Even in times of record low mortgage rates, first-time home buyers still find it difficult to get into the real estate market what with property values seemingly increasing month to month. So what can you do to get into the market?  The strategies for getting into the market have changed from past generations.

Stop trying to find the perfect home.

Many buyers feel they need to fall in love with everything about their first home. However, in a market like Metro Vancouver, the important thing is to just get into the market.  For instance, if you can’t afford to purchase in the neighborhood you ideally want to live in, consider purchasing where you can afford now with the intention of renting the home out.  You can then rent and live in a neighborhood you prefer while renting out the home you purchased.  Look for a good location with convenient amenities such as transit and grocery stores.  This will give you an advantage when renting as well as when it comes time to sell the home in future.

Forget the 20% down payment “Rule”.

If you are finding it impossible to save for a 20% down payment, look into going with a 10% down payment.  Mortgage brokers will advise you not to put down less than 20% down as the Canadian Mortgage and Housing Corporation (CMHC) requires you to pay an insurance premium under 20%. However, the pros and cons of sitting on the sidelines while you save for a larger down payment need to be examined.

According to the CMHC, a $350,000 home with a 10% deposit would incur an insurance premium of $7,560 that may be paid as a lump sum or incorporated into your monthly payments.  If we assume a lump sum payment for the insurance premium, an interest rate of 3.04% (RBC posted 2 year rate) and a 25-year amortization, monthly payments with 10% down would be $1,497.40 and with 20% down would be $1,330.85.

With property values steadily rising, you must decide as a first-time home buyer if you can afford to wait 5 or more years till you have a 20% down payment. It may be worth it to pay $7,560 in premiums and an extra $170 per month in mortgage payments now to get into the market and start building equity.

Being a first-time home buyer isn’t easy, however the goal should be getting into the market as soon as possible so you can enjoy the increase in equity which traditionally comes with a long term real estate investment.