Over half of young Canadians (55 per cent) believe that it makes sense to delay a home purchase until next year, 10 points higher than the national average, and almost half (46 per cent) of younger homeowners admit that their mortgage is using up too much of their income, according to the 18th Annual RBC Homeownership Study.
“In a more balanced housing market, it makes sense that younger and first time homebuyers are waiting to assess all of their options and do their research before buying a home,” said Bernice Dunsby, director of Client Acquisition, Home Equity, RBC. “It’s also important to get expert advice on what you can afford and leave yourself with a little extra wiggle room in your budget so you don’t become house poor, as home maintenance and lifestyle costs can add up.”
The poll found that younger Canadians are more likely to purchase a home than other age groups, as 43 per cent (aged 18-34) are looking to buy in the next two years, compared to the national average of 29 per cent. Older Canadians are much less likely to buy in the next two years, including those aged 35-54 (29 per cent) and over-55 (17 per cent).
When looking for advice on purchasing a home, younger homebuyers (aged 18-34) are more likely to use real estate websites (55 per cent) or family (48 per cent) and friends (35 per cent). The majority of older Canadians, aged 45-54 and over-55, are more likely to rely on a real estate agent as their choice for advice, at 71 per cent and 74 per cent respectively.
“Being prepared and working with a mortgage specialist will help you buy with confidence and give you expert advice on current financing options,” added Dunsby. “Having a mortgage pre-approval is a critical component of buying a home, particularly for younger homebuyers. It presents you as a serious purchaser to both realtors and sellers.”
According to the poll, younger Canadians (aged 18-34) are most concerned about having a good down payment (23 per cent) and rising real estate prices (23 per cent) when looking to buy a home. Canadians aged 35-54 are most concerned with rising prices, as 24 per cent are worried about mortgage rates and 25 per cent about home prices increasing. Canadians over the age of 55 list increasing home prices (36 per cent) as their biggest worry when deciding to purchase a home.
While 43 per cent of younger Canadians (aged 18-34) are paying off their mortgage faster than they expected, two-thirds (66 per cent) say it is larger than they would like it to be.
Dunsby outlines five tips for younger Canadians looking to buy a home:
Leave some wiggle room: Line up your paycheque and compare it to your total costs. Make sure that you have enough left over for new furniture, repairs and costs of living. Do a spending analysis to see what the total costs of homeownership would be relative to your lifestyle and build that into your plan (i.e. if you enjoy eating out or going to the gym).
The power of the pre-approval and stress test: Make sure you have your financing in order before you start your search – it will show sellers and real estate agents that you’re serious. Mortgage pre-approvals have no obligation and help lock in your interest rate. Work with a professional mortgage specialist to test your mortgage for potential mortgage rate and cost increases to make sure you can handle it.
Don’t overbuy: Be realistic in choosing a home that’s within your means and make concessions on what you’re looking for. Set aside a budget for ongoing home maintenance and potential cost increases (for utilities, taxes and fees). Online tools and calculators can help you plan your budget.
Look at payment flexibility: Look at a mortgage that provides you with the option of doubling up your mortgage payment or putting down a lump sum payment once a year. Doubling up your mortgage payment just once per year can save you tens of thousands in interest costs and take years off your mortgage amortization period.
Don’t forget closing costs: Closing costs are typically one to two per cent of your final purchase price. Build this into your budget along with the cost of new appliances, utility and cable hookup and moving costs.
What types of homes are Canadians looking to buy? (according to the 18th Annual RBC Homeownership Poll):
Younger Canadians (ages 18-34)
- Detached house 59 per cent
- Condo/loft 15 per cent
- Semi detached house 10 per cent
- Townhouse 10 per cent
- Mid-range Canadians (ages 35-54)
- Detached house 71 per cent
- Condo/loft 10 per cent
- Semi detached house eight per cent
- Townhouse seven per cent
Older Canadians (55 and older)
- Detached house 68 per cent
- Condo/loft 15 per cent
- Semi detached house five per cent
- Townhouse five per cent
More First Time Homebuyers choose RBC Royal Bank than any other bank. Canadians can visit the RBC Advice Centre for advice on the costs associated with purchasing a home. The RBC Advice Centre is an online resource that gives Canadians access to advice about all aspects of their finances including their homeownership goals – whether they are buying their first home, planning their next move, renovating or managing their current home financing.
RBC is the largest residential mortgage lender in Canada. As the country’s number one source of financial advice on homeownership, RBC conducts consumer surveys as one way to provide insight to Canadians about the marketplace in which they live. These are some of the findings of the RBC’s 18th Annual Homeownership poll conducted by Ipsos Reid between January 12 to17, 2011. The annual online survey tracks Canadians attitudes and behaviours around homebuying and homeownership. The results are based on a sample where quota sampling and weighting are employed to balance demographics and ensure that the sample’s composition reflects that of the actual Canadian population according to Census data. Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. An unweighted probability sample of 2,103 adult Canadians, with 100 per cent response rate would have an estimated margin of error of ±2 percentage points, 19 times out of 20. The margin of error will be larger within regions and for other sub-groupings of the survey population.
For further information:
Matt Gierasimczuk, RBC Communications, (416) 974-2124
Elyse Lalonde, RBC Media Relations, (416) 974-8810