Mortgage Motivation: Are You Prepared

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First Time Homebuyers Mortgage Motivation

Are you ready to buy a new home? Before deciding to obtain a mortgage in Calgary, first look at what is motivating you. If you feel like you should buy a home only because everyone around you is, that’s probably not a good reason to tie yourself into a home loan.

By definition, purchase motivation is described as the psychological reasons behind making certain purchases. One of those purchases is the decision to buy a new home. While owning your home can be exciting, this big-ticket item can also be scary.

Homeownership will impact your life and financial picture for a long time. That’s why talking with a mortgage broker in Calgary is always a good idea.

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Start By Doing Research

Many people looking to buy a home spend a lot of time researching every detail first. Like any other life decision, you want to gather information, specifically about mortgages. Speak with your peers, family members, professional banking services, and mortgage brokers.

Speaking with friends or others who have recently purchased a house will give you a good insight into your potential purchase. They will be able to provide you with a rough idea of property taxes for their home, utility costs, and more.

Watch Out For Buyer Mentality

While searching for a home, you will spend a reasonable amount of time online, gathering mortgage loan information and looking at potential homes. It can be easy to fall into a buyer mentality with targeted ads shown to you on mortgages, real estate agents, and possible home listings.

Other Factors To Consider When Buying A Home

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Many buyers watch interest rates and monitor the availability of homes before they make a purchase. Still, there are other considerations people use to justify taking out a mortgage too.

Emotional factors can influence what you want or need when looking at potential home purchases.

Sellers and realtors will target these emotional flags when they are selling homes. So it is crucial to take stock of your needs and wants in addition to assessing your financial matters before you sign mortgage documents.

You Are Here

The best place to start when looking at emotional factors is to describe your current stage of life.
These won’t be the same for all people, but a generalization sets the stage to think about what changes you want.

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It can also define your future needs and wants for your first home. For example,

  • Are you a single person who just landed that full-time job and are looking to own not rent?
  • Maybe you just got married, have two incomes, and now you can afford a joint mortgage loan.
  • It could be you just had a baby and need more room for a nursery.
  • Or do you have a growing family and are running out of living space in your current accommodations?
  • You might have a multi-generational household and need a larger lodging with more than one living area under the same roof.
  • For older singles and couples, you may be downsizing or looking for accommodation that will allow caregivers to help you when you need care later in life.

As you can see, there are many reasons why you might be looking at buying a new home.

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Demographics For First Time Homebuyers

  • 80% Are Employed Full Time
  • 49% Are Single
  • 45% Are Between The Ages Of 25-34
  • 40% Are Married
  • 61% Purchase A Single Detached Dwelling & Have An Income Between $60,000 & $90,000
  • 21% Are New To Canada

Some Canadian demographics indicate percentages for first-time buyers.
They are:

Motivations For Purchasing A Home

When looking at your mortgage motivations for homeownership, consider which of these emotional factors apply to you and how they shape your wants and needs.

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  • A Desire To Become Independent
  • Looking For Stability
  • Increasing Your Comfort Leve
  • Finding Something More Convenient
  • Providing A Safe Living Space
  • Expanding Your Socialization Potential
  • Meet Changes In Medical Conditions
  • Wanting Financial Growth
  • Desiring Prestige
  • Gaining Fulfillment Through Ownership

Proceed With Caution

When you are aware of these goals, you can analyze them and apply that data to the reality of the purchase you are considering.

There is a caution here that it is important. Don’t sign up for a mortgage based wholly on emotional factors that override the realities of your financial means.

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For example, you may crave prestige and look for a home in a high-end area, only to realize you don’t currently have the money to meet the asking price of the house. An assessment like this can help you find ways to improve your financial means so that you can purchase a similar home at a later date.

There is a good article by Matthew Kassel in the Wall Street Journal that highlights some of the pitfalls first-time buyers should avoid when considering their wants and needs list.

Evaluating Your Current State

Another lifestyle evaluation used by realtors and sellers is matching demographics with psychological factors by creating a category of types for home buyers.

It is called the VALS Framework. It breaks down factors identifying buyers as innovators, thinkers, believers, achievers, strivers, experiencers, makers, and survivors. Just for fun, take a look at this website and see what describes you best.

