No two events have the same kind of profound effect on a person's life quite like having your first child or buying your first home.
And while soon-to-be parents spend months preparing for the arrival of their first born through careful planning, parenting classes, and receiving advice from dozens of friends and family members, most first time home buyers aren't often taking the equivalent of prenatal classes or doing the same level of preparation before diving into the housing market.
Not unlike the ups and downs experienced by first-time parents, purchasing your first home can be exhilarating yet nerve-wracking at the same time, and just as it's important to prepare for parenthood, knowing what to expect on the homebuying journey can help cut down on unexpected surprises.
In fact, more than half (56%) of Canadian first-time homebuyers are afraid of missing important steps as they find their footing on the property ladder, while nearly one quarter (24 per cent) say that the homebuying process is stressing them out, according to a new 2018 survey from TD.
The survey, which looked at first-time home buyers in Canada, also revealed that seven out of ten (71 per cent) first-time homebuyers worry about being hit with unanticipated costs during the homebuying process.
And yet, despite the worries about the unknown risks and unanticipated costs associated with the purchase of a first home, many Canadians aren't adequately preparing themselves for what to expect from the home buying process, with only 39 per cent reporting that they are taking steps to reduce their debt, and only 28 per cent working to improve their credit score.
"Similar to anticipating costs of a child, taking the time to consider the many costs and steps associated with home ownership – from appraisal fees to mortgage default insurance – is important," said Marc Kulak, Vice President, TD Bank Group. "By anticipating expenses and adopting sound financial behaviours such as paying down your existing debts, you are setting yourself up for success.”
For those Canadians embarking on their first homebuying journey, here are a few tips and tricks to help ensure the process of buying your first home is as welcoming as possible:
Manage any existing debt
First-time parents are often advised to get financially "ready" as they prepare to make the big decision to have kids. Similarly, you’ll want to feel financially "ready" when making a decision as important as buying a home. Before applying for a mortgage, it is a good idea to get your own ‘financial house’ in order. The TD Mortgage Affordability Calculator is a helpful tool – it uses financial information provided by the potential buyer to help them understand how much home they may be able to afford after monthly expenses, debt payments and savings are accounted for.
Consider all homebuying costs
From diapers to daycare and everything in between, the costs associated with caring for a newborn can add up fast. Similarly, first-time homebuyers will quickly find out there are many expenses associated with buying a home. The survey found less than half first-time home buyers had planned for appraisal fees (49 per cent), mortgage default insurance (47 per cent) or closing adjustments (41 per cent). The best advice is to be aware of all the possible costs you could face so you don’t get hit with an unexpected expense.
Make your mortgage work for you
As first-time parents find out soon enough, every baby is different; first time home-buyers also learn that not all mortgages are the same. The TD survey revealed that more than half (52 per cent) of first-time homebuyers are uncertain which type of mortgage would be the best fit for their needs and lifestyle. Meeting with a financial advisor can help determine the best mortgage type to help meet your personal financial situation.
Don’t put your finances under pressure
Similar to parenting, the costs of owning a home continue for years to come. Once you close on your home purchase and pay all closing costs, don’t make the mistake of assuming your mortgage payments will be the only home-related expenses you'll face. From property taxes to maintenance costs, there are lots of responsibilities and expenses that come with owning a home.
Protect your home
It's well-known that new parents are typically very protective of their children, and often child-proof their home well before their child is on the move. Protecting your new home is also critical. Most first time home-buyers (70 per cent) are prepared for the costs of home insurance. Having the right insurance can help you feel at ease with your specific circumstances and help ensure there are no surprises down the road if crisis or catastrophe hits.
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