Buying your first home is an exciting chapter in the lives of many Canadians. The time where you say goodbye to landlords and living with roommates, and hello to a place you can truly call your own. However, as the global pandemic continues to evolve, young Canadians see their dreams of owning their first home as just that – a dream. As housing prices continue to skyrocket, those early in their careers and earning a modest income may see owning a home as unachievable. However, while buying a home is not an easy endeavour, the right financial planning can turn your homeownership dreams into a reality.
Here are a few helpful tips to help you get closer to securing your future home:
1) Get to Know Your Credit Score
Building a good credit score doesn’t cost you anything but having one could open the doors to homeownership much faster for you. From your monthly rent, utilities, or credit card bills, making sure to pay these bills on time can have a big impact on your credit score. In Canada, credit scores range between 300 – 900, with scores between 660-724 seen as individuals who have good credit. The higher your credit score, the better chance you have of getting approved for a mortgage for your first home. So, in the end, it pays off to pay your bills on time! Before starting the home buying process, review your credit report to get a holistic look at whether buying a home is a reachable goal for you now or something you must work towards as your financial circumstances improve. You can request a copy of your credit report at any time for a fee from one of the two credit bureaus in Canada: Equifax Canada and TransUnion.
2) Pay off your student loans and other debts
Saving for your down payment is a key step towards purchasing your first home. If you are not already saving with your RRSP, now is the time to start. With the Home Buyers’ Plan (HBP), first-time homebuyers can withdraw up to $35,000 tax-free from their RRSP to put towards their first home. After the purchase, you’ll have 15 years to repay the funds to your RRSP at no tax penalty. So, punch your ticket to homeownership with the Home Buyer’s Plan! Talk to a financial advisor at your local credit union to determine if this option is right for you.
3) Save towards your down payment with your RRSP
With the cost of everyday items increasing from year to year, these larger price tags could make reaching your savings goals seem like a tall task. However, no matter your income level, developing regular savings habits is the key to putting you on the path to financial freedom. Start by setting aside as little as $10 per paycheck (or as much as your finances allow) into a savings account to help you reach your financial goals. Consider putting these funds into a high-interest savings account and take advantage of favourable interest rates, so you can keep building your wealth even in financially uncertain times. Visit your local credit union and speak with a financial advisor about your savings account options to find the one that’s right for you.
4) Location Shop
As the age-old saying goes; location, location, location. This is no truer than when deciding where to purchase your first home, as the city or neighborhood you choose could directly influence the price you pay. If the homes in your dream neighborhood are out of your budget, consider expanding your home search. For example, instead of purchasing a home in downtown Toronto, consider smaller cities such as London or Hamilton to find homes that may be closer to your price range. Alternatively, if buying a home in the big city is truly your dream, consider a pre-construction home in an up-and-coming Toronto neighborhood. This way you can stay in the city you love, at a price point, you can afford!
5) Embrace the fixer-upper home
If the current houses on the market in your desired neighbourhoods are out of your budget, consider purchasing a fixer-upper home instead. By conducting the appropriate housing research, you are bound to come across a few gems in your city that are just in need of some T.L.C. If you are willing to invest a little sweat into your home, a fixer-upper home could be the perfect fit for you. Including fixer-upper homes in your home search allows you to expand the purchasing options within your budget, moving you one step higher on the property ladder.
Here are a few helpful hacks to pay off your new home faster:
a) Rent out your space
Thinking of buying a new car or renovating your home? Consider putting those plans on temporary hold. With inflation at an all-time high, the cost of a new car is more expensive than ever before. Similarly, the rising cost of building materials and supplies such as lumber and steel have made home renovations a costly endeavour. So rather than jumping to purchase that new car you’ve been looking at, or upgrading your kitchen, consider delaying these big-ticket purchases until prices stabilize and put that extra cash towards your savings instead.
b) Get your side hustle on
Getting on the side hustle bandwagon can help you bolster your income to help you better manage when unexpected home repairs arise. Whether it’s serving as a driver for Uber or Lyft, doing Uber Eats deliveries, or serving as the neighborhood dog walker, these additional sources of income could help cover the bills your paycheck doesn’t. By taking on a side hustle, you can know that you’ve got that unexpected $2000 roof repair or water-heater replacement cost covered.
Unlock the keys to homeownership… Become a credit union member
From rising food prices to the housing market, inflation impacts every facet of Canadians lives. Credit unions are an excellent option to help you purchase your first home or manage the financial realities of being a homeowner. Not yet a credit union member? Find your nearest credit union click here.