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6 things I’ve learned from watching home buying shows

Over the weekend I watched two full seasons of My First Home on Netflix. Yes, I said seasons.

I couldn’t help myself – I love home buying shows for so many different reasons. I love comparing Vancouver real estate to the rest of North America, and also other places in the world. I love learning about their budgets, expectations, style, and renovation reveals. And still, even to this day, I find it insane that a $200k house in a small town in the U.S. would be worth $3 million if it were located here in Vancouver. Sometimes when watching home shows, I get envious, sometimes I’m puzzled, confused, or irrationally angry … but I love them and I always come back for more.

Here are 6 take-aways I learned from binge watching My First Home on Netflix:

Men are obsessed with man caves

What is the deal with man caves? Why is this even a thing? It just seems really weird to me that men get a special space in the house that’s all their own to “get away” from their wife and children – where they can shut the door and drink beer and watch football and play video games with their friends. Where is that same space for women?! Look, I understand hobby rooms and places in the house dedicated to certain activities (RD wants an area in our condo so that he can set up an easel and paint, for example), but having a space in the house that’s so aggressively male – and only for males – just irks me I guess. And the fact that not having one can be a deal breaker to an otherwise perfect house? Come on.

Buyers believe what the banks tell them they can afford

I was constantly surprised that buyers would just take what the bank told them they can afford and that so many people spent to their maximum pre-approval. Not that there’s anything wrong with that if you’ve run your own numbers and can fit that mortgage payment (and all other associated housing costs) into your budget, but many of the buyers just said things like “the bank pre-approved us for $140k, so that’s our budget.” No. Please please please. If you’re thinking of buying a home, please run the numbers and consider all scenarios – what would happen if you (or your partner) lost your job? What happens if you have kids? Do you have an emergency fund? Are you saving enough for retirement? Did you leave room in your monthly budget for property tax, insurance, and strata fees? I’ll admit that perhaps my budgeting spreadsheet(s) are too detailed to be enjoyed by most people, but the minimum you should be doing is spending a few hours looking at your finances and seeing what you can actually afford, not what the bank says you can afford. Because the bank? They’re not looking out for your best interest. They’re looking to make as much money off you as possible.

Nobody had a 20% down payment

I think out of the entire two seasons I watched, only two buyers had a 20% down payment, and one was because he received an inheritance. As for the other buyers, some didn’t have down payments at all. But I was mostly surprised that many were going house hunting with such a small amount saved (even though they often had good salaries). It made me wonder if they even had any additional money set aside for an emergency fund or moving costs. Because if they say they’ve been able to save $4,000 for a down payment, that’s a small enough number that it makes me think that’s probably all of their savings, no?

Related: Why I don’t want to burn my mortgage

In some places, normal people with normal salaries can afford houses

The amount that RD and I paid for our condo was more than anyone paid for their house on the show in the 2 seasons I watched. It made me cry a little bit inside when one guy (who had no down payment, btw) signed the papers on a 3-bedroom house where his mortgage would be less than $500/month. Or another episode where a guy bought a 2,200 sq.ft. house for $200k. That same house would have easily cost $3 million if it were located in Vancouver!

I definitely got super envious at the housing prices – I’d love a house for $100k, thanks – but then I think about living in Rural Wherever and I’m okay with spending what we did to live in a big city. :) Lifestyle and demand and all that stuff mean that in big cities like Vancouver or Toronto or New York, normal people with normal salaries will never be able to afford houses.

Some people don’t have Realtors

Okay this one really did shock me. I didn’t realize people went house hunting on their own without representation. I’m not saying that in a snarky way, I really was surprised. I know that sometimes Realtors get a bad reputation, but not to have one at all to give you advice and protecting your best interests … I dunno, it feels like going to court without a lawyer.

In this one episode, a woman was looking to buy a house and had searching on her own for MONTHS without any luck. She was getting into multiple offer situations, often got outbid, and was extremely frustrated. Yet she kept commenting that there was no way a Realtor could do a better job than what she was already doing. Her friend reluctantly convinced her to use a Realtor, and she ended up finding her dream home with them. When you’re buying real estate, using a Realtor is free (you only have to pay commissions when you sell using a Realtor). I’ve only had very positive experiences using a Realtor, and can’t imagine ever navigating the property market without one. But of course that’s my own experience and my own opinion!

