Financing options exist for savvy buyers

Many Canadians, especially those who belong to the so-called Generation Y, are less than confident when it comes to their chances of financing a home purchase.

Data from real estate firm Royal LePage shows that more than 72 percent of survey respondents born between 1980 and 1994 said they were pessimistic about their chances of becoming homeowners due to housing prices.

In addition to young homebuyers, 66 percent of baby boomers who took the survey also said they were worried about being able to afford a home.

"Baby boomers have built homes for themselves," said Phil Soper, CEO of Royal LePage. "It's their children that are seeking to create a similar atmosphere of their own, even though new impediments exist for this younger generation."

Meanwhile, a separate survey from the Royal Bank of Canada shows further trepidation on the part of Canadian homebuyers. Of survey respondents asked if they were planning to buy a home within the next two years, only 15 percent said yes. This marks a decrease from 27 percent during 2012. It also represents the largest drop in prospective homebuyers since the survey's inception 20 years ago.

In both cases, the decrease in homebuying confidence is being partly attributed to stricter mortgage rules put in place by Finance Minister Jim Flaherty. According to buyers, the rules, which include reducing the maximum amortization rate from 30 years to 25 years on high-ratio mortgages, are making it more difficult to finance a home purchase, despite ultra-low mortgage rates. In fact, results from the Royal Bank of Canada survey show that nearly 4 in 10 prospective homebuyers blamed the reduction in amortization rates for their inability to purchase a home.

Figures from the Royal LePage survey show that 46 percent of Generation Y buyers said the new mortgage restrictions would affect their ability to buy a home.

Financing smart
While the new mortgage restrictions may make financing more difficult, there are still plenty of ways for homebuyers, especially first-time buyers, to find home loans that suit their specific financial needs.

One option is taking advantage of Canada's First-Time Home Buyers' Tax Credit. Another idea is investing in a professional who can help inexperienced homebuyers find the mortgage that's right for them. Mortgage brokers have networks of contacts they can use to to compare and contrast different mortgages, often finding loans that would not be available to buyers seeking financing on their own.

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