Part 2: First timers in marriage, moving and money
This post is part 2 of a 3 part series, where I share some key moments on my journey to financial freedom. It was originally featured in Notes & Stories Magazine on November 14, 2018.
Getting my personal debt under control was the best decision of my life. It was hard work to pay off $12,000 of debt in 6 months but it was absolutely worth it!
Now I knew how to accumulate cash in the bank for my future. Practicing controlling my spending and achieving a big goal left me feeling happy and confident.
I didn’t know what was next but I was open and ready!
The Next Big Thing
My next big money goal was to stop renting and invest in real estate. At the time, I had just conquered $12,000 of debt and that seemed like a lot of money. I didn’t really believe it was possible to find somewhere affordable or save a downpayment. We live in the most expensive real estate market in Canada, and the media is constantly talking about housing. In Vancouver, friends and strangers discuss price fluctuations and interest rates. The general buzz is about getting in and how much it all costs.
Do your research & know what you want
Our friends who are realtors kept us in the loop about prices in different areas of town. We soon learned that even in the craziest markets, there are affordable options. To find them you have to be prepared to wait for the opportunity and have cash in the bank for when you decide to execute.
We did our research and were clear on our goals: we wanted affordable mortgage payments in an up and coming area that catered to how we spend our downtime.
My then boyfriend, now husband, is an avid mountain biker and loves the North Shore so when our friend told him about a condo development close to the mountains, we had to check it out.
By winter 2015, just a few months after I repaid my debt and started building my cash reserve, we decided to get married and purchase a pre-sale condominium in a family-friendly area of North Vancouver.
We’ll save the wedding details for another article… for now let’s talk about the condo.
Dig into the details
This wouldn’t be an article from The Money Edit without the nitty gritty details of how we made our first home purchase happen.
Based on mortgage payments and money down we knew we could afford a property in the range of $380K-$420K.
I used www.ratehub.com to understand the rules of purchasing a home in Canada. As first time homebuyers in British Columbia, we were exempt from the property transfer tax and eligible for the RRSP Home Buyers Plan. The rate hub mortgage calculator helped me figure out how much we wanted to put down and what our resulting monthly payment would be.
The condo we purchased was $399,999 brand new, and buying new means you have to pay GST. The total purchase price was $419,998.95. In order to avoid paying the costly CMHC insurance, we knew we wanted to make a 20% down payment of $84,000.
I calculated that with 20% down, paying 2.25% interest amortized over 30 years (those were the days!), our monthly payment would be $1283. This plus our strata fee of $239/month, the minimum price of this new home would be $1522/month.
A big improvement
This was about the same price as the rent we were paying to live in a silverfish ridden, 50 year old, 3 story walk up in Kitsilano. We knew the condo in North Vancouver was the right price and right area to build our future.
18 months to save and 25% down
We purchased the pre-sale condo in February 2015 with an initial down payment of $40,000 (an advance payment of 10% was required by the developer). The condo would be ready some time in Fall 2016 and at that point we could top up our down payment before assuming the mortgage. We had around 18 months to save another $44,000.
Getting the down payment together took the same grit and determination as paying off debt.
We combined finances and looked at our individual investments and money in registered accounts. We maximized tax returns and saved every penny. Our Tangerine savings account paid 2-3% interest throughout the 18 months of saving (did I mention it's easy to bank for free?!). We examined our cash flow and made sure that we stuck to our monthly savings goals. We worked our side hustles, postponed trips and lived simply. There are too many details to share here, but if you want to know more keep reading The Money Edit blog.
By Fall 2016, we had saved another $65,000 toward our down payment, for a total of $105,000 toward our mortgage.
So that’s the story of how we bought our first property. We learned:
- Money doesn’t have to be complex. It is just simple math!
- If the numbers work and the product (or condo in this case) is sound, go for it.
- Life is a fun adventure! Combining forces with someone who deeply believes in the same things that you do makes for a great ride.
Next on our list was securing passive income. Stay tuned for the details in a few weeks.