The Secret To Investing In A New Home
Planning Ahead Question: Are you thinking of buying a new home? Answer: Learn everything you need to know about getting settled into your latest investment.
When it comes to life’s biggest changes, buying a home for the first time is up there alongside getting married and having a baby. The process leading up to this important investment is often filled with excitement, nervousness and uncertainty. And with record low rates contrasting with the high cost of real estate in British Columbia, many rookie home buyers are clueless as to where the market is going to go.
"When it comes to being proactive, it’s essential that first time home buyers do their homework."
Luckily, there are experienced professionals in the field of home buying who are more than happy to help educate first-time buyers on what they need to know when it comes to taking this enormous step.
Caution to first time buyers
Colin Dreyer, President and CEO, and John Kelly, COO, of Verico Financial Group Inc., one of Canada’s largest mortgage broker networks, say that first time home buyers are more likely to get a deeply discounted rate when they take out a first mortgage because banks are trying to compete and win their business.
However, they caution consumers to consider the total cost of home ownership and not just their interest rate over the initial term. “It’s important to remember that this deeply discounted rate is typically only applicable to the first term of your mortgage, which is usually the first three to five years.” Dreyer says.
“Most mortgages, especially in Vancouver, have amortizations of up to 30 years; so, home owners need to keep in mind that the great low rate offered by your bank may only be applicable for one tenth of your 30 year mortgage.”
Seek out resources
“There are many strategies that home owners can employ to save money. Shorter amortizations, accelerated payments or annual balloon payments can all be utilized to lower your total cost of home ownership,” says Kelly. \
“Mortgage brokers are experts in creating these strategies and can help you achieve your financial goals now and in the future.”
The role of a broker is to be a trusted advisor, somebody who can take a look at a potential buyer’s financial wherewithal, their career plans and lifestyle and figure what would be the right fit for them. Are they planning on having a big family? How secure is their career? Is there any potential for a move to another city?
All this matters greatly when buying a home for the first time. The most optimal time to visit a broker is four to six months prior to the big investment. “One of the unique benefits of working with a broker is that because we have access to a bunch of different lending institutions, we can customize and cater a debt management plan or a mortgage plan, instead of just looking at it as a transaction on whether you qualify or not,” says Rob Regan-Pollock, a senior mortgage broker with Invis. “Everyone is unique and has a unique lifestyle, it’s not one size fits all.”
He adds that whether his clients don’t want to change their lifestyle (or if they do want to change their lifestyle and are primarily concerned with the size of house they can get), his role is to give them full disclosure before he can help them get there.
Understanding the costs
When it comes to being proactive, it’s essential that first time home buyers do their homework. That means understanding all the costs that come with owning a home; Things like maintenance, equipment, additional heating, utilities, and repairs, to name just a few. “All those extra costs and repairs, that if they weren’t a homeowner before, they’re now responsible for that can add up to a heck of a lot of money for consumer,” says Scott Hannah, President of Credit Counselling Society.
Investing in a home will likely lead to lifestyle changes, so Hannah advises to put a lot of thought into location. “Often times when people are looking to buy a single detached home versus living in an apartment, because of house prices, they’ve got to move away from the major centres,” he explains. “That may increase transportation costs dramatically.” By keeping these tips in mind, the process of buying a first home will likely be more exciting than overwhelming.