Due to the fact that our house prices have risen over the past few years, and at the same time our incomes have either been stagnating or declining, many Baby Boomers now think that their children will not be able to buy a home. In fact, according to a survey done by the Bank of Montreal last month, 48 per cent of Boomers think that their kids won’t be able to afford a home. The same survey showed that only 17 per cent of Boomers think their kids will have an easier time getting a mortgage than they did.
BMO agrees that it’s definitely harder to get a Toronto mortgage or Ottawa mortgage now than it was a decade or two ago, and they say that because of it, younger homeowners today have different concerns than their parents did.
Laura Parsons, mortgage expert at BMO says, “In the current economic environment, buying a home is a more expensive endeavor for today’s younger generation than it was for their parents. With that in mind, today’s younger buyer needs to take a different approach to financing a home purchase to ensure that affordability is sustainable over the long term.”
And it’s not just those at BMO that have been tracking how our younger generations feel about debt and financing. TD also released their own survey findings from a study showing how young Canadians would pay for their first major purchases, such as a car, a home, or a wedding. Most said that because they had trouble saving any significant amount of money, they would be comfortable taking on debt in order to make those payments. And that’s especially true when it comes to owning a home; 68 per cent of these respondents said they’d be happy to take on debt in exchange for owning a home.
Kevin Moffat, vice president of TD Canada Trust, has a few suggestions for young Canadians looking to buy a home. One of those is that they try to save at least 15 to 20 per cent for the down payment; and to keep the total amount of debt (including credit cards, mortgages, and other loans) to less than 40 per cent of the total household’s income.
“A home is probably the biggest purchase you’ll ever make,” said Mr. Moffat. “Coming up with a sizable down payment proves that you are ready to take on the responsibility of a mortgage, plus the more you pay upfront, the more you save in the long run.”
