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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

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.

Source: http://www.rbc.com/newsroom/2013/04-29-hop-wave2.html

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Poll conducted by Harris/Decima reveals more than one-third of Canadian homeowners plan to take on some form of home renovation project this year, with an average expected renovation cost of just over $15,000.


Highlights of the poll include:

  • $15,300 is the amount Canadian homeowners say they will spend on their home renovations this year, on average
  • 39 per cent of Canadian homeowners say they plan to renovate their home in the next 12 months
  • Among Canadian homeowners planning to renovate, Alberta homeowners plan to spend the most on their home renovations this year ( $22,900 on average), while Atlantic Canadians say they plan to spend among the least ( $11,000 on average)
  • Regionally, Alberta residents are among the most likely (52 per cent) to say they plan to renovate their home in the next 12 months, while British Columbians are among the least likely with only 25 per cent of home owners saying they plan to renovate
  • Among demographics, Canadians aged 45-54 plan to spend among the most on their home renovations this year ( $18,300 on average), nearly $3,000 more than the national average

"Whether it's replacing an old roof or updating a kitchen, home renovations can help you get more out of your property, but you do need to consider how the costs will fit with your overall financial plan," said Colette Delaney, Executive Vice President of Mortgage, Lending, Insurance and Deposit Products, CIBC.


Previous CIBC research shows that Canadians named paying down debt as their top financial priority for 2013, suggesting that those Canadians taking on a home renovation will need to keep a close eye on their renovation budget to stay on track towards their financial goals.


"Most people taking on a renovation have a clear vision of how they want their home to look when it's done. Our message is you need the same clear plan for repaying any debt you might incur along the way," added Ms. Delaney.


HGTV's Scott McGillivray Notes that Planning is Key to a Successful Renovation

Scott McGillivray, host of HGTV's "Income Property", also stressed the benefits of planning when it comes to making improvements to your home while managing your budget.


"The most important part of a renovation is the planning. It sounds cliché, but planning really is half the battle. In my experience, the homeowners who plan ahead are also more likely to be happy with the end result, and are better at sticking to their budget."


For Canadians looking to stretch their renovation budget, it's important to prioritize your renovations by mapping out where you are going to invest within your home, and how much money you will need to allocate to each job.


"Kitchens and bathrooms are always value-adds, so if you're prioritizing your renovations and looking to make your dollars go further, plan on doing those rooms first," added Mr. McGillivray "I also like to add an income suite in where possible, but that's a personal choice."


Renovation Tips from Scott McGillivray:

To make sure you stick to your renovation budget, while getting the greatest return on your investment, Mr. McGillivray offers the following tips:

  • Plan the Work: You don't want to be in the middle of a home renovation project when you realize you are unable to meet your timeline or budget, especially if you are operating with a tight budget.
  • Set your Priorities: If you are taking on multiple renovations, decide which ones are the most important to you, and tackle those first. Kitchens and bathrooms make good choices for a renovation because of the potential to add value to your home.
  • Expect the Unexpected: Regardless of how much you plan in advance, leave a cushion in your budget for the unexpected. You should aim to have a cushion of 20 per cent to over any unexpected costs.
  • Get it in Writing: You should always get quotes from contractors before any work starts, have a signed agreement on the scope of work they will be doing and everything that's included. You also need to be clear on what's not included so that you'll know about any expenses that will be your responsibility.

Financing Advice from CIBC:

To help fund their home renovation, CIBC offers the following tips:

  • Draw on Savings - if you are able to draw on savings to fund part or all of your renovation, it may be the best option. Be sure to leave yourself some emergency funds in your savings account so that you still have a cushion against other unexpected expenses that can arise.
  • Choose a Low Cost Borrowing Option:
    • A secured line of credit, like CIBC's Home Power Plan, offers Canadians with equity in their homes a low cost borrowing solution that can be used to finance expenses such as home improvements. CIBC's Home Power Plan provides Canadians the fixed payment schedule of a mortgage with the flexibility of a line or credit, and the ability to access the funds whenever you need them, should you need to make a future repair or in the event of an emergency.
    • An Unsecured Line of Credit (UPLC) is another option that can be used to finance home renovations. An Unsecured Line of Credit represents a good option for borrowing of smaller amounts with a plan in place to repay the amount owing.

Source: http://www.northumberlandview.ca/index.php?module=news&type=user&func=display&sid=21783

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