Home buyers report a variety of feelings when it comes to financing a new home. According to the 2019 CMHC consumer report, most borrowers reported feeling “happy” or “excited” about their purchase, but over one-third of borrowers also said that buying made them feel stressed. Additionally, 42% of buyers felt uncertain about the process and 28% felt anxious about home ownership.

Along with feelings of frustration and fear, it is fair to feel overwhelmed with emotion while making, arguably, your largest financial decision. While it is important to acknowledge those feelings, we want borrowers to feel confident about their decision, and optimistic about their future. This post contains a few tips on how you can reduce feelings of stress, fear and frustration during the home-buying process as mentioned by Jacqueline Kean  in Home-Trust blog post.

Budget

You can help reduce the stress around home buying by beginning with a budget. A budget can help you feel more in control of your financial situation and reduce your stress. Budgets can allow you to better balance your income against expenses, which will help you reach your financial goals faster.

The Government of Canada has budget worksheets that can help you calculate expenses, including your one-time expenses in buying a home, such as your down payment, closing costs and ongoing expenses like your mortgage payment or optional mortgage life and disability insurance. Budget planners and calculators can help you understand what expenses to expect which may reduce any fear or frustration caused by future surprise expenses.

Having a budget also allows you to allocate money toward your emergency fund. Experience from  COVID-19 has emphasized the importance of having an emergency fund to reduce financial stress, both now and for the future. As a general rule, your emergency fund should cover your expenses for three to six months.

Research

While it seems like more work up front, learning mortgage terminology before you start the process can help you prepare for conversations with your broker. For example, knowing the correct language can help you understand a mortgage pre-approval, which is when a lender examines your finances to understand what they would lend you. Over half of borrowers who plan to purchase a home in the next two years get pre-approved.[1] Pre-approval can be a good step to understanding what you can afford while you are in the early stages of buying a home.

By familiarizing yourself with mortgage terminology, you can also reduce uncertainty and stress later in the process when it comes to signing a commitment. Start with words like term, amortization and principal.

Planning

An essential part of planning is finding a mortgage broker you trust with your story. One-third of buyers received recommendations for a broker from a real estate agent, and half of customers interacted with a broker in 2019. At Home Trust, our broker partners understand that life happens, and take the time to listen to your whole story so we can work together to find you the right mortgage solution.

While buying a home can seem stressful, there is an abundance of resources, from budgeting tools, realtors and brokers that can help you through the process. By taking the time to learn more about mortgages, you can feel confident about your financial situation.

Housing starts in Canada bounced back in June, reversing a string of declines dating back to November of last year as mentioned by First National Financial LP

Canada Mortgage and Housing Corporation reports the seasonally adjusted annual rate of housing starts totalled 281,373 units in June, up from 200,018 in May.

The increase was led by multi-unit starts in urban areas, which rose nearly 60% to almost 220,000 units.  Single, detached urban home starts were up a mere 3%.  Almost half of the total number of starts were in Toronto and Vancouver.

The June jump is widely seen as hopeful, but temporary.

The longer-term trend, which looks at the six-month moving average of the seasonally adjusted annual rate, shows about 235,000 units were started in June, up just 2.4% from May.  Housing starts for the first half of the year were 8% lower than for the same period last year.

The building business in Canada has been weighed down by a worker shortage, lingering pandemic supply chain problems, high inflation and rising interest rates.  Slowing home sales have also seen some developers put projects on hold.

“The high interest rate environment continues to challenge housing starts through increasing borrowing costs,” said CHMC chief economist Bob Dugan in a statement.

In June of last year CMHC projected that, based on the rate of construction at the time, Canada would need to build 3.5-million more housing units by 2030, on top of what is already expected, in order to restore affordability.

It was a busy week for economic data in Canada.  Much of it tended to be optimistic but there is little to suggest the Bank of Canada will not be raising interest rates again on July 12th as mentioned by First National Financial LP.

