Four Ways You Can Still Be A First Time Homeowner

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We are now at the beginning of March, and the new mortgage rules are seeing their effects on potential future homeowners, especially younger people with lower income than baby boomers. These mortgage rules, however, should not completely stop you from going after your dreams! There are still ways to figure out a home purchase, without it damaging your finances. It’s unfortunate that salaries are not keeping up with inflation, and many more people today are working as freelancers or contractors; something traditional lenders are not fond of. And the money we make to keep? Spending it away!

1. Clean up your debt. That would usually mean better discipline with our credit cards, because all the debt reeks high interests that takes forever to clear. Young people should make that their first priority, “It’s the credit card debt that will sink people. And it’s the credit card debt that gets people into a world of hurt,” Ken Beaton of ARCA Real Estate advises.

He continued “Credit cards are far more likely to bring people to the financial brink than is home ownership.” He also believes the government can do a better job helping Canadians spend within their means by focusing on plastic instead of making it so difficult to afford a home. “Going into long-term debt to purchase one of the most bulletproof investments out there is far smarter than charging big-ticket items such as boats and RVs,” Beaton added.

There’s nothing wrong with purchasing fancy stuff you like if you can afford them; but it won’t help you saving up for the home you wish. Beaton also advised that we must understand the effect of the financial decisions we make, whether they are a mistake or clever purchases.

2. Move away from the city? Buying a home in the country could also be of benefit. It’s not the same as being close to everything in the city, but the homes are definitely cheaper and potentially a good ROI. Some rural municipalities offer incentive programs to attract first-time homebuyers. Beaton continued, “They will give you the five per cent down payment for your first purchase. Not many realtors know and understand this.” Another important tip he added is that you should choose a community that has easy access to public transport, so that you don’t need to rely on a car to get around.

3. Help from the parents? We can always tap into our RRSPs to help with a down payment, but we have to pay it back. But if you don’t have that option, you can always rely on your parents; but not necessarily in the conventional way you think! They can lend you the money from their own RRSPs. It’s safe, can securely earn them interest, and will help you out in the process. Beaton continued, “Unlike a conventional mortgage from the bank, [parents] are allowed to lend 90 or 95 per cent of the value of that property.”

As mentioned earlier about the non-conventional way about getting money, this is not a family member “gifting”‘ you the cash to help with your down payment. The loan is truly a gift, and not repaid with interest, Beaton said.

Can you and your parents get in trouble with the CRA for ‘mortgage fraud’? Be careful how this loan would be handed out.

4. Rent out part of an expensive home? To finish off, Beaton also advises that you could also buy an extremely expensive home, but rent out a couple of rooms and still keep some privacy – it can pay off alot of your mortgage! It can be a basement you renovate and turn into a couple of bedrooms, and would have to share the house with others. A landlord living in their own home without losing too much money. Always make sure all your activities are legal, though!