Tuesday’s BMO report on first-time homebuyers paying an average $48,000 down on a $300,000 home is unrealistic, says one Barrie broker.
“I think they are whistling Dixie,” says Jerry Rose, a broker with Verico Allendale Mortgage Services. “BMO’s numbers for what is an average down payment isn’t what I’m seeing.”
The BMO First-time Home Buyer’s Report also revealed that on average, first-time home buyers expect to be mortgage-free in 20 years, with 20 per cent estimating it will take between 10-19 years.
But those numbers are optimistic at best, says Rose.
“I’m seeing first-time homebuyers only able to put down a 5 to 10 per cent,” he told MortgageBrokerNews.ca. “I had one young man buying a home who can only put down 5 per cent on a $300,000 mortgage ($15,000), but it will still be a struggle when you include the 1.5 per cent closing costs, and probably CMHC will hold back 50 per cent of the taxes. That is the reality for most first-time homebuyers.”
Other results from the BMO report show 59 per cent of first-time buyers have had to hold off buying their first home because of increasing housing prices, wishing they had bought their first home five years ago.
“Buying a home is one of the most important financial decisions one can make. It’s crucial that those planning to enter the market are well prepared – not only to manage their costs, but also to pay off their mortgage as soon as possible,” said Laura Parsons, a mortgage expert with BMO. “Determining what your mortgage payments and overall costs of home ownership will look like, and then living in that financial reality for a year before entering the market, can be an effective strategy.”
According to the report, two-thirds of first-time buyers (66 per cent) say the latest changes to mortgage regulations – which included reducing the maximum amortization for government-insured mortgages to 25 years from 30 years – have not affected their buying timeline, while one in five (19 per cent) say they will have to wait longer before buying as a result.
“A shorter amortization is the most responsible approach to home financing,” argues Parsons, reiterating the bank’s support of the 25-year cap. “It’s something BMO has been encouraging their customers to consider for years, as it means becoming debt-free sooner.”
For Rose, the large number of those surveyed who are holding off buying a new home does make sense.
“A lot of my job is counseling first-time buyers, telling them what they need to do to be in the position to buy a house six months or a year down the road,” he says. “Owning a home is the best security young people can have – the government needs to make it easier for Canadians to do that.”