# Ready to Buy? - First Time Buyer of Condo



## 604firsttimebuyer (Mar 5, 2014)

Hi there,

Like many similar posters here on this forum, I'm on the brink of making my first condo purchase.
I currently have roughly $130,000 saved up ($25K of which will be taken out of my RRSP home buyers plan).
My fiance and I have a combined annual salary of $94,000. 

We're looking for a 2 bedroom condo in the $330k-370k range here in Burnaby, BC. I know it might not necessarily be the best time to buy but we're planning to pay off our mortgage and make this purchase our home in the long run (rather than renting it out). We are aiming to make our purchase by the end of the year so I guess my questions are as follows:

1. Would it be wise to put down $120,000 (down payment and tax/fees) and keep $10,000 saved up as an emergency fund?
*I'm not exactly investment-savvy, so preferably, I'd like to keep my money in TFSA and GICs
2. Based on our salaries, what would be our best options in terms of mortgage rates and amortization period?
3. Are we overall ready to even buy our own condo?

Any advice would be greatly appreciated.

Many thanks!


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## Jon_Snow (May 20, 2009)

My sympathies.... your 130k downpayment almost bought our nice 2 bedroom condo outright in 2002 in a neighbourhood not far removed from Burnaby.

$370,000? *shakes head*

OP, don't blame you for buying, but you are going to be behind the proverbial 8 ball financially for a long time. Then again, those that have waited years for a housing correction are STILL waiting.

I would strongly recommend you to give Garth Turner's blog a gander....

You mention investments - after your mortgage, strata fees, property tax, plus your other spending, how much is going to left for investments at the end of the month? Don't mean to sound overly negative, but you need to look carefully at everything before proceeding....


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## 604firsttimebuyer (Mar 5, 2014)

Jon_Snow said:


> I would strongly recommend you to give Garth Turner's blog a gander....
> 
> You mention investments - after your mortgage, strata fees, property tax, plus your other spending, how much is going to left for investments at the end of the month? Don't mean to sound overly negative, but you need to look carefully at everything before proceeding....



Hey Jon, I've actually been reading Garth's blog for 2 years now. He emphasizes on the long-awaited housing correction coming but yea, like you said, everyone's still WAITING.

I just figured if I bought closer to the $330K side, a near-50% down payment (instead of a 5% down payment like many) would make the my life at least feasible without having to throw every dollar I make into my mortgage...which kinda leads me to my original post asking for advice on mortgage rates options / amortization periods.

As for the investments, I wrote that I'm NOT very savvy and don't plan to invest. I've always just kinda thrown my money into TFSA, RRSP, GIC accounts. My goal is to just repay my RRSP and max out my TFSA every year.


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## Just a Guy (Mar 27, 2012)

One of the things you can do is take out a 30 year amortization, but ask that the payments be taken out as if it were a 20 year, bi-weekly rapid mortgage (so it's paid off in 17 years). If you run into trouble, you can ask them to change the payments to a lower, longer payoff, more interest paying option...

If you lock in at 20 years, they won't give you the option to switch to a longer term without renegotiating.


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## andrewf (Mar 1, 2010)

It may not be the best time to buy from a valuation standpoint, but you are not overbuying/overleveraging. A $210k -$250k mortgage should be manageable for your level of income, depending on your lifestyle and other factors such as job security and whether you or your partner will be taking time off work to raise children. So if you are really set on getting into real estate now, you are making a good decision by not overextending yourselves, financially, to do so.

One thing I find is that people overestimate how long they will stay in a given home when they buy it. Are you sure that your circumstances won't change in the next 5 - 10 years such that you'd want to move into a different area/different kind of home? Given transaction costs, it's something to consider.


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## james4beach (Nov 15, 2012)

How secure is your job?

What are the scenarios that would result in you or your fiance losing your jobs/income? This is what I would seriously think about.

What if you two break up? I'm not trying to stop you from buying, but you should think about these scenarios carefully.

For example... I lived in Toronto and my bank was very eager to give me a huge mortgage for a big condo purchase. (I didn't do it). Within a few months, I got laid off. _So_ glad I didn't buy.


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## MoreMiles (Apr 20, 2011)

Jon_Snow said:


> My sympathies.... your 130k downpayment almost bought our nice 2 bedroom condo outright in 2002 in a neighbourhood not far removed from Burnaby.
> 
> $370,000? *shakes head*


In 2002, stamps were about 30 cents and coffees were about 70 cents each... Now they are all 3x the cost. Let's don't even get into gasoline and vacation expenses. It now costs $100 for day admission ticket to Disney World in Florida!

So as you can see, you would have been protected from this inflation if you own a house!


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## Taraz (Nov 24, 2013)

You can also be protected from inflation if you own stocks, without the highly-leveraged risk inherent in a mortgage.


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## Mortgage u/w (Feb 6, 2014)

My recommendation is NOT to use the HBP. Too many people underestimate the effort of repayment afterwards. Since you are fortunate to have a good amount saved out of your RRSP, just use that as DP and keep your RRSP intact. Focus on growin the RRSP (as well as other saving vehicles) by contributing regularly. As you mentioned, TFSA, GIC... whatever works for you is fine....as long as you commit to saving!

As for the mortgage, rates are very low today so you can benefit in a low payment. Take advantage and boost the payment to a level you are comfortable with. Since your loan to value will be less than 80%, you can amortize up to 30 years.....but most of your payment will be attributed to interest. If you don't beef up you payment, your capital will take a very long time to get paid. 
A typical payment for a $250k mortgage over 30 years would be just under $1100/mth assuming a 30 year amort. If that's the route you take, establish a fixed payment of $1500 per month...you'll be allocating an extra $400 per month directly to your capital. Do the math and you can clearly see how many years and interest you will be saving! 

As for the HBP, keeping it intact leaves out the concern and burden of repaying it. Instead, you'll focus on paying down the mortgage faster....while maintaining your savings intact - and growing it of course!

Always focus on both debt repayment and savings - do not choose to 1 without the other!


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## richard (Jun 20, 2013)

Are all your investments in GICs? If so you're likely to do better for now by paying down a mortgage, although once that's done you might need to plan some other investments if you don't have a pension.

It sounds like you can easily afford a condo, but that doesn't mean there are no better options. If the rents for something similar cost half as much every month then you could come out ahead by renting, especially if you don't plan to live in a 2 bedroom condo forever or you might want to live in a different area. If it's far away from where you spend a lot of your time you'll notice that every day. The priorities for a decision like this should be 1) fits your lifestyle (location, size, and so on) 2) affordable and 3) owning, if it makes sense for you.


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## NotMe (Jan 10, 2011)

604firsttimebuyer said:


> Hey Jon, I've actually been reading Garth's blog for 2 years now. He emphasizes on the long-awaited housing correction coming but yea, like you said, everyone's still WAITING.


Well, Garth's blog is 6 years old now, so it's been a long long wait (not to be construed as recommending a purchase, but that he's been wrong so long it's crazy).


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## Mortgage u/w (Feb 6, 2014)

Those waiting for a housing correction will indeed wait a very long time. Good luck to you And even if there were some crazy housing correction (never happened here), it should not deter anyone from purchasing a home. You're purchasing a h.o.m.e not a stock investment. I assume you intend on living in the home not short sell it or hedge it. And I also assume you intend on living in it long term - and long term values increase in general. It is more likely to see incomes increasing rather than housing prices decreasing.

I really bugs me to hear people repeat 'ideas' or 'assumptions' some 'genius' 'economist' decided to 'blurt out' (notice all the parenthesis). Unknowingly, it hurts the economy because it simply scares society and drives sales to a halt.


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