Potential buyers in Vancouver and Toronto feel pressure to buy now rather than later, according to a recent big bank study; and that bank is advising clients to put a purchase off until they are financial able to handle the costs.
"We recommend that first-time homebuyers save for the largest down payment they can afford, even if that means waiting a bit longer to buy," Marc Kulak, associate vice president, Real Estate Secured Lending at TD Canada Trust
, said. "The larger the down payment, the less you will need to borrow, which ultimately saves you money in interest payments long term. With a down payment of at least 20 per cent, buyers can also save on mortgage insurance premiums upfront."
It’s prudent advice – especially coming from a big bank, which are often vilified for pushing products and retaining clients at all costs.
According to a report by TD, one if five Vancouver- and Toronto-based homeowners said “Fear of Missing Out” was a top consideration before purchasing a home.
The reason for the “FOMO” is the ever-increasing home prices in those markets, according to TD.
"The busy spring home buying season can create competitive bidding wars, and research suggests that prospective buyers are already worried about rushing the process," Kulak said. "There's more to consider beyond purchase price, interest rate and the monthly mortgage payment. It's essential that buyers leave enough time to do their homework - especially considering, 40 per cent of prospective first-time buyers are worried they don't understand the full cost of ownership."
Still, it’s a very real concern for buyers; especially considering just how much homes have appreciated.
In Vancouver, the average home price increased 22.6% year-over-year in March to $1,093,267.
In Toronto, meanwhile, the average home now costs %688,181 – an increase of 12.1% year-over-year.
If this advice sounds familiar, it’s probably because it is the same kind many brokers have prided themselves on providing.