TD Canada Trust recently released a survey revealing the thoughts and attitudes of first-time homebuyers in Canada. It seems as though Canadians are expecting to pay less than the asking price for a home even though prices are likely to trend upward within the next year before taking a dip in 2011. In fact, 71% of Albertans expect to pay less than the listing price as compared to 65% nationally.
As well, first-time homebuyers are showing a preference for newer and detached homes over older and semi-detached or condos. Six out of ten first-time buyers said they bought or intend to purchase a fully detached home and three-quarters of those people want a new home. It looks like these buyers are aiming high and dreaming big for their first homes while fewer people are willing to settle for a condo or an older house that needs a fair amount of renovations.
In turn, we might begin to wonder if people are creating unreasonable expectations of what they can afford for their first home which could very well have been created by previously rock bottom interest rates. Since two thirds of Alberta, first-time homebuyers are worried about making their mortgage payments if interest rates increase too much, it is likely that such expectations are continuously being fostered. In addition, only 25% of Albertans surveyed said they plan to have or already have a 20% down payment for their house. As a result, insurers such as Canada Guaranty, Genworth and the Crown Corporation CMHC, continue to insure a larger number of unconventional mortgages.
Ultimately there are pros and cons when considering whether you should wait and save for a bigger down payment. The other option would be to buy a house sooner and pay the CMHC insurance premium but secure a lower interest rate. In the latter case the home buyer would have to determine whether the insurance premiums they would pay (especially if amortized over 25 years) would equal less than the extra they would pay in interest rates if they waited to save a larger down payment.