After I made my final debt repayment in May 2013, it took a couple months for me to decide what my first big savings goal would be. I knew I wanted an Emergency Fund, but I wasn’t immediately confident I would be able to save five figures. Up until that point, the most I’d managed to save (and eventually spent) was somewhere in the $3,000 range, so $10,000 seemed like a stretch. It took 17 months, but I finally topped it up to $10,000 in November 2014.
For the past two months, I’ve found myself back in that state of limbo re: deciding what my next savings goal should be. I’ve been standoffish about the topic of saving a down payment and buying a home, for years, which I can see now is probably because it has never been tangible. It’s still not within my reach, nor is it at the forefront of my thoughts, but I think I’m finally ready to at least start talking about (and saving for) it… here goes.
My Thoughts on Homeownership
Here are my honest and personal thoughts on homeownership (for me!). Remember, this isn’t advice; it’s just where my head is at, right now.
First, let’s look at the facts. I’m turning 30 this year, I’m single and I don’t have any kids. I make decent money and could likely get approved for a $350-375,000 mortgage, but I’ve done the math enough times to know I’d only be comfortable taking on a $250-275,000 mortgage by myself (plus the condo fees, property taxes and maintenance costs that would go along with that). In Greater Vancouver, I’d be lucky if that could buy the 1-bedroom condo I’m currently renting.
This brings me to another fact – or, an opinion I’ve had for years: 1-bedroom condos are a bad investment. Unless you’re prepared to rent it out after, and be a landlord for years, the resale value on them isn’t great. In big cities, especially, where the prices of townhouses and detached homes continue to go (way) up, more families are looking for 2-bed, 2-bath condos (which are not in my price range). Nobody wants a 1-bedroom condo – including me.
I want the first place I buy to at least be a 5-year home, if not a 10-year home. (Closing costs are expensive, and you only get first-time homebuyer credits/rebates once!) I also want to have kids. Tack those onto the list of reasons why I don’t want a 1-bedroom condo, and it’s safe to say that I don’t think I’ll be buying a place in Greater Vancouver anytime soon. The stats on lack of affordable housing in many parts of the country are true, but especially here. So, for now, I’m happy renting.
For almost all the facts listed above, there are variables that could change things. The single factor is the first variable. If I met someone and we decided to buy a place together, our combined incomes would give us so many more options. I’d honestly prefer to never buy into a condo building (stratas, am I right?), but I’d much rather buy a 2-bed, 2-bath condo than a 1-bed. So, a second person + second income would at least open more doors for long-term housing options.
As great as it would be to find someone and buy a place together, the biggest variable for me, personally, is still location. I have no idea where I want to live long-term. I don’t think I’d ever move back to Toronto, but sometimes I think about moving back to Victoria or further up island. I’m happy in Vancouver right now, but homeownership here feels like a pipedream. Maybe I’ll stay. Maybe I’ll go. Or maybe I’ll meet someone who lives somewhere else and move yet again. Who knows!
Whenever someone asks if I’m saving for a down payment yet, or pressures me to become a homeowner sooner than later, I feel my teenage-like defense walls come up. Like all things finance-related, decisions we make around homeownership are extremely personal. Your ideal home/location won’t match up with the ideals of everyone else in your life, and that’s ok! It’s taken growing up on an island and moving to two big cities for me to realize what I want…
In my dreams, I’d buy or build something small (not tiny house small, but not 2,000+ square feet big either) near mountains and close to a body of water. I don’t need a lot of space inside, but a big deck and/or a backyard with a firepit would be amazing. My friends who moved up island to Shawnigan Lake first inspired this, but then the Frugalwoods‘ posts about it confirm that’s what I want. Again, maybe it’s just a pipedream, but I’m allowed to voice it!
The reality, of course, is that I’m starting with nothing. I thought swiping for useless crap was more important in my early 20s, had to pay it off in my mid-to-late 20s and am now approaching 30 with nothing in the bank. Ok, not nothing… I have $36,000+ in my RRSPs, after transferring my old pension over. But I don’t plan on using the Home Buyers’ Plan (where I could pull $25,000 tax-free from that) because my RRSPs are strictly for retirement – no ifs, ands or buts. (Again, a personal decision.)
So, I’m starting at $0. I’d like to save $30,000 before I even begin to consider buying a place, which would give me a 10% down payment on something in my single-person price range (because I can’t assume I’ll have a partner). Canadians strive to save 20%, so we can avoid having to get mortgage default insurance, but that could be yet another pipedream for me. I’d like to save $30,000 in 3.5 years, so we’ll see where I’m at in life then… maybe I’ll take the time to save more and buy later.
The Question Mark Account
Now that my Emergency Fund is