This article is written for a Millennial audience, which represents 9 million Canadians or 25% of the national population. A millennial is someone who is born between 1980 and 1999. Here at CME, we like Millennials.
Thinking of getting into the real estate market? Well… it’s never a good idea to make hasty decisions. Don’t just rush into the housing market because it’s what your parents did, instead, do your homework: learn the basics of savings, credit, and budgeting first, then the world is your oyster. (whatever that means).
Lifelong savings is a crucial ingredient to financial prosperity. You must spend less than you earn, ideally saving at least 10 percent of your gross income. Put your savings on automatic pilot, having at least 10 percent of every pay check automatically deducted. Money you don’t see you won’t spend. Contributing to an RRSP, at least enough to gain any matching funds your employer will provide, is essential. The Tax Free Savings Account (TFSA) is an ideal vehicle for saving for a down payment and now you can contribute as much as $10,000 a year.
You also need to establish a good credit record. Lenders want to see a record of your ability to pay your bills. As early as possible, get a credit card and put your name on cable, phone or other utility bills. Pay your bills and your rent in full and on time. Do not run up credit card lines of credit. The interest rates are exorbitant and the only one who benefits is your bank. Keep your credit card balances well below their credit limit.
Do a free credit check with Equifax every six months to learn your credit score and to see if there are any problems. Equifax tracks all of your credit history, which includes school loans, car loans, credit cards and computer loans. Equifax grades you based on your responsible usage and payments.
Budgeting is also essential and it is easier than ever with online apps. You need to know how you spend your money to discover where there is waste and opportunity for savings. The CMHC Household Budget Calculator helps you take a realistic look at your current monthly expenses.
If you want to talk with someone about your home ownership goals, one of our Canadian Mortgage Experts would love to work with you!
This article was adapted from Top 5 things millennials should know when buying real estate. written by DLC Chief Economist Dr. Sherry Cooper. Go ahead and read the original version by clicking that link! Happy day!