First-Time Buyers

The owning advantage (and some added incentive)

Two out of three Canadian families own a house – that's one of the highest rates of home ownership in the world. And for good reason.

Real estate is a great investment. And with increasing housing prices, it's all the more important for first-time buyers to get a foot on the first rung of the property ladder.

Financial advantage of home ownership

- Homeownership is the single largest source of savings for Canadian households.
- Your payments build equity (as opposed to renting, where your money goes to the building owner).
- Unlike other investments that can be volatile, when you buy a home the increase in its value is relatively steady. The average price of a house for sale on the Canadian real estate market has increased every year since 1998.
- The return on investment for a house can be substantial. In 2004, the average house price in Canada rose by 9% in just one year. It also experienced a 27% increase over four years.
- Homeowners can use the equity in their homes as security for other loans.
- Buying a home and building equity is the first step on the property ladder. It gets you into the housing market, keeps you in touch with increasing house prices, and puts you in a good position to trade up to bigger and better homes as your circumstances allow.

How much can I afford?

So how do you get from here to there? Bridging the gap between dreaming and owning can be costly.

Most lenders say that your monthly housing expenses (principal, interest and taxes) should not exceed 30% of your family income (before personal income tax). This is called your gross debt service ratio (GDS).

Lenders may also look at your total debt service ratio (TDS). Your TDS takes into account monthly housing expenses, plus other debts and loans you may have.


To calculate your TDS:

1. Multiply your monthly gross (before tax) income by the maximum TDS ratio of 40%.
2. Subtract your regular monthly costs (e.g. credit cards, car payments, personal loans).

The figure you are left with represents the maximum amount available for your mortgage payment, property taxes and 50% of condo fees (if applicable).

 

Think back to high school economics. Remember those lessons on the laws of supply and demand, and how you swore you’d never need to know that stuff in the real world? Well, if you’re looking to buy a house, it could come in handy.

The concept is a simple one, but it teaches a valuable lesson in how housing market conditions affect price, and how understanding the market can affect your buying strategy.

In a nutshell, when there are more homes for sale than there are potential buyers, house prices drop. When there are fewer houses on the market than there are buyers, house prices will climb. When the number of homes on the market is roughly equal to the number of buyers, it’s called a balanced market.

Market conditions can vary widely across the nation, across provinces and even across neighbourhoods. The demand for housing in a given locale may be influenced by any number of factors. Swings in the economy (both national and local), the availability of property (supply), and the fickle nature of consumer trends can determine if a given neighbourhood is hot or not.

As an expert on your local real estate market, a Royal LePage agent is an excellent place to start understanding the state of your local market. You may also want to consult the Royal LePage Survey of Canadian House Prices. This is a quarterly report geared to help you learn more about housing price trends in your area as well as housing markets across the country.

Here is a quick rundown on how the changing housing market can impact buying and selling behaviours: 

Closing the Purchase

Get in touch

Phone number

(306) 694-8082

Toll Free

1-877-694-8082

Office location

605A Main Street N
Moose Jaw, SK
S6H 0W6

Email address

Twitter