Three years ago this past September I bought my first home, and in the process made the biggest financial decision of my life. I can honestly attest that my home purchased has been the best decision of my life, and something that I’ve embraced whole hardheartedly. As a home owner over the past four years I’ve discovered a lot about my self and finances.
To be quite honest, the whole purchasing of my first home was sort of a fluke. My finances were a mess, I didn’t have any money saved, credit-card was maxed out, and I was living paycheck to paycheck. I knew I need to make changes, but I was definitely in no hurry. While in a financial mess, a close friend who worked as a financial advisor suggested I start saving for retirement by opening up a RRSP, through taking out a $5k loan.
I figured I needed to grow up at some point, so I took her on the offer and followed her suggestion – take the large tax break from the government at tax time, and apply it to your repayment. Thankfully I listened, and paid off the loan within 12 months. Later in the same year (2008), recession hit, and the government introduced the Home Buyers Plan – using your retirement savings to apply as a down-payment towards the purchase of your first home.
Six months later, I bought my first home with a 5% down-payment consisting of HBP and some savings I had. See, I told you my first home purchase was a little luck and a bit flukey. So, I purchased my first condo in a 40 year old building which consisted of 1,000 sq feet, two bedrooms, a bathroom, and a balcony big enough to park the beemer. The condo was a dump, but was selling $20k below than other condos in the same building – so I jumped on it fully knowing that I’ll be getting my hands dirty.
I always said that necessity is the mother of invention, and I’ve learned a lot about home ownership and my finances over the past 36 months.
Here are a few lessons I learned:
1. Buying Less is More
For instance, I pay about $450 per month to heat, cool and power my 1,00-square-foot starter condo in Toronto. That’s on top of my mortgage, but we all need utilities to survive. I spent $1,300 a year on property taxes, and my home insurance is just under $45 per month. This is not counting the maintenance costs, and any extra unexpected repairs.
Despite all the extras, I still wouldn’t change a thing, because I love everything about home ownership.
3. DIY or Pay Out of Your Nose
Before I bought the condo, I considered my self as someone I would have classify as “handy.” I’ve painted, assembled, and learned a lot over the years at my parents home.
It’s been a busy 36months, and every few months there’s some reno project going on in my condo. I’ve come to a point that there’s virtually nothing left to paint, refinish, strip, fix or upgrade. In 3 years I’ve installed new hardwood floors, new kitchen, backslash, fully painted the whole condo, new bathroom, changed every single interior door, new light fixtures, new exterior balcony door, and tons of other minor upgrades.
4. Plan Ahead
There’s always something to be done on a house. The trick is to separate needs and wants, to figure out what is the best use for your money and your situation. It took me 36 months to get my condo up to the standard that I wanted. Never in my dreams did I imagine that it would take this long, but renovations are anything but cheap.
I planned ahead by picking up creating a renovation budget and trimming the budget in certain places to save the money for the project in advance — with a cushion, of course, to cover the unexpected. Because no matter how much you budget, you’ll always go over budget. Something that took me a long while to understand.
5. Always Do Your Own Comparison
Having a Realtor is not a full blessing in disguise. You gotta remember, your Realtor is no different than the sales rep at the car dealership – they know the product, industry and all the jazz, but at the end of the day they’re there to earn a buck. My Realtor recommended a lawyer (chose my own in the end), a handy man (did majority of my renovations with friends) and financing options for your mortgage (found my own financing through a broker) – at the end of the day, anytime a your realtor refers you to someone within their circle, they may be doing you a favor by sending you to someone they know, but you don’t know them, and you’re also not the one earning a referral fee either.
Readers, what were the biggest lessons you learned during your time as home owner?
Photo Credit (quasimeme)