Seven mistakes Millennials make when buying real estate
You've cut back on lattes, taken a soul-crushing job on Burrard Street or 2nd Street SW, and borrowed from mom and dad. Congrats! You’re ready to put down a chunk of cash to cover the 20% down payment on a property. But don’t make newbie mistakes, like trusting your bank to look after you.
Here's what you need to know before you sign on the dotted line when shopping around for mortgages:
Putting Every last cent into a down payment
With today's crazy prices, putting all of your savings into a home may not be the best idea. It's recommended that you set aside 6-12 months of "emergency funds" in case any unexpected financial shocks surprise you, such as your car breaking down, divorce, etc..
Rushing to buy a condo, when you really want a house
Buying a condo may result in a home that isn't climbing in value as fast as you may have initially though. When young homebuyers are ready to start growing their family, a condo just might not cut it. Thinking of moving into a condo, only to sell it later so that you can move into that nice big house, may just backfire on you.
Do your own property searching
Individuals often browse MLS for homes they like and end up contacting the listing agent pictured on the listing. The listing agent works on behalf of the seller, not the buyer! Passing them along information about what you can afford may end up having you pay more for the home that you could have potentially saved, using a realtor backing you up!
Thinking what a bank will lend you is what you can afford
If you fail to budget for additional expenses when factoring in your mortgage payments, you're in for a surprise. Insurance, property taxes, home maintenance - you may soon find yourself in financial trouble, quickly! You shouldn't focus on the maximum amount you can borrow, but more on what you should borrow. Add up your current living expenses, plus the extra expenses associated with home-ownership, then tack on at least 5%-10% of your monthly income for savings.
Over-trusting your bank's mortgage adviser
As an inexperienced home buyer, young or old, you're more likely to depend on what the professionals tell you - but never assume any mortgage professional knows best. Verify that the rates offered to you are competitive, and that they’ve disclosed all potential downsides of the mortgage they're recommending. Remember, banks can only offer you products from their portfolio. Mortgage Brokers deal with dozens of financial institutions, which result in a much wider variety and competitive of products they can offer you.