Just recently Troy Media and the Macdonald-Laurier Institute sat down with Jane Londerville, Associate Professor of Real Estate at the University of Guelph, to speak about the mortgage market and the problems its currently facing. One of those problems she says, is that first-time homebuyers simply don’t have enough money to pay a mortgage, even though it may all balance out on paper. Londerville says that in order to keep people from taking on debt they can’t afford, and to help them really understand mortgages and second mortgages, all first-time homebuyers should be required to take a class educating them on the process.
Ms. Londerville says, “I think any first-time buyer really should go through an education process. It does not have to be enormously elaborate, but it should cover the true costs to home ownership that people might not be aware of. Not just the purchase price, which is pretty obvious but insurance, maintenance, property taxes, land transfer taxes, and all of that stuff that you do not know anything about the first time you buy a house.”
Ms. Londerville also says that while the percentages of our income and debt used to make sense, today it may leave families struggling to meet ends meet. She says that while using one-third of your income might make sense in households with two incomes coming in, that’s not the case for many first-time buyers. She says these are typically young people who are just starting their families at the same time, and need to take time off work or have added expenditures, such as daycare.
She says, “The course should get people to ask themselves, ‘How much take home pay do I really have? How much of that is allocated to various things I want to continue doing to earn my salary, such as a train pass? How much do I have left over, realistically, to make a mortgage payment?’ If you are making $200,000 the numbers are probably not a problem. But if you are making $60,000 between two people and one of them might be taking some time off to look after an infant, those numbers are pretty scary.”
Ms. Londerville says that while banks should stay away from teaching the courses, as it would create a conflict of interest, private companies could be set up to teach the courses, just as companies are set up for debt consolidation. She also suggested that people could be able to go online and complete courses there. At the end of the course, the potential buyer would then need to take a test proving that they’ve absorbed everything they learned about mortgages, second mortgages, and home refinancing.
What do you think? Should first-time buyers need to take a course before getting a home? Or do you think Canadians can be trusted to make their own decisions?
