The Covid-19 pandemic has not stopped people from wanting to buy a home for the first time. However it is necessary to do some long term planning including preparation for the unknown before taking the plunge into the housing market.
Canadian house sales rebounded by 63% month over month in June showing that the real estate market seems to be holding steady despite the financial problems that the pandemic has caused. However the Canada Mortgage and Housing Corporation (CMHC) predicts that home prices will fall up to 18% due to job losses, declining income, stalling construction and it has now tightened lending restrictions. Despite this, Canadians are still feeling optimistic about the real estate market mostly due to the all time historic low interest rates.
If you are thinking about purchasing your first home you should consider the following:
1. Adjusting your expectations - even if you are relatively unscathed by the pandemic and still have stable employment it is a good idea to weigh your needs against what you want to own and adjusting your expectations. For example do you really need a single detached home? If you are working remotely would living outside of the city where property is usually cheaper to buy be an option? Do you really need a backyard? if not would a condo work for you? Making adjustments to your expectations will help you to better assess what you can comfortably afford while maybe retaining some of your savings.
2. What you can afford should be based on your lifestyle not low interest rates. You should not be stretching yourself beyond the limits of what you can really afford while still retaining your lifestyle. Though low interest rates are a plus for many the CMHC says it is important to consider the losses that you may suffer should house prices decline. Making a bigger downpayment will help to protect you against these possible future losses.
3. Align your budget - make sure your budget is realistic and something that you can stick to. Use it to determine the down payment that you can make while accounting for your expenses and leaving some money for savings. You should consider your cash flow and liquidity and make contingency plans preparing for a worst case scenario such as job loss or unexpected costs. It is important to maintain your savings rather than relying on credit to help you pull through difficult times.
4. Plan for hidden costs - purchasing a home involves a lot more than just your down payment, mortgage payments and the interest rate and you need to be prepared for these extra costs. These include:
From an article by Sophie Nicholls Jones
Paying Digitally? – Tips to Stay on Top of Your Finances
Business Continuity in a Crisis
Benefits and Impacts of Deferring your Mortgage Payments
Bubble Friendly Ways to Vacation
How the Pandemic is Affecting Canadian Businesses
Covid-19 Now is the Time to get Serious About Your Financial Wellness
Five to Ten a Day for Better Health (of Your Business)
Personal Finance New Year’s Resolutions