Pattie Lovett-Reid: Fixer-upper or move-in ready, which makes most sense for you?
TORONTO -- An increase in demand and an increase in competition has made it a discouraging endeavour if you are in the market for a new home.
Higher prices are making it almost insurmountable to find a home that fits your budget, your preferred location, and one that meets at least some of your needs and wants.
According to a new survey from CIBC, only 6% of homeowners polled say they planned to sell their home pre-pandemic, and the majority (77%) say the pandemic has not changed their housing plans. Meanwhile, most (63%) agreed the low interest rate environment hasn't motivated them to sell and upgrade to a bigger home.
This certainly isn't great news for the real estate market's supply side of the equation, while demand in parts of the country continue to grow.
However, lessons from the past year have highlighted how we ideally would like to live, work and play, and home renovations are on the rise with a twist. According to CIBC, we aren't borrowing and taking on more debt to renovate, and that is great news. In fact, 71% have used savings. Meanwhile, 34% have already completed a home upgrade while 31% are planning to do so in the next 12 months.
But if you are someone still interested in finding the perfect place, and securing a turnkey home is out of your price range, maybe you should consider a home that needs a little TLC.
Many potential homebuyers who haven't explored anything other than the picture perfect home don't always budget for "upgrade costs," but due to prices and limited supply, are being forced to consider buying a fixer-upper.
According to Rakhee Dhingra, CEO of Mortgage Savvy, "a Purchase Plus Improvement (PPI) product will allow for the cost for an upgrade to be allocated within your mortgage rather than saving up or securing a separate renovation loan." The benefit here is that it allows you to buy a home that has potential and then covers the costs to renovate through a mortgage loan. In other words, all of your costs are rolled into one.
However, buyer beware. You need to ensure you can secure reputable trades, which in today's environment can be a challenge. And estimates need to be submitted to the lender up front with your approval request.
Meanwhile, if you decide not to move and can secure good trades people, the top five renovations undertaken in the past 12 months, according to CIBC, are: basic home improvements (54%), landscaping (45%), bathrooms (32%), decorating (26%) and kitchens (24%).
One final note. The Bank of Canada announced rates may not be low for as long as originally projected, given the recent strength we are seeing in the economy. So if you are thinking of moving, now is the time to get pre-approval which will hold rates for up to 120 days, allowing you to move quickly in the spring market.
Bottom line: You need to decide whether it still makes sense to move, or would a little home renovation do the trick?