Hopeful First Time Home Buyer….eventually!

Early Saturday afternoon, I went to the bank and met a young man to discuss opening an RRSP. I told him that I wanted to start saving pronto for an early retirement and he mentioned first time housebuying.  Since I’m hoping that we can buy a house in two years, I decided to also open this RRSP for that purpose.

Then he asked how much I wanted to put away each month into this account and I said $50.After shaking hands and leaving, I felt all grown up and proud of myself for finally creating this account.

Then I got home and looked at the real estate ads. $300, 000 seems to be the ‘magic’ number that many houses sell for nowadays! But there are some that hover up to the 400-600K range! 600K! How the hell can anyone afford that?!  Now I’m not an idiot, I know houses aren’t cheap and I had told Mr. Banker that once Hubby starts working, I will be increasing my monthly contributions. But at those prices, I might as well start looking into organized crime!

After browsing the houses for sale online, I called my other investment specialists-my parents-and discussed the situation with my mom. She seemed confident that once I increase my monthly contributions, that we could still buy a house fairly soon. Then she took a stroll down memory lane and said that what she and my dad paid for the house where I spent the better half of my childhood in, was $50,000 dollars waaay back in the 80s!

So basically I have to save up to around what she paid for her entire mortgage just as a downpayment! Insane!

What about you readers? Do you rent or own? How did you scramble together the money for a downpayment or did you just forego that entirely?


22 thoughts on “Hopeful First Time Home Buyer….eventually!

  1. XUP

    I have absolutely no desire to own a home. People say you throw your money away on rent, but the fact is you don’t throw any more money away on rent than you do on mortgage interests, maintenance, insurance, taxes, upkeep and all the other little extras that go with home ownership that you never recoup when selling your home. I see no reason to tie myself to a house and constantly be worrying if the roof is going to blow off or the furnace is going to blow up; or to spend my weekends painting, repairing or doing yard when I could be off having fun. I don’t want to get up half an hour earlier every day in the winter to shovel snow. And what if my neighbours are horrid? I’m stuck with them. I love the freedom of renting. One payment a month and all the headaches are someone else’s. And if I decide to move on, I give notice and pack up and go. I don’t need any more space that I now have. I don’t need a back yard — or if I really want one I can rent a garden apartment. As for the investment opportunities home ownership promises – when you take all the extra expenses into consideration I don’t think you’re much further ahead than if you rent and put money into a high-interest fund every month. Some financial people in fact believe that unless you can pay cash for a house or put down at least a 50% downpayment you’re much better off renting. But then again, people do crave that sense of ownership….

  2. Lynn

    Our first home was a modest townhome in the burbs and we managed the downpayment and payments alright. Once we decided for sure to buy, we went into intense saving mode — no dinners out, no trips, saving every penny we could. We bought a new house, so once the papers were signed we still had six months to save up, which really helped. We ended up reaching our downpayment goal — I think it was around 15% — and it was all good.

    Good luck, I know you can do it!

  3. quackattack

    Don’t look at Vancouver house prices … now that will REALLY terrify you.

    … I am terrified.


  4. Pauline Post author

    XUP-You raise some very valid points, owning a house certainly comes with lots of headaches and expenses, apart from the montly mortgage payments. But I still want to own so I can have the power to create the kind of home I want (ie. renovations, etc), without having to ‘ask permission’ from someone else first. Plus, I want to have a nice front and backyard and most apartments obviously don’t have those.
    I’m not sure which planet these ‘financial people’ that you speak of live on, because most of us can barely save up for 10-15% downpayment! But that shouldn’t mean that all of us shouldn’t own.
    Lynn-How did you do it? Being so disciplined? I really NEED some kind of vacation every year, nothing necessarily extravagant but I like to get away from Ottawa for a week or so. As for eating out…yes, admittedly we could probably do that less often.
    That is awesome that you saved up and gives me hope that I can do the same!
    Quackattack-LOL! Hubby looked at some ads while we were in Vancouver just for fun and yep, $2-3 million was the listing price for some of the houses. Awful!
    I think if we lived in BC, we would buy somewhere outside of Vancouver and you might have to do the same one day.:)

  5. quackattack

    Oh, I’m already contemplating my escape … could come much sooner than anyone would expect.
    Stay tuned! 😛

  6. J.

    We got very lucky with our down payment. But before that happen, we were going to borrow some money from our parents and give them the interest, rather than the bank.

    We also got a little creative. Instead of buying a single family home, we bought an investment property. Something that would help us pay our mortgage.

    I would recommend looking into a duplex. There is something to be said for investment properties.

  7. Kate

    My husband and I rented in Chicago for seven years, then bought a house about 60 miles from the city because that’s the only place that home prices/property taxes were reasonable enough for us. I suppose we could have bought closer to the city, but we would have been forced to purchase something smaller for a (much) larger mortgage. Also, my dad gave us a nice chunk of change to add to our down payment. He’s of the mind that I’d get the money anyway when he dies, so he wanted to give it to us when we actually needed it.

  8. famethrowa

    I started saving for a house early and was super diligent about putting away as much as I could, even if it meant sacrificing some fun.

    I did use the home buyer’s plan and used the money in my RRSP to put toward my down payment, but I wasn’t able to put the recommended 25% down. Still, I jumped in anyway.