(Curious – has anyone been successful in not using a realtor to buy?)

Buying a home with someone is a huge commitment

In some ways, buying a home with someone is more of a commitment than marriage, so you better be sure that person is the right one for you! There was one episode where a couple had been dating for 7 years, but when she realized that a mortgage meant they’d be committed for the next 30 years? She freaked out and they broke up. There was another episode where the woman wanted a huge house to fill it up with future children, and the guy looked so frightened and the Realtor looked like she wanted to die it was so awkward.

I personally think it’s important to figure out what you both want (now and in the future) before you start your home search. Think about where you want to live, if you want kids, if you plan on getting married – all of the big life decisions don’t have to be made immediately, but at least openly discussing them before committing to a home could potentially save a lot of arguing, and also money. From a financial perspective, I think it’s also important how you plan on combining financing, splitting mortgage and household payments, as well as who actually owns the house (or how it’ll be split). It was interesting to see the creative solutions the home buyers on the show came up with in terms of ownership rights, and payment to the mortgage, which goes to show that there’s not one right way of doing things.

Related: Combining our finances

Anyway part of me is really glad that we don’t have cable, otherwise I’d have access to all those other home buying/house flipping shows that I’m obsessed with. :) What are some of the things you’ve learned from watching shows like this?!

Why I don’t want to burn my mortgage

When I bought my first home in 2011, I had a very Independent Woman attitude about it all, and wanted to pay down my mortgage as fast as possible. Because I was self-reliant, and didn’t need a man to become debt-free and reach all my goals! Right? Well. 28-year-old-Krystal had a lot to learn about financial priorities. I eventually realized that putting every extra penny towards my mortgage wasn’t making me happy, and it wasn’t getting me any closer to my number one financial goal of early retirement. So by the time I sold that home in 2015, the only extras I was putting towards my mortgage was keeping to an accelerated bi-weekly schedule.

Related: Why I’m reducing my mortgage payments

Since RD and I are taking possession of our home in a few weeks, we’ve been discussing how we plan to pay down our mortgage. Based on our budget I showed you earlier this month, we’ll definitely be going with an accelerated bi-weekly payment plan, but aside from that? We have vague goals of putting down some sort of lump sum payment every year. Accelerated payments and small lump sums will be enough for us to reach our goal of eliminating our mortgage before we retire. But as a PF blogger, I just had to run the numbers to see how long it would take us to “burn” our mortgage, Sean Cooper style. :)

We’ve calculated that our joint expenses will be $3,600/month – which includes our base mortgage payment, strata, and property taxes, along with our fixed bills, groceries, household expenses, and a monthly buffer of $365 set aside for household repairs and emergencies. If we decided to trim down those expenses a little bit and put the rest of our income towards the mortgage (which means we’d live on a very strict budget), we could eliminate our mortgage in less than 5 years.

So yeah, it would be pretty damn cool to be mortgage-free before I’m 40 (especially in the Vancouver area!), but the lifestyle and sacrifice required to achieve that goal is not appealing. And at this point in our lives, it’s just not going to happen. 5 years is a really long time! Maybe our mindset will change in the future, but here’s why it’s not going to happen right now:

We have other (more important) financial goals

Yes, paying down the mortgage is a big financial priority, but early retirement and traveling every year is higher up on that list. It always has been.

Traveling multiple times a year is something we both agree is really important to us, and we want to do for as long as we are physically able to travel. It’s one thing to potentially lose our big trip each year (that seems manageable), but not be able to afford flights to visit our families, go to Tofino, or plan weekend getaways to the Sunshine Coast or Squamish? That sounds horrible. Living that kind of life for the next 5 years (which happen to be prime adventure travel/hiking years) to pay off our mortgage sooner? No thanks.

