What’s Driving Canadian Homebuyers?
Sabeena Bubber • February 22, 2018
Mortgage rule changes and increasing interest rates—surprisingly—weren’t the top motivators for prospective homebuyers in 2017, according to a new survey from the Canada Mortgage and Housing Corporation (CMHC).
Instead, the 2018 Prospective Home Buyers Survey found that improved accessibility (i.e., fewer physical obstacles and barriers) and investment opportunity were the main driving factors to purchase a home.
The results were divided into three segments of buyers: first-time buyers, previous owners (who had previously owned a home but do not currently) and current owners.
For first-time buyers and previous owners, the desire to stop renting was ranked as one of the top three motivators to buy a home by 65% and 60%, respectively.
“The majority of prospective home buyers from all groups agree that home ownership is a good long-term financial investment,” the survey noted.
This is the first time CMHC has conducted this specific study, which examined attitudes and expectations of prospective Canadian homebuyers, as well as their understanding of the homebuying process.
There was also some positive news for brokers, as the survey confirmed that a majority of buyers from all three groups—including a full 80% of first-time buyers—planned to consult a mortgage broker before making their home purchase.
Here are some of those findings:
Mortgage Rule Changes, Home Prices & Rising Interest Rates
- 36% of first-time buyers were aware of the 2016 mortgage qualification rule changes
(e.g., the 10% down payment required for the home price portion above $500,000 and the requirement for all insured mortgages to be stress-tested using the 5-year posted rate).
- 53% of previous owners and 58% of current owners were aware.
- 20% of first-time buyers not previously aware of the rule changes said it will impact their purchase decision in some way.
- Vs. 18% of previous owners and 14% of current owners.
- 50% of first-time buyers said the changes would cause them to delay their home purchase, while 23% would purchase a smaller home.
- 51% of previous owners and 65% of current owners would delay their purchase
- 35% of previous owners and 32% of current owners would purchase a smaller home
- 76% of first-time buyers said they are likely to delay their home purchase due to high home prices , followed by 73% of previous owners and 63% of current owners.
- 70% of first-time homebuyers said they are concerned about the possibility of interest rates increasing before they buy their home, followed by 62% of previous owners and 61% of current owners.
- 61% of first-time buyers would, as a result, likely delay their home purchase, followed by 61% of previous owners and 50% of current owners.
Homebuying Expectations
- 69% of first-time buyers agree that they have a good understanding of how much mortgage they can afford.
- Vs. 79% of previous owners and 83% of current owners.
- 54% of first-time buyers and previous owners are planning to spend under $300,000 on their next home.
- Vs. 33% of current owners.
- 25% of first-time buyers and previous owners are planning to spend between $300,000 and $500,000 on their next home.
- 34% of current owners are planning to spend over $500,000 on their next home.
- 68% of first-time homebuyers feel confident they can find a suitable home within their budget.
- Vs. 83% of current owners.
In a scenario where buyers would not be able to find their ideal home:
- 43% of first-time buyers would delay their purchase.
- Vs. 45% of previous owners and 28% of current owners.
- 42% of first-time buyers would compromise on the size of the home.
- Vs. 39% of previous owners and 42% of current owners.
- 38% of first-time buyers would compromise on the location of the home.
- Vs. 39% of previous owners and 38% of current owners.
Buying Preparedness
- 80% of first-time homebuyers plan to consult with a mortgage broker before purchasing a home.
- Vs. 72% of previous owners and 69% of current owners.
- 16% of first-time buyers pre-qualify for a mortgage within three months of purchasing their home.
- Vs. 21% of previous owners and 22% of current owners.
- 33% of all buyers prepare a detailed budget on their own within six months to a year before purchasing their home.
Financing home
- 66% of first-time buyers say they have a good understanding of the full cost of homeownership, including mortgage payments, property taxes, condo fees, utilities, maintenance, etc.).
- Vs. 79% of previous owners and 85% of current owners.
- 33% of all homebuyers say they will take additional steps to pay down their mortgage as soon as possible.
- 40% of first-time buyers and previous owners say they are unlikely to have a financial buffer in case their expenses change in the future.
- 40% of first-time buyers say they are confident they have the necessary tools and information to manage their mortgage and debt load.
- Vs. 40% of previous owners and 50% of current owners.
Homebuyers and Technology
- 68% of first-time homebuyers would prefer to complete the entire homebuying process with help from a professional and be using online tools and resources:
- Vs. 60% of previous owners and 58% of current owners.
- 7% of first-time buyers would prefer to use online tools and resources exclusively, without the help of a professional:
- Vs. 4% of previous owners and 5% of current owners.
This article was originally published on Canadian Mortgage Trends on Feb 14th 2018, written by Steve Huebl.
