Getting help for your first home - Shulman Law Firm - Family Law in Toronto

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Millennial Marriage: Getting Help for the First Home

The real estate market has proven to be challenging for many would-be investors. Are you are a millennial ( identified as between age 18-34) who has recently married and is now looking to buy your first home? How will these financial headwinds affect your chances?  Read on to learn what you need to know when making your purchase. 

Home prices are at all-time highs in major cities, and in surrounding areas as well.  This means that homes that were once affordable-especially outside of the city limits are facing bidding wars. They are significantly over asking. 

Factors contributing to this phenomenon are the following: 

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1) low-interest rates. If you are currently searching for a home, it is a particularly attractive time to finance a mortgage. Rates have become extremely affordable in the pandemic. Low-interest rates have led to many more investors looking to buy which is also driving prices up. 

2) More people are involved in remote work.  As more workers face the workday at home, they are opting for homes outside the big city. Typically offering more space for less money.

3) An urgent need for more space.  As the pandemic dragged on and families in lockdown worked on top of each other, an urgent need for space emerged.  This has led to a large percentage of buyers looking for a home at the same time.

Are You and Your Partner on Financially on The Same Page? 

Chances are if you are a millennial, you are more comfortable than other generations when it comes to talking about your finances according to a 2019 Harris poll.  This means that more than likely you had a money conversation before marriage. You may already know each other’s credit score, how much debt each other has, how much each of you have in savings, your annual income, and what may be available as a down payment.  This is a great start. In fact, millennials are more likely to shack up before marriage. This means they may already have some experience sharing the bills with their partner and discussing their financial situation. The point here is, it’s important to thoroughly discuss your finances before contemplating buying a home with your spouse.  

There is something to keep in mind before you can take on a mortgage payment. The bank needs to know you have a solid track record of repayment. They will check your credit score when you make a mortgage application.  This means they will want to know your score before starting this process. This determines your chances of qualifying for a mortgage and how much of a down payment you will need.   

Consider The Pre-Qualifying Process Before House Hunting 

After you have had the financial discussion, it is a good idea to work with a mortgage professional to discuss the process. Learn exactly how much the bank will lend you to buy your first home.  Mortgage rules are constantly changing and home prices are heating up in the background. Stay in touch with your mortgage broker to ensure the terms of your agreement have not changed.  An example of this is the tougher mortgage stress test that came into effect on June 1st.  The new test will determine if you would still qualify for a mortgage. Based on the bank 5 year posted rates. Being financially prepared for a change in mortgage rules will reduce the chances of you and your spouse being disappointed after finding the perfect home… 

Will Mom and Dad Help with Your Purchase? 

More and more parents are coming to the aid of their millennial children. (As the children financially struggle to own a home.) This can take the form of a gift or loan to their child to help with the down payment. It can make all the difference in making the mortgage payments more economical.  However, depending on how this gift is structured, could compromise whether or not your new partner has rights to the funds should the marriage not work out.  

Was a prenup or post-nup agreement put in place to identify the funds gifted to the couple and place-specific rules on how the funds will be treated in a marital breakdown? It’s important to understand that having no agreement in place could have implications on how a parent’s gift or loan for a down payment will be seen by the courts in a marital breakdown.  Discuss with your partner what legal steps can be taken to protect the funds being offered to help with your pending purchase.  Speak to a lawyer for more information about your options. 

Don’t Feel Rushed to Make the Purchase 

A home purchase is one of the largest purchases you will make in your lifetime, so take your time to make the right purchase and think long term, especially in a hot market where prices feel like they just keep going up. Remember there may never be a perfect time to buy the right home.  If you have a solid understanding of what you and your spouse can afford you are more likely to keep a cool head, when looking and resist getting caught up in a bidding war.  

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