Ed and I are officially trying to buy a place. Believe it or not, we’ve given this a lot of thought – we’re tired of Aquaman and his never-ending crime spree, tired of our car being hit by Admiral Ackbar, tired of our neighbours (especially those jerks in #5). We seriously looked into moving elsewhere and continuing to rent, but the idea didn’t really appeal to us – we’d have to almost double the amount of rent we pay currently, and for what? At the end of the day, you’ve really got nothing.
Neither of us had given much thought to owning property before. We thought it was the unattainable dream; something fancy people did but certainly not happy little nerds like us. We honestly thought that we’d be cool with renting forever – it was cheap, we could live with the minor inconveniences, Drunk Bettie is always hilarious, and having Josh and Shan downstairs was all kinds of awesome.
Then all at once, our friends decided renting was lame and also that they hate living near us.
It seemed to happen in an instant, but over the course of a weekend all our friends had meetings and brokers and agreements and approvals for mortgages. This made Ed and I pause – if they could get a mortgage, couldn’t we? After all, we make similar amounts of chickens and we don’t have much debt. Rates are low, all the signage says – I don’t know what that means, but maybe we should look into this some more.
So, we did. We met with a sexy mortgage broker whom I have seen without pants, and he crunched some numbers but good. End result: Ed and I qualify for a hilariously high mortgage and now we can go out and buy a house (or a condo/townhouse, which is what we’re looking for – fuck lawns). Hooray!
Except now we need to come up with a down payment, and it somehow turned into a never-ending lecture about sacrifice and responsibility and how we are total failures as adults (which, duh, have you met me?) and I am so tired of it all I’m thinking about living in the car out of spite.
We don’t have $20,000 in twonies in my puggy bank. I know, I know – total failure as an adult – but it’s true. We DO have the money tucked away in RRSPs, though. Awesome! Let’s get started!
Yeah, because things are totally that easy for us.
For reasons we can’t quite track down, the RRSP is of the Locked-In variety and we can’t touch it until we retire. Sure, when we hit 55 and if we have a valid reason, we can take out SOME of it – but the rest stays put until you are 65. The only exception is made for people with terminal illnesses and/or if you are literally starving and going to be out on the street within 24 hours unless you can find some cash, neither of which apply to us. So, we’re boned. Boned!
We’re looking at other solutions, including the time-honoured act of begging mommy and daddy for a loan. I steeled myself with a shot of Drano and called my mother, which went about as well as can be expected – I am a horrible child and the reason that cancer exists and no one will ever love me and I am a complete and utter failure as a human being and .. she’ll think about it. Ed asked his parents, which went a little better (although not without some agonizing discussions about our frivolous lifestyle) – but at the moment, we’re in limbo. We’re throwing all our extra cash into a Down Payment Fund and cutting back on as much as we can, but bills still need to be paid and we still need to eat. There isn’t really a hell of a lot we can cut out of our budget – regardless of what our parents think, we don’t actually live that extravagant a life. I’ve already cut back on my video games almost 90% from last year, we don’t drink, we buy our whores in Family Packs at Costco, I rarely buy new vehicles on a whim – what more can we do? Okay, we’ll eat out less. I’ll buy Mystery Meat instead of Grade A Beef. No more Sephora sprees, and it wouldn’t kill me to limit my champagne baths to once a month instead of weekly. All of these are good decisions, but none of it will help us get to $20K before the HST hits.
Normally there would be no sense of urgency about this, but there is. We’ve been in this situation once before, where we were thinking about buying – but at the time, $175000 for a townhouse seemed outrageous, and also I hated Calgary. A very short time later, that $175K property was selling for $380K – oops. There are four things driving us to buy sooner rather than later:
- Rates are really stinkin’ low and they can’t get much lower
- The Olympics could create a housing boom and we’d price ourselves out of the market
- The upcoming HST will increase the price of a new home by thousands
- If I have to pay to replace our car windows one more time I am going to snap and cut a bitch
I’m really stressed out about all of this, and we’re not even beyond the “curiously looking” stage. I’m also tired of hearing about sacrifice – it’s all about giving things up and forcing hardship upon yourselves to feel as though you’ve truly earned it, apparently. Except .. no one is looking at this through MY eyes. Sacrifice isn’t always giving up material goods or self-flagellation – in order for this whole “buying a house” thing to work, I have to give up something much more important to me:
*dramatic pause*
I am giving up MY FREEDOM.
