Significant renovations, small down payments and no home inspection are among the top mistakes homebuyers make: RBC Poll
RBC Royal Bank provides tips to combat common home buying pitfalls
The majority (60 per cent) of Canadian homeowners admit they made at least one mistake when they bought a home, according to the 20th Annual RBC Home Ownership Poll. Asked to list up to three scenarios as their top mistakes, Canadians pointed to significant renovations needed to the property (15 per cent), not having a bigger down payment (14 per cent), and lack of a home inspection (13 per cent).
"Unfortunately we don't get a 'do-over' when buying our first home, so it's important to arm yourself with the right advice to avoid unexpected financial costs down the road," said Rachel Wihby, strategy manager for First-Time Homebuyers at RBC. "Skipping a home inspection or rushing a home purchase are cautionary tales for prospective homebuyers, especially younger and first-time purchasers."
Homeowners also cited purchasing too quickly (11 per cent) and failing to account for extra costs or total cost of home ownership (10 per cent) among some of the wrong moves made during a home purchase.
Younger Canadian homeowners (ages 18 to 34) were more likely than the average Canadian to list not having a bigger down payment as a mistake (21 per cent vs. 14 per cent national), according to the poll. A larger percentage of younger Canadian homeowners also did not think about future family and space needs (13 per cent vs. eight per cent national)
Affordability and saving for a down payment top concerns for first-time buyers
The "mistakes" are consistent with some of the common concerns that current prospective first-time buyers face, who say they haven't purchased yet because they weren't able to afford it (46 per cent) or they were saving for a large down payment (32 per cent).
Among these prospective buyers, almost two-thirds (62 per cent) anticipate their down payment will represent up to 10 per cent of the home's value. Half (53 per cent) said it would take up to three years to save enough for a down payment. This time line fits with an earlier RBC news release that showed four-in-10 Canadians (40 per cent) planning to enter the housing market over the next two years will be first-time homebuyers.
Many first-time buyers will use their savings accounts and RRSP/TFSA for a down payment
Aside from taking out a mortgage, prospective buyers expect to fund their home purchase by putting money aside in a special saving account (48 per cent), using their RRSPs (25 per cent), using a tax-free savings account (23 per cent) or delaying other big purchases such as a car or vacation (17 per cent).
"Buying a home is typically the biggest financial decision that most people will ever make, so it's important to plan ahead and keep emotions in check. Seek expert advice every step of the way and leave some wiggle room in your budget for unexpected costs," added Wihby.
The survey found that prospective first-time buyers were most interested in a combination/hybrid mortgage (42 per cent vs. 29 per cent national) and were more likely to be looking for a mortgage that was longer than a 5-year term (39 per cent vs. 22 per cent national).
About the RBC 20th Annual Home Ownership Poll
RBC is the largest residential mortgage lender in Canada. With over 1,400 mortgage specialists across Canada, RBC has helped thousands of Canadians find a home. As the country's number one source of financial advice on home ownership, RBC conducts consumer surveys as one way to provide insight to Canadians about the marketplace in which they live.
These are some of the findings of the RBC's 20th Annual Home Ownership poll conducted by Ipsos Reid between January 31 and February 8, 2013. The annual online survey tracks Canadians attitudes and behaviours regarding homebuying and home ownership. The results are based on a sample where quota sampling and weighting are employed to balance demographics and ensure that the sample's composition reflects that of the actual Canadian population according to Census data. Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. An unweighted probability sample of 3,005 adult Canadians, with 100 per cent response rate would have an estimated margin of error of ±3 percentage points, 19 times out of 20. The margin of error will be larger within regions and for other sub-groupings of the survey population.