# Young Couple - Saving for House



## gc_srt (Mar 30, 2013)

My wife and I just got married in September and we are currently saving for a house. I am 27, graduated in 2010 and she is 26 and graduated in 2012.

We gross about $180,000 per annum with bonuses and overtime.

We are looking for a house while saving - trying to save 20% for a house. We have had a couple discussion of what we can comfortably afford and what we need. Looking for some input from fellow members on this site.

Assets:
- RRSP $15,000 (her's)
- RRSP $35,000 (mine)
- RSP $16,000 (mine)
- TFSA $16,500 mutual funds (mine)
- Mutual Funds $10,000 (ours)
- Stocks - $22,000 (mine)
- Cash - $18,000
- Car 1: Mine - $30,000 (paid off)
- Car 2: Her's - $22,000 ($10k owing) 
- Snowmobile - $8,000 (paid off)

Total:$182,500

Liabilities:
- Car 2 - $10k owning - 5%/year
- Visa 1 - $1500 (paid off monthly) - mine
- Visa 2 - $1000 (paid off monthly) - hers
Total: $12,500

Monthly expenses:
- Rent: $1400 
- Utilities (heat, electricity, internet, phone, cell): $500
- Restaurant, booze, fun: $1000
-Car (parking, gas, insurance): $1000 (both of the SUV's are hard on gas (12 and 16 mpg) - my weakness)
- Investments: $1000 
- Food and supplies: $500

Total: $5400

(other than the Rent / Utilities, these are WAGs - we both don't budget our funds but all the extras goes on our Visa's)

I am thinking to purchase a new house for approximately $450,000 and my wife wants a fully developed home for closer to $400,000. Would like to have the house paid off in 15 years. Kids are planned 3-4 years from now.

Thoughts?

Thanks,
Dustin


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## jcgd (Oct 30, 2011)

You guys look to be in good shape to me. Are you specifically wondering what home you can afford?

I consider vehicles to be liabilities even if they are owned outright. What you could realistically get for them if they were liquidated? Vehicles have maintenance costs, insurance, etc., and long term will ultimately decrease your net worth. Just some food for thought.


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## My Own Advisor (Sep 24, 2012)

Good of you to put 20% down. 

You make great money for folks in your 20s. Well done.

You could probably afford a more expensive home, but again, I think you're smart not taking every penny the bank could give you.

Are you going to liquidate your TFSA for the downpayment? RRSP?


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## gc_srt (Mar 30, 2013)

jcgd said:


> You guys look to be in good shape to me. Are you specifically wondering what home you can afford?
> 
> I consider vehicles to be liabilities even if they are owned outright. What you could realistically get for them if they were liquidated? Vehicles have maintenance costs, insurance, etc., and long term will ultimately decrease your net worth. Just some food for thought.


Car #1 - $25k easily and Car #2 18k. I definitely know that cars cost money in the long run - especially true if purchase new which we don't. In the next couple of years we will most likely be looking at two newer cars and keep her SUV (Car #2). She wants something with better fuel economy and I would like a vehicle with a little more power. 



My Own Advisor said:


> Good of you to put 20% down.
> 
> You make great money for folks in your 20s. Well done.
> 
> ...


I cannot justify spending 1.75% to 2.75% of the mortgaged value for insurance. I also want to make sure if one of us loses are jobs, we can afford our house still. We can definitely get approved for a larger house mortgaged (roughly $900k) but we don't want to be house poor. 

We would liquidate our RRSP ($25k from me and $15k from her as we are both first time home buyers), TFSA ($16k), mutual funds ($10k), cash ($10k), and some of my stocks (most are not doing so well). 

I was thinking we should add another $10k to my wife's RRSP so we have have the maximum down payment from our RRSP (have to wait 90 days). I would like to contribute directly to her RRSP but I hear you have to wait 3 years to use them - my salary is higher of the two.

Do you know of any other tax savings we can use to apply to a down payment on a house?


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## Pigzfly (Dec 2, 2010)

Sure you don't want to list your snowmobile under liability? ;-)

Some tips: Get a house that you will be able to afford on a single salary, especially if you plan to have those kiddos. Then, pay it down like you had two salaries (or pay into your other savings). That will help minimize your risks, plus make it easier if one of you decides to stay home with the munchkins.

