With interest rates still sitting at “emergency” levels with nowhere to go but up, now is an ideal time for you to market to renters/potential first-time homebuyers with solid examples of how much they could save in interest if they bought in the current low interest rate environment versus predicted rates over the next couple of years.
But if historically-low interest rates still don’t tip the scales with potential first-time buyers who are sitting on the fence, it’s important to have prepared answers to their most common objections to help convince them why now is an optimal time to buy.
Down payment
The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. The key is to explain to first-time buyers that there are many solutions available today that can help them with their down payments.
Talk about how many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, explain how many offer cash-back options that can be used as a down payment.
Better yet, introduce potential first-time buyers to available programs from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, the client will end up paying about 1% more in their interest rate, but the program will help them get in the homeownership door and start accumulating equity earlier. The client must, however, stay with the original lender for the full initial five-year term or else they’ll have to pay the down payment back.
First-time homebuyer incentive
As you’re probably well aware, last year a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free. The problem is that many potential homebuyers still don’t know this fact.
And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.
Educating and coaching
There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What they need, therefore, is education and coaching as opposed to being bombarded with more information.
You may even want to suggest that they speak to a trusted real estate agent contact of yours once you’ve gotten them pre-approved and before they head out home shopping. This will help set their minds at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Providing real examples can go a long way in showing them what it costs to buy a home in their area versus what they’re currently paying in rent.
If a renter is currently paying $800 per month, for example, with that same payment (including taxes) they could afford to buy a $120,000 home. And assuming real estate values increase 2% per year over the next five years, the new homeowner would have accumulated $27,000 in equity in their home. If they continue renting, however, this $27,000 has generated equity in someone else’s home.
It may even be worth your while to set up a joint meeting with your undecided client and a trusted real estate agent to further clarify the situation. Your client will have two professionals in one place available to answer all of their questions about the home financing and purchasing processes.
And if you don’t think it would be worth your while to take a team approach with a real estate agent for just one client, consider holding a free first-time homebuyers seminar where you and other professionals can dispel the myths and educate any clients you have that are undecided about homeownership. This is an excellent way to pool your resources to not only help your clients make a decision, but also tap into the clients of the other professionals holding the seminar with you.
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