Strong Market Keeps Homeownership Affordable in Alberta
Monday, September 23, 2013
Home ownership was something many people were able to achieve in the second quarter this year, according to recently released statistics from RBC Economics.
According to its latest Housing Trends Report, ownership costs - such as for utilities, Alberta home insurance and asking prices - remained in affordable territory. RBC's tool that it uses to assess the overall expense taken on by the average homeowner increased by 0.7 percentage points, reaching 32.4 percent for bungalows and 34.5 percent for two-story homes, up four-tenths of a percent from the previous quarter.
Craig Wright, senior vice-president and chief economist at RBC, indicated that because demand was so high in the spring, it caused listing prices to rise modestly. However, this isn't resulting in fewer people being able to attain homeownership.
"Though prices are now on a steeper upward trajectory, the effects have yet to undermine affordability in a material way," said Wright. "In fact, affordability levels in Calgary continue to be among the best in Canada."
He added that demand will likely continue to move at a healthy pace, thanks to a strong economic base, job numbers that are in favorable territory and a "fast-rising population."
At a regional level, home sales were solid between March and June. RBC noted that resale activity jumped 12 percent on a quarter-over-quarter basis. That's the fastest pace of sales activity since 2009.
Farhaneh Haque, director of mortgage advice for a leading financial firm, indicated that homeownership is one of the most momentous decisions adults make in their life. As such, it's crucial to be aware of the steps involved in the purchase process.
"In today's market it is especially important that prospective buyers understand home financing options in order to manage their overall monthly costs, assess the flexibility they will need, and help plan for the future," said Haque.
If you are considering buying a home for the first time, these tips can help you determine whether you can afford it:
- Down payment - As a general rule, the down payment should be about 20 percent of the home's listed price. However, the higher down payment, the less you'll have to pay for a mortgage over the life of a loan.
- Mortgage terms - Whether it's fixed, variable or closed, there are a variety of amortization periods to choose from. With a fixed, the interest rate stays the same for however long it takes to pay off the loan. With a variable rate term - just as the name describes - the interest fluctuates, going up or down depending on the market.
- Length of mortgage term - This is how long you will take to pay off a mortgage. Typically, the years range from 20 to 30 years.
You will also want to secure a home insurance policy. These plans are typically required of mortgage lenders before they determine whether to approve a loan request.