Realestate, Mortgage and Home owners discussion

[supersuk]

Since I'm gonna start looking for my own place. Probably others as well.

I thought some of you might have a large pool of wealth to share.
Just general discussions Q&A's etc.

I'll start off by asking, what percent of my NET income should go towards my mortgage while still maintaining a somewhat comfortable life style? Keep in mind, I dont buy alot of things, am somewhat fiscally responsible, occasional partying, no wife or children.

[geForce]

The rule of thumb is 28% of your gross monthly income to go towards mortgage. That's JUST mortgage though.
I know you say you don't spend much money right now, but that's because you're blessed with living with your parents right now. You have to keep in mind other expenses as well, like utilities, groceries, insurance, etc. These expenses go up or down depending on your lifestyle as well.

Utilities include things like:

Electricity - for a smaller apartment, could average about $15-25/month
Gas (if applicable) - another $15-25/month
Cable/Internet - if you watch TV, could be up to around $50-75/month
Phone - probably will just be your cell phone... $60/month with your data plan?

You also own a car, which I don't know if it's fully paid off or not, but you'll have to account for car payments, gas and car insurance too.

Also, if you're looking for an apartment or condo of any sorts, there will be strata fees. Depends on size of the apartment plus age of the building, but is usually around 20-25 cents per square foot, which for a 500 square foot 1 bedroom apartment, it is $125 per month approx.

I forgot which bank it is that does this, but they have a mortgage savings plan that will let you put aside each month an amount that will be equal to your expected mortgage payments. This goes towards your future down payment and plus it will give you a good idea of what it feels like to live with having to pay mortgage payments each month.

[supersuk]

With all those in mind, I still dont spend that much money.

So 28% of gross will still be living somewhat comfortably? Thats 28% towards my mortgage or towards strata fee, insurance and etc also?

[geForce]

[supersuk]

The more I crunch the numbers, the more depressed I get.

[nature boy]

[supersuk]

The sad part is that I'm probably going to pay more in interest than principal after the whole term. Unless your place doubles in price in your lifetime, you've lost money.

How do average single people afford a place without a 30-35 year amortization. I dont make alot, just an average middle class income range (looked up stats Can lol) and I'm finding the numbers a bit tough...

Looks like i'll either need one or a combination of the following
1.) a fat pay raise
2.) long term mortgage
3.) bigger down payment (which I could of had by now if I didn't go on my trip and bought a cheaper car or if my parents didn't charge me rent)
4.) find a place in Slurry or somewhere else further away from Vancouver.
5.) another bubble burst
6.) get married and have a 2nd income, but that would defeat the purpose of having my own personal shagpad for a few years..

On the bright side, I am somewhat still young and my income will probably still increase in the coming years. So what is now 30% of my gross income might be only 20-25% of gross in 5-10 years.





Next question, at the current state of the market right now, is it more likely that I will lowball the listing price, give an offer at the listing price or assume multiple offers above listing price?

[geForce]

Haha, it is pretty depressing if you think about that way, eh?
Long term mortgages are pretty risky.. something really to think about. I'm sure you've crunched the numbers on that option already.

Any mortgage, you will end up paying tons in interest. Banks aren't out there to help you.. they're out there to make money off of you. It's just a matter of living in that happy medium of finding a way to pay the least amount of interest possible and the banks being happy with that amount they're making off of you.

At your age though, keep in mind that you won't be keeping your place for a very long time. You will probably live at your first place for 5 or 6 years at most (around the time your first mortgage term is up). Then you'll have accumulated some capital from that as well as from any hopeful profit from a price increase in your property. Then you'll move onto your next property with more downpayment.

[supersuk]

How is it risky? In case rates soar for long periods?

