Global News ,March 3, 2015 – As house prices and rent continue to rise so does stress. A new exclusive Ipsos-Reid survey for Global News shows Canadians are shelling out a lot when it comes to housing and the pressure is mounting.
One in three people said they are stressed out about their next mortgage or rent payment, with the average Canadian spending 40 per cent of their take-home pay on housing costs, taxes and utilities.
“It’s really important for people to realize what it really costs to get into a home, just because you have a $20,000 down payment and the numbers say you can afford a $400,000 purchase it doesn’t mean it’s in your best interest and it’s really important to be aware of what you’re comfort level is going into a purchase,” said Amber Rambally, a mortgage associate with The Mortgage Group (TMG) in Saskatoon.
According to the survey’s findings, one of the most significant sources of stress was saving up for a down payment, with 37 per cent of respondents saying it caused them grief.
“I start with my client’s budget, I always ask them so what price range are we looking in but what would you like your monthly payments to be because typically those are two completely different price ranges.”
Experts say you’ll need a minimum of five per cent of your purchase price for a down payment for an insured mortgage. In Saskatoon, you’d be looking at close to $14,000 for a $275,000 condo and $17,500 for a $350,000 home.
“Your closing costs are going to run you about one per cent of your purchase price, however the lenders ask us to show them that they have one-and-a-half per cent available, so I like to tell my clients that I’d like to see 6.5 per cent for a down payment.”
Here’s how experts suggest you relieve some stress, pinch those pennies and start saving.
“There are lots of options RRSPs, any types of investments that belong to them, they can cash in, borrowing against an existing asset so say your car is paid in full you can definitely take a loan against that vehicle, it’s maybe not going to be your total down payment but it’s going to help towards that.”
Rambally also suggests the potential of taking a loan out against an asset to put into an RRSP, getting a tax refund that you’ll want to reinvest into your RRSP and you’re well on your way.
“Another good option is a gift from an immediate family member, mom, dad, grandma or grandpa, often they’re more than willing to help.”
Downsize to a smaller vehicle and a smaller payment using the rest towards your down payment.
“It’s your asset, it’s your equity, you’re putting money into yourself rather than into someone else’s pocket so the quicker you can get into your home is definitely your best option.”
The advice doesn’t stop there. Once you’ve made the big leap to home ownership, be frugal about purchases after the fact.
“I think a lot of people they’re tighter with their money leading into their purchase and then they think ‘oh we’ve got what we want now it’s going to be easier’ and that’s when they go and buy the bigger vehicle or they finance the furniture and the bigger TV so although they qualified when they made the purchase, it makes things a little bit more difficult when you go and finance a number of things after that.”