2695 replies to this topic

[FirstTimeHomeCrier]

Anyone without an account in the Bank of Mom and Dad is going to find that 20% difficult to come by. Don't forget many of us are paying roughly half our after-tax income in rent, and we need to eat, use electricity, have a working phone, etc. By the time we can get the $40-60k down payment needed for a decent one-bedroom condo in today's market, it's 5-10 years in the future and prices have somehow tripled.

[jonny]

Geez, you get an answer to your darn question, one that you even scripted yourself, and you still can't let it die.

 

I'll stick with $3,200 bi-weekly, because that better aligns with our current bi-weekly mortgage. Assuming I have no down payment saved, $600k mortgage at the stress test of 4.54% over 30 years is $1,519 every two weeks. Add in other housing costs and we're spending over 50% of our take home on housing.

 

That is not sound fiscal management. There is no need for re-prioritization, when the priority is to have a solid bank account. I have no desire to be house poor when I've got kids to worry about down the road.

 

How could you have no down payments saved on $6,400 of monthly take home pay? That's crazy. If you have no down payment saved, you shouldn't be thinking about home ownership and need to build a budget ASAP.

 

If we had $6,400k in monthly take home pay, which we will hopefully achieve in a year when my wife starts working again, we'd be saving over $2k a month. That will grow into a sizable down payment for our next home. Let's say we save $2k per month. At an 8.5% annualized stock market rate of return, we'll have about $150k saved up within 5 years, which equates to 20% on a $750k home.

 

For all the griping about interest rates, when they do go up, they will not go up quickly. The Bank of Canada moves in increments of 0.25% here and there, and of course the BoC is acutely aware of the profound effects increasing interest rates would have on the real estate market. I would imagine that any increase will be at most 1% over an entire year, and most mortgage holders have fixed rate mortgages over many year terms so these effects won't hit everybody all at once.

 

Cratered oil prices seem to have had almost no effect in parts of Canada not within Alberta. The real estate market is more likely to falter due to a totally unrelated macroeconomic shock, like the tech bubble burst of the late 90's, at which point you can bet that interest rates would again be low, low, low to encourage consumption. 

[shoeflack]

How could you have no down payments saved on $6,400 of monthly take home pay? That's crazy. If you have no down payment saved, you shouldn't be thinking about home ownership and need to build a budget ASAP.

 

It was a hypothetical situation. I'm already a home owner who made a purchase with 20% down.

[jonny]

Anyone without an account in the Bank of Mom and Dad is going to find that 20% difficult to come by. Don't forget many of us are paying roughly half our after-tax income in rent, and we need to eat, use electricity, have a working phone, etc. By the time we can get the $40-60k down payment needed for a decent one-bedroom condo in today's market, it's 5-10 years in the future and prices have somehow tripled.

 

I don't want to get too far into your business, but what I did was live with roommates for 5+ years longer than I had to to save money. That easily saved me $50k over the years, along with other savings and investments, which we are now using to purchase our first condo.

 

Saving money is hard. Do you have a budget? Do you save? How much do you save per month? What can you cut out? Are you willing to eat ramen noodles twice a week instead of eating out? How do you invest that money that you saved? These are all things to consider.

 

Prices will not triple in 5-10 years. Historically in the Victoria market, prices spike, drop a bit and then plateau for many years. The average condo price in Victoria from Jan 2007 to Jan 2017 went from $325k to $370k. 

 

http://www.vreb.org/...ical-statistics

[jonny]

It was a hypothetical situation. I'm already a home owner who made a purchase with 20% down.

 

I find that to be an odd hypothetical not even worth of consideration.

 

I'd say, if you can't even put 10% or say a minimum of 30 grand down, forget about buying and focus on saving.

[Mike K.]

That is not sound fiscal management. There is no need for re-prioritization, when the priority is to have a solid bank account. I have no desire to be house poor when I've got kids to worry about down the road.

 

Ok, hold on. What's the issue here? You don't want to buy a house, but you want to buy a house?

 

If you can't make ends meet the way you'd like with $85k in annual take-home post-tax, owning a house may not be the best move for you, period.

 

If a one-bedroom condo is putting pressure on your finances a house would be financially crippling even if it was valued at far below what the current market dictates.

[shoeflack]

Ok, hold on. What's the issue here? You don't want to buy a house, but you want to buy a house?

 

If you can't make ends meet the way you'd like with $85k in annual take-home post-tax, owning a house may not be the best move for you, period.

 

If a one-bedroom condo is putting pressure on your finances a house would be financially crippling even if it was valued at far below what the current market dictates.

 

One's financial situation changes as time goes on, right? So that equity I've built is worth something, or the two years left on that student loan opens up more cash flow down the road, or that car payment ceases to exist.

 

You need to consider both the present and the future when making large purchases like real estate. That we can all agree on.

 

So while today a house (let's not say house, let's say a certain price range) is not in the cards, that will change in x years because other finances have changed.

