Image of a bag of money being exchanged for a house to illustrated buying a house as a millennial.

Advice For Millennials Thinking of Buying a House In Toronto Or The GTA From Frank Leo, The #1 Individual RE/MAX Agent in the World

With almost 65% of millennials saving money with the intent of buying a house in Toronto or elsewhere, we want to provide first-time homebuyers with the best possible advice and insights when it comes to what could be the largest financial decision of a lifetime.

Taking the right approach when investing in Toronto real estate can make a tremendous difference in your adult life. This goes for buying as an investment or as a primary residence. A small mistake could mean the difference between a benchmark investment and an issue plaguing your finances for years to come.

Remember that Frank Leo & Associates, the #1 RE/MAX Team in Canada** led by the #1 Individual RE/MAX Agent in the World* are here to answer you Toronto real estate questions at any time. If you have any questions about home ownership that are outside the scope of this article, don’t hesitate to reach out and contact us.

Benefits of Being a Millennial Owning a House in Toronto

If you’re considering buying a home in Toronto & the GTA, you’re no doubt aware of some of the many benefits it can provide. You can use it to generate income, use home equity as collateral, or sell at a profit.

For some people, the feeling of not paying rent anymore justifies the commitment of paying for a house.

However, before you make that commitment, which is significant, you should be aware of everything that comes with it. Going into a big decision like buying a house blind is a sure way to make life difficult for yourself.

Understand What Buying a House in Toronto & The GTA Involves

Owning a house is a big responsibility, both financially and in terms of your day-to-day life.

In maintaining a house and the grounds takes a lot of work. It can be a bit of an adjustment for the uninitiated.

It could also limit your mobility when it comes to travel. If you plan on going away for a longer period of time the house will need maintenance.

In terms of finances, buying a house with a mortgage makes it a big financial responsibility. Missing mortgage payments, or in the worst case defaulting on your mortgage can leave you bankrupt and throw your financial future into turmoil.

For that reason taking out a mortgage is not a decision to be taken lightly or without completely thinking through your plans.

Some of the questions you should ask yourself when thinking of buying a home in Toronto or The GTA include:

–  Are you able to afford owning a home in Toronto & the GTA?

–  Can you continue to make mortgage payments even after a change in income?

–  Do you have the financial means to put in a good enough down payment to support the rest of the costs needed to be payed?

–   Is your current debt a heavy burden?

–   Would it benefit you to wait for more favourable market conditions or until you have more savings?

–   Have you considered ALL of the costs associated with buying a house?

–   What kind of a mortgage should you take out?

If you’re seeking advice on buying your first house in Toronto & the GTA, Frank Leo & Associates would be more than happy to provide expert guidance. FOLLOW HERE TO CONTACT US or Call (416)917-5466.

Financing Your First House in Toronto & The GTA If You’re a Millennial

Many millennials think of the Toronto & GTA Real Estate market and wonder if they’ll ever be able to afford a house. Although Toronto & the GTA house prices go up and down, the market is seen as inaccessible to young people in much of millennial culture.

An image showing personal finance calculations for someone thinking of buying a house in Toronto

In reality, many millennials could afford buying a house with a mortgage while taking advantage of some of the financial incentives the Government has instituted to help first time home-owners.

For example, the First-Time Home Buyer’s Credit (FTHBC) introduced by Revenue Canada in 2009 is a terrific place to start when it comes to easing the financial stress of buying a house in Toronto. If you’re a first-time homebuyer thinking of buying a house in Toronto check if you meet the requirements and whether the house qualifies for the credit.

The 15% income tax credit and other credits you may be eligible could mean the difference between affording the home and saving for a few more years.

Is It The Right Time To Buy A House in Toronto & the GTA?

Timing can play a big role when it comes to buying a house in Toronto. Determining when is the right time is a personal financial decision based on:

  • The conditions of the Toronto & GTA Real estate market. Houses could be exceptionally expensive or more affordable
  • Mortgage rates. Depending on the state of the mortgage industry, interest rates on the money you’re borrowing to buy a house could be relatively high or low
  • Your financial situation. Is it a good idea to buy now or save for a bit longer?
  • The Right House. Have you the perfect home for you?

There is no one-size-fits-all approach to answering these questions. It comes down to your current situation, your financial plans, and what your plans are for the future. When it comes to financial planning you can seek out the help of a professional, but in regard to any of your Toronto real estate questions you can count on Frank Leo & Associates.

Our award-winning real estate service has helped 1,000’s or people find their dream homes in Toronto & The GTA over three decades. Reach out to us to learn more about how we can help make your real estate dreams a reality.

Making Your Down Payment When Buying A House in Toronto & The GTA As A Millennial

In addition to other home-ownership costs, mortgage insurance is another expense you will have to pay on a monthly basis if you don’t own 20% equity. In practical terms, that means anyone buying a house who makes less than the traditional 20% down payment will have to buy this insurance.

Mortgage insurance protects the lender from losses if you are suddenly unable to make mortgage payments.

Making a larger down payment also means you start out with a higher share of equity in the property. Having more equity gives you more financial options in the future.

Remember the Stress Test

In order to be approved for a mortgage in Canada you need to undergo a financial stress test. As of October 17, 2016, this stress test is mandatory for all insured mortgages in Canada, even if you make a 20% down payment.

Historically this test only applied to people making a downpayment of less than 20%. These new rules were put in place to ensure that you can afford to keep making payments even if mortgage rates were to increase.

Image of a calliper measuring to determine if someone has enough cash when buying a home

In addition to qualifying for the rate provided by your lender, the stress test requires that you qualify for the Bank of Canada’s five-year fixed mortgage rate. The BOC’s rate acts as a sort of benchmark that gives an indication of your financial status to help prevent people from defaulting on their mortgages.  

This mandatory measure includes a requirement that as a home buyer you are not spending more than 39% of your income on home costs. Those costs include taxes, mortgage payments, utilities, etc.

Finally, your TDS (Total Debt Service) ratio cannot be over 44% and needs to include all other debt payments.

All of these conditions might seem like obstacles for millennials thinking of buying houses in Toronto. However, they’re there to prevent Canadians from falling into dire financial circumstances if their mortgage rates were to increase, unexpectedly.

Be aware of how your financial standing stacks up to the stress test requirements. Check where you stand before getting too invested in buying a house.

Get Informed About Toronto & The GTA Real Estate

Buying a home requires research, knowledge and an understanding of the home-buying process. Having insight and experience on your side is even better. Unfortunately it’s not as simple as just looking through Toronto & GTA real estate listings and picking a house.

Over 3 decades we’ve been helping people in Toronto & The GTA navigate the real estate market and we’ve developed an expert understanding of it.

That’s what makes us the #1 RE/MAX Team in Canada.* If you’d like the #1 Team on your side when navigating the home-buying process, we’re here for you.

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Led by the #1 RE/MAX Agent in the world*, Frank Leo & Associates has helped 1000’s people in Toronto & The GTA navigate the real estate market.

That’s what makes us the #1 RE/MAX Team in Canada.**

Consider speaking with Frank and his team of associates help you navigating the home-buying process, FOLLOW HERE TO CONTACT US TODAY or Call (416)917-5466.

* Dollar Volume in 2017

** Dollar Volume  January – May 2018