Millennials are the generation born between the early nineteen-eighties and the early two thousands. Many millennials are now entering the real estate market.
How Are Millennials Able To Afford Home Buying?
Many Millennials are living at home much longer to continue their education and save for their future. Back in the day, it was common for people to marry very young. Some would marry shortly after graduating high school.
However with the changing of the times and technology more and more millennials are discovering continuing education is very important. With the ability to live rent-free or contributing very little while living at home, they are able to tuck away much more money. Many Millennials are living at home well into their 30’s.
The Canadian Government is very focused on today’s economy and Real Estate Market. There are programs available for first time home buyers such as:
- There are land transfer rebates also.
- HST rebates.
- The Canadian Mortgage and Housing Corporation (CMHC) is in the process of providing a First Home Ownership Incentive. CMHC will lend the first time home buyer 5% of a down payment for the purchase of an existing home, or 10% of the down payment for the purchase of a new build. This is known as a shared equity mortgage . This assistance from CMHC allows the purchaser to reduce their monthly mortgage payment. A maximum household income of $120,000 is eligible to apply. Total borrowing is limited to the total of 4 times the household income.
There are 23 first time home buyer grants/Programs for Ontario this year.
- First Time Home Buyer – Federal Government
- First Time Home Buyer – Ontario Government
- First Time Home Buyer – Toronto
- First Time Home Buyer – Waterloo
- First Time Home Buyer – Windsor & Essex County
- First Time Home Buyer – Simcoe County
- First Time Home Buyer – Kingston
- First Time Home Buyer – Lambton County
- First Time Home Buyer – Chatham-Kent
- First Time Home Buyer – Peel
- First Time Home Buyer – Muskoka
- First Time Home Buyer – Lanark County
- First Time Home Buyer – Dufferin County
- First Time Home Buyer – St Thomas
These programs and incentives include Home Buyers Tax Credits, New Housing tax rebates, CMHC Green Home, Rebates through Genworth Canada, etc.
Habitat For Humanity
The Habitat For Humanity is a group that helps low-income families get into the real estate market and out of the rut of expensive rentals. They build and buy homes and offer a no-interest mortgage. Payments are less than 30% of gross income. In lieu of a down payment, families help build the home. Struggling Millennials can benefit from this program.
There are so many programs and incentive available to help with Homeowners, first-time buyers and established. For example:
- Hydro One has a list of 13 rebates, incentives, and programs.
- BC Hydro also has Rebate and Assistance Programs available.
- Other programs and incentives are offered by Manitoba Hydro and UnionGas.
- People are far more energy conscious today than in previous times.
Tighter Rules for Foreign Investors
The Government of Canada applied a 15% surtax on foreign investors to help cool down the Real Estate Market. It was first introduced in Vancouver and then later in Toronto. The Market in both Vancouver and Toronto slowed after the tax imposition. The number of resale transaction slowed for a short while but then started to slowly increase.
Mortgage Rates and Guidelines
Low mortgage rates have been available for quite some time now. This is a great advantage to Millennials buying their first home. The ability to afford a reasonable monthly mortgage payment is definitely a buying feature.
In January 2018, new mortgage qualification guidelines were introduced and reduced the borrowers amount of mortgage debt they could qualify for.
RBC has recently done a survey finding an increase in millennials, with 39% expected to purchase a home over the next two years. This is comparison to 25% overall.
According to a survey by Genworth Canada, a mortgage insurer in May 2018, 59% of Millennials have already jumped into the Real Estate Market.
Parental Assistance With Down Payment
35% of Millennials who plan on buying a home in the next two years, plan on getting financial assistance for their down payment from their parents.
With the recent increase in home prices, baby boomers are able to borrow against the equity in their homes. Secured lines of credit offer lower interest rates. This can result in enabling the Millennials the affordability to come up with the down payment on a home.
Another way Millennials can save money to put towards their purchase is to have roommates if they rent. To help with mortgage payments they may take renters in. Buying a home with rental potential, for example, basement apartment or duplex is another way these Millennials can afford the market.
Location – Location
When Millennials are first entering the Real Estate Market, they may choose to buy in lower-priced area or suburb. While saving money on the purchase, this can create a few inconveniences. They may have to make longer commutes to and from work, live a distance away from family and friends or require a newer more reliable vehicle. Some may have to resort to taking public transit.
Many Millennials have been taught to save and invest their money from a young age. Some parents have also started growth funds and other savings programs to assist their children when they become adults. Some millennials have earned income playing the stock market. Investing funds for a reasonable return can also help build the bank account.
So basically the millennial generation may experience some difficulty getting into the Real Estate Market. However, with all the Government programs and incentives, it can make it easier for some.
Having baby boomer well off parents that can assist with the purchase is also a great advantage. The ability to live at home for next to nothing until a later age is probably the largest benefit. Personal drive and setting goals for the future is imperative for a balanced financial lifestyle.