 

I think this is the challenge a lot of first time home buyers face. They (myself among them) are trying to get rid of those student loans, start saving for retirement...all of those things while at the same time trying to build a down payment. So just getting into the market is a challenge, but once you're in, there's more flexibility to move within in.

[shoeflack]

Ok, hold on. What's the issue here? You don't want to buy a house, but you want to buy a house?

 

If you can't make ends meet the way you'd like with $85k in annual take-home post-tax, owning a house may not be the best move for you, period.

 

If a one-bedroom condo is putting pressure on your finances a house would be financially crippling even if it was valued at far below what the current market dictates.

 

I think the other point here, going back to your original comment on what you could be approved for, is that the goal should be for your home to not be putting pressure on your finances. That's my school of thought anyways. The more room there is to save (i.e.; buying within your means, not stretching to hit that "you've been approved for" number), the more room there is to grow your portfolio as the years go on.

[Mike K.]

Yes, once you're in you're in, for sure.

 

But I think what we've successfully done here is dissect the situation for what it really is. Student loans, car loans, hobbies, travel, etc., all impact the bottom line but the real-estate market has far less to do with affordability if the rest of one's finances are not in order.

 

With $85k post-tax, provided you play your cards right once your loans are taken care of, you could easily afford a $650,000 mortgage amortized over 30-years with today's ultra-low interest rates. With a $100,000 down payment, you could be looking at a pretty nice starter home in the City of Victoria/Esquimalt or a pretty lux new-build two-bedroom+plus den condo should you wish to go that route.

[dasmo]

Yes, once you're in you're in, for sure.

 

But I think what we've successfully done here is dissect the situation for what it really is. Student loans, car loans, hobbies, travel, etc., all impact the bottom line but the real-estate market has far less to do with affordability if the rest of one's finances are not in order.

 

With $85k post-tax, provided you play your cards right once your loans are taken care of, you could easily afford a $650,000 mortgage amortized over 30-years with today's ultra-low interest rates. With a $100,000 down payment, you could be looking at a pretty nice starter home in the City of Victoria/Esquimalt or a pretty lux new-build two-bedroom+plus den condo should you wish to go that route.

You will need $125k down payment and then just your mortgage payments will $2800. Add on another $400/month for property taxes, $400/month for vehicle expenses and we are at $3600/month. Not including any other debt servicing, savings or emergency money to deal with the occasional $10,000 meal your house needs.  I wouldn't call half of ones total take home pay at record low interest rates "easily" affordable. More like "Barely" affordable. 

[Mike K.]

Mortgage payments on $600k at 30-years with 2.3% will be about $2,500.

Even if the monthly home expense is $3,500, that still leaves $3,500 every single month.

But yeah, if $3,500 per month is too much, go for a townhome or a house in Langford.

[FirstTimeHomeCrier]

I don't want to get too far into your business, but what I did was live with roommates for 5+ years longer than I had to to save money. That easily saved me $50k over the years, along with other savings and investments, which we are now using to purchase our first condo.

 

Saving money is hard. Do you have a budget? Do you save? How much do you save per month? What can you cut out? Are you willing to eat ramen noodles twice a week instead of eating out? How do you invest that money that you saved? These are all things to consider.

 

Prices will not triple in 5-10 years. Historically in the Victoria market, prices spike, drop a bit and then plateau for many years. The average condo price in Victoria from Jan 2007 to Jan 2017 went from $325k to $370k. 

 

http://www.vreb.org/...ical-statistics

 

On the other hand, the average price for condos went from about $150k to $325k between 2000 and 2010. Tripled was an exaggeration, but clearly prices can double in a decade. People keep saying the market is going to slow down, but assessments for single family homes went up something like 30% over a single year. I'm not feeling optimistic about prices in the near future.

 

I do manage to save money. Admittedly, I could spend less on restaurants, work clothes, and entertainment. But generally, my expenses are fairly low. I am debt-free, bike to work as often as I can, buy my groceries on sale or in bulk. Our idea of an expensive annual vacation is a roadtrip with a tent, maybe one night in a hotel for a treat. I'm definitely not buying $10 coffees every morning, spending my Friday nights racking up a bar tab, or planning a trip to an all-inclusive resort. I try to find a balance that allows me to be happy.

 

It's weird that we try to normalize living off ramen noodles and sharing a one-bedroom apartment with three roommates as an essential rite of passage. I'm part of the middle class, except that I don't have access to a second income. I have economic value in this community, so why am I being told that I should find another community or live miserably if I want to have a permanent home?

[VicHockeyFan]

It's weird that we try to normalize living off ramen noodles and sharing a one-bedroom apartment with three roommates as an essential rite of passage. I'm part of the middle class, except that I don't have access to a second income. I have economic value in this community, so why am I being told that I should find another community or live miserably if I want to have a permanent home?

 

A couple things.  What do you mean you do not have access to a second income?  Does your current employer forbid you having another job or side gig?   That would be rare.

