According to Insauga.com, Brampton has the highest rents in all of the GTA! Brampton had an average rental price of $3,263 per month in the first quarter of 2023, while the average mortgage payment for a $1,000,000 home was $4,626 for a difference of just $1,363.
Given the upward spiral of rents, prospective homebuyers are questioning whether it’s more affordable to rent or take the plunge now and buy a home and make monthly mortgage payments.
The narrowing gap between rent and mortgage payments is a compelling reason to purchase this Fall, but there are other reasons why becoming a homeowner makes excellent long-term financial sense.
Immigration is Surging but Housing Starts are Behind Schedule
Immigration plays a significant role in the Canadian economy, offering both benefits and challenges.
Of course, immigration is essential for sustaining population growth in Canada. With an aging native population and declining birth rates, immigration helps maintain a vibrant and productive workforce. Newcomers also contribute to the Canadian economy through consumer spending and taxes. The tax revenues support government programs and services, such as healthcare, education, and infrastructure, benefiting both Canadian citizens and immigrants alike.
Immigration does however lead to an increased demand for housing, particularly in urban areas like the GTA and Toronto.
Unfortunately, Canada is grappling with a persistent housing shortage. In 2022, the Canada Mortgage and Housing Corporation (CMHC) emphasized that an additional 3.5 million homes needed to be built by 2030 to achieve affordable housing for Canadians. This figure was in addition to the already anticipated completion of nineteen million housing units by the same year. However, CMHC data indicates that housing starts are not keeping pace, and it’s uncertain if the original goal of nineteen million new housing units will be reached by 2030.
The housing shortage is compounded by Canada’s escalating immigration targets. As per Statistics Canada, the Canadian population surpassed forty million as of June 16, 2023. This milestone was reached faster than anticipated, with 1.050 million people arriving in 2022 alone, marking the first time the country’s population grew by over a million in a single year, primarily driven by both permanent and temporary immigrants.
Our chronic lack of supply has transformed the real estate market into an intensely competitive landscape, with first-time buyers facing frustration and significant challenges in finding affordable housing options.
Inflation is on the Decline
There was a significant drop in annual inflation, coming in at 2.8% on July 18th. This positive development brings us closer to the Bank of Canada’s target rate of 2%. Once the Bank deems its goal is achieved, interest rates will start to decline.
However, it may not be the best course of action to wait for rates to drop and delay getting into the housing market. When rates do begin to decrease, the market could experience a surge in activity, given pent-up demand from buyers, improved affordability due to lower interest rates, a notable increase in immigration, and a severe shortage of available housing supply.
Buyers are already aware of the current market dynamics and are actively searching for suitable properties. In a recent article in the Financial Post, Phil Soper, the CEO of Royal LePage, highlighted that some buyers have come to terms with the idea of higher initial mortgage payments. They believe that interest rates have either reached their peak or are close to it, anticipating that carrying a mortgage will become more affordable soon.
So Where Do You Start?
As a prospective first-time homebuyer in Brampton, Toronto, or the GTA, there are several key considerations you should keep in mind when thinking about buying your first home. Here are some key factors to consider:
- Financial Readiness: Do a review of your financial situation to determine if you’re ready to take on the responsibilities of homeownership. You’ll want to consider your credit score, the amount you have for a down payment, your monthly budget, and your ability to manage additional costs like property taxes, maintenance, and insurance.
- Affordability: Research the housing market in Brampton, Toronto, or the GTA to understand current home prices and affordability. Calculate your budget and determine the type and size of property that aligns with your financial capabilities.
- Location: Evaluate neighborhoods based on your preferences, such as proximity to work, schools, amenities, transportation options, and future development plans. Consider the commute time and lifestyle factors that are important to you.
- Professional Help: Work with a reputable real estate agent who specializes in the Brampton, Toronto, or the GTA market. Your agent can provide valuable advice and guidance, help you navigate the buying process, and negotiate on your behalf. We can refer you to a trusted and top-rated realtor who specializes in the area in which you are interested.
- Government Incentives and Programs: There are programs that offer financial assistance or tax benefits that can help make homeownership more affordable. Here are the programs available from the Federal government.
How can Rakhi Madan, Brampton Mortgage Broker help?
Rakhi, an experienced Mortgage Specialist, can provide valuable assistance to individuals who are getting ready to buy a home in Brampton, Toronto, or the GTA. Here’s how she can help:
- Initial Assessment and Discussion: Rakhi can assess your financial situation and help you understand the requirements for homeownership. She will help you understand the costs associated with homeownership, such as down payment requirements, closing costs, monthly mortgage payments, property taxes, and insurance. She will review your income, expenses, credit history, and savings to determine the feasibility of obtaining a mortgage. This is such a key step since you want to ensure you can comfortably afford your mortgage payments.
- Mortgage Pre-approval: Before beginning your home search, get pre-approved for your mortgage. This will give you a clear understanding of your borrowing capacity and enable you to make a confident offer when you find a suitable property. Rakhi will collaborate with you to complete the necessary paperwork, submit your application to multiple lenders, and negotiate on your behalf to secure the best possible mortgage terms.
- Credit Improvement: If your credit score is a concern, Rakhi can guide you on improving your creditworthiness. She can provide advice on managing debts, making timely payments, and taking steps to boost your credit score, which can increase your chances of getting approved for a mortgage.
- Access to Multiple Lenders: Rakhi has access to a wide network of lenders, including banks, credit unions, and alternative lenders. She can leverage her relationships to find mortgage options that suit your unique financial circumstances. This can be especially helpful if you have a non-traditional income source or are self-employed.
- Alternative Financing Options: If you’re not ready for a traditional mortgage, there are options available. At first glance, the 6-month mortgage might seem unusual. However, this product boasts a significantly lower interest rate, helping you qualify for your mortgage and pass the stress test. After the initial 6-month period, you’ll have the opportunity to renew into a product that aligns with the best rates available at that time.
Many non-prime lenders and credit unions offer a solution. They are not federally regulated, which means they do not require applicants to undergo the stress test for mortgage qualification. Instead, these lenders will assess your application based on your contract rate alone, without adding 2% as required by the stress test. This can increase your chances of qualifying for the desired mortgage amount or even enable you to consider purchasing a more substantial property.
- Guidance and Support: Throughout the home-buying process, Rakhi will offer guidance and answer any questions you may have. She can explain complex mortgage terms, compare mortgage products, and help you make informed decisions that align with your financial goals.
What’s the Bottom Line?
Fall presents a window of opportunity for prospective homebuyers in Brampton, Toronto, and the GTA. With the narrowing gap between rents and mortgage payments, the financial advantage of homeownership becomes apparent. Additionally, factors such as surging immigration, housing starts behind schedule, and declining inflation further support the long-term financial benefits of becoming a homeowner.
Rakhi Madan, a top Brampton Mortgage Broker, can provide valuable assistance to individuals who are just becoming financially ready to buy a home. Rakhi can assess your financial situation, guide you on credit improvement, and provide access to multiple lenders. She can explore alternative financing options if qualifying is difficult and offer guidance throughout the home-buying process. With Rakhi’s expertise, you can navigate the complexities of obtaining a mortgage and make informed decisions that align with your financial goals.
Fall is not just a season of changing leaves; it can also be the season when you take a leap toward homeownership. By seeking the assistance of professionals like Rakhi Madan, Brampton Mortgage Broker, you can increase your chances of turning the dream of owning a home in Brampton, Toronto, or the GTA into a reality. So, don’t miss the opportunity this Fall. Start your journey toward becoming a proud homeowner in one of Canada’s most vibrant regions.
