Buying a property solo or with friends or family?
TD advises on specific considerations when taking a less conventional approach to buying property
TORONTO, March 25, 2014 /CNW/ - Today's homebuyers don't always look like the traditional nuclear family of the past. As a recent TD survey discovered, a quarter of Canadians who bought a home in the last 24 months - or are planning to in the near future - did so on their own. Furthermore, four in ten Canadians think buying property - whether a primary residence or vacation home - with friends or family members is a great way to get started. With this shift towards non-traditional ways of purchasing property, planning carefully can help avoid potential bumps on the road.
"Whether buying a home on your own or together in partnership with family members or friends, many of the guiding principles remain the same," said Michelle Snow, Associate Vice President, Retail Products at TD. "Start by setting a realistic budget, talking to a mortgage specialist for advice and taking the time to make an informed decision. The real estate market may move fast, but that doesn't mean you have to rush your decision."
Whether buying alone or with someone else, the first step is to decide how much you are comfortable spending, and what the down payment will be. Homebuyers pooling their resources may be able to make a larger down payment on their purchase, and there are benefits to this. For example, homebuyers who put down 20 per cent or more may avoid paying for mortgage default insurance. The premiums for mortgage default insurance are calculated as a percentage of the mortgage and paid up front or by adding it to the principal portion of the mortgage. Eliminating or decreasing this premium can result in significant savings over the lifetime of the mortgage.
"Once homebuyers set their budget and down payment, they can take their prospective monthly mortgage payment for a test-drive and 'pay' into a TFSA or savings account," said Snow. "This two-fold solution allows the homebuyer to see how comfortable the monthly mortgage payment is before locking in, and save for a larger down payment at the same time. For co-purchasers, it opens the line of communication to talk about how these monthly payments will work after the purchase."
While agreeing on a budget and down payment are essential, the conversation shouldn't stop there, Snow advises. Co-purchasers also need to agree on the key characteristics they want in a property, and what they are and are not willing to compromise on. For example, will the primary residence be a house or condominium? If it's a second home to be used as a vacation destination, will it be a cabin in the woods or a cottage by the water? Once these decisions are made, consider how the associated costs, like taxes, insurance, utilities, repairs and maintenance fees will fit into the overall budget.
"The last thing new homeowners want is an unwelcome surprise when they're about to sign on the dotted line," Snow said. "Whether purchasing alone, or with a co-purchaser, a mortgage specialist can help navigate home financing questions well before they've entered the house hunt, so they can make informed decisions that can save money and stress in the long run."
For more information, tools and resources on home ownership, visit www.tdcanadatrust.com/firsthome
About the TD Canada Trust Buying a House Poll
TD Canada Trust commissioned Environics Research Group to conduct an online custom survey of 6,015 Canadians aged 18 years and older. Responses were collected between February 11 and 25, 2014.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.
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