Is Now a Good Time To Buy? (Covid-19)
Jen & Cory • March 31, 2020
If you’ve been thinking about buying a new home, chances are the instability of the Canadian economy and the impact Covid-19 has you second-guessing yourself. And chances are, at this point in time, you are probably right to do so.
Right now there is uncertainty in the Canadian housing market. We’re in uncharted waters and the full impact of Covid-19 has yet to be seen. Obviously, as people continue to self-isolate, we can expect sales numbers to drop.
But as real estate agents find new ways to make house-hunting accessible online through virtual tours, coupled with incredibly low interest rates, it’s certainly not as cut and dry as might be expected.
So, is right now a good time to buy a home? Well, that’s tough to answer, but what if you looked at it another way?
Instead of basing your buying decision on external market factors, consider asking yourself, is now a good time to buy a home for me?
When you stop looking at the market to determine your timing to buy a home, and instead examine your personal financial situation and your reasons for buying a home, the picture becomes clearer.
Consider asking yourself the following:
- Does buying a new home now put me in a better or worse financial position?
- Is there a chance I could lose my job or get laid off because of Covid-19?
- Have I saved enough money for a downpayment?
- Do I have a plan in place if I get sick and I’m not able to work for any length of time?
- Is there any scenario where I might have to sell quickly and potentially lose money?
- Do I really want to buy, or am I feeling the pressure that if I don’t buy now, I might never be able to?
- Am I scared that if I buy now, the market will crash the second I do?
Regardless if you decide now is a good time to buy, or to wait, consider putting a plan in place! A plan makes all the difference.
If you decide to wait, consider ways to save a little extra money for the downpayment or to squirrel away in your emergency fund. Interest rates won’t be going through the roof anytime soon (slight fluctuations are normal), so don’t feel you need to be in a hurry.
If you decide now is a good time to buy start with a mortgage pre-approval. Contact us anytime; we can go over your financial situation, complete an online mortgage application and put together a plan.
Although Covid-19 has significantly impacted the way we live our lives, life will go on. People will continue to buy and sell houses, albeit maybe not as many for a while. But we all need places to live and we can’t let fear make our decisions for us.
Having a plan in place is what allows you to have certainty in these uncertain times!
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For most Canadians, the down payment is the biggest hurdle to homeownership. A down payment is the initial amount you contribute toward your property purchase, while the lender covers the rest through a mortgage. By law, Canadian lenders can only finance up to 95% of a property’s value, which means you’ll need at least 5% down to qualify. If you’re putting down less than 20%, your mortgage must be insured through one of Canada’s three default insurance providers— CMHC, Sagen (formerly Genworth), or Canada Guaranty . This insurance comes at a cost, but it can be rolled into your mortgage amount. The less you put down, the higher the premium. Since saving a down payment can feel overwhelming, it helps to know the different sources you can draw from. Here are the most common options available to Canadian homebuyers: 1. Savings & Personal Resources The most straightforward source is your own savings. Lenders will ask to see a 90-day history of the funds in your account. Any large deposits outside of regular payroll must be explained with documentation—such as the sale of a vehicle or a transfer from an investment account. This requirement isn’t just red tape; it’s part of Canada’s anti-money laundering rules. 2. Proceeds from the Sale of a Property If you’ve recently sold another home, you can use the proceeds as a down payment on your new purchase. Proof of the sale—such as the final statement of adjustments from your lawyer—will be required. 3. RRSP Home Buyers’ Plan (HBP) First-time buyers can withdraw up to $35,000 each (or $70,000 as a couple) from their RRSPs to put toward a down payment under the federal Home Buyers’ Plan . The funds are withdrawn tax-free, but they must be repaid over a 15-year period. This is a popular option for buyers who have been steadily contributing to their retirement savings. 4. Gifted Down Payment With today’s housing prices, many buyers turn to family for help. A parent or immediate family member can provide a gift that makes up part—or even all—of the required down payment. The lender will require a signed gift letter confirming that the money is a true gift (with no repayment expected) and proof that the funds have been deposited into your account. 5. Borrowed Down Payment In some cases, you may be able to borrow your down payment. This option is usually available only if you have strong credit and sufficient income. The payments on the borrowed funds are factored into your debt service ratios, so affordability is key. Lenders typically use 3% of the outstanding balance when calculating the additional payment. The Bottom Line A down payment doesn’t have to come from just one source—it can be a combination of savings, gifted funds, RRSPs, or other resources. What matters most is being able to show where the money came from and that it meets lender requirements. If you’d like to explore your options or learn how much you might qualify for, it’s never too early to start the conversation. Connect with us today—we’d be happy to help you create a plan and take the first steps toward homeownership.
