They’re facing tighter mortgage rules, a national economy that’s growing at a moderate pace and real estate prices that continue to rise. Despite these challenges, Canadian homebuyers remain confident in the long-term bene-fits of buying a home.
In a national survey by Canadian mortgage insurer Genworth Canada and the Canadian Association of Credit Counselling Services (CACCS), 90 per cent of respondents said owning their home gave them a greater sense of emotional well-being, and that they would rather own their home than rent.
“Despite tighter mortgage qualification criteria over recent years, survey results point towards positive trends in homebuyer behaviour,” says Stuart Levings, chief operating officer of Genworth Canada. “With a stable economy and real estate market, Canadians appear to have more confidence in the value of homeownership.”
Unlike past generations of buyers, Canadians in the market for a home today face greater barriers to homeownership. Over the past six years, the federal government has introduced a number of regulations – particularly for high-ratio mortgages with down payments less than 20 per cent – to prevent buyers from taking on excessive debt. These rules include a more stringent process for approving mortgages and home equity lines of credit, and a maximum amortization period shortened from 30 to 25 years on high-ratio mortgages.
Buyers with less than a 20 per cent down payment are required to purchase mortgage default insurance, which protects the lender in case the borrower stops making payments.
While tighter mortgage rules have apparently had little impact on Canadians’ positive view of homeownership, what seems to be changing is the attitude towards saving and managing debt. Instead of rushing headlong into homeownership, many Canadians are willing to work harder and longer to save for a down payment, according to the survey by Genworth Canada and CACCS.
Half of survey respondents said it would take them one to two years to save for their down payment, while close to 30 per cent said it will take them three to four years to come up with this lump sum.
Close to 70 per cent said they want to pay off their mortgage as fast as possible, even if that means scrimping and downgrading their lifestyle. In a 2012 survey, the same question garnered agreement from just over 60 per cent of respondents.
Laura Leyser, a realtor with RE/MAX A-B Realty Ltd. in Stratford, Ont., says it’s the young, first-time homebuyers just coming out of school who tend to struggle with down payments. For many people within this group, waiting to buy their first home is a necessity, not a choice.
“This is a group that’s between 25 to 30 years old who are well educated, have debt from school and no money to put down,” says Ms. Leyser. “It’s not that they want to wait to buy their first home; given their financial situation, they have to wait.”
Looking at the majority of survey respondents who want to pay off their mortgage as fast as possible, Ms. Leyser points to older homeowners who are now in their second and third home and enjoying significantly lower interest rates than they’ve had in past decades.
“These are people who started off with rates of 18 to 21 per cent, and now have mortgages sitting at three to four per cent,” says Ms. Leyser. “They're realizing, ‘this is our opportunity to pay our mortgage down faster.’”
ASK AN EXPERT
Unless this is your only option, I don’t recommend it. First, it’s not like you can simply choose to skip a payment. You can miss a regular mortgage payment as long as you have already prepaid that amount by doubling up a payment, increasing your payments or making lump sum payments.
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