Home buyers in the Gen X cohort will not be content to let their mortgages interfere with their lifestyles, according to a TD Bank survey.
“More than two-thirds of Gen X Canadians have told us they don’t want their entire budget allocated to mortgage payments,” says Nupi Zubair, associate vice-president, Retail Products at TD. “It’s possible to own a home and not feel handcuffed to the mortgage, but it does require careful saving and planning before signing on the dotted line. Buyers need to purchase a home at a price they can afford, while still budgeting for the other things on their list of priorities.”
Only one in seven Gen X Canadians — born between the mid-1960s and the early 1980s — consider themselves ‘house-all’ buyers who go to the higher end of what they can comfortably afford when it comes to their mortgage, leaving less room for discretionary spending.
Gen X-ers are fairly evenly split between those who see themselves living in their current home forever (42%) and those who see it as a stepping stone to a different property (45%). In addition to the sale price of the home, Gen X-ers must factor in other costs of home ownership, such as taxes, maintenance, closing costs and insurance and set a budget for all of the discretionary things they want to do.
“One way to have more disposable income every month is to make a larger down payment up front, which ultimately reduces the size of the mortgage and monthly payments,” says Zubair. “Keep in mind though, a shorter amortization period and making payments weekly, rather than monthly, can increase overall monthly payments but lower the overall costs of the mortgage. It really comes down to the buyer’s priorities.”
At the top of the priority list for them is the price of the home followed closely by location and the future appreciation of the home. This was particularly true for those who consider themselves ‘house-plus’ home buyers, but even ‘house-all’ buyers put sale price at the top of their list.
Access to public transit and proximity to schools were much lower on the priority list for all categories of Gen X Canadians, including those who planned to stay in their home forever.
Zubair offers the following tips:
Save for a down payment: The easiest way to do this is to set up a regular automatic savings plan and add to it any special monetary gifts or bonuses received. First-time buyers can also take advantage of the RSP Home Buyers’ Plan to build a bigger down payment.
Set a budget: Start by listing all sources of income. Then list all non-discretionary expenses, such as food, utilities, insurance and car or student loan. What’s left will be the amount available for mortgage payments (replacing current living expenses), savings and any discretionary spending buyers may want to account for.
Buy the house that fits the budget: The mortgage should be realistic based on the available budget.
Ask for advice: Buying a home is one of the most important investment decisions Canadians will make, so take the time to talk to an experienced mortgage specialist and financial advisor.