SHARE THIS ARTICLE
RECENT POSTS
Chances are if the title of this article piqued your interest enough to get you here, your family is probably growing. Congratulations! If you’ve thought now is the time to find a new property to accommodate your growing family, but you’re unsure how your parental leave will impact your ability to get a mortgage, you’ve come to the right place! Here’s how it works. When you work with an independent mortgage professional, it won’t be a problem to qualify your income on a mortgage application while on parental leave, as long as you have documentation proving that you have guaranteed employment when you return to work. A word of caution, if you walk into your local bank to look for a mortgage and you disclose that you’re currently collecting parental leave, there’s a chance they’ll only allow you to use that income to qualify. This reduction in income isn’t ideal because at 55% of your previous income up to $595/week, you won’t be eligible to borrow as much, limiting your options. The advantage of working with an independent mortgage professional is choice. You have a choice between lenders and mortgage products, including lenders who use 100% of your return-to-work income. To qualify, you’ll need an employment letter from your current employer that states the following: Your employer’s name preferably on the company letterhead Your position Your initial start date to ensure you’ve passed any probationary period Your scheduled return to work date Your guaranteed salary For a lender to feel confident about your ability to cover your mortgage payments, they want to see that you have a position waiting for you once your parental leave is over. You might also be required to provide a history of your income for the past couple of years, but that is typical of mortgage financing. Whether you intend to return to work after your parental leave is over or not, once the mortgage is in place, what you decide to do is entirely up to you. Mortgage qualification requires only that you have a position waiting for you. If you have any questions about this or anything else mortgage-related, please connect anytime. It would be a pleasure to work with you.
The idea of owning a vacation home—your own cozy escape from everyday life—is a dream many Canadians share. Whether it’s a lakeside cabin, a ski chalet, or a beachside bungalow, a second property can add lifestyle value, rental income, and long-term wealth. But before you jump into vacation home ownership, it’s important to think through the details—both financial and practical. Start With Your 5- and 10-Year Plan Before you get swept away by the perfect view or your dream destination, take a step back and ask yourself: Will you use it enough to justify the cost? Are there other financial goals that take priority right now? What’s the opportunity cost of tying up your money in a second home? Owning a vacation home can be incredibly rewarding, but it should fit comfortably within your long-term financial goals—not compete with them. Financing a Vacation Property: What to Consider If you don’t plan to pay cash, then financing your vacation home will be your next major step. Mortgage rules for second properties are more complex than those for your primary residence, so here’s what to think about: 1. Do You Have Enough for a Down Payment? Depending on the type of property and how you plan to use it, down payment requirements typically range from 5% to 20%+ . Factors like whether the property is winterized, the purchase price, and its location all come into play. 2. Can You Afford the Additional Debt? Lenders will calculate your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to assess whether you can take on a second mortgage. GDS: Should not exceed 39% of your income TDS: Should not exceed 44% If you’re not sure how to calculate these, that’s where I can help! 3. Is the Property Mortgage-Eligible? Remote or non-winterized properties, or those located outside of Canada, may not qualify for traditional mortgage financing. In these cases, we may need to look at creative lending solutions . 4. Owner-Occupied or Investment Property? Whether you’ll live in the home occasionally, rent it out, or use it strictly as an investment affects what type of financing you’ll need and what your tax implications might be. Location, Location… Logistics Choosing the right vacation property is more than just finding a beautiful setting. Consider: Current and future development in the area Available municipal services (sewer, water, road maintenance) Transportation access – how easy is it to get to your vacation home in all seasons? Resale value and long-term potential Seasonal access or weather challenges What Happens When You’re Not There? Unless you plan to live there full-time, you'll need to consider: Will you rent it out for extra income? Will you hire a property manager or rely on family/friends? What’s required to maintain valid home insurance while it’s vacant? Planning ahead will protect your investment and give you peace of mind while you’re away. Not Sure Where to Start? I’ve Got You Covered. Buying a vacation home is exciting—but it can also be complicated. As a mortgage broker, I can help you: Understand your financial readiness Calculate your GDS/TDS ratios Review down payment and lending requirements Explore creative solutions like second mortgages , reverse mortgages , or alternative lenders Whether you’re just starting to dream or ready to take action, let’s build a plan that gets you one step closer to your ideal getaway. Reach out today—it would be a pleasure to work with you.
Let’s say you have a home that you’ve outgrown; it’s time to make a move to something better suited to your needs and lifestyle. You have no desire to keep two properties, so selling your existing home and moving into something new (to you) is the best idea. Ideally, when planning out how that looks, most people want to take possession of the new house before moving out of the old one. Not only does this make moving your stuff more manageable, but it also allows you to make the new home a little more “you” by painting or completing some minor renovations before moving in. But what if you need the money from the sale of your existing home to come up with the downpayment for your next home? This situation is where bridge financing comes in. Bridge financing allows you to bridge the financial gap between the firm sale of your current home and the purchase of your new home. Bridge financing allows you to access some of the equity in your existing property and use it for the downpayment on the property you are buying. So now let’s also say that it’s a very competitive housing market where you’re looking to buy. Chances are you’ll want to make the best offer you can and include a significant deposit. If you don’t have immediate access to the cash in your bank account, but you do have equity in your home, a deposit loan allows you to make a very strong offer when negotiating the terms of purchasing your new home. Now, to secure bridge financing and/or a deposit loan, you must have a firm sale on your existing home. If you don’t have a firm sale on your home, you won’t get the bridge financing or deposit loan because there is no concrete way for a lender to calculate how much equity you have available. A firm sale is the key to securing bridge financing and a deposit loan. So if you’d like to know more about bridge financing, deposit loans, or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you.
LET'S TALK
