Housing chill opens the door

Are visions of owning coming back into sight as the housing market chills a little? Follow these tips if buying is in your near-ish future.

Trim your budget busters pronto Now is not the time for food waste, unnecessary subscriptions and impulse buying. Go through your spending line by line and find your most important priorities. If it’s super important (and makes you happy), keep it. If it’s not, reallocate that money toward savings for that home purchase and paying off debt. You won’t want to be balancing a mortgage

alongside credit card balances. If you’re not yet putting 10 per cent of your take-home pay toward clearing debt, it’s time to make that happen. Your credit score will improve as you make progress on your debts, and a higher score could help land you a better rate in the mortgage approval process.

Start saving your down payment much sooner than you think

Calculate how much a 10 to 20 per cent down payment will be, then set up a savings schedule co-ordinated with your paydays. That might mean putting $500 or $1,000 per paycheque into a safe cashable GIC or a high-interest savings account tucked within your TFSA, RRSP or the new tax-Free First Home Savings Account (FHSA) introduced by the Liberal government. Saving a down payment takes time so set a savings goal of up to five years to raise the money.

Get creative if you’re buying into an aggressively priced market

Most millennial buyers cannot afford their dream home right away, unless they are getting assistance from family, which I highly encourage if it’s possible. But, by getting your foot in the door with a smaller condo or townhouse in a great location, you can start building up equity and move to your dream home down the road. It’s OK to shift your vision to a lower price point.

You can also look for income potential, like a rental suite, an extra parking stall or storage space. By generating income from the property you can better manage your cash flow, pay off your mortgage faster and allocate more savings towards retirement.

There are downsides to take into account, like the fact you’ll be on call 24/7 if something goes wrong like a burst pipe.

According to a recent poll by The Star, it’s becoming more common for millennial and Gen Z buyers to buy with friends and family to help share the costs, and also to get the support of a co-signer to help qualify for the mortgage.

Just be aware these relationships can have strings attached, so clear up how these non-traditional arrangements are going to work before you sign on the dotted line.

Protect yourself now and as a future homeowner

There are two ways to protect yourself and your family for eventual home ownership.

First, have life insurance. According to RBC Insurance, there are two myths out there that first; life insurance is way too expensive (it’s actually much more affordable than you might think and the younger you are, the cheaper it is); and second; that you might not need it if you don’t have kids. But if you’re a millennial, I know your age, and know you have some assets and debts which means I can almost guarantee you need it by this point in your life. So, fit it into your budget even if you have to trim from somewhere else.

The second way to protect yourself is to have a rainy-day fund so that, in an emergency, you have something to fall back on. It takes time to build this up, so stick with it with regular contributions each pay.

My final three concluding tips for soon-to-be-buyers are:

Don’t buy too much house. This can leave you house rich but cash poor with little money to save, let alone have fun.

Don’t forget to budget for closing costs. Budget 1.5 to four per cent of your home’s purchase price towards closing costs, such as home inspection, land transfer tax and real estate lawyer fees.

Do set your mortgage-free date (for many this is 25 years out, but it could be sooner).