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Planning For Homeownership In Today’s Market

Author: rationale | Posted: 21.11.2008 | Views: 25

Mortgage rates throughout Canada have spiked over the over the past few months; it’s a sign of the times but that doesn’t mean that you have to scrap your game plan if you were planning to buy a home in Canada. A little refining of your “road to homeownership” plan might be in order though.

For instance, what was your goal for your Canada real estate purchase? Did you plan to live in Canada or were you purchasing the real estate for an investment? Knowing this before you actually buy is key because it will affect every other part of your homeownership plan. For instance, now is a great time to get exceptional deals on Canada real estate IF you plan on living in the home but if you don’t have enough disposable income, now may not be the best time to flip Canada real estate or to become a landlord.

Another question that you may need to consider is the type of loan that’s best for you. What you originally planned for may not be the best type of loan for today’s economy. For example, if you once thought that a variable rate non-conventional loan was ideal, that may not be the case anymore. With the volatility of today’s economy, it may be smarter to consider a fixed rate mortgage. That way, you’ll know exactly what your mortgage payments will be and can budget accordingly. Also, a short-term loan, which will allow you to reevaluate your loan in two to three years and adjust accordingly, may be a better option than a long-term loan.

In addition to knowing what your goal is and re-thinking the type of Canada mortgage loan that is best suited for you in this economy, you should also re-think exactly how you will pay for the real estate; your original plan for accruing the monies needed for the mortgage loan down payment and closing costs may not be as feasible now as it was when you first decided that you were going to buy real estate. Did you plan on using an annual bonus from work? Were you just going to pay for the down payment and closing costs out of your savings? Maybe you thought you could afford to borrow money from a retirement account. If you planned on using equity from a current property or financial assets from previous investment, you’ll definitely need to re-think your strategy based on the current and projected economy. The point is that, whatever you had in mind, you MUST re-think that decision to make sure it’s still the best option, taking into account how your decision will affect you financially in the long run.

If you have asked all of the above and have reasonable responses, the next question to ask is: What’s your plan for staying a Canada homeowner or landlord once you’ve have successfully purchased a home? If the home in Canada will be your primary residence, you’ll need to plan where the monies will come from for utilities, interior and exterior maintenance, taxes and mortgage payments. Then, figure out how to lower the costs of each of those as much as possible! If you’re going to be a landlord, you’ll need to not only estimate costs for maintenance and utilities but also how you’ll cover the mortgage payments if your tenant fails to pay rent. As for you investors who want to flip real estate in Canada, you’ll need to budget wisely as it may take you longer than expected to sell the property. Also, keep in mind that a flip in Canada (or anywhere in Canada, actually) may not earn the same ROI as it would’ve a year ago. Therefore, do not take on a larger mortgage loan than you can truly handle. Remember: Investment property or not, the Canada home will still your property so you will still be responsible for everything related to owning the real estate.

The final part of your plan for home ownership that you should re-think is your contingency plan. This is critical!!! As stated earlier, Canada’s economy is different today than it was six months ago. A year from now, it could be significantly even more different; the economic pendulum could swing wither way. Therefore, plan for the worst and expect the best. That way, you won’t have anything to worry about once you get approved for your Canada mortgage and buy the real estate you’ve been wanting!
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