When it comes time to invest your hard-earned savings, you want to make sure you’re getting some bang for your buck.
You want the perfect house, in the perfect neighbourhood, and at the perfect price.
Well the reality is – nothing is 10/10 and rather than taking the perspective that a home that isn’t ‘perfect’ is settling, the ability to reframe as it as an investment opportunity, workable to satisfy my wants/needs and a viable stepping-stone to the next closer-to-perfect home, will get you farther and faster in achieving your goal of homeownership.
Timing the market
Similarly, some think there is a perfect time to buy a house, right? Well, while we’re dispelling myths, we might as well tackle this most elusive one: No.
Now, that isn’t to say that buying in a down market, from an investment perspective, isn’t ideal – of course it is. The distinction in residential real estate is two-fold:
1) more likely than not, you are either renting (paying a landlord’s mortgage) or –
2) up-sizing: needing to sell to buy something more suitable.
If the house is intended to be a home, attempting to ‘time’ the market will invariably delay your life plans and no one really knows the bottom of a market until it’s too late. So, better to get on-the-court, get a roof over your head and start building equity while taking advantage of appreciation and low-interest rates.
As an investor, if you are currently invested in another product that is providing better returns than real estate and there is no impetus to buy, feel free to wait for a downtown – the amount of discount and how long it will take are unknowns.
Back to someone looking for a home. Just like the proverb says, “The best time to plant a tree was 20 years ago. The second best time is now.” If your dream home isn’t available, well check out myths one, two and three.
You can keep waiting out the market for the hopes that prices will drop, or a home pops up in your dream neighbourhood, or the perfect home gets listed… but that’s a lot of variables you’re counting on. Particularly in Toronto where the core is dense, the prices are rising, and the availability of housing is far out-paced by the population.
So, when is the best time to buy a house?
When you Have the Down Payment
You only need a 5% down payment for a home that’s $500,000, and 10% for anything above that as long as you are willing to pay extra interest in the form of CMHC fees. If you can muster that, you can have a home as soon as possible, or – a small investment condo if you’ve got low rent or currently own another property that works for you size-wise.
Not to mention, after September 2, 2019, you can also apply for the First Time Home Buyer’s Incentive. This little offer comes directly from the government and will give you an additional 5% towards the mortgage, although they do expect 5% back after 25 years or once you sell your home and there are a number of qualifiers you’d need to match to have it work. There are more details, so make sure to read the link.
Paying extra interest can be a deterrent for some. Keep in mind, unless you can save more than what the value of a home is appreciating year-over-year (or, if you are simultaneously renting and that monthly amount could go towards your home instead of in the landlords pocket) it may be more viable to suck-it-up and pay CMHC to secure a property.
If this is you, you’re saved-up and ready to shop and are stopped by nerves, lack of understanding of the market (we can help) – keep in mind what a few months delay can mean for your purchase. If your money is sitting in a bank account, it’s value will be going down. The home you might have been eyeing could very well be gone and the price of the next home will likely have increased (based on current market conditions).
Where Do I go From Here?
You can look back at our other blog posts to get a better idea of the stress test and requirements of buying, but a big down payment doesn’t have to mean a big obstacle. Having a holistic approach to buying, that takes into consideration the big picture of owning property as an asset, will likely have you be more decisive when the time comes to say ‘Yes!’ even when the flooring is ‘too dark’.