Related: When renting is better than home ownership

As for early retirement, saving for that goal has always been my top financial priority. And now that RD has figured out when he can retire from the government, it means my retirement age will be 54. :) Losing 5 key years of retirement savings stresses me out because if I keep saving at the rate that I’m saving right now, I will reach my goal easily.

No interest in working harder

Work more than my 9-5 job, and the small amount of freelance work I do on the side? Sorry, again, not interested. Maybe that’s a horrible attitude to have, but this is the reason why we chose to take on a small mortgage – so that we will never feel like we need to work harder than we already are, just to keep a roof over our heads.

Related: Why I don’t want to be self-employed

Don’t get me wrong, I think it’s really important to work hard to achieve your goals. I worked three jobs to pay down my debt, and continued to hustle in order to save for my first down payment – often working 70-75 hours/week. But that lifestyle isn’t sustainable, and I burned out after 18 months. I’m glad I worked hard to put myself in the financial situation I am now, but I made a promise to myself after I moved back from Germany that I was never going back to working crazy hours again – even if it meant taking a pay cut. Living a balanced lifestyle is just so much more important to me now.

I want a little YOLO attitude in my life

We love our lifestyle right now. We’re frugal and we often say no to things when they come up, but we also don’t want to miss out on what we feel is important. I love being able to say ‘yes’ to a girls weekend in Seattle or Vegas, treating my sister to a spa day for her birthday, and buying that sorta pricey climbing gym membership with zero regrets. I want to continue being able to do all of these things without stressing or feeling guilty that I should be putting those dollars towards the mortgage instead.

You really do only live once, and the whole point of buying the condo that we bought was because we could afford to continue living exactly how we’re living now. I’ve worked so hard for the past 10 years to become as financially stable as I am right now, and the idea of having to sacrifice for 5 more years sounds exhausting. And, honestly, it seems joyless.

Our mortgage will be paid off before we retire

We both agree that we don’t want a mortgage in retirement, and that goal is easily attainable by making accelerated bi-weekly mortgage payments, and small lump sum payments every year. Interest rates may change in the future, but for the next 5 years, we’re looking at a 2.59% 2.54% rate. And I know we can get a better return for our money by investing it instead. Since we already have a sizeable down payment, the thought of putting more of our net worth into real estate isn’t something we are super comfortable with.

Related: My biggest home buying regret – not fully considering the future

As I said at the beginning of this post, this is our thinking right now, but it doesn’t mean we won’t change our minds in the future. Maybe we’ll come up with a happy middle ground where we are paying extra towards our mortgage to eliminate it in 10 or 12 years instead of aggressively going for 5 years. Or maybe we’ll just be happy with the 18 year plan that we have going for us.

Are you planning on aggressively paying down your mortgage?

We are homeowners!

I honestly cannot believe how fast the last two years have flown by. Life has changed so much, and back in the summer of 2015, I never would have guessed that I’d meet someone as amazing as RD, and that we’d be settling down and planning the rest of our lives together.

Before we decided we wanted to buy a home, we spent a few months going through all the possible scenarios that life could throw our way in the next 10-15 years. We thought about where we wanted to live, what kind of space we wanted, what our lives would look like, and whether we wanted kids or a pet (or maybe both). In the end, we agreed that Vancouver is where we’ll be until we retire. And because of that, we decided to make home ownership a goal with the idea that whatever we end up buying, we’ll be living there for the long-term.

I know, buying real estate in Vancouver in 2017 is crazy, right? Maybe, yeah. But we have good jobs and a nice amount of money saved, and we are both level-headed enough to not buy anything out of our comfort level. So even though we were pre-approved for a mortgage of about $850,000, we set a top end budget of $475,000.

Location

We didn’t struggle at all on where we wanted to live. I’ve always been in love with New Westminster (where I owned my townhouse, and also where I rented an apartment years earlier). It’s just got a strong community vibe, and since our budget wasn’t going to buy us a 2-bedroom home where we currently live in Mount Pleasant (that would have cost us about $800,000), it was the obvious choice. Especially considering my commute would only increase by 10 min., and RD’s commute actually gets shorter.

