Tech
Toronto startups make the home-buying process easier
Buying a house in Toronto is something I haven't cared to learn about until now. Sure, it's great to be educated about the home-buying process, but for me it was always depressing to learn about the sky-high condo prices downtown, where I want to eventually buy a property. So instead of researching mortgage rates and figuring out the difference between pre-construction and resale properties, I've been renting in ignorant bliss, slowly saving up for the elusive down payment.
This spring when I realized that by George, I might actually have enough to buy a place this decade, I set out to learn as much as I could about the home-buying process. While researching, I discovered a couple Toronto-based startups that are making buying a home a simple process for potential buyers, both pre- and post-purchase.
The first step to buying a home is figuring out the mortgage you can afford, and the type of mortgage you want. Toronto startup RateHub.ca, started by Alyssa Richard, is a mortgage education tool that helps prospective homeowners research information and compare rates. The site, which is free to use for consumers and makes money by referring homeowners to mortgage lenders, has what you would expect on a mortgage site - it compares rates based on term and based on banks and other brokers.
But the best parts of RateHub are the Education Centre and Mortgage Calculators. There's an affordability calculator that tells you how much you can afford based on your salary, and compares different amortization periods and includes applicable taxes; and a mortgage payment calculator that shows you what your monthly fees would be for a specific property. If you have no idea what an amortization period is, the education centre provides a wealth of videos, articles and fact sheets that takes you through the process of buying property in Canada. It's also tailored to where you live in Canada, so you can see local bylaws or exemptions. While the site may not replace working with someone at your bank, for me it's been a great place to get started.
Once you know what you can afford, it's time to start looking for a property. I had no idea if I should get an agent, or search myself, or just wait until someone puts for-sale signs on my mailroom bulletin board. Local company BuzzBuzzHome has been a great tool for researching new condos, townhomes and homes across Canada (if you're looking for an old fixer-upper or an older apartment then this site probably isn't for you). Founder Matthew Slutsky says the idea was born out of frustration he felt while working for Toronto builders. "For me, it was a frustration that I experienced while working for Toronto builders, and seeing a huge gap of information in the new-construction industry that was not being filled," he says.
The site allows you to search by property development, and includes pre-construction as well as already completed properties. You can search by neighbourhood, project or price range, and you can contact the builder directly through the site for more information. They have a blog that covers sales centre openings and property trends in Canada, and active forums with threads of information about the home-buying process - it's where I've been researching whether to buy pre-construction vs. resale.
I still plan on using a real estate agent to find me a property in Toronto, but these resources have helped educate me on what I need to know before I seriously consider buying. And sure, they've depressed me a little (CMHC fees! Pre-construction down payments!) but at the same time they've opened my eyes to what it's like to be a property owner in Toronto. And hey, renting isn't so bad for now - just don't remind me that I'm paying someone else's mortgage.
Photo by rickpenner on Flickr
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I've slowly but surely started to look a bit more into this whole home-buying process now that I approach an age where renting probably isn't the best thing for me to do, and have been on Buzz Buzz Home several times. It's a pretty fun site, they seem to have fun with what they do, and it's been quite helpful to me as someone who admittedly knows jack shizz about the industry.
Sites like Ratehub too are soooooooooooo helpful. Really lays things out in a way that is easier to understand.
There are ways to make money in real estate, even in this market - concentrate on up-and-coming neighbourhoods, save big, buy an improvement property, and move up.
If this exceeds the price of your rent, nobody is pressuring you to invest elsewhere.
If it doesn't exceed your rent, you may not want to build up your landlord's equity on your dime.
Now, for your asset you are about to buy, you do want to protect yourself by understanding when you might sell this asset. Is your time-line 2-5 years, 5-10 years, or once in a generation? That is much more important to understand than almost any other factor.
Disclosure: I am a realtor.
There will be one, make no mistake. Renters are being squeezed, the middle class is dissolving, 70% of condos are foreign-owned and rented out as investments while a large number of them sit vacant, after the brokers have their pick of the pre-builds Joe Public gets an inferior unit at a marked up rate, and realtors are trying to sell us on that very unit at $700/sf being a great investment? When buying a condo, will your realtor inform you that Toronto has more unsold condo units than any other city in North America? Keeping your money in the bank and in other investments and renting is much smarter than buying while prices are up, up, up, up, up, up, up.
Frankly, the tools you describe can be easily found and in many places. The best thing about this information age is that it empowers buyers with the knowledge - and comfort of knowing - about making a good, informed decision.
Realtors never should have been looked upon as "the guy that showed me the house". I mean, IT'S A HOUSE! They are very big and easy to find! The ones for sale usually have a big sign out in front!
The problem is that most Realtors are viewed as "salespeople" who will talk you into something that is not good for you while keeping you from the good stuff.
But just like any profession, there are good ones and not-so-good ones. Find one you like and can talk with. One who listens to what you want and counsels you about what you should watch out for. It's like finding a friend.
Then, empowered with knowledge and a knowledgeable professional guide you, take some responsibility for finding the place where you will be most happy living.
You seem to have the right strategic approach to things. I'm happy that you feel ready to buy your own place soon.
I don't blame you for wanting to live in downtown Toronto. If this is indeed your dream, you most certainly have ways of getting there.
The first step will be buying a property elsewhere that is cheap enough that you can afford the down payment right now. This way, you can start paying for YOUR OWN mortgage rather than somebody else's, as you so smartly put it.
This will make your wealth build up in the property instead of going down the drain of rental expenses. You don't have to finish paying for the place the full 25-or-so years. You can move out as soon as you have accumulated in the property enough wealth to make a down payment for a condo downtown.
Your best option currently is to save up until you have more than 20% of the downtown condo price and then apply for a mortgage with extended amortization (up to 40-year mortgage, can be repaid faster though). This will hopefully let you buy the more expensive downtown property even if your income would otherwise disqualify you. And who knows, maybe your income will improve as well by then.
I'm eager to answer any of your questions, so just be bold and make good use of the money you work so hard to earn.
Cheers,
Heather of http://ILoveToronto.com/