Category Archives: property

Why I’m reducing my mortgage payments

One of the ideas I’ve been wrestling with for the last few months is my mortgage payments. I’m currently paying $660 bi-weekly, which is approximately $110 more than my minimum payment. I was happily paying this extra money until I realized that early retirement was still my number one financial goal. And if it’s the most important financial goal for me at the moment, why wasn’t my budget reflecting my priorities?

I thought about this for a long time, debated the merits of mortgage payments vs. RRSP with friends, tried to find money in my budget, got jealous because BF has a pension plan waiting for him in less than 20 years… and then I decided to make my move.

Related: What does retirement mean to you?

The extra $110 I’m putting towards my mortgage on a bi-weekly basis is gone. Instead, I will funnel the money into my RRSP/TFSA. That’s an extra $2,860 I can save in 2014, and will help me with my goal of saving at least $750/month towards retirement this year. With the tax refund I will receive, that money will go towards my mortgage as a lump sum payment.

I think this is an appropriate move because even with just my accelerated bi-weekly payments, I will be finished paying off my mortgage before my desired retirement age. And if that’s the case, it makes sense to put extra money into my retirement accounts now so that I can benefit from compound growth for the next 25+ years.

Take a look at the chart below. The dark blue represents accelerated bi-weekly payments without any additional prepayment options. That cut my original 30-year mortgage down by 4 years.

What I have been doing for the majority of last 2.5 years is what the orange represents: accelerated bi-weekly payments with an additional 20% prepayment. That knocked my mortgage down even further, to 19 years. It’s hard to give that up.

I’m anxious about reducing my mortgage payments, because my plan was always to pay down my mortgage as fast as possible. It doesn’t feel right to pay down debt at a slower rate than I’m capable of. But the past 2.5 years of home ownership have taught me a lot. Being a single homeowner is difficult. It’s hard to get ahead, and planning for the future is tough on a one-income household – especially a future that includes early retirement without a company pension. I’m comforted by the fact that my tax refunds will now go towards my mortgage, so at least I’ll continue to over contribute in some way. :) And, by changing the way I save my money, I believe I’m keeping myself on track to achieve my financial goals.

Have you ever had to choose between paying down a mortgage faster or contributing to retirement?

How I chose my first home

Some people say they knew exactly when they had found “The One” for them. They just got that giddy feeling inside of them. Everything about it was perfect. It was love at first sight.

Of course, I’m talking about buying your first home. :)

For me, I’ve always been a little bit indecisive when it comes to making big decisions, and buying my first home was no exception. I always thought I’d buy my first home with a partner (maybe a husband), but life doesn’t always work out the way you think it will. I had spent years saving up for my down payment, and I was ready to buy. I just needed to find “The One” for me.

Related: Two years of home ownership

Once I found a real estate agent that I wanted to work with, I came up with a wish list of things that I wanted for my first home:

  • Less than $280,000
  • One bedroom
  • Townhouse (separate entrance)
  • In-suite laundry
  • Parking spot
  • Open floor plan

My agent took me to see 11 different properties over two weekends. I saw everything from new builds with granite countertops and all the upgrades, to rundown units that needed a lot of TLC. In the end, the two that appealed to me were townhouses. I liked the idea of having a separate entrance – it felt like more of a home to me, instead of living in a condo building surrounded by neighbours.

The first townhouse was listed at $265,900. It was a one-bedroom home in a very desirable location, and ticked off all of the items on my wish list. The layout was a little quirky, but it had a nice front porch and was just steps away from a beautiful park.

Related: Take this quick and easy quiz to see if you’re ready to become a homeowner!

The second townhouse was $292,000. It was a two-bedroom home with a slightly more closed off floor plan, but closer to public transportation. It was a little more expensive than my wish list budget, but I could see how I would be happy there.

It was a really tough decision. I visited both places twice, and spent some time just hanging out. I took into consideration the layout of both places, as well as the space provided (the two-bedroom townhouse was approximately 250 sq. ft. bigger). Having a bigger home would mean it would be more appropriate for a longer period of my life. But did I really need the space?

Most importantly, I thought about the price. Was the second townhouse worth almost $30,000 more?

Related: How I saved for my down payment

Broken down over 25 or 30 years, it wasn’t a big difference in terms of monthly payments. But I needed to think about a bunch of different factors, such as the amount of interest paid over that time frame, how quickly it would take for me to pay off the mortgage, and how a larger monthly payment would affect my other life goals (such as retirement and travel).