How highly do you want to prioritize the downpayment savings? You're spending a decently large amount of money, so if the downpayment is truly a priority, you'll be able to cut back a bit on your fun money to make this happen.

Your $1400 in rent will rough and dirty cover a 200K mortgage loan amortized over 15 years @ 3.5%. You can play with all of the variables from there to determine what's comfortable and affordable.


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## Just a Guy (Mar 27, 2012)

My advice would be to point three things:

1) life is always more expensive than you think. 
2) life doesn't care about your plan, it has a tendency to impose its own will. 
3) you'll adapt. 

As for your house, remember the average Canadian moves every 7 years. This probably won't be your final place. Pick one that serves your needs, you'll soon learn what you like and don't like about it. When you move, you'll find a place that has different problems, but there will be less as you're now experienced. 

Don't worry about finding the perfect place out of the gate. Other than that, I think you're on the right track.


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## gc_srt (Mar 30, 2013)

Pigzfly said:


> Sure you don't want to list your snowmobile under liability? ;-)
> 
> Some tips: Get a house that you will be able to afford on a single salary, especially if you plan to have those kiddos. Then, pay it down like you had two salaries (or pay into your other savings). That will help minimize your risks, plus make it easier if one of you decides to stay home with the munchkins.
> 
> ...


Would have to agree that my sled is a liability. The operating cost per km is quite high. There are quite a few financial books that indicate that a house is a liability as well. 

Saving for a down-payment is pretty high on the list but not the top - as you can see by how much money we spend on 'fun money'. My wife enjoys shopping and I splurge from time to time on liabilities like sleds, sled parts, excessively large wheels, car parts, etc. When we do this, we always make sure we have cash in hand to pay of it. I have been doing the majority of the saving for the down-payment as I have the higher salary of the two of us and my toys are paid off. 

We would not get very much for $200k in our area. This is the price for a double bedroom condo. We could afford about $3500 per month for housing - utilities, taxes, upkeep, and mortgage.



Just a Guy said:


> My advice would be to point three things:
> 
> 1) life is always more expensive than you think.
> 2) life doesn't care about your plan, it has a tendency to impose its own will.
> ...


We have been looking for a house that we both like, but not 100% what area we want and layout. Time will tell.

Thanks for all the help.


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## Ponderling (Mar 1, 2013)

Young, double income no kids, living well, saving well.

Consider how your life will be different with big mortgage, one income, young kids, RESP contributions, as well as TFSA and RRSP.

Consider living a month or two with food at $500, restaurants and fun at say $200, and one income wholly set aside and not drawn on during the 'parental with house' test drive mode.

Such a test drive will tell you how well you might adapt to life in a few years, and if your fiscal projections will be still be as likely to be viable and valid.


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## none (Jan 15, 2013)

In most markets in Canada there is little financial justification for (even when adding a substantial "home ownership premium" that I don't really understand) unless you are speculating that house prices will increase further.


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## Plugging Along (Jan 3, 2011)

Ponderling said:


> Young, double income no kids, living well, saving well.
> 
> Consider how your life will be different with big mortgage, one income, young kids, RESP contributions, as well as TFSA and RRSP.
> 
> ...


This is pretty close to what we did. We lived off the LOWEST income for about a year, and banked the other income for the down payment. It gave us a good idea what we could afford, and then we also knew we had the option if one of us wanted to stay home with the kids, we could do it.


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## Just a Guy (Mar 27, 2012)

It's good that you did it for a year, now imagine doing it for the next 20, with extra mouths to feed, sports, school fees, music, braces, clothes, etc.

There is no going back once it starts...


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## Feruk (Aug 15, 2012)

I don't think cars should count as assets. If you sell one, you're just gonna have to buy another... Also, your monthly expenses look overinflated because you add "investments" in there which isn't an expense. Why do you pay so much for utilities? As for the comments above about reducing your going out funds from $1000/month to $200/month, I disagree. You guys make $180K/year. You can comfortably save/invest and still have some fun. You're not poor. The argument that you'll have to cut back when you have kids is only a half-truth because (theoretically) you should be making more money at that point.

Only other addition I'd have is on the cash that you have in "stocks that aren't doing so well." If you need the money for a down payment soon, is the risk tolerance correct?


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## Pennypincher (Dec 3, 2012)

You sound like my spouse and I did when we were your age - except our income wasn't nearly as great and we both graduated a bit younger so we had more years to earn and save. 

