Strategies for First-Time Home Buyers

Story Connie Jeske Crane

Illustration Sheila Britton

“Will I ever own a home?” These days, more than ever, this is a question that keeps many Canadians up at night. For would-be home buyers weary of pounding the pavement, and for young people (and concerned parents) looking ahead, Canada’s housing market is daunting.

The last few years, fuelled by inflation, interest rate hikes and lack of supply, an affordability crisis extends well beyond hotspots like Toronto and Vancouver.

Is there any recourse? We looked at some government initiatives and contacted Gary Taitt, a broker with RE/MAX Hallmark Realty Ltd. in Toronto. While there’s no magic solution, creative longer-term strategies can be very helpful for many first-time buyers. Here’s a closer look:

DOWN PAYMENT REALITIES

Understanding Canada Mortgage & Housing Corporation requirements is a crucial first step. (Hint: you may need more of a down payment than you think.) Talking with a lender can help buyers get clear on how much they need to save.

For example, the Financial Consumer Agency of Canada states, “If your down payment is less than 20 per cent of the price of your home, you must buy mortgage loan insurance.” At the same time, “Mortgage loan insurance isn’t available if the purchase price of the home is one million dollars or more.” It means many first-time buyers are constrained to stick under that million-dollar price.

Gary says due to lofty requirements, even dual-income buyers with healthy salaries can struggle with a “down payment problem.”

GOVERNMENT INITIATIVES

As for financial assistance, Gary says, “The government’s come up with new incentives to help first-time buyers.”

This April, among several initiatives, Canada introduced a First-Time Home Buyers’ Tax Credit (HBTC), plus a registered First Home Savings Account (FHSA). The FHSA allows first-timers to save up to $40,000 tax-free towards down payments – and unlike RRSP Home Buyers’ Plans, funds don’t have to be repaid.

Provincially, Ontario first-time home buyers may qualify for a land transfer tax rebate.

FAMILY HELP

Where possible, asking for family help is an increasingly common strategy for younger buyers. According to a recent CIBC report, almost one-third of first-time buyers get financial help from family for down payments.

On the ground, Gary says, “I see that way more now, where people get money from the bank of mom and dad.”

CREATIVE STRATEGIES

Finally, by necessity, today’s first-time buyers can apply other can-do strategies:

Smaller centres – Choosing to buy outside of Canada’s priciest centres can boost affordability. As Gary says, “If you’re living in Toronto, it may seem daunting, but if you’re living in Calgary or Ottawa, you just need a really good plan.”

Fixer uppers – While many buyers gravitate towards magazine-perfect “showpiece” homes, Gary says the “junky houses, the fixer uppers” are where buyers can find lower prices and add value.

Condos – In this niche, Gary says, “Now it’s kind of flipped where buying a new condo costs more.” Currently Gary sees more resale condos available and says for first-timers, these can be more affordable and easier to upgrade. “They only really have to do flooring, kitchen and bathroom.”

Co-ownership – Slowly gaining traction in Canada, Gary feels this strategy works for some, citing three buyers he worked with who bought a large house together in Toronto. “They held it for four years and by the end of it, they sold and each made enough for their down payments and moved on to their own houses.”

Finding tenants – Becoming a landlord during the early stages is another route Gary is seeing. “I would live in a basement and rent out the upstairs until my principal came down.”

MINDSET

In Canada, Gary has seen affordability concerns rising for 10 years or so. “I started hearing it when my kids were around eight or nine. ‘Oh, they’ll never be able to afford a house’ and parents say these words.”

Challenges aside though, Gary believes in a solutions mindset, and in the lasting value of home ownership. “Real estate values double every 10 years, give or take,” he says, and encourages buyers to have a vision not just of today’s challenges but of where they could be five or 10 years down the road. OH

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BY THE NUMBERS

36 is the average age of first-time home buyers in Canada

$40,000 is the maximum first-time buyers can contribute towards a home purchase via Canada’s new tax-free First Home Savings Account (FHSA) (up from 20 per cent in 2015)

43 per cent of Canadians aged 20-34 own their home (30 per cent lower than other age groups)

30 per cent of first-time buyers in 2021 received financial gifts towards a down payment (up from 20 per cent in 2015)

$82,000 was the average down payment gift received by first-time buyers in 2021 (up from $52,000 in 2015)