(TORONTO, ON) – A recent survey from TD Bank shows that millennials would rather enjoy their money rather than sink it all into real estate. More than two-thirds consider themselves to be “House-Plus” buyers, meaning they want their budget to be flexible enough to afford things like travel after they cover their monthly mortgage payments.
Here are some of the other findings from the survey:
- Only 14 per cent consider themselves “House-All” buyers; their mortgages are at the higher end of their budget.
- Forty-two per cent of millennials see themselves living in their current home forever.
- Forty-five per cent of them see their homes as stepping stones to a different property.
- Sale price is the most important factor in buying a home, closely followed by location and future appreciation of the home.
“The vast majority of millennials Canadians want to break the chains of a mortgage and free up their money for other things,” says Jeff Schwartz, Executive Director of Consolidated Credit Counseling Services of Canada. “It’s a nice sentiment, but it will take a lot of budgeting and planning to get there.”
Nupi Zubair, Associate Vice President, Retail Products at TD, agrees, noting that Canadians need to factor in affordability and must craft a budget that fits their list of priorities.
Consolidated Credit believes that it is possible to have some breathing room when getting into a mortgage, and offers the following tips to new homebuyers:
- How much can you afford? – Take a look at your monthly household income and multiply it by .28 – that’s the most you should spend on your mortgage payments. Experts agree that a housing ratio of 28% of your budget, or less, is considered ideal. Spending more will overextend yourself and lead to financial trouble down the road.
- Save Save Save – The bigger the down payment, the better. At least 5 per cent is required for a high-ratio mortgage, and at least 20 per cent of the purchase price is required for a conventional mortgage. A different TD survey found that the majority of new homebuyers wished they had saved up for a bigger down payment. Some patience now will save you a lot of interest in the future.
- Be aware of extras – There are a multitude of fees that will show up on your bill when you bring your mortgage to the check-out counter. Expect the following: Land Registration Fees (sometimes called Land Transfer Tax), real estate agency fees, property insurance, legal fees, appraisal fees, and more. These extras can add tens of thousands of dollars to the final price.
- And then there are more costs – The spending doesn’t stop once you sign on the dotted line. You will want to have money set aside for moving expenses, appliances, renovations or repairs, and service hook-up fees.
- Think long and hard – This is perhaps the biggest purchase you’ll ever make. Think very carefully about what this property will mean to you, down the road. If it’s a long-term home, make sure it meets your family’s long-term goals. And if you are hoping to sell it in the near future, keep a very close eye on housing markets.
“Purchasing a home can be incredibly satisfying and is an important financial milestone,” adds Schwartz. “Prioritizing and careful financial planning will mean that you can truly enjoy the new place you call home.”
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Jacob MacDonald, Public Relations Coordinator, Consolidated Credit Counseling Services of Canada, Inc.
T: 416-915-7283 ext.1041