The Search

We targeted a very specific area in New Westminster and started our home search by getting pre-approved for a mortgage in early March. We wanted to have our finances sorted out just in case something amazing came onto the market. Weeks went by. We saw a lot of bidding wars, condos that regularly went for $100,000 over asking … and we went to a lot of open houses, but most places just didn’t suit us for one reason or another. It’s not that we were being overly picky, we just knew exactly what we wanted.

Related: Thoughts on our open house tour

One day we went to view a 2 bed/2 bath condo in a high rise building. It had a great layout, floor-to-ceiling windows, and an amazing view from the gigantic balcony – but we’d have to do work just to move in (replace carpet, fix doors, etc), and that would have taken us over our budget. So we reluctantly passed. The following week, we saw another unit just a few floors down which required no updating, and the views were just as stunning. But that price point was at the very top of our self-imposed budget, and we just assumed everything was going to sell over asking (like all the other condos we had viewed). So we left the open house and didn’t consider it a contender.

The next week, I noticed the listing was still online, so I messaged my Realtor and asked if it was still available – and to our surprise, it was! So we snuck in a low ball offer, and after a bit of negotiating, we ended up getting it for about $10,000 less than list price.

The Financials

We had a $125,000 down payment, and decided to use $115,000 towards the home, holding back $10,000 for closing and moving costs. So no, we didn’t end up meeting our original goal of $150,000 towards a home, but I really feel pleased with the amount we were able to save.

Our purchase price was $468,000. And after the down payment, our mortgage will be $353,000.

The mortgage amount represents 2.2x our combined gross annual salary, and all housing expenses come out to 23% of our combined net monthly income – this is based on our full-time jobs alone. Even though I have consistently made a nice chunk of freelance income every year, we decided to only get pre-approval (and create a budget) based on our secure income.

Related: My biggest home buying regret – not considering the future

And what kind of PF blogger would I be if I didn’t include a mock budget? :) This time the chart below indicates our joint household expenses, and what we expect to put into our joint account every pay cheque. We’ve also built in a nice buffer each month which will serve as our household savings fund for emergencies and future large household expenses.

We pay $1,650/month for rent right now, and as you can see our base housing costs (mortgage/strata/property tax) is $2,045/month. While normally I would scoff at such a big increase to our living expenses, we are both absolutely ok with it because we knew we were going to move eventually (and that it would cost us more money), but also:

  • We can still comfortably pursue our financial goals of early retirement and travelling every year.
  • 2-bedroom apartments cost on average $2,500/month to rent in Vancouver, and about $2,000 in New Westminster (units for rent in our building are going for $2,200+).
  • We will be able to sell RD’s car and go down to a one-car household.
  • The building has a nice gym (eliminating the need to continue to pay drop-in fees at the rec centre).
  • Crazy amount of natural light and a large patio (our current home has zero outdoor space and very minimal natural light).
  • A little more space (we’re going from 680 sq.ft. to 825 sq.ft.).
  • A usable second bedroom for guests, and RD can have a small art area.
  • The ability to have a small garden on the patio.
  • Pet-friendly, so we can finally get a cat.

Even though we have decided to buy a home, I am (and will always be) a fan of renting. For some, owning in Vancouver will never be an option, and there’s nothing wrong with that. What’s the point of stretching yourself to the limit just to buy a home? Renting is a fantastic choice for many people, because owning a home only makes sense if 1) your monthly housing expenses are on par with renting, 2) you’ve decided to settle down in one place for the long term, and 3) you aren’t stretching yourself to the point where your lifestyle and retirement savings are compromised.

Related: When renting is better than home ownership

We don’t take possession until mid-June when RD comes back from his annual 5-week field work trip, and we’ll officially be moved in by the end of June. But there’s a lot to do in the meantime! I’ll need to get quotes from painters and movers, change over our insurance, update addresses, as well as start to sort through our stuff for selling or donating.

Anyway, there you have it! I’m surprised but happy that we bought a home so quickly, and we are both looking forward to settling into our new home. :)

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