I selected a five-year, 25-year fixed repayment of 5.89% (the bottom rate of interest on the time).
Since then, the Bank of Canada has cut rates 4 times, and if I had waited a number of more months or opted for an adjustable rate mortgage, my payments would have been significantly reduced.
The mortgage payment can be only a part of the associated fee. After adding all of the bills like property taxes ($172), condo fees ($495), condo insurance ($27), and utilities ($86), I noticed that a smaller mortgage would have made quite a bit more sense. I still needed to think about food and every day living expenses (Basic necessities cost more in Calgary than in Toronto) and transportation (since Calgary is so opened up, you may have to drive all over the place!). This leaves little room for savings, debt repayment or social activities.
4. When purchasing a property, you have to do your due diligence
I hired a 3rd party company to audit the condo’s reserve fund and financials (one other $415). Even though the expert told me that the reserve fund was not where it ought to be, I still bought the property. I’ve already been hit with a special assessment (nearly $1,400) to cover operating and reserve fund deficits, and there are likely more to come back.
5. You must have a plan B
After quickly depleting my savings and having to place just about every thing on credit, I wish I had had a plan on the right way to take care of this beforehand. Not only did I actually have to limit my discretionary spending and forego many social activities, I also had many sleepless nights worrying about money.
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Kenneth Doll, a licensed financial planner (CFP) in Calgary, says it isn’t unusual for people to risk an excessive amount of when buying their first home. He says banks are within the business of lending and the larger the mortgage a brand new home buyer takes out, the more the bank gets in interest.
“I think most people buy as much as they can and then end up living in poverty or, God forbid, someone loses their job or whatever, and then they’re really in a bind,” Doll says.
While the CMHC recommends spending not more than 32% of gross income on housing, Doll says everyone’s situation is different. He advises would-be home buyers to have a conversation with a financial planner to debate their income, expenses, savings and debts to learn the way much they will actually afford a house – versus what the bank or a Google Search guarantees.
