Real advice for navigating today’s housing market: your questions answered

Last month, Coast Capital Savings asked you to send in the financial questions keeping you up at night, and — no surprise — housing seems to be on everyone’s mind. From the impacts of student loans on mortgages to saving for a down payment amid record-high rental costs, Coast Capital, Canada’s largest federal credit union by membership, is providing real advice to help ensure you’re on the right path to achieving your home-ownership goals.

In today’s insane housing and rental market, how can I save for a down payment while paying high rent costs?

If you’re feeling overwhelmed by BC’s red-hot housing and rental markets, you’re not alone. Between inflation and income disparity across the province, many British Columbians are struggling to manage their day-to-day expenses, let alone save for a down payment. In fact, the average home in our province nets out at $1.042 million, a 23.5% year-over-year increase from $843,918 in January 2021. Combined with high rent prices and the rising cost of living, it can feel nearly impossible to break into the market.

Despite these daunting facts, there are a few things you can do to plan for a down payment while paying rent and managing your financial obligations.

First, build a monthly budget and stick with it. Take some time to understand where your money is going, identify ways to cut back on spending and be as specific as possible when setting limits. One tactic to curb spending and allocate more money to savings is to utilize a personal finance app such as Mint or You Need a Budget. Apps like these provide real-time expense and goal tracking to help you stay within a limit and avoid overspending.

Coast Capital

You can also maximize savings by contributing to a Registered Retirement Savings Plan (RRSP) — which has several tax benefits. With an RRSP, you can also take advantage of the First Time Home Buyers’ Plan, a program that allows you to withdraw up to $35,000 from your RRSP to buy or build a qualifying home for yourself. If your timeframe for purchasing a home is five years or longer, consider investing in mutual funds, which are investment funds that provide access to diversified investments without the need to purchase or monitor dozens of assets yourself.

Overall, the best way to save for a down payment and meet your financial goals is to create healthy routines and habits that set you up for success. Speaking to a financial advisor is a great way to kick-start the process.

My student loans cut my pre-approval mortgage amount in half, yet I haven’t missed a payment since I graduated and have no issues paying for it. However, I don’t have enough to pay it off in full and for a down payment on a property. What do you suggest that I do?

When qualifying for a mortgage, two major factors lenders look at are income and existing debts. If more than 40% of your income goes towards servicing debt, it might be difficult to be pre-approved for a mortgage or borrow money from a financial institution so you may want to focus on paying those off first. However, it is possible to get into the property market with some debt. Lenders will also consider things like your credit history and the size of your down payment. If a 20% down payment is too hefty, a high-ratio-insured mortgage will allow you to put as little as 5% down, giving you the flexibility to make a smaller down payment while continuing to pay off your student loans. For personalized advice and more information on the different types of mortgages and lender expectations, you can also consult with a mortgage specialist.

How much does my credit score affect my mortgage?

Your credit score partially determines what your mortgage rate will be so it’s a good idea to monitor it regularly to avoid any surprises. If you’re looking to improve your score, focus on your credit utilization by aiming to use less than 35% of your available credit each month. The longer you have a credit account open and in use, the better it is for your score, and making more than the minimum payments on time can also help to improve it.

Coast Capital

I’m a recent grad and I have no idea how to/how long it’ll take me to save up for my first home. Any advice?

A good starting point is to determine what area you want to live in and look into the prices of homes sold within that region. Whether you’re looking for a condo in Vancouver or a detached house in Kelowna, you should aim to save between five to 20% of the average purchase price. From there, it’s important to build a budget to see how much extra cash flow you have every month to invest. In the meantime, utilize free online tools like Coast Capital’s Money Chat, connect with a financial advisor, and explore resources for first-time homebuyers to help you prepare.

Still have questions? Send them in anonymously through the form below and they’ll be answered in no-nonsense articles published on Daily Hive in the weeks to come.