I mean it. If I sign all the papers and commit to paying off a mortgage, I will officially no longer be allowed to run away. Even when things are going awesome with Ed (as they are now), I still harbor a secret desire to run away to exotic locations and see what lies over that hill. If we buy a place, I will be more married than ever before. I don’t see it as being “stuck”, since it’s something I want – but I certainly won’t be able to flee when the fancy strikes. As silly as it sounds, this is really important to me. I won’t be able to run away, and that’s the biggest sacrifice I can think of – but it doesn’t count, because it’s not a tangible thing.
Seriously though, how much do we suck for not having $20K sitting around? We are pathetic.
Building myself a fort out of couch cushions never sounded so good.
delicious juice dot com 
Yikes. that whole RRSP thing stinks.
One savings tip that helped us when we were working on a down-payment was to start living on a budget that accounted for what our mortgage payment would be, and dumping the difference between rent and the future mortgage into a savings account.
YMMV of course. But for us, that way it felt less like sacrifice (which I am also not so good at) and more like a good way to adjust to the inevitable and pay ourselves in the process.
That’s exactly what we’re doing (plus a little extra) :) It’s sort of an exercise to see what our life would be like if we were paying an additional 120% in rent/mortgage .. so far, it’s been fine. There’s just a little less “hey I like that thing I will buy it now”, but not much else has changed. It’s still new to us, so we’ll see what it’s like when the holiday season hits!
I like Jen’s suggestion about dumping the difference between rent and mortgage into a savings account. Yeah, it would take time to save the entire 20K, but think about how awesome you would feel knowing that YOU saved the cash and did it YOURSELF – instead of having to rely on other folks. It would be something of your own creation – something created of your own resilience and commitment. That would be kind of awesome, no? Not very instant gratification-ie, I know, but still! :) Pride, accomplishment, and all that junk.
Well, at least that’s how I would tackle the whole thing if it was me. :) And truth be told, it would be me if W and I had any interest in buying a place of our own. We have nada when it comes to down payments too.
I’d love to do that, but it doesn’t help us avoid the HST issue – we can’t save $20K before June :(
You could move back to Alberta.
[duck]
;)
The HST is the new 12% tax thing that your Premier is introducing, yeah? If so, no, it doesn’t help you to avoid the HST issue, but, perhaps you can factor it into your plan of attack for your home-buying plan? Its a hurdle, sure, but not an insurmountable one. Its all about the realistic planning. :)
The HST really isn’t the end of the world though – it only applies (same as GST) to brand new construction houses, not new-to-you houses.
You will still end up paying it on your realtor & legal fees, but at least that will only mean an increase of hundreds, or low thousands of dollars, rather than tens of thousands on the value of the property itself.
What is your minimum down payment option? Balance out if the extra cost in CMHC is more or less then the HST coming out, and see if you can do 5% or 10% or 20% etc…
LOVED this one. I’m buying as well…due to pressures of everyone else doing it, and proving to me that it makes financial sense. But the stress of being strapped for $250k is enormous…and what if I hate it, the neighbours suck, everything breaks in a year…I am responsible and can’t just move away!!! EEEeeeekkkkKKKK. I could get a whopping mortgage (and plan on using my RRSP to do the down payment), but am single and am too scared to fully stretch myself to that point…so am allowing for a smaller reasonable amount. Unfortunately that means there is nothing in Vancouver that I would like to live in, and I do not want to move out of Vancouver, especially as a night owl single girl – all my friends here, all the action here. I’ve talked myself into waiting until after the Olympics because then more people will have lost their jobs, and people holding their rentals for the Olympics will be selling…and maybe then I’ll be ready to face the music.
Now I’m freaked about what kind of RRSP i have!!!
I feel you on so much of this – Me & my man bought this July when prices were at an all time low. Your RRSP should be accesible to you, all of them allow you to access if you’re a first time home-buyer – that’s pretty much the only RSSP get-out clause that’s around – speak to your mortgage broker, he should know this.
As for downpayment – you can buy nowadays with zero down – sure, you have to pay more for that, but if you don’t have 20k sitting around, then it’s the way to go. We ended up putting some money we had in, and then using my mother’s borrowing credit to borrow the rest for our downpayment, so as to not ‘sully’ our credit rating with the mortgage pple.
With regards to real estate trends – I’d be a little careful – historically prices go DOWN after olympics, not up – a lot of pple who were employed b/c of the olympics decided to buy, and when their work runs out and the amount of jobs around gets reduced, a lot of them will have to foreclose – which (don’t kill me from profiting on other people’s misfortune) is actually good for you, since you can wait until then and get some really great deals.
