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Buying a home without your parents’ help
Yes, it’s indeed possible — experts who spoke to Global News for this month’s Home School series say that with the right savings strategies, you too can buy a home without tapping the Bank of Mom and Dad.
But that doesn’t mean it’s easy.
A financial gift from a parent or grandparent to help out with a down payment or the mortgage is increasingly common for prospective buyers looking to break into some of Canada’s most expensive housing markets.
Jason Heath, managing director at Objective Financial Partners, says clients he works with are prioritizing saving for their child’s eventual home purchase alongside their education.
For homeownership hopefuls feeling the fear of missing out after seeing their friends move into big houses financed by the Bank of Mom and Dad, Heath and other experts who spoke to Global News have some advice for how to build your “savings muscle” and work up to a home of your own.
However, Heath always warns that buying a home in Canada’s increasingly unaffordable market might not be the best choice for everyone, with some able to achieve financial success as a “wealthy renter.”
“I think it’s really important to be mindful before you just plunge into the housing ownership market,” he says.
Read more to decide which path is really right for you.
Housing affordability hits 41-year low
As mentioned above, the affordability picture hasn’t gotten much rosier for homebuyers or owners alike in Canada as of late.
The Bank of Canada’s housing affordability index hit its worst levels in 41 years last quarter, as an overall rise in home prices nationally coincided with a bump in borrowing costs.
The Canadian Real Estate Association said this week, however, that its own home price index continued to decline in November as housing markets from coast to coast continued to chill heading into the end of 2023.
The national real estate body said Ontario is continuing to bear the bulk of home price declines in the correction, though softer prices are also being felt in Greater Vancouver, Halifax and Winnipeg.
Some forecasters aren’t expecting these cool conditions to last in the new year, however.
A Royal LePage report released this week is expecting home prices to rise 5.5 per cent annually by the fourth quarter of 2024, climbing to levels roughly on par with the pandemic-era peak seen in early 2022.
Here’s what to know about the Royal LePage forecast and how the spring market is shaping up.
Cost of care rises for furry friends
A surge in the cost of care for pets is spilling over into crises at many animal shelters, with rising surrender rates threatening to overwhelm some centres.
In addition to the rising price of food for furred friends, and ballooning costs elsewhere in pet parents’ lives, the cost of veterinarian care has been on the rise as of late.
“Our rescue is getting more calls from owners wanting to relinquish sick or injured cats because they cannot afford the vet care,” Louise Hindle, founder of the Cat Rescue Network in Ottawa, told Global News.
Those rising costs also mean fewer people are coming in to adopt new pets, putting a crunch on shelters and humane societies that are running out of their already limited space.
Despite the dire situation, animal advocates also have stark warnings about the dangers of gifting pets during the holidays.
Read more about how the rising cost of living is compounding on shelters.
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– THE QUESTION –
“I really appreciated the question asked in last week’s newsletter about mutual funds vs. GIC for retirement. I am in a similar situation with my TD mutual funds not doing much for me since 2017. Because this money, around $50,000ish and adding in $500 a month, is for retirement in 25 years I am not worried about volatility in the markets as much. I worry about the management fees I pay with a TFSA mutual fund in a comfort growth portfolio but also am not savvy in the investing world so not comfortable investing into individual stocks etc. Am I wasting money with these management fees and should look at some kind of roboadvising with less fees but still hands off from me? Any options you recommend or just stay the course with a managed mutual funds account?”
— A Money123 reader
“There’s not much you can do about a mutual fund’s management fee, except for avoiding it by buying another product. Roboadvisors are certainly user-friendly, but they, too, come with a cost and can suffer from a lack of customization.
For someone who is young and already saving for retirement (kudos to you!), I would generally recommend a low-cost stock index Exchange Traded Fund (ETF) that tracks the overall equity market or something like the S&P 500. TSX:XEQT and TSX:VFV are popular options. Here, you’re not buying an individual stock but a basket of stocks. Your long time horizon allows you to recover from any short-term losses if we face a recession or other global event.
However, before jumping right in, you should consider your risk tolerance first. If the stock market declines 10 per cent over the next few months, would you be able to sleep at night? If not, consider putting a portion of your portfolio into bonds (or a bond ETF), which can round out your portfolio. An 80/20 split between equities and bonds is a popular choice. But investing too much into bonds could negatively affect your returns and leave you without enough to retire. The return from stocks will usually always outpace the return from bonds over the long term.”
– Adrian Zee, personal finance writer
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