The Consumer Price Index for May showed the annualized inflation rate slowed to 3.4%, down a full percentage point from April.  Much of that decline came from the falling price of fuel.  The Bank of Canada’s measures of Core inflation, which strip out volatile items like fuel and food, were also down.  However, they all remain above the Bank’s 2.0% target.

Unfortunately, the Bank’s interest rate hikes are actually driving up a key component of the inflation calculation.  Mortgage Interest Cost rose at a rate of nearly 30% in May, up about half a percentage point from April.  Excluding higher mortgage costs, the inflation rate drops to 2.5%.

A pair of quarterly surveys performed by the Bank of Canada suggest inflation expectations remain elevated and have become somewhat entrenched, which the Bank was hoping to avoid.  Both businesses and consumers expect price increases and wage demands to be higher than usual for the foreseeable future.

According to the Bank, several businesses are “planning to make larger and more frequent price increases, in the coming year, than they usually would.”  Businesses also think it will take the Bank longer than forecast to tame inflation.  More than half do not expect to see the rate back at 2.0% until 2025, at the earliest.

Consumers also expect high inflation to persist.  Not surprisingly the survey suggests the cost of living is the top concern for Canadians, with mortgage holders expecting their payments to increase when it comes time to renew.

“Most mortgage holders are confident they will be able to make these higher payments, though doing so will further constrain their discretionary spending,” the report says.

Expectations for wage gains also remain elevated.

Finally, despite the Bank’s efforts to slow the economy, growth remains resilient.  While Gross Domestic Product came in flat in April, that is considered a strong performance in light of the impact of the national, federal public service strike that month.  The early projections for May show 0.4% growth.

Most market watchers remain confident the Bank of Canada will announce another quarter-point interest rate increase on July 12th.

When you’re ready to enter the housing market as a first-time home buyer, one key part of the home-buying process is choosing the right neighbourhood to live in. After all, your neighbourhood choice can have a significant impact on the types of property that are available to you, the cost of homeownership and your overall enjoyment of your new home and community as mentioned by Duffie Osental from Home Trust.

But how can you tell if the neighbourhood is right for you? We look at some signs to help you decide.

1. It fits your needs and lifestyle.

When looking for a neighbourhood to buy a home in, it pays to think about how a potential area fits your needs and lifestyle. If you enjoy the outdoors, for instance, you will probably want your neighbourhood to have easy access to parks and hiking trails. Or if you’re new to Canada, perhaps you’d want to have a cultural centre nearby.

2. You like the environment.

When you explore the vicinity of a potential neighbourhood, it’s a good idea to ask yourself if you’re happy with an area’s character and feel. For instance, do you want to live in a quiet suburb of detached homes or do you prefer the buzz of the big city?

A good way to get a good feel for the environment is to spend some time walking or driving around at different times of the day and imagine yourself living there. Does it feel like home or is there something missing?

3. You’ve considered your transit options.

Your transit options in a new location may have a significant impact on your expenses and quality of life, so think about what you need to get around in your day-to-day life. For instance, if you feel like you need a car, you will need to add insurance, maintenance and gas costs to your monthly budget.

4. You are comfortable with the cost of living in the area.

The cost of living is the cost of things like housing, food, taxes and healthcare in a given area. This information will give you a better understanding of how much you need to be earning to live in the neighbourhood you’re eying.

One good resource for this information is a real estate agent, who will often have expertise in certain geographical areas. Another great resource is a mortgage broker, who will be able to give you an idea of how much your monthly payments might be in a given neighbourhood.

5. You like where the neighbourhood is heading.

When choosing a neighbourhood, do some research on any future developments that are being planned and ask yourself if that’s something that you’d like to see. For example, are there any new additions to the nearby parks that will be built over the next few years? Are new train lines, bus stops or roads coming soon? It’s prudent to also weigh out the pros and cons of each new development – a new train line and station nearby, for example, may add transit options but it can also result in noisier surroundings.

Whatever neighbourhood you choose to buy a house in, an experienced mortgage broker will be able to guide you through the home buying process.