    I gave up a lot of what I wanted in a house to start with something I could afford. I didn’t want to get in over my head.

    If you’re willing to sacrifice some features, you can get something for under $200K. My condo was inside the greenbelt (near Woodroffe and Hunt Club), 1350 square feet, and 3 bedrooms, and I’ll be selling it this year for under $175,000.

    Now I’m going back to renting with Mr. Chatty. We can’t afford what we want, and Mr. Chatty is not willing to sacrifice the things he wants. So this time I’ll be saving as much as I can, but I’m still doubtful that we’ll buy something. We may rent forever instead, which isn’t terrible. It’ll allow us to save more for retirement and have some fun perks like traveling.

  9. Bueberry

    For my first house, I scraped up the minimum down payment (the price was $9,000 – and that was the price of the house!), and from there, sold for profit, bought another one, going through that cycle a few times. After the first 2 houses, I had the purchasing help of an added spouse’s income. Now on house #6. We’ve got pretty modest income now, and would not be able to swing the payments on a 300K house, but we do have a decent-sized 3 bdrm, 2.5 bath in the ‘burbs.

    My experience is that someone, during the process, has always counseled me that I could afford a lot more house than *I* thought I could afford – and I’ve been glad I’ve followed my best judgment and not gotten in over my head (so far).

  10. green_grrl

    I second the earlier comments about investment properties. Our house (first and current) is a duplex. Buying a duplex doesn’t help much with getting a mortgage approved (the bank wouldn’t count the rental income we would receive into the income we already had). But it does mean that you can get a bigger mortgage than you would normally be comfortable with because you know you’ll have more income coming in. Especially helps if you have friends who want to rent. All our tenants have been friends and so far no problems. And we are going on 7 years now.

  11. lacochran

    Generally, you’re better off having 20% down to avoid having to pay MIP (mortgage insurance for the loaner) but there are creative financiers who will do an 80/10/10–first mortgage of 80%, second mortgage of 10% and 10% down payment–at least that’s how it’s worked out here. Might be worth investigating. We did an 80/10/10 with the 80 fixed and the 10 adjustable. We ramped up to completely pay off the 10 adjustable in a couple years so we didn’t have to worry about the rates changing dramatically on us.

  12. Nat

    My dad rather than pay for university put money into RRSPs for me. We used that for our downpayments on this house… I will admit it was an impulse buy.

    I am going to disagree with XUP. We bought 11 years ago, if we were to sell it right now (as is), we would get roughly 2.5 times what we paid for it. (Conservatively.) We pay less than we would to rent the same square footage in this area (and yes, with a yard). Not saying you will necessarily make money on property (and it’s really not why we bought.) But to say renting is more cost effective, in our case, simply isn’t true on all fronts.

  13. get off my lawn

    We are considering. We are both employed and make okay salaries. But even outside Vancouver, BC is just insane. No one is lowering prices, just hanging on until the market catches up, which it soon will if it hasn’t already.
    Even with the two incomes, $600K is just ridiculous. I can’t afford it either and might need to start looking outside B.C. I have no solutions.

  14. Pauline Post author

    Robin-Well I suppose thats better than no house at all right?
    Kate-The suburbs vs living closer to downtown issue is something I’ve been pondering. I’m tired of commuting for an hour both ways every day, but you are right, it might be the best option because otherwise you end up with a bigger mortgage and a smaller property. But I guess we’ll see. That’s very nice of your dad to give you that money and he is right in that you will probably need it more now then later.

  15. Pauline Post author

    Famethrowa-Yes sacrificing some features that we want might be necessary for our first home. Maybe your first house is like a stepping stone to what you eventually want in a house.
    Too bad we don’t have the money saved up yet, I might want to take a look at your condo thats for sale.:)
    Blueberry-$9000? Wow! I am jealous! It is important to have people who can give you unbiased advice. Hubby and I have family that are involved in fields like insurance, real estate and law, so we definitely consult with them over large purchases like these.:)

  16. Pauline Post author

    Green_grrl-That is great that you have found another solution to housebuying. Personally though, I don’t think I could handle tenants, even if they were my friends. Hubby and I like to just come home to each other and our pets after a long day. Tenants to me would just be another headache after a day of headaches.
    Lacochran-So its 20-25% now? Cripes!
    I’ve never heard of the 80/10/10 thing, but I’m still fairly new to real estate. 80% is a lot though!

  17. Pauline Post author

    Nat-Don’t even get me started on university tuition! How the hell people of our generation are supposed to pay exorbitant fees for education AND homes is beyond me! Anyways, your dad was smart to put that money into an RRSP. From what I hear, most people make back the purchase cost and then some when they sell their house. Also, when you rent, your rent money is gone, but when you buy, your monthly payments are going towards an investment. But I guess everyone is different and the freedom is what draws many people towards renting.
    Wandering Coyote-Unfortunately thats the case for many other people. Not right at all!
    Get off my lawn-B.C. is beautiful but I have no idea how anyone can afford to live there unless they are a rich celebrity. Makes Ontario look cheap!

  18. Pauline Post author

    Aandhari-So you’re terrified but you plan to do that before you hit 30? Well good on ya! I hope you’ve got a good amount saved up already!

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