From high property prices to tighter lending conditions, young homebuyers say they face challenges their parents didn’t have to worry about, says TD.
The top obstacles for Millennials compared to Boomers were:
- Saving a large enough down payment (57% of Gen Y non-homeowners versus 33% of Boomer homeowners);
- High property prices (52% of Gen Y versus 16% of Boomers);
- Not earning enough to afford mortgage payments (48% of Gen Y versus 13% of Boomers).
Here are some tips to overcome these challenges.
1. Skyrocketing prices
Half of Millennials think home prices will continue to increase over the next year and 57% feel saving a big enough down payment is a concern.
Farhaneh Haque, director, mortgage advice, TD Canada Trust advises buyers to make the largest down payment they can, even if it means waiting longer to buy.
“While young people may be anxious to start building equity rather than paying rent, waiting until you have a larger down payment can save you thousands of dollars,” says Haque. “First-time buyers can also consider the federal government’s Home Buyers’ Plan, which lets you borrow up to $25,000 from your RSP for a down payment on your first home.”
Also, future homebuyers can create a down payment fund by setting up automatic transfers into a TFSA or high interest savings account.
2. Not earning enough
“For what you are paying in rent, you may be able to own your home so why not take a mortgage for a test run” says Haque. “Set aside your expected mortgage payments plus all other home expenses for a few months, less your current rent, and see how you do. If you find you’re stretched too thin or run out of money before the end of the month, look for ways to cut back on other expenses and keep saving.”
Read: Canadians struggle to become mortgage-free
3. Tighter lending conditions
Buyers should seek pre-approval for a mortgage before house hunting, so they know exactly how much they can afford.
“There are a variety of mortgage options such as fixed versus variable interest rate mortgages, short and long term mortgages and cash back mortgages,” says Haque.
4. Balancing debt and homeownership
Millennials cite another barrier to homeownership: student loans.
“A good first step [to pay down loans] is to set up a regular preauthorized transfer of a portion of your pay cheque onto your loan,” says Haque. “Try to gradually increase your repayments over time. Every little bit helps and chances are you may not even miss that extra $5 or $10 a week.”