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The point is, get into the market as soon as you can, however you can
One of the wisest moves anyone can make is to own real estate, whether it is to live in or as part of a financial investment portfolio.
Nowadays, owning may seem elusive to first-time buyers because of skyrocketing prices and the down payment amounts that come with them, but a great way to buy real estate is to begin by owning it. Sound contradictory? Here’s what I mean.
A popular avenue for first-time buyers is through gifting from their parents (often referred to as the bank of mom and dad).
Last year around this time, CIBC issued an Economics in Focus report stating that in 2020, approximately 30 per cent of homeowners in Canada received financial help from their families – with the average gifts reaching up to $128,000.
Only about 5.5 per cent of the givers went into debt to help their children. Some of this money came from savings; others gifted what would be considered part of their children’s inheritance.
Families doing the gifting usually can, because of the equity they have earned from homeownership over time.
Some parents co-sign for their children’s mortgages, again because the older generation has likely paid off their own mortgage. In addition, many of these parents were paying mortgages when interest rates were double digits!
They realize how important it is for their children to get into the market now, while rates are still incredibly low. They also understand that the window of opportunity is narrowing as rates inch up.
Another example of owning real estate to buy real estate involves move-up buyers who use equity from the home they sell to help afford a more expensive residence. They may have added to their families or simply decided they wanted more space.
Then, let’s look at real estate investors. Some are using the equity they have earned from previous investments to continue purchasing homes and/or condominiums. This is a wise investment move because it keeps momentum going and offers the potential for even more return-on-investment.
And here’s an interesting twist on the idea: purchase real estate somewhere outside of the GTA, or even outside of Ontario, where prices are better, with the intention of selling and buying locally in the future.
For example, at In2ition Realty, we represent two very affordable developments in Edmonton, where the Alberta government is enthusiastically encouraging homeownership through the media.
The point is, get into the market as soon as you can, however you can. Check out every government incentive for first-time buyers, including Canada’s Home Buyers’ Plan, through which you can draw up to $35,000 from your RRSPs toward your down payment. Canada’s First-time Home Buyers’ Tax Credit helps too.
Check CMHC as well regarding the First-time Home Buyer Incentive), which helps qualified buyers reduce their monthly mortgage payments. These are just three of many possible options available.
A new home or condominium will likely be the largest – and wisest – financial move you’ll ever make. Equity opens the door to financial options that can help carry you through your life cycles.
You want to get the most for your (and possibly your parents’) hard-earned dollars, so shop wisely and take advantage of every incentive you can.
Debbie Cosic is CEO and founder of In2ition Realty. Visit www.in2ition.ca