BMO Survey Shows 90 Percent of Canadian House Hunters Value Affordability and Location over Resale Value
* Women are more likely than men to make a purchase based on resale value (63 per cent vs. 57 per cent)
* Two-thirds cite a ‘good feeling’ towards a specific property as the reason they buy
* BMO offers advice for potential homebuyers
TORONTO - As the busiest season for the housing market gets underway, a new survey from BMO Bank of Montreal shows that the price of a home and where it’s located is much more important for homebuyers than future sale price.
The survey, conducted by Leger Marketing, shows that the majority of Canadians planning to buy a home in the next two years value the price and location of the property (92 per cent and 91 per cent respectively) over resale value (60 per cent). The report also revealed that intuition plays a key role, with 67 per cent claiming a ‘good feeling’ towards the home is an important factor in the decision-making process.
“There are a number of factors to be considered when deciding to buy a home. However, it’s critical that Canadians balance their desire for a dream home against what they can realistically afford,” said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. “It’s easy to become attached to that perfect house in the ideal location, but in today’s market, it’s important to take a practical approach and carefully examine the emotional aspects of the purchase.”
The Leger survey also revealed:
81 per cent cite the age of the home to be the main factor when deciding to buy.
Women are more likely than men to make a purchase based on resale value (63 per cent vs. 57 per cent).
Those living in an urban area are more likely to say price is key when deciding to buy a home compared to those living in a rural community (93 per cent vs. 87 per cent).
The same is true when it comes to married versus single people (93 per cent vs. 88 percent respectively).
BMO’s Katie Archdekin offers the following advice for Canadians looking to buy a home during the busy spring months:
Make sure you can afford what you signed up for:
Stress test your financial budget using a mortgage payment based on a higher interest rate. For example, if your rate rises even 1 per cent from 5 to 6 per cent, you will need an additional $146 per month on a $250,000 mortgage amortized over 25 years.
Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.
Think carefully about fixed vs. variable:
Choosing a variable rate mortgage has been a winning strategy over the long term, but fixed rate mortgages (currently at historic lows) provide the peace of mind of insulating you against rate increases during the term of your mortgage.
Think about the future:
View your home as an investment. Consider its location and accessibility, and whether or not renovations may be required down the road.
Take a shorter amortization:
The shorter the life of the mortgage, the less you pay in interest.
Cutting your amortization period from 30 years to 25 years on a $250,000 mortgage can save you more than $55,000 in interest costs based on a 5 year fixed rate of 6 per cent.
The Leger Marketing survey was completed on-line from Thursday, March 10th, to Monday, March 21st, 2011, using Leger Marketing’s online panel, LegerWeb, with a sample of 1508 Canadians, 25-45 years old, who plan to by a home in the next two years.
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