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Dear Younger Self: Look Before You Leap Into Home Ownership

Significant renovations, small down payments and no home inspection are among the top mistakes homebuyers make: RBC Poll

TORONTO, April 29, 2013 /CNW/ - The majority (60 per cent) of Canadian homeowners admit they made at least one mistake when they bought a home, according to the 20 th Annual RBC Home Ownership Poll. Asked to list up to three scenarios as their top mistakes, Canadians pointed to significant renovations needed to the property (15 per cent), not having a bigger down payment (14 per cent), and lack of a home inspection (13 per cent).

"Unfortunately we don't get a 'do-over' when buying our first home, so it's important to arm yourself with the right advice to avoid unexpected financial costs down the road," said Rachel Wihby, strategy manager for First-Time Homebuyers at RBC. "Skipping a home inspection or rushing a home purchase are cautionary tales for prospective homebuyers, especially younger and first-time purchasers."

Homeowners also cited purchasing too quickly (11 per cent) and failing to account for extra costs or total cost of home ownership (10 per cent) among some of the wrong moves made during a home purchase.

Younger Canadian homeowners (ages 18 to 34) were more likely than the average Canadian to list not having a bigger down payment as a mistake (21 per cent vs. 14 per cent national), according to the poll. A larger percentage of younger Canadian homeowners also did not think about future family and space needs (13 per cent vs. eight per cent national).

Affordability and saving for a down payment top concerns for first-time buyers The " mistakes" are consistent with some of the common concerns that current prospective first-time buyers face, who say they haven't purchased yet because they weren't able to afford it (46 per cent) or they were saving for a large down payment (32 per cent).

Among these prospective buyers, almost two-thirds (62 per cent) anticipate their down payment will represent up to 10 per cent of the home's value. Half (53 per cent) said it would take up to three years to save enough for a down payment. This time line fits with an earlier RBC news release that showed four-in-10 Canadians (40 per cent) planning to enter the housing market over the next two years will be first-time homebuyers.

Many first-time buyers will use their savings accounts and RRSP/TFSA for a down payment Aside from taking out a mortgage, prospective buyers expect to fund their home purchase by putting money aside in a special saving account (48 per cent), using their RRSPs (25 per cent), using a tax-free savings account (23 per cent) or delaying other big purchases such as a car or vacation (17 per cent).

"Buying a home is typically the biggest financial decision that most people will ever make, so it's important to plan ahead and keep emotions in check. Seek expert advice every step of the way and leave some wiggle room in your budget for unexpected costs," added Wihby.

Stock quotes in this article: RY 

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