Home Realty – How To Get a Foot In The Housing Market
Sharing a home with other family members one way of beating sky rocketing prices.
The GTA housing market has gone wild with detached homes selling for hundreds of thousands of dollars over asking. Traditional single family houses are out of reach for most first-time buyers. Even move-up buyers looking to purchase an actual house might be feeling the pinch these days, given how sky high prices have soared.
The average price of a new detached house in the GTA has soared from $440,000 a decade ago to more than $1.2 million. It’s forcing many purchasers seeking single-family homes to head much farther afield, beyond the GTA’s borders, in order to be able to afford a home.
That doesn’t mean folks choosing to remain in the GTA have to give up on the idea of homeownership, mind you. In this vigorous market, where prices keep climbing higher, there are still ways to get a foot on the property ladder.
First, you could buy a house with family members, likely your parents. Borrowing from the Bank of Mom and Dad is how most first-time buyers are able to get into the market these days. Parents — or grandparents — might simply give the kids the down payment, helping them qualify for a mortgage. Or, in some cases, the parents might end up co-owning a home with their kids — and eventually grandkids — sharing the house, its responsibilities, as well as the equity gains.
But a more comfortable option for some might be to buy a house with a friend. In this case, you can get what’s known as a mixer mortgage, which can be split into separate terms for the two owners with fixed and variable rates and different amortization periods.
You might also consider buying a bigger property with several friends and renting out part of it. Some ground oriented townhouses have finished basements, which can be ideal for use as rental suites. Renting a portion of your property to a third party is a great way to help cut down otherwise hefty mortgage payments.
Whether buying a home with family or friends, you must be sure to put together a legally binding agreement that outlines responsibilities for payments and contingencies. What happens if someone falls ill and can no longer handle payments? Or what if the situation sours and things need to be undone? It’s best to have this outlined in writing so there are no nasty surprises if circumstances change.
If you want to buy a home but not be tied to a partner in the purchase, remember that you have the option of taking money out of an RRSP via the Home Buyers’ Plan, and use that for a down payment. This could help to shore up your other savings and get you across the mortgage loan qualification line.
Multiple debts might be taking a toll on your personal finance profile, so before applying for a mortgage you might also want to consider having student loans and credit card debt consolidated into a single loan. This could help improve your prospects in the qualification process.
Don’t let the ever-climbing house prices freak you out. There are still ways to get into the homeownership game, it will just require a bit of creativity and flexibility.
Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years. She has sold and overseen the sale of over $15 billion worth of real estate and, with Debbie at the helm, In2ition has become one of the fastest-growing and most innovative new home and condo sales companies. In2ition has received numerous awards from the Building Industry and Land Development Association and the National Association of Home Builders.