In the end, I chose the one-bedroom townhouse because I knew I wouldn’t be able to fully utilize the space that a two-bedroom offered. My real estate agent and I were able to negotiate the price down to $259,900 – $6,000 off of the list price.

By choosing the cheaper option, I’m living in a nicer building complex, as well as saving on my mortgage, utility bills, future renovations, and the cost and energy of running a home. But perhaps most importantly, as a single homeowner, I have the security in knowing that I can comfortably afford my mortgage (even if interest rates rise) by myself.

Disclaimer: This post content is sponsored by Royal Bank of Canada, however the views and opinions expressed herein represent my own and not those of Royal Bank of Canada or any other party and do not constitute financial, legal or other advice.

Two years of home ownership

If you’ve got a ton of questions about buying your first home, you’re not alone. Join @RBC_Canada and a panel of 5 experts for the #FirstHome Twitter chat, on June 5th at 8 pm, EST. Get answers to your most burning questions — and a chance to win RBC Visa Gift Cards!

This month I celebrate two years of home ownership. It’s been an interesting (sometimes overwhelming) journey that required years of research and saving up to make sure I was ready.

Although home ownership has definitely not been easy, I feel like I made a smart, calculated decision that I’m still really happy about.

Here’s why:

My mortgage is comfortable

When I decided I was ready to stop renting and become a homeowner, I knew the bank would approve me for much more than I was comfortable spending. And when I was pre-approved for close to $300,000, I had already gone over my finances and decided that I wasn’t going to take on a mortgage of more than $250,000.

Related: Take this quick and easy quiz to see if you’re ready to become a homeowner!

No matter how stable you might think your life is, things can change. Case in point, eight months into my home ownership adventure, I was faced with the opportunity to live in Germany for what turned out to be almost 11 months. Because my townhouse complex does not allow rentals, if I had taken on a bigger mortgage, there’s no way I could have afforded to go.

I can still save for everything else in my life

I ended up taking out a mortgage of just over $238,000 – which meant my monthly mortgage payments are approximately $1,070/month. I decided to increase my payments by 20% and opted for a bi-weekly payment option in order to pay off my mortgage faster. Had I chosen a more expensive home, I wouldn’t have the wiggle room in my budget to save for retirement, travel frequently, and pay down my mortgage faster.

The place feels like a home

It can be so tempting to head to a home improvement store and go on a renovation and decorating spree. But if you haven’t set aside money in your home buying budget for improvements, it’s likely better to hold off until you can afford to pay for your purchases in cash.

Part of my strategy to becoming a first time homeowner was to be able to make renovations or buy furniture and decorations as soon as I moved in. I wanted it to feel like home – so I saved $4,500 and spent the entire amount on new floors, fresh paint, and furniture (which I purchased off Craigslist to save more money).

I have all my finances in order

Buying my first home was the biggest, most important financial decision of my life. Not only am I single (so the “household” only has one income to support the mortgage), I also had to take in to consideration many different things – including my work history, credit scores, and cash savings. I knew that the cleaner my overall financial history was, the better chance I would have at snagging the best interest rate possible for my mortgage.

I started thinking about becoming a homeowner six years before I closed on my townhouse. In that time, I eliminated all of my debt, increased my net worth by over $80,000, created an emergency fund, and tucked money aside for closing costs, moving expenses, renovations, and furniture.

Doing my research well beforehand, and making sure I had enough money to cover every detail of the purchase made my home buying experience a lot less stressful.

Disclaimer: This post content is sponsored by Royal Bank of Canada, however the views and opinions expressed herein represent my own and not those of Royal Bank of Canada or any other party and do not constitute financial, legal or other advice.

Would you buy a condo that has rental restrictions?

When I was house hunting two years ago, a huge consideration for me was whether I should purchase a home in a building complex that allows rental units.

Condo buildings often have bylaws that might restrict whether you can rent out your residential unit. This can be seen as a good, or a bad thing. If you plan to live in your condo, you may want other owners to live in their units as well.  However, if you are buying a home as an investment to rent out, or if you think you might want to rent it out in the future, you will want to check the building’s rental restrictions and bylaws carefully before you make an offer.

I ended up choosing a townhouse in a complex that did not allow rentals (except under financial hardship, which is super complicated to prove) – and that seemed like a great decision. However, eight months later I found myself looking to move to Europe, and all of a sudden I was faced with the financial burden of not being allowed to rent out my unit while I lived abroad. Thankfully I was able to pay my mortgage and my rent while living in Germany, but for a lot of people, that wouldn’t have been an option.

