RBC’s latest data shows that as of Q4 2023, the housing affordability crisis in the country was at its worst levels. The forecasted interest rate cuts in 2024 may improve this affordability situation a bit but not by much. It will take a long time, maybe years, for properties in big Canadian cities to become affordable again including in Toronto.
These tough conditions in the current housing market have made it much easier for a would-be buyer to make a big mistake. The urgency to grab an MLS listing in Toronto before prices climb even higher can cloud buyers’ judgment and lead to rash decisions.
In case you don’t want to be making these expensive mistakes that other homebuyers are making in Toronto, then you need to read this blog. Here, we’ll talk about the common mistakes most first-time buyers make so you can avoid them and make a wise investment.
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Waiting for a Magic Dip in Home Prices
Most aspiring homeowners are thinking “Maybe I shall wait for home prices or interest rates to go down to make a move.” This may sound like a wise idea at the moment but it’s actually a trap that home buyers are falling into and it can cost them in the long run.
Here’s why -
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Prices might not fall much - The demand for MLS listings Toronto usually stays high irrespective of the state of the housing market. So, a big drop in the price of properties in 6ix isn’t likely.
Even if home prices dip a bit, keep in mind that interest rates are expected to be slashed too. This means that more homebuyers waiting on the sideline will step foot in the housing market, pushing prices back up again.
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You’ll be competing with future homebuyers - Continuing our last point, if you wait, you’ll be facing even more competition from fellow buyers when interest rates drop. With more buyers in the market, bidding wars could become even more common, making it harder to find a house in Toronto within your budget.
So, what should you do instead?
You can neither control the price nor the demand and supply of MLS listings in Toronto. But you can control your finances so get pre-approved for a mortgage to understand what you can afford. This way, you’ll be ready to make a move quickly when you find the right house in Toronto.
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Stuck Only Thinking About the Mortgage Payment
“ As of July 2024, the 5-year fixed rates in Canada are at around 4.6% and variable rates are still around 6%.”
The breaking news of today’s housing market is undoubtedly these rising mortgage rates. Because of this, it’s natural for a homebuyer to be worried specifically about affording the monthly mortgage payment. However, focusing solely on that number while buying a Toronto MLS listing can be a big mistake for first-time homebuyers.
Why This is a Problem
Let’s say the monthly mortgage payment of a house in Toronto you love is $2000. You may be able to comfortably manage this cost but what if you haven’t factored in -
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Property Taxes
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Homeowners Insurance
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Mortgage Insurance (if applicable)
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Maintenance and Repairs
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And other regular expenses
If so, the otherwise manageable 2,000 monthly payment could balloon to much more. This could strain your budget and make homeownership expenses unmanageable for you.
So, what should you do instead?
Instead of just focusing on the mortgage payment while buying an MLS listing in Toronto, take a more comprehensive approach. Create a detailed budget that factors in ALL the cost of homeownership in Toronto. This should include the mortgage payment, property taxes, homeowners insurance, PMI, regular living expenses, and set-aside amount for maintenance and repairs.
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Rushing and Buying Unseen
As home prices continue to climb, home buyers might feel pressured to act fast and snag a property before the price increases or some buyer grabs the home. But what homebuyers do not know is that things aren’t as fast and competitive in the Toronto housing market right now. This means you can take a breath and avoid two common mistakes first-time homebuyers make - rushing the decision and buying sight unseen.
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Rushing to buy a home
In your excitement or urgency, you may overlook important steps while buying the MLS listing in Toronto such as getting a thorough inspection. You may overlook potential issues with the property such as structural problems, pest infestations, or other hidden problems that can be costly to fix. Rushing can also lead to overpaying for a property.
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Buying a home unseen
Pictures, videos, and even virtual tours may not help you properly understand key aspects of the property and neighbourhood. You cannot know about the size of the rooms, the condition of the finishes, noise levels, traffic flows, and neighbourhood feel from the virtual tour or photos and videos. Hence, if you don’t want to go through buyer’s remorse, don’t buy a Toronto home without physically visiting and inspecting the property.
So, what should you do instead?
You must take your time and thoroughly explore the Toronto MLS listing and its neighbourhood before making an offer. Visit the house in person, take a tour of the neighbourhood, and schedule a professional home inspection before making an offer.
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Skipping Over New Construction
Many first-time homebuyers automatically dismiss newly constructed homes in Toronto thinking these properties are too deep for their pockets. But little do homebuyers realize that these newly constructed homes can turn out into a budget buy.
This is because nearly a third of builders of newly constructed properties lower the price to attract early buyers. On top of price cuts, over half of builders offer enticing incentives to Toronto homebuyers. These can include things such as locking in a low mortgage rate for a certain period or even helping to pay down your interest rate.
So, what should you do instead?
Do not rule out newly constructed MLS listings in Toronto without exploring this option first. Because of price cuts and incentives, these properties can turn out to be more affordable than you think. Talk to a Realtor who specializes in new construction homes - they can help you find affordable deals.
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Skip Hiring a Real Estate Agent
With high home prices and expensive mortgage payments, buyers try avoiding hiring a Realtor (and paying the commission fees) to give their wallets some breathing room. However, this supposedly wise strategy of homebuyers can backfire significantly.
Here’s why -
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Save you money: Real estate agents know how to tactfully negotiate a better price on a Toronto MLS listing, saving you more than their fee.
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Find the right home: They have access to hidden listings and understand the housing market, finding you the perfect home before others.
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Protect you from mistakes: Agents guide you through complex paperwork and identify potential problems, preventing costly repairs down the road.
So, what should you do instead?
Partner with a qualified Realtor to ensure a smooth, successful, and cost-effective home-buying journey.
The Better Informed You Are, the Smarter Your Homebuying Choices Will Be
With rising prices and fluctuating interest rates, it’s easy to feel overwhelmed while buying an MLS listing in Toronto. But if you’re fully informed about this home-buying process, you can navigate this housing market with confidence and avoid costly mistakes. So, learn and research as much as you can about the Toronto housing market and the home-buying process before kickstarting this journey. Happy homebuying!