A few months ago when I wrote about being a property virgin and looking at our first potential home to buy, I said the two main reasons for wanting to buy a house are the desire for more space (for the million babies we plan on having) and/or for an investment. However, I consciously omitted what is most likely the most significant reason of all to buy a home: stability.
I held off on mentioning stability as a driving force to becoming a land baron because I felt it was a part of a much bigger discussion on how I am feeling torn between wanting the stability of a home, and still wanting my financial freedom. Of course I want to lay down roots and build a stable, crazy-landlord-free home for my family, but I also covet and appreciate my ability to take a job because I am passionate about it, and not necessarily for the money (or the stable pay cheque that will be needed for the next 25 years). As much fun as it is to dream about buying a home right now, am I willing to give that freedom up?
SO first, to investigate what kind of financial commitment we’d be making, we met with the bank. And I promised to share anything I learned about this frightening and mysterious process with the Grown-Up Party community, so here is what I found out:
[sidenote: if your down payment is under 20%, you have to buy “default insurance”, which gets added to your mortgage (so to be paid over 25 years) and ultimately just raises the price of the home. And of course the more you can have for your down payment the cheaper the house and monthly payments will be because the default insurance premium will go down.]
For a $750,000 home with a down payment of $50,000:
– default insurance is $19,250.00 (so house price becomes $769,250)
– with a mortgage rate of 2.89 (+ property tax of roughly $300 a month), monthly payments = $3,663.36
– Alternatively with a mortgage rate of 5.14 (+ property tax of roughly $300 a month), monthly payments = $4,700
BALLPARK: $4,000 a month
For a $650,000 home with a down payment of $50,000:
– with a mortgage rate of 3.19, monthly payments = $2,977.00
BALLPARK: $3,000 a month
For a $350,000 home with a down payment of $50,000:
– default insurance is $4,987.50 (so house price becomes $354,987.50)
– with a mortgage rate of 3.19 (+ strata fees of roughly $300 a month), monthly payments = $1,600.00
BALLPARK: Under $2,000 a month
I know these are not all the costs when purchasing a home that you have to think of. And whether you are buying a condo or a house, as this CBC analysis points out (passed on from awesome pal Amanda!), either way ideally you need a solid down payment to avoid the default insurance. And I know you can get a lower (or be stuck with a higher) mortgage payment. And I want to make it clear that these figures do not mean we have the money to make this happen (right now at least). But if we just look at these as rough, ballpark figures, basically buying a condo could be equivalent to paying rent, while buying a small $750,000 in Vancouver (if you can find one) would be a huge financial stretch, and ultimately taking away lots of financial freedom, and replacing it with lots of financial stress. [No surprise here I know].
But this is where my next big question comes in: Is buying a condo/apartment the middle ground of that stability vs. freedom conundrum, and is it a necessary step before buying a home?
Personally I have been resisting the option of buying a condo/apartment for fear of not being able to sell it once we are ready to buy a house, but is buying a condo the balance I need of stability and freedom? Of owning our own place, but still being free to take a job for passion or not feeling stuck in a job if I want to switch careers or take some time off? And perhaps more importantly, is this how everyone ultimately gets to buying a house and I am just unaware that this is a necessary step?
I would LOVE to hear your thoughts. And as I become more open to the condo possibility (while still looking at Vancouver homes just to keep our options open), I again promise to share anything I learn about condo/townhouse/apartment buying here, and I already have LOADS more questions I plan on asking: Is it hard to sell an apartment? Should we look at buying a used apartment, or are those even harder to sell?
So stay tuned for more tales of the property virgins.
PS. Do you walk around Vancouver at night and look at homes/condos/sweet pads that people own and wonder “how did they buy that house!?” I DO!!!!! In fact it kind of walks the line of creepy. But I’ve decided that I am going to start getting to the bottom of those stories and share them here on Grown-Up Party. If you know someone with an especially sweet pad or home buying story, please let me know! I’d love to chat with them.