If searching for your home overwhelms you, there are professionals out there that will help you match your wants and needs to your available resources. A good realtor, bank, or independent mortgage broker can take your collected data, which include emotional factors, and match mortgage plans to your desired goal.

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Our professional mortgage brokers at The Mortgage Group in Calgary would be happy to help you analyze the data you have collected and answer any questions you may have about mortgages. Give us a call, 403-571-8142, or fill out our secure contact request form today.

An Upside To Calgary’s Falling House Prices

Real Estate - Buying a home mortgages

Written by Robson Fletcher · CBC News · 

Based on income and benchmark prices, report finds most people here could afford a single-family home

For nearly five years now, Calgary’s real estate market has been described as slow, flat, listless.

Compared with long-term averages, fewer homes are being bought and sold these days. And those that do sell are often going for well under the asking price.

By one common measure, prices for single-family homes are now about seven per cent lower than they were back in October 2014. When you factor in inflation, the losses are even greater — on paper, at least — for those who bought at the peak, in real-dollar terms.

This is often framed in the media, by real estate agents, and in casual conversation as bad news. And indeed it is, if you are like most Calgarians and own a home. (This city has one of the highest home-ownership rates in the country.) It’s especially bad if you’re currently looking to sell.

But the flip side of the equation is that home ownership — including the idealized detached home with a yard and garage — is attainable for far more people here than in other major cities.

“If you’re a first-time buyer and you want your first home to be a detached house, based on our numbers, you’ll have a better chance of accomplishing that in a market like Calgary,” said Penelope Graham with Zoocasa, a Toronto-based real estate firm.

That’s according to a recent report from the firm, which, based on income data from Statistics Canada and sales data from various real estate boards, estimates that more than 50 per cent of income earners in Calgary could afford a typical, detached home at current prices.

Compare that with Toronto, where only the top 10 per cent of income earners are in the same boat. Or Vancouver, where it’s a mere 2.5 per cent.

So, especially for a first-time buyer in Calgary, the recent real estate news might not seem so bad.

'Seeing Value'

Alim Charania has been working as a mortgage broker for nearly 20 years in Calgary, and while business may have been brisker in the past, he says there’s still plenty of interest from first-time buyers these days.

Many “are seeing value” in the market, he said, which he personally believes is now one of the best for affordability among major cities.

“Pricing-wise, versus the rest of Canada, for a great city to live in? You probably can’t beat it, to be honest,” he said.

Still, many would-be buyers are in no hurry to pull the trigger.

“They’re still scared,” Charania said. “There is still some uncertainty in the market. They don’t know where Alberta’s going to go; they don’t know if this is the bottom. So that’s usually top of mind.”

Looking over the Zoocasa report, he raised an eyebrow at some of its assumptions when it comes to determining what’s affordable. The firm assumed people would be making a 20-per-cent down payment, and paying a 3.75-per-cent mortgage rate over a 30-year amortization.

Charania said most clients he meets aren’t putting that much money down, and the relatively new mortgage “stress-test” rules would require them to prove they could pay a higher interest rate in order to qualify for a loan.

But, all those assumptions being equal across the various markets being compared, he said the report does highlight how much more attainable home ownership is in Calgary compared with other major centres.

“Affordability-wise, definitely we rank quite high, for sure,” he said.

Buyer's Market — If You Can Get A Loan

Lori Grill, an associate with The Mortgage Group Inc., says it remains a “buyer’s market” in Calgary.

And while the decline in house prices over the past several years may be appealing for first-time buyers, in particular, she said home ownership is still unattainable for many Calgarians.

That’s in large part due to the stricter lending rules, but Grill said more and more of her clients seem aware of the new mortgage environment.

“They do come to us saying, ‘Oh, I don’t know if I can qualify,'” she said.

“And some of them are pleasantly surprised and they leave my office feeling quite happy … and then others go, ‘OK, well, I guess I have some work to do. I need to get some credit cards paid off. I didn’t realize that was going to have the impact that it does.'”

The data in the report, Graham noted, is aggregated from real estate boards in each local market and the typical home price is based on the “benchmark” in each region. That means many houses will cost more than that — and many will cost less.

“We don’t want to put out the message that some of these markets are completely unaffordable for everyone,” she said. “There’s always going to be options that are below the average in these markets. So it’s important to keep that in mind — that we’re looking at aggregate data.”