First time buyers in 2021 may be wondering if now is the time to get into the Toronto Real Estate market. If you’re thinking about making your first purchase in the coming months, there are many things you can do now to set yourself up for success.
Do you have a lease that’s expiring soon, and you want to start contributing to your own future rather than paying off someone else’s mortgage? This is the biggest reason to do whatever it takes to make your first purchase. Why give money to your landlord’s future instead of putting money into your own pocket? Now is the time to make moves to put yourself first!
The biggest thing to remember is to not be overwhelmed – buying should be a fun and educational experience. Yes, we said it – fun.
Now or Later – What’s Best for First Time Buyers in 2021?
When examining the current market and all things pandemic-related (this blog was written in February), we have strong recommendations to first-time buyers in 2021 that don’t come around very often. Wait. Don’t jump into the market right at this moment in time (February).
Why you ask? Inventory is low. Demand is high. Pent up buyers and investors are looking and snatching up listings within just a few days. Condos are seeing bidding wars and selling in multiple offers.
But don’t let this scare you! It’s a good thing – we promise. What this trend usually tells us is that for a short time, demand will be high, and inventory will be low, resulting in increased prices.
But this also means that sellers are paying attention, and in a few short months, you’ll see an influx of listings hit the market. THIS is what you want to wait for. You’ll have time and control on your side.
So, what can you do in the meantime? First step is to form your real estate team. Finding an experienced Real Estate Broker who has a proven track record with first time buyers is an important step.
We pride ourselves on educating first-time buyers through every step of the process. You should be excited to purchase your first house or condo – if you’re feeling less than that, it’s time to re-evaluate your team.
Buying for the first time shouldn’t be stressful, and with our list of things you can do now, you won’t have to worry about missing any of the critical steps in your first time-buyer experience.
Get a Mortgage Pre-Approval
A mortgage pre-approval will tell you how much you quality for. This is a critical first step for first time buyers in 2021, as you will work with a mortgage agent to get all of your qualifications in order. A good mortgage broker will guide you and educate you on the pre-approval process, and give you comfort in knowing exactly what your budget range is so you can start looking for a home you can actually afford.
How Much Can You Afford?
Think about your monthly costs. What can you afford to pay per month for your mortgage? Think about your other monthly costs too. Insurance, public transit pass or car loan, grocery bills, entertainment and anything else you pay on a monthly basis that will impact your home costs. Just because you are approved for a certain amount doesn’t mean that’s what you should actually pay.
First Time Buyers in 2021: Saving for a Down Payment
Living in a big city like Toronto where everything is pricier than most other parts of Canada, saving for a down payment can be a challenge. And it will not be fun – we get it. But this is how smart people save a lot of money.
They make lifestyle changes by finding different, cheaper ways of doing things without diminishing their fun. Here are some great examples we found:
- Stick to one entertainment outlet. If you have cable TV, cancel your Netflix account. Can’t live without Netflix? Cable has to go. There are so many ways to spend money each month on entertainment, and during the pandemic you may feel that you need all of them – try to pick your most-watch or go-to account and stick with it.
- Getting a lot of takeout? Try limiting your ordering to once per week. And when you do order, go pick up yourself – not only does it help your bank account, it helps put more of that money into the restaurant’s pocket.
- Do you buy a lot of new clothes? Limit yourself to only 5 new pieces of clothing, shoes and accessories per season. And when you buy, look for off-season deals. We love a good semi-annual Nordstrom sale.
- If you’re saving for a down payment, you should think about shelving any major holiday plans. Although we’re all not-vacationing now, don’t spend that saved up money on an epic holiday once we can. Take that money and put it towards your amazing condo or house you’re going to purchase. At the very least, think about road trips or visiting a friend’s cottage instead of getting on that flight as soon as we’re able to.
- Pick your at-home workout like your entertainment source – just one that covers it all. There’s no need for multi-platform workouts. Look at an option like Obe fitness – thousands of on-demand classes that you can do anywhere any time for a yearly fee of $200.
- Consider a side-hustle. Smart-savers know that they can make extra money on the side by doing various jobs. Are you really good at digital marketing? Consider a small consulting job for a handful of mom-and-pop shops that need help in your neighbourhood.
Borrow from your RRSP or Use a Tax-Free Savings Account
You can withdraw up to $25,000 from your RRSP to buy your first condo or house. This is a great way to come up with a down payment if you already have some RRSPs. If you don’t, this may be a good way to save money for your RRSP and at the same time get a tax credit to help reduce your taxes.
The only catch to this program is that you have to pay the money back to your RRSP within 15 years. If you don’t repay the money, it is treated as income and you will have to pay tax on the money you withdrew as though it were income.
A Tax Free-Savings Account can also be a great place to save your down payment money as your money can grow tax free in this account. This means you won’t have to pay income tax on the money you earn as it grows.
We recommend consulting you’re your financial advisor, planner or band for more information how these two options can work best for you.
First time buyers in 2021 are going to have a distinct advantage in the market. Make sure you’re ready to jump when the time is right.
Want to learn more about when the right time to get into the game will be in 2021? Fill out our form below so we can help you get exactly what you want and start putting your money towards your own future.