At Kelly Raabe PREC we believe that one of the best things a person can do to set themselves up for financial success in the future is to buy their first property as young as possible. Historical data on Metro Vancouver and the Fraser Valley shows that property values tend to double every 14 years following a 7 year flat, 7 year climb pattern. When timed correctly based on season of the market, government incentives and a mortgage with favourable terms, the return on investment on a first property can be even greater than this.
The more market cycles an individual is able to participate in, the higher potential net worth they should be able to achieve at the time of retirement. People who get into the market at a young age are typically able to be more flexible in terms of location and housing type. If they do not have a family yet, they are easily able to live in a bachelor or 1 bedroom suite. They may have more energy to improve the property to add value or “sweat equity”.
The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage payments without adding to their financial burdens.
The First-Time Home Buyer Incentive is a shared-equity mortgage with the Government of Canada. It offers:
By obtaining the Incentive, the borrower may not have to save as much of a down payment to be able to afford the payments associated with the mortgage. The effect of the larger down payment is a smaller mortgage, and, ultimately, lower monthly costs.
The homebuyer will have to repay the Incentive based on the property’s fair market value at the time of repayment. If a homebuyer received a 5% Incentive, they would repay 5% of the home’s value at repayment. If a homebuyer received a 10% Incentive, they would repay 10% of the home’s value at repayment.
The homebuyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full any time before, without a pre-payment penalty.
There comes a time when a growing family needs a bigger home. In an ideal situation, an individual will have purchased their first home in the Under $500,000 range at least 3-5 years before they may need to upgrade to something bigger to provide for a growing family. This allows for time to build equity in order to have a larger down-payment when it comes time to upsize.
At Kelly Raabe PREC we love working with families who are needing to up-size their property to either a 3 bedroom townhouse or a detached house, possibly with an income suite to offset the costs. Careful consideration is given to budget and lifestyle needs. A thorough long term real estate financial plan is also provided to aid the family in the decision making process.