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.
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
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.
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.
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?
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.
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.
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.
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.
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.
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. :)
Well May is a difficult month because RD is gone and I already miss him, but I have a lot of fun things planned – and work is going to be super busy, so I’m looking forward to picking up a lot of OT hours to help pay for all the travel we have left in the year. :)
This coming weekend I’m headed to Seattle for a girls trip with one of my best friends. We’re splurging a bit and taking a cruise ship from Vancouver to Seattle for one night. :) We’ll then stay another night in the city and catch a Mariners game. I’m excited for this trip because we used to travel a lot together, but she had a daughter now, and understandably it’s much harder for her to get away.
I’m also headed home for the May long weekend to take my sister out for her birthday. I booked us a session at the Float House, as well as a massage afterwards. It’ll be pricey, but I’ll be able to claim my massage through benefits, so it’ll be less expensive than last year’s birthday trip to the spa. :) I’ll also get to see some friends that I haven’t seen since Christmas, so I’m really looking forward to that.
I mentioned in my April goals review that I got a raise. It’s not a huge bump, but every bit counts, and it does increase my net income by about $220/month which definitely affects my budget. I’m mostly really happy that my hard work was acknowledged! After thinking it over, $75 of that will be saved for retirement, $100 will go towards general savings, and the rest will be eaten up by lifestyle inflation because this fall we are getting a cat. :)
The second bit of news is that RD and I have bought a condo. We were both really surprised that we found something in just a few months of looking. But it was exactly what we were looking for, and came in under our budget so we’re pleased. We don’t take possession until mid-June, so May’s budget is not affected. I have a big post scheduled for Monday that will run through the details, so stay tuned for that.
Here is my proposed budget for May:
May 2017 Goals:
- Exercise. I bought a one-month pass to YYoga on Monday because it was on sale, but it was still expensive! I went to YYoga last May when they were having a sale on passes, and I loved it because they offer both spin and yoga classes. It was a nice break from the climbing gym, and helped me get my cardio up for the hiking season. I can’t justify a studio pass AND a climbing membership for the year, so this is my one month to get as much yoga and spin in as I can. :)
- Organize our move. When RD and I moved into our little laneway house 1.5 years ago, he did all of the legwork because I was in Toronto doing some freelancing. So now that the roles are reversed, I have a lot to organize. I’ll need to get quotes from movers and painters (to see if it’s even feasible that we hire them), organize move-in times with the building, look into getting strata approval to do a quick renovation, and start to pack up our home with the things I know we’ll be taking with us.
- Refresh GMBMFB. I’ve been wanting to do this all freaking year, but this is going to be the month to do it.