Help clients buy a first home without abandoning long-term goals

Despite high real estate prices in many markets across the country, many Canadians want to buy a home. In fact, a 2024 Royal LePage survey found that among those ages 18 to 38, 84% think home ownership is a worthwhile investment, and 74% of those who don’t own a primary residence are prioritizing home ownership.

Furthermore, dreams of buying a home aren’t far off in the future. Nearly one in five surveyed respondents (18%) said they wanted to make the purchase within three years, 13% said within three to five years, and 40% said within five to 10 years.

There’s an important opportunity here for advisors to help clients with planning that enables them to achieve their home ownership goals without compromising other critical objectives, says Andrew Gardiner, a Senior Regional Sales Director with Beneva. In addition, providing the guidance clients need can earn advisors long-term loyalty.

While it’s true a home is a very big investment and will likely dominate short-term financial decision-making, advisors need to make sure clients don’t forget about long-term saving for retirement and short-term saving for emergencies. Even if those other goals are largely put on hold for a time, they need to remain part of the conversation so clients can turn their attention back to them once they’ve accumulated enough for a down payment.

Also, keep in mind that home ownership isn’t for everyone, Gardiner says. When it isn’t in the cards, advisors should ensure their clients are investing in other appreciating assets.

“What I find problematic is that people may be giving up on home ownership, but they aren’t redirecting money that could have gone toward that into long-term growth strategies.”

Home Buyers’ Plan or First Home Savings Account?

The best place to save toward a down payment depends on the client, but Gardiner says many first-time homebuyers will need all the available tools.

“You can pull out only X amount from a Registered Retirement Savings Plan (RRSP) [on a tax-deferred basis through the Home Buyers’ Plan (HBP)]. You can contribute only X amount to the First Home Savings Account (FHSA). So, you may have to use both.”

Many people, especially those in lower-income tax brackets who can’t benefit as much from the tax deduction resulting from an RRSP contribution, may max out FHSA contributions first and then contribute to an RRSP with an eye to using HBP withdrawals to help fund a down payment, says Gardiner.

“You definitely want to [save for the down payment] in some type of registered plan so that you’re not incurring the taxes on the growth and the money can come out, at least initially, on a tax-free basis.”

That said, the reality of today’s real estate markets means non-registered savings will probably be needed as well. Meanwhile, 32% of respondents in the Royal LePage survey were anticipating financial contributions from others, including family, to help them with the purchase of their first home.

Protecting a home purchase from risk

“Life, disability, and critical illness insurance are important in their own right, [but] they become especially important when there’s a large asset [such as a home] that needs to be protected,” Gardiner says.

While lenders often sell mortgage insurance packaged with mortgages, financial advisors have a much broader product shelf and can potentially offer better protection at a lower cost, he says. When buying insurance through an advisor, clients get a portable policy that they, not the lender, own and that’s set up to meet their specific requirements.

Aspiring homeowners “need to have someone there who can walk them through the differences [between] what they’re being offered by the lender and what else is available to them,” says Gardiner. “There’s a lot of pressure, [so] the client needs to feel comfortable that they can decline that offer and shop for something else.”

Beyond providing comprehensive advice that includes cash flow, investing, and insurance guidance, Gardiner suggests advisors strengthen relationships with clients by building a network of referral partners that may include mortgage brokers, real estate lawyers, real estate agents, renovation contractors, and moving companies.

“It’s helping out clients, referring people to people we like and trust and that will do a good job for them,” he says. “It’s a way to add a lot of value in areas that are not [the advisor’s] core competencies.”