Purchasing a condo in Toronto is a good way for people to extend their wealth, but it is becoming more difficult to do this because of the increased cost of condos.
If a person has decided that they are financially ready to purchase a condo, then they will need these tips for first time condo buyers.
- This is not usually a “forever home” so don’t look for your dream home as your first purchase.
Many first time condo buyers need to learn how to compromise. Most will understand that they can only get so much with their current budget, but few still will want a high-end condo for the price of a rundown studio apartment. They seem to fantasize that even though the market is strong in Toronto, they should be able to get what they want for less than market value.
- Consider finding a roommate.
Since many younger people are renting for longer periods of time, by the time they decide to purchase their own condo, they are used to living alone. They do not want to even think about living with a roommate, but this might be the only way that they can afford a new condo purchase.
A lot of these buyers cannot afford a mortgage, maintenance fees, property taxes and other bills without having some extra rental income. If the condo buyer is going to be living month-to-month paying the bills with no room for savings, they need to consider renting part of the condo to a roommate.
While it is true that not everyone is successful with being a landlord, it will be much easier if the correct tenant is found. First time condo buyers who are considering finding a roommate will be pleased to know that the CMHC is accepting anticipated rental income on mortgage insurance applications for owner occupied condos. This will make it easier for condo buyers to get approved for a high ratio mortgage on a two-bedroom condo.
- Understand the risk of paying either 5% or 10% down on a mortgage.
There are many good options for buyers who only want to pay 5% down on their mortgage. High ratio mortgages are better for people who have stable jobs and enough experience to find a new position if necessary. It is important that these people save money easily and be responsible with their credit.
There is always risk when it comes to investments, but if the purchase was a smart one and the buyer didn’t overpay, they should be fine if the market changes. However, it is best to look at all scenarios in case the market does change dramatically. No condo owner wants to owe more on their property than they can sell it for.
- Prioritize investment instead of style.
First time condo buyers should always consider the investment amount of the condo instead of the style of the condo. They need to remember that this is not their forever home and that they will want large returns in this investment in the future.
Most buyers dream of using certain spaces in a condo when in reality these rooms get used once or twice the entire time that they live there. Others move into a smaller space, so that they can have fancier finishes and then realize that they really need the larger space.
Every buyer needs to be thinking a few years ahead and they need to choose properties that are in neighborhoods that have high growth potential.
- Make homeownership a priority.
There are many expenses that buyers have that can drain their accounts quickly and these expenses may or may not be absolutely necessary. First time condo buyers need to prioritize and maintain a strict budget. This may mean that they will have to spend less on entertainment and other nonessential items.
Many times it is easy to cut spending by comparing rates between internet providers or cell phone carriers. Everyone should keep their credit card charges to a minimum and if they do have a balance, they should try to get a deal on the interest rate they are paying. If the buyer is always eating dinner out with friends, they may need to change that and start having gatherings at home with home cooked foods.
Remembering the goal of homeownership should make it easy to create an honest and workable budget for first time buyers.
Every homeowner needs to learn how to diversify their investments, instead of just investing in one or two things. While a home may seem like a good investment, there is still risk involved. The best way to reduce the risk is to purchase a condo at a good price.
If every first time condo buyer uses these recommendations and chooses investment over style, stays on budget and considers having a roommate, they should be able to find a condo that they can afford, even if it is not their permanent dream home.