People have been waiting for years now for the Toronto area real estate market to settle down. Some have been squirreling away money diligently, whereas others have resigned themselves to rent a little while longer, crossing their fingers for when the figurative bubble actually bursts. Whether you’re a home owner or saving, here are 5 things you can do to soften the blow.
Don’t overextend yourself by taking out a large home equity loan, since these are based on your property’s value. This means that if your home is overvalued (which is happening a lot in the GTA) they may be eliminated once your mortgage term is up if your lender determines your home is not worth what it was previously. If you need a loan, it’s best to connect with your lender or a mortgage broker now to secure a solid rate before interest rates rise.
Looking To Buy?
As hard as this is to stomach, a big down payment is the best way to protect yourself from any market bubbles. Yes, you may end up paying more for your home overall, however this saving will be a sound investment and protect you when interest rates go up. The minimum amount that is recommended to put down is at least 15 to 20 percent in terms of a deposit (20 percent is required to avoid mandatory CMHC mortgage loan insurance)
Buy Your Home To Live In
Don’t purchase your home unless you are certain that it is somewhere you are sure that you’ll want to live for at least a few years. The cost of investing in a home will take several years to reclaim your investment costs, make sure you purchase a place while you’ll enjoy the wait. The longer you stay, the more sound your investment is, no matter how large (or little) the appreciation in value of your purchase is because the home has had the value as your primary residence.
If You Can’t Afford It, Don’t Do It
We’ve all heard the term “house poor”. This is something that is happening more and more as people are overextending themselves and borrowing more than they can really afford. Work out a livable budget (including some room for savings and an emergency fund) before you purchase. To view some helpful budget worksheets, click here.
Invest In Your Home (Not Luxury Items)
Investing in maintenance, upkeep, and renovations on your home will help you far more than splurging on a fancy car or big screen TV. Buy a home with good resale potential, that you can gradually upgrade while you live there to get the most benefits from your purchase.