Having any sort of rental restrictions on units in a building will always lesson the pool of potential buyers (like investors), but it doesn’t seem to negatively affect the price in which the unit will end up selling for. In fact, it’s the opposite. In a Downtown Vancouver Ownership, Occupancy, and Rentals study, the median value for owner-occupied units were valued over $30,000 to $40,000 more than non-owner occupied units.

My realtor explained to me that it’s because owners often purchase with their wants in mind, and are willing to pay more for units with a better layout, upgraded features, or a nicer view. Makes sense. Owners are more willing to invest money to renovate their units and make them nicer, because it helps them improve their overall quality of life – and that’s why owner-occupied units usually sell for more. Whereas investors who rent out units for profit are only concerned about their bottom line.

That being said, if you plan on living in the unit that you purchase, there’s a chance purchasing in a building that allows rental units might negatively affect the price of your owner-occupied unit when it comes time to sell. Since a rental will typically sell for less than an owner-occupied unit in the same building, the owner-occupied unit would then have to use the rental unit sale price as a comparable.

I liked the idea (and still do) of living in an owner-occupied community because I feel like owners have a stake in the building, and are more likely to take good care of the common space. Also (and maybe this is just my own personal experience living in rental units), I find that noise and cleanliness to be better when living in an owner-occupied building, and there’s a nice sense of community because people usually purchase property and plan on staying put for an extended period of time.

Would you buy (or have you ever bought) a condo that has rental restrictions?

How walkable is your neighbourhood?

When you decide to buy real estate or move into a new rental apartment, most people are able to narrow down what they need from their new home – how many bedrooms, how much they can afford to pay each month, or how many parking spots they will get. But Realtors always say that the only thing you can’t change about your home is the location, and that’s why neighbourhood was the biggest consideration for me when I was buying my first home last year.

I depend heavily on a website called Walk Score. This website is amazing because it measures how easy it is to get around without a car. They use an algorithm based on the distance to amenities in different categories. Amenities within 0.25 miles receive maximum points, and no points are awarded to anything located outside of a 1-mile radius. They base their score out of 100, and use a variety of data sources including Google, Education.com, Open Street Map, and Localeze.

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Why your walk score is important:

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  • People in walkable neighborhoods weigh 6-10 lbs less.
  • Walkable places make you happier and healthier.
  • Short commutes reduce stress and increase community involvement.
  • Saves money on the cost of operating a vehicle.
  • Your feet are zero-pollution transportation machines.
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What makes a neighbourhood walkable?

To show you how Walk Score works, I took a screenshot of a neighbourhood called Gastown in downtown Vancouver. It’s one of my favourite neighbourhoods in the city, and as you can see, it scores 100/100 in walkability.

According to Walk Score, the walkability of a neighbourhood is based on the following criteria:

Why your walk score is important:

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  • A center: Walkable neighborhoods have a center, whether it’s a main street or a public space.
  • People: Enough people for businesses to flourish and for public transit to run frequently.
  • Mixed income, mixed use: Affordable housing located near businesses.
  • Parks and public space: Plenty of public places to gather and play.
  • Pedestrian design: Buildings are close to the street, parking lots are relegated to the back.
  • Schools and workplaces: Close enough that most residents can walk from their homes.
  • Complete streets: Streets designed for bicyclists, pedestrians, and transit.
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Great for people looking into a new neighbourhood

Walk Score is perfect for people looking at neighbourhoods they aren’t familiar with. I used Walk Score a lot when trying to find an apartment in Stuttgart, Germany. And back in Vancouver, I loved how it gave me quick information public transportation, my potential commute time (and cost), as well as specific amenities within the  neighbourhood.

For me, as long as everything that I need is within a 10-15 minute walk, I’m happy. Within a 5-minute walk of my home, I have a beautiful park with a running trail, two grocery stores, a liquor store, and a Starbucks. That’s all I need, right? :) My only complaint with the neighbourhood that I live in is that it’s a 20 minute walk to a SkyTrain station if I don’t take the bus. But I rarely take public transit anyway, so it’s not that big of a deal.

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[icon name="sign-in" size="small"] How walkable is your neighbourhood?

[icon name="sign-in" size="small"] Do you think your happiness is related to the walkability of your neighbourhood?

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