I really do feel you on the car front – we decided to buy after the 3rd smashed window in our rental. But it’s not all it’s cracked up to be.. there’s no one to call when things break, it’s all on you. You’re practically married to your strata, so if they suck, you’re stuck until you sell.
With regards to being tied down – that was also a huge problem for me (you have no idea how much this post resonated) but you have to think of it rather a home for the next 25 yrs, that you’re making a sound investment and can sell at anytime. We plan on selling in the next 4 years MAX, preferably sooner – and taking the profit and spending it on travelling.
I do suggest you look into co-hab agreements – we aren’t married either, and since we went into this 50/50 as an investment, we decided to write a co-hab in case the worst happens and we split up, just so that we have it in writing that we will sell & split, and clauses about when it’s ok to sell (so that we have a minimum amount agreed upon to sell)
Anyway, prob more info than you wanted, hope it helped!
Victoria
The RRSP thing sucks, was it a pension transfer from a past job or an RRSP that you started separately and have been paying into? Victoria is incorrect and there are definitely RRSPs that are locked in and cannot be accessed until retirement (or box-living, as you mentioned) – I have one myself. It would be bizarre for someone to recommend you start a locked-in RRSP like that, and is more common in the case of pension plan transfer (as is the case with mine).
I am also entertained that you’ve been mis-read and apparently assumed to *not* be married. Oh the scandal! You’re living in sin! Could you imagine what your mother would have to say about that? ;)
Considering arguments provided by the various parental units, I think you would probably have decent luck at trying a meet-in-the-middle approach. To be honest, if I were your parents I probably wouldn’t hand over the entire amount either – you’d have to show me you’ve been working at it.
You do have the advantage that your rent is so low compared to possible mortgage payment, your current plan of saving the difference is perfect. I would suggest doing that for a few months until you have a sizeable chunk of the money required, then go back to the ‘rents. It’s a much easier sell to say “Hey parents! We’ve been good little bees and have saved up this large chunk of our down payment, proving we are more than capable of holding our own when it comes to being responsible adults. Now that we’ve done that, there are a billion reasons why it’s better to buy now then to wait. Will you help us with the remaining half?” – there are no guarantees, but it makes it harder to say no when you’ve already shown you’ve stuck to the plan and can make it work financially.
The olympics isn’t going to drive prices up, and rates are expected to stay low for a while yet. Our original plan was to buy in the spring, it was really only an accident that we bought now instead. I think that the HST thing is going to cause a small run on the used market so our plan was to buy before that all happened, but if you save every penny then go back to ask for help with the rest I think that is likely still a good possibility for you :)
xoxoxo!
kimli! it’s hard, but you guys can do it!
I myself am paying off my debt and limiting my spending to basically nothing.
in the end, the result is you guys being more happier.
HOORAY!
I don’t think zero down mortgages are available anymore, you cannot borrow a down payment (but it can be a “gift” with the appropriate paperwork), don’t forget you’ll need (possibly) more life insurance so stop with the hookers and blow now to get them out of your system, and remember to remember the DEPOSIT which nobody mentioned to us till it was time to write a fat cheque as a sign of good will…
Happy hunting! Oh, and whatever you do, don’t think about what the mortgage will have cost you when you are all done paying it. That amount will be enough to make you want to keep renting. :)
Careful of the low interest rate thing. When your 5 year mortgage rate is due to be renewed, the rate could be higher and be a financial strain. It’s already expected that in 4-5 years this will happen and another bubble of homeowners will be forced to sell (those who were only able to afford because of the low interest rate.)
I did a rent/buy calculator and based on my low rent vs typical Victoria condo mortgage cost, I’d make more money in 25 years by investing the difference than I would by paying interest on the mortgage and earning equity (plus property value appreciation). Still seems appealing tho! :)
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Kelli is right.
You’d make a mint.
One word of caution – banks, especially ones in the Vancouver area, will approve you for mortgage amounts that are wildly inappropriate. So you CAN mortgage yourself to your eyeballs, even though most people (other than bankers and realtors) would suggest that that is not the thing to do.
I would not stress about buying right this moment. HST only applies to new construction (which might turn off enough people from new stuff that the price of new stuff comes down proportionally, who knows)…. so worst case scenario, you buy not-brand-new but you can buy when you have your down payment saved up.
In any case – have fun!