Table of Contents Show
- Is A Rental Property a Good Investment Amidst the Pandemic?
- Factors to Consider Before Making Real-Estate Investment
- What Are the Government Incentives for First-Time Homebuyers?
- Should You Buy a Home Amidst the Pandemic?
With COVID 19 disrupting the world economy, many industries suffered huge losses. Therefore, many people are now skeptical about investing in the most secured sector- real estate.
Are you also wondering whether you should invest in real estate amidst the pandemic scenario? When you voyage through the waters with caution, you can unlock various investment opportunities that’ll build your wealth and portfolio in the industry.
Thankfully, with real-estate investments, you have the advantage to choose from various options such as home equity loans, Home Buyer’s plan through RRSPs, loans from banks, etc. You can visit here to know more about investing in a property.
Is A Rental Property a Good Investment Amidst the Pandemic?
The Canadian Real Estate Association (CREA) reported that real estate sales in the country jumped up by a whopping 7.2% from November to December in the initial pandemic period (2020). Following this, the nation’s property sales were reported to be at an all-time high and increasing.
In fact, the amount of property investment transactions also increased by a whopping 12.6% from the pre-pandemic scenario.
This increase can fundamentally be attributed to the following reasons:
- Housing estate investments are one of the most secured and risk-free paths to generate wealth through investments.
- In typical situations, building home equity could take years. The booming residential real estate market fuelled the increase in appreciation over a short period. In fact, in the most lucrative areas, month-to-month appreciation is observed.
- Real estate investment comes with the benefit of long-term capital gains.
- The interest rates are historically-low, luring many investors to buy condos, apartment homes, and single-family houses as an investment property.
All these factors make the pandemic era exceptionally good for property investments.
Factors to Consider Before Making Real-Estate Investment
Let’s understand the factors you should consider before purchasing a property.
Is Your Financial Situation Steady for Making a Substantial Investment?
COVID-19 came with nasty surprises. And financial instability was one of them. The low wage and higher rates of daily essentials might have imposed a financial burden on many.
Purchasing property involves a significant investment, and most importantly, it is a life-altering decision.
- Evaluate your current financial situation
- Connect with experts and professional mortgage brokers to understand the best financing solutions.
While the banks might require a good credit score for low rates, home equity loans might offer you the necessary financial backing even without a stable earning.
What Are the Various Financing Options Available for Purchasing a property?
Loans from banks, mortgages, financing from credit unions, and taking advantage of government benefits are a few ways to get financial support to buy your first home.
A better understanding of each type of mortgage can help you make an informed decision.
Fixed and Variable Financing
When you opt for a fixed mortgage, you’ll be locked into a specific interest rate for the entire loan period. This way, you can better plan your budget, get better transparency and enjoy the lower rates during future cases of inflation.
With variable mortgages, interest rates vary depending on the broader economic scenario.
Open and Closed Financing
After the interest rate, the next thing you need to consider is the terms of the financing option. You can opt for early closure through lump-sum repayments with an open mortgage. However, open mortgages might have higher interest rates or mortgage fees.
Closed loans are inflexible and don’t allow early closure. However, you might get lower rates for these loans.
Conventional vs. High Ratio Financing
When you want to purchase a property in Canada, you’ll first need to make a down payment. Conventional financing offers financial aid after you pay a 20% down payment of the total price on your own.
If you can’t afford the 20% down payment, you might opt for high ratio financing. You only need to make a 5-10% down payment in this case. However, the interest rates might be higher.
Home Equity Loan
Home equity loans offer financing at competitive rates. Since your property is provided as security, you don’t necessarily need to have a good credit score or stable income to secure the loan.
Additionally, you can secure up to 95% of the home value. Expert mortgage brokers with extensive experience can help you find the correct home equity loan creditor that suits your requirement. You’ll also receive that lump sum amount directly in your bank account within a short time.
What Are the Government Incentives for First-Time Homebuyers?
First-time homebuyers can enjoy various rebates from the government.
The Home Buyers Plan is beneficial if you have an RRSP account. First-time homebuyers get the advantage to withdraw up to $35,000 from their RRSP account (or $70,000 when you consider your spouse).
You can use this amount to finance a down payment. However, your RRSP account must be opened 90 days before the application. You need to have a signed agreement on the property purchase. The withdrawal from the RRSP plan is entirely tax-free. The repayment time limit is 15 years.
First-Time Home Buyers’ (FTHB) tax credit
A qualifying individual purchasing a residential property can enjoy up to $750 in federal tax relief through this benefit. You can receive a maximum of $5000 non-refundable income tax credit.
GST/HST New Housing Rebate
Under this benefit, you’re eligible to receive reimbursement on the GST/HST you pay. This rebate is exclusively available for first-time homeowners. You can enjoy a 36% rebate on HST/GST or up to $6300 with a $350,000 or less property valuation.
Should You Buy a Home Amidst the Pandemic?
Single-homes, condos, and vacation homes have become a popular investment choice in recent times. The answer to whether you should buy a home during a pandemic or not depends on certain factors:
- Your financial condition and financial stability to afford a loan.
- The financing options are available for you.
- The location and expected appraisal on the property.
- Whether you’re getting competitive interest rates.
Buying a house can be a substantial investment. However, you can benefit from rental returns and long-term value increments with an appraisal.
The housing industry is always a safe and secure investment option. It offers an excellent avenue for diversifying your portfolio. Connect with a professional mortgage broker to understand the housing industry better and choose the most suitable financing option.