“How the hell can I afford to buy a house?”
That’s the question HGTV’s Income Property host Scott McGillivray says he gets the most from first-time home buyers.
And you know what? There’s no easy answer.
Which is why McGillivray joined CIBC’s Mobile Mortgage Advisor Jason John as the two of them hit up an open house at 8 Regal Road in Toronto in CIBC’s Mobile Mortgage Bar. While Scott was there to surprise unsuspecting house hunters, seasoned mortgage advisor Jason was there to lend an ear and help buyers navigate the mortgage process – from behind the bar.
Yes, mortgage bar. As in, there were drinks being served.
Which is a very good thing when you’re talking about the Toronto housing market. As McGillivray explains:
Millennials don’t have it easy…most notable are house prices vs. income. So you look at how many times it would take your income to buy the property. If you’re making $100K a year and the average house price is a million dollars in Toronto, you’re looking at an affordability factor of ten times which is the highest it’s ever been in history. Normally it’s 3-5 times.
So what then, can our generation do? Well, according to McGillivray, the #1 rule is to “never buy something you can’t afford.” Of course, you’re going to have to be pre-approved for your mortgage (that’s where CIBC’s Jason John comes in) so you shouldn’t have to be too worried about going way beyond your means. This isn’t America in 2007 when anyone could get a sub-prime mortgage.
“I think for first-time home buyers you have to be super sensible and an advisor like Jason can help you determine affordability. You’ll also need shop for a good mortgage rate (right now CIBC is offering special introductory rates). Also, you probably have to buy something with income potential (might as well, rental rates in the city are outrageous), and that way it can be profitable to own a place” McGillivray told us.
On top of that, he would “make sure that you can put at least 20% down so you don’t have to pay the CHMC premium, make sure you can make the payments in a 25-year mortgage, and buy something that needs work. Do not try to buy a move-in ready home, it’s too expensive. The best thing you can do is force appreciation in – build some sweat equity.”
That’s right, kids – elbow grease is your new best friend. And your best chance to scrub out some more equity.
“The second biggest question people ask me is ‘where should I buy?’ Where’s the place. Everybody wants to buy where it’s low now but prices are still going to go up…it’s like chasing unicorns, right? Unless you’re willing to drive 45 minutes to an hour, you’re not going to get great deals.”
His suggestion for still finding the neighbourhood you want though?
“Figure out where you want to live, and then be willing to move a little bit further. The best thing that you can possibly do is move into a squeeze area.” In other words, “Find a spot that is close to a great area. But not just close to a great area, in between two great areas. ‘Cause you get the squeeze effect from both sides.”
“Basically, you pinpoint some of the hottest areas and look at the places in between that are a little sketchy still. But don’t go full sketch, you never go full sketch!”
You heard it here first, home buyers. Never go full sketch.
If you want to learn more about personalized mortgage advice and home buying, join Scott and CIBC for a Twitter chat on Wed. Mar. 30th between 9-10 PM EST.