additional costs: 29 percent say they didn’t budget for on-going costs such as maintenance and utilities, 13 percent overlooked some of the one-time fees associated with buying a home, such as inspection fees and land transfer costs, and 6 percent didn’t budget for anything beyond the down payment and monthly mortgage payment.
More than half of first time home buyers with a mortgage (55 percent) said they were worried about affording their home if interest rates increase. If you’re on a tight budget and worried that a rate increase could put too much pressure on your cash flow, Haque recommends considering a fixed interest rate mortgage. “If you do decide to go with a variable interest rate mortgage, factor the potential for a rate increase into your budget and make sure there’s a clause that lets you lock in at a fixed rate if market volatility makes you nervous down the road.”
Buy now or save for a larger down payment? The top reasons home buyers give for deciding when to buy their first home is that they get sick of paying rent (48 percent), get a full time job (31 percent) or want to start a family and need more space (31 percent). Many first time buyers say if they could do it again, they would have bought sooner (55 percent), however 60 percent also say they wish they would have made a bigger down payment (likely requiring more time to save).
According to first time home buyers, saving for a bigger down payment might not take as long as you may think:
- A down payment of 5% or less takes 2 years or less to save (71%)
- A down payment of 10% to 20% takes 1 to 4 years to save (66%)
- A down payment of 25% or more takes 3 years or more to save (61%)
The majority of first time buyers say they’re looking for a detached home (54 percent). Condos were a distant second (18 percent). The top five most important features first time home buyers considered when shopping for a home were price (97 percent), the layout of the home (96 percent), number of bedrooms (95 percent), features of the home (92 percent) and size of backyard/garden (86 percent).
But, realizing that their dream home may not exist, the report found first time home buyers are willing to make some compromises. Encouragingly, the majority say they will stick within their budget and aren’t willing to compromise on price (52 percent).