 

You simply do not have enough "economic value" to be living in the core.  Just like most of us could never live in Palo Alto, or New York.  So be it.  There are lots of other places to live, even nearby.

[FirstTimeHomeCrier]

A couple things.  What do you mean you do not have access to a second income?  Does your current employer forbid you having another job or side gig?   That would be rare.

 

You simply do not have enough "economic value" to be living in the core.  Just like most of us could never live in Palo Alto, or New York.  So be it.  There are lots of other places to live, even nearby.

 

As in I'm not married or common law with a partner making a similar income.

 

So the middle class and skilled workers aren't valuable enough to live in the place they work? If everyone in my position moves to Prince George to buy a house, who the heck is going to do our jobs?

[nerka]

It's weird that we try to normalize living off ramen noodles and sharing a one-bedroom apartment with three roommates as an essential rite of passage. I'm part of the middle class, except that I don't have access to a second income. I have economic value in this community, so why am I being told that I should find another community or live miserably if I want to have a permanent home?

I have loads and loads of sympathy for first time buyers. There has not been another time in recent history worse for first time buyers in many BC communities.

 

That said a bit of sacrifice is not so unreasonable.  I know my parents had to sacrifice starting out, even though they got some family help. Other families I know had to sacrifice quite a bit more. This is not some crazy new thing! The specifics of ramen noodles are not important, the key is being able to find a time in your life when you can live significantly below your means for a while and build up some savings

[dasmo]

Mortgage payments on $600k at 30-years with 2.3% will be about $2,500.

Even if the monthly home expense is $3,500, that still leaves $3,500 every single month.

But yeah, if $3,500 per month is too much, go for a townhome or a house in Langford.

That was $3500 with only property tax and one vehicle so you can get to your job. It was without other home expenses. Add in day care, a second car because we need two jobs and this house is in Langford, so we are now at $5000/month. This doesn't include any student loans, savings, food, clothing, insurance, emergency fund, kid stuff, utilities, household maintenance or entertainment.

[dasmo]

Sure sacrifice is necessary. I sacrificed by living with a roommate till I was in my thirties. But then a buying opportunity came along in the early 2000's and I was ready for it. Now is about the furthest from a buying opportunity in history.

[LeoVictoria]

Oh yeah, I get ya, for sure.

 

But but but, we're in the situation we're in. All of us. And sometimes it does rub us all the wrong way that we can't live in Vic West or Fernwood or Fairfield, but there are great communities beyond the core that are well within what we can afford.

 

Failing that, the only other option is to live in a condo (older is definitely more affordable) or a townhome. Unfortunately a yard, a 2,000 square foot home and walking distance to work now costs $700k-to-$1-million in the City of Victoria and periphery areas.

 

I like this new Mike.  A very stoic approach to life.    

 

The housing market is super crappy right now.  But what to do about it?   Personally I advocate really looking hard at other markets.   Victoria is not the be-all end all of places, and I don't think it is worth chaining yourself to the size of mortgage that a bank would give you.  We just saw in the news how the banks are only out to pad their bottom line and will happily sell your a mortgage that will make you completely miserable to meet their sales targets.   

[jonny]

OIt's weird that we try to normalize living off ramen noodles and sharing a one-bedroom apartment with three roommates as an essential rite of passage. I'm part of the middle class, except that I don't have access to a second income. I have economic value in this community, so why am I being told that I should find another community or live miserably if I want to have a permanent home?

 

OK, this is not what I or anybody has said. You seem to be asking for advice, which people have kindly offered. 

 

This is a market where sacrifice is necessary if you want to build up savings rapidly. The average Fairfield SFH buyer is probably older and wealthy or a married couple who is making $200k before taxes.

 

Why do you think so many people live in Sooke, Shawnigan, Cobble Hill, Mill Bay, Central Saanich, Langford...even Duncan and Nanaimo and commute into work? This isn't a new problem! You should check out London if you want to see un-affordable...good lord!

 

I lived with roommates and paid $500-700/mo in rent for 6 years when I could have afforded a $1,500/mo downtown apartment. And no, there wasn't three of us to a bedroom. I'd suggest that the biggest thing you can do to improve your prospects is to increase your savings and invest aggressively to get that money working for you.

 

A buddy of mine moved back in with his parents for 5 years and saved a ton of money. Two years ago he bought a nice home in Gordon Head with a basement suite.

 

Some friends of ours, oh boy, the wife worked at a couple of local bars two nights a week and made a killing on tips on top of working full time as a hair stylist. The husband did the two week on, two week off thing in Alberta for a while. They recently bought a $450k townhouse.

[LeoVictoria]

20% opens up the world of lending to you, literally. Anyone making a purchase should strive to put down that 20%.

It's hard, for sure, but the opportunity to have a 30-year mortgage should you so choose is so, so worth it.

 

30 year mortgage is great!  Too bad it is going the way of the dodo.  

 

How did you find getting approved as self-employed?  Difficult?