I'm not looking to flip places every few years, I just want a domocile of my own where I can walk around naked, have people over with akward intrusions from the 'folks', set the temperature to my own liking and most importantly not be waken up durring my naps or at wierd hours. Numbers are numbers, and I dont have the luxury of enough capital for taking a short mortgage. My income in the deciding factor.

lol, 'hopeful'. Property value has to rise alot because you're still paying mostly principal early in your mortgage. So say you pay 100k total in your first 5 years of your term then decide to flip it, only 18k of that is yours and 81k of it is purely going towards interest. Meaning your property has to go up at least 81k for you to break even (not even counting opportunity cost against putting money into other investments).
Its nearly impossible to make a profit early on if you decide to sell it and buy a bigger place, its gonna be a loss.

If I could wait, I'd buy a place, maybe even a shorter term morgage (which would mean higher term payments) then rent it out for 5-10 years (to pay for the higher payments) then move in afterwards when most of the payments is actually going towards my principal. I was hoping to buy something before the market picks up again but realistically I dont think its wise for my financial situation to get anything untill another 3-4 years of saving. Who knows, by then renting may be the only option like in New York or something.


damned if you do, damned if you dont.

[tiger]

to keep the math easier, 30% of gross income. Don't forget to budget for RRSP, savings, and emergency spending. Those are 3 distinct catagories that should not be mixed. RRSP for retirement, Savings for future necessary purchases, emergency funds for unexpected bills.

If in a few years you haven't had many emergencies or if you got your furniture/TV cheap, you can pay down your mortgage.

35 year mortgages are not recommended unless you get a really long term low rate. Always try to get out of your mortgage quick. The quicker, the less interest.

Typically, the 1st 5 years of your mortgage only covers your mortgage payments. You don't cut into your principle until then. (but it depends on the interest rate). If you can live at home rent free (or at some reduced amount), and can rent the place out so it pretty much covers the mortgage, that helps a lot. You can even double down on your mortgage payments to reduce the effects of compound interest.

Because we rented our basement and were agressive with our payments, most of the interest on our mortgage was covered by rent.

Unfortunately, the biggest dent you can make on your mortgage is a larger downpayment. Which is why I advocate saving everything you have for that down payment.

As you mentioned earlier, the interest will be more than the principle over the entire term of the mortgage. So for every $1 you borrow, you pay back $2. So for every $1 you don't borrow, you save $1. So that shirt you got for 10% off, really cost you twice as much, and has no re-sale value.

I'm glad you are asking these questions, so you can see with both eyes wide open what is happening to your hard earned money. There may have been some purchases that you made in the past that you will come to regret. Learn from them. (glad to see your item #3). Many people don't want to look back at past mistakes b/c it makes them feel stupid. But would you rather keep making those mistakes?

If you are interested in a townhouse in Surrey, I still have that contact. They are doing another site, but it's been selling quick and prices have already jumped $20k. I don't know if I can still get any deals for you. The site is on 84th & 164th. was 320k a unit, now 340.

[tiger]

I had posted an in-depth ramble about stuff like this when Dunc was considering a new vehicle.

viewtopic.php?f=7&t=13&start=15

[nature boy]

i wouldn't recommend buying to flip, at least not in this market (so i'm told).

i remember reading this article on first time buyers, and how many people who are buying now have gotten used to living with their parents in a large(ish) house. and so they go out with a twinkle in their eye wanting nothing less than what their parents have now. but they (or i should say we) forget that our parents probably started off in a rental 1 bedroom 1 bath and no kitchen and no tv. i sometimes think about how i could have had a decent house if i saved up my money and bought wisely when i could have (but that's ok, life experience has value too, a house isn't everything).

i honestly don't think there's any shame in renting (maybe because that's all i can afford with one income and two dependents lol), and it might be wise to do so if you're looking at a short term thing (shagpad), because in renting you don't have to worry about property tax, maintenance, and all that other crap that comes with owning. you just pay rent and call your landlord when you've clogged the toilet yet again.

of course, if you can i'd say stay with your parents and save up. but if you need to get out of the house now for sanity reasons, then i'd say renting is the way to go.

[supersuk]

[tiger]

if you're cool with that, it's all good. It just that some people realize after that it wasn't worth it, and then live in denial trying to justify it so they won't feel bad, rather than learning from it.

[[JT]]