BECOMING A HOMEOWNER
Are you currently renting and thinking about joining the ranks of homeowners? You should know that in addition to providing numerous financial benefits, buying a home will help improve your quality of life. Not only do homeowners enjoy more freedom, they also have a strong feeling of pride, as well as peace of mind. It’s definitely a worthwhile investment!
A Well-Adapted Home
First and foremost, being a homeowner means living in a house that suits your tastes and fits your lifestyle.
Is your family growing – do you want a backyard and basement playroom for your children? The purchase of a home can help you benefit from these extra spaces and is also a good long-term investment. Condominiums and plexes offer other benefits: less maintenance in the first case and additional income in the latter.
Paying for a home is a bit like making long-term savings. Instead of paying rent to a landlord, your monthly mortgage payments are used to finance your assets and build capital that you will recover once you finish paying.
A Profitable Investment
Across Canada, the value of real estate investments has increased significantly over the past ten years. In Québec, the median price of a single-family home grew from $110,000 to $209,500 between 2002 and 2010. This translates into an average appreciation of 8% per year.
Taking Advantage of Fixed Payments
Tired of rent increases? Unlike tenants who must deal with these fluctuations, as a homeowner, you can enjoy fixed payments for many years and, depending on the type of mortgage you choose, protect yourself against possible interest rate increases.
A New Lifestyle
Unleash your creativity and decorate your house as you wish, without worrying about the restrictions that are imposed on tenants. Any amount invested in decoration or renovation will be for your benefit. Moreover, nobody can make you leave your home, or enter uninvited for inspection or maintenance.
ANALYZE YOUR NEEDS
You’re dreaming of a big house on the waterfront, but does it really fit your lifestyle? Consider this carefully because it’s important to distinguish your dream home from the one that actually meets your needs. Before you begin your search, take the time to consider your needs thoroughly.
Every family has its own needs and priorities. How many rooms and bathrooms will you need? Is a dining room a necessity? And what about the garage? Will it turn into yet another storage space?
Consider your style. If you’re not enthusiastic about do-it-yourself projects, avoid homes that require major renovations. And even if a spacious yard seems attractive, are you willing to spend the time caring for it? If you prefer city life you’ll have access to theatres, services and restaurants, but it’ll be noisier and won’t have as many green spaces. In other words, determine your priorities!
What’s Your Budget?
Don’t make the mistake of buying a home that is out of your price range. To find the home that’s right for you, adapt your needs to your budget. Once you’ve become an owner, your investment will start to increase in value and will eventually help you access a home that is closer to your ideal. In the beginning, it’s important to put savings aside for small purchases and unexpected expenses. Ensure you have enough money for maintenance costs such as insurance and repairs, as these can amount to 2% or 3% of the price of your home per year.
The environment is also an important factor. Is there a daycare or school nearby? Can your children take public transportation or will you need to drive them around? Consider the distance between home and work too.
Did you know that when you buy a property, you must have money set aside to cover start-up costs? Your down payment and mortgage payments are not the only costs involved, so it’s wise to have some additional savings set aside that can be used for your additional expenses.
These expenses should not be taken lightly and some mortgage lenders will even check that you have these funds available before granting you a loan. Mortgage loans are calculated based on the value of your home and, therefore, cannot be used to pay these additional costs.
Here is a list of common start-up costs:
- Property inspection and evaluation
- File processing fee for mortgage insurer as well as any taxes on the premium
- Notary fees
- Adjustment costs determined by the notary (electricity, heating, municipal and school taxes, equipment rental contract, etc.)
- Property transfer tax (welcome tax)
- Moving expenses
- Service and utilities hook-up fees (phone, electricity, etc.)
- Decorating (paint, curtains, etc.)
FEEL LIKE INVESTING?
Buying a house is like long-term savings. As an owner, you make mortgage payments every month that finance your assets and allow you to build capital that you can recover at a later date when you sell your property.
Across Canada, the value of real estate has increased significantly over the last decade. In Québec, the median price of a single-family home grew from $110,000 to $209,500 between 2002 and 2010. This translates into an average appreciation of 8% per year. This represents an average appreciation of close to 9% per year. And this growth is far from over if we look at the trends for the factors mentioned below.
What Drives the Residential Real Estate Market?
Whether you&’re already a homeowner or about to become one, owning property is one of the most important investments you’ll make in your lifetime. Therefore, you should be aware of the four main factors that influence the shape of the real estate market, which are population growth, interest rates, income and socio-demographic trends.
It stands to reason that everyone needs somewhere to live and that’s why the strength of the residential real estate market is directly linked to demographic growth. Whether it’s as a result of immigration, migration or natural population growth, the higher the population increase, the higher the demand for housing and thus, the stronger the market.
Interest rates also play an important role in the real estate market. When rates are lower, generally the market is stronger as lower rates mean less cost to finance a property. This, in turn, encourages consumers to become owners, or to buy larger or more luxurious properties or renovate.
When property values are increasing, it’s generally a true reflection of a household’s ability to pay. Therefore, the market’s strength is closely connected to job creation and a household`’s disposable income.
And finally, there are certain socio-demographic trends which have an impact on the real estate market. For example, when households get smaller, meaning more and more people have chosen to live alone as has been the case over the past decades, more properties find buyers.
In conclusion, remember the law of economics: price is always a reflection of supply and demand. So, all other things being equal, high demand means higher prices.