We started out with a condo and then sold it and bought a modest house for $500,000 in a decently expensive city. When we bought the condo, we regretted not buying bigger. Try to imagine what you would live in with a family of two kids. And think about schools and commutes. you are young still, but it all happens very fast after marriage. Definitely put down as much as you can now while you have that great earning potential.

You might think you will both work and continue to earn good incomes, but as others have said, life happens. In our case, we both still earn great money, but daycare costs are $2,300/month for two kids under 5. I lost my supposedly stable, good benefits, well paid government job because they transferred the position to another city and I said no way. I moved into the private sector at a lower pay level and less flexibility and I am deeply pondering quitting my job so I can stay home with the kids until they are halfway through elementary school. The only reason I can do it is because our mortgage is now at $25,000 after big principal payments. If we had a big huge mortgage payment still, I would have to work.

So on the one hand, you want an affordable house. On the other hand, you don't want to move every 3 years and waste real estate fees because you didn't buy a big enough house or one close enough to public transportation or your preferred school.

You both sound very smart with your money and I am sure your decision will be a good one.


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## gc_srt (Mar 30, 2013)

Feruk said:


> I don't think cars should count as assets. If you sell one, you're just gonna have to buy another... Also, your monthly expenses look overinflated because you add "investments" in there which isn't an expense. Why do you pay so much for utilities? As for the comments above about reducing your going out funds from $1000/month to $200/month, I disagree. You guys make $180K/year. You can comfortably save/invest and still have some fun. You're not poor. The argument that you'll have to cut back when you have kids is only a half-truth because (theoretically) you should be making more money at that point.
> 
> Only other addition I'd have is on the cash that you have in "stocks that aren't doing so well." If you need the money for a down payment soon, is the risk tolerance correct?


About half the utility cost are the phones. We both pay about $80-90 per month on cell phone bills. I work at a fly in camp and we talk every night, hence the pricey cell phone bills (and why our combined income is quite high). We still have a land line phone but we plan on disconnecting it.

The stocks that aren't doing well on my company stocks - I purchase them off every check as the employer does match a certain percentage. They most likely are not the best as far as risk tolerance, but my company pitches in some which reduces the risk of purchasing them (instant return on investment).


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## gc_srt (Mar 30, 2013)

Pennypincher said:


> You sound like my spouse and I did when we were your age - except our income wasn't nearly as great and we both graduated a bit younger so we had more years to earn and save.
> 
> We started out with a condo and then sold it and bought a modest house for $500,000 in a decently expensive city. When we bought the condo, we regretted not buying bigger. Try to imagine what you would live in with a family of two kids. And think about schools and commutes. you are young still, but it all happens very fast after marriage. Definitely put down as much as you can now while you have that great earning potential.
> 
> ...


I took my time though school, taking a year off to work the rigs and finished my undergrad in 5 years. My wife was nearly a full time student - she has two degrees and a masters now. 

We currently are renting a townhouse condo. It is a decent size (1200 sq. ft., 3 bedroom, with double car garage) but it does not fit our current needs (dog and future kids). We are looking for a 1400 sq. ft., open concept home with an oversized double car garage in a newer area. The cost for that is about $450,000 depending on what upgrades are completed on the home. Rough numbers for the cost of the home would be:

Mortgage - accelerated bi-weekly payments - $900 ($360k after 20% down, 25 years, 3.5% fixed)
Taxes - $3500/year - $134 bi-weekly
Utilities - $500/month - $230 - bi-weekly
House upkeep - $10,000/year (purchasing new home: driveway, basement, landscaping, etc.) - $384 - bi-weekly
Paying down mortgage - $100 - bi-weekly

My wife and I had a discussion, we both agree that we can afford $1750 bi-weekly for housing - which works out to the budget above. My goal would to have the house paid off in 15 years while maxing out RRSP and TFSA. 

Should be doable, but depends on the cost of raising children. I am always shocked by the price of child care and the newest trends of all children over 5 having their own cell phones and ipads. Luckily we will have a couple more years to save for little ones and hopefully hopefully some new grandparents will be retiring  

Thanks,
Dustin


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## Pennypincher (Dec 3, 2012)

Your budget above sounds very reasonable. If your income increases or bonuses come your way, it sounds like you can pay off a mortgage even faster. 

Childcare costs are definitely crazy.


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