A house is more than a comfortable shelter selected to match your lifestyle. Whether it is your first or subsequent purchase, it is most likely your largest single investment, requiring a significant level of debt financing. Making such a significant investment requires knowledge, skills and confidence, yet most Canadians feel ill-equipped.
In a survey commissioned in 2012 by the Canadian Real Estate Association (CREA), just 16 per cent of Canadians said they had no need for additional information about the financial details of buying a home. Almost two-thirds of those surveyed, reported having a “major need” for such information, and the percentage increased to 72 when the question was put to those aged 18 to 29.
This information gap is worrisome on a number of levels. Poorly informed decision-making can create dangerously high levels of household indebtedness. In turn, this can make homeowners “house poor” — affecting their ability to make wise spending decisions elsewhere. It can also limit their ability to take vacations, visit distant family members, pursue additional education opportunities, or other activities that might enrich their quality of life.
Even more seriously, making a bad decision related to homeownership can have broader impact, at worst leading to debt default and foreclosure, or even home abandonment on the scale seen in the United States.
These larger impacts, and their potential effect on Canada’s economy, are at the root of the federal government’s focus on financial literacy.
It is a concern shared by CREA and the REALTORS® who are on the frontline of financial literacy every day, helping potential home buyers understand the financial implications of ownership. They recognize that giving Canadians the knowledge, skills and confidence to make responsible home-buying decisions will contribute to the long-term stability of the housing market.
In support of Financial Literacy Month in November 2012, CREA introduced its Homebuyers’ Road Map, which is an information toolkit designed to assist Canadians to understand and navigate the home-buying process. The Homebuyers’ Road Map outlines the financial aspects of purchasing a house as well as the importance of negotiating with lenders and researching federal government programs like the Home Buyers’ Plan and the First-Time Homebuyers’ Tax Credit.
It addresses questions such as: What do lenders require of prospective buyers? What type of mortgage is best for your circumstances? and What types of closing costs should you expect to pay?
Note: In the interest of helping first-time buyers in Manitoba, REALTORS® are calling for the Manitoba Government to match the federal government’s First-Time Homebuyers’ Credit of $750, as it will help offset the high provincial land transfer tax. In Ontario and B.C. where they also have a land transfer tax, they offer generous first-time home buyer exemptions on their land transfer tax.
In the year since its launch, the Homebuyers’ Road Map has fulfilled the desire, expressed by 86 per cent of those polled, for a free toolkit to help them better understand the financial aspects of buying a home. To date, more than 25,000 copies of the resource have been distributed.
The Homebuyers’ Road Map was developed in collaboration with the Financial Consumer Agency of Canada (FCAC), the independent federal government body that works to protect and inform consumers of financial products and services.
The FCAC, CREA, WinnipegREALTORS® and REALTORS® across Canada share the belief that financial literacy is essential for those facing buying decisions and financing their home purchases with some form of credit. Together, they are committed to giving home buyers the tools and knowledge to make informed choices and invest wisely in properties that will become major assets without unduly straining homeowners’ budgets.
No one has innate insights into the complex, sometimes confusing, process of buying and financing a house. Canada’s REALTORS® train hard to gain those insights, and they are uniquely positioned to share their knowledge with buyers to ensure that a new house becomes a home and not a burden.