Housing: Is It Your Time to Buy a Home?
Miguel Letelier bought his first home in 1992 in Montreal. He was in his mid-twenties, had arrived seven years earlier from Chile, and his girlfriend at the time insisted they buy a condo together. He wasn’t thrilled with the idea, because to him, making that kind of commitment seemed like a burden: “Eventually we ended our relationship, she bought my half, and I recovered my independence,” says Letelier, who works in the media industry, and needed financial freedom to move around in search of opportunities in his field.
“For me renting was the best option at that point in my life because I wasn’t ready to settle down; I had different jobs in Montreal, I lived in Atlanta, and now I’m working in Toronto, and in all that time I never rented a place for longer than five years,” he observes.
Like Letelier, many immigrants wonder if they are ready for this huge life decision. As the Canada Mortgage and Housing Corporation (CMHC) advises, “Although buying a home can provide financial security and stability, coming up with the down payment, meeting regular mortgage payments and other ongoing costs will tie up a lot of your cash, and can put considerable stress on your finances.”
Claire Drage learned this lesson the hard way. She landed in Canada 12 years ago from England, and was misguided into buying a home that she eventually lost. “I was pressured, I bought a home probably sooner than I should’ve done, and was not given the right advice. No one listened to me, because they were too busy trying to sell me a mortgage that wasn’t going to work for me”, she recalls.
After this experience, Drage decided to become a mortgage agent, and specialized in immigrant homebuyers to help other newcomers avoid the ordeal she had to go through.
She gets a commission from the lenders, so her services are free for her clients, who in some cases seek her advice even before they land in Canada, via Skype or e-mail. She walks them through multiple mortgage solutions according to each particular situation, and makes sure that they buy only after they have been prepared.
“I understand the challenges a new immigrant has, because when you move you have to get a job, choose a neighbourhood, find schooling for the kids, buy a car, and there is so much stuff going on that you need someone to guide you, who can educate you before you make the decision, so that you make the right one,” she says.
According to the expert, the factors you need to consider are income stability, your credit history both in Canada and in your country of origin, and your capacity for handling the financial responsibility of a mortgage and the added expenses of owning a house or condo. Drage says that the biggest concern their clients have is whether they will qualify for a mortgage if they have no job or credit in Canada.
This was the case of Grace Ho, a single mother who in 1997 moved to Toronto from Taiwan with her two young children, and had no other choice but to rent an apartment, while trying to settle in. Shortly after her arrival she started to feel that she was throwing money away on rent, and even though it only took her two weeks to reach the decision of buying a home, two years went by until she could turn the key of her condo’s door for the first time.
Ho had a good credit history, but didn’t make enough income to qualify for a mortgage, so she opened a Guaranteed Investment Certificate (GIC) account to prove that she could handle the financial responsibility. She borrowed the money from her siblings in Taiwan, and after a year she purchased her first home. “I bought a preconstruction condo to take advantage of the lower price, but my final objective was a house, so after two years I sold it, made a profit, and bought a bigger condo,” she says.
After a while Ho sold the second condo, and bought a third one, and ten years after her arrival in Canada, she sold that one and bought a house. She now works as a Job Search Program Assistant at Skills for Change and has enough financial stability to afford the home she always wanted. “I’m happy with my house, so I don’t plan to move any time soon,” she adds.
This is a common strategy among Drage’s clients, who in some cases bring their funds from their home country and stay in a hotel for a month, while they buy a property. “If you have enough to make a large down payment, any lender will approve a mortgage. Another alternative is to pre-pay their mortgage for the first year, or put 12 months of mortgage payment into a GIC, to prove that you have the funds to cover at least the first year” she explains. “Everyone’s situation is different, and we make sure that our clients can physically make the mortgage payments. We tell them to buy only if they can make the payments and still sleep at night, and some people prefer to wait until they can afford the life style they want.”
For 15 years Letelier felt comfortable moving from place to place signing rental agreements, but three years ago he found himself at a different stage in his life, with a wife and a new-born baby. When he realized that he could leave the city, buy a house bigger than the one he was renting in Toronto, and take advantage of the low interest rate, it only took him two months to move his family to a five year-old house in Oshawa.
“I remember having concerns about not being financially stable when I was younger, but now I have a good job, I don’t have plans to relocate, and even if that happens I see how quickly houses sell in my neighbourhood, so the house itself provides me with some financial security. I felt it was finally the right time to buy, so after all this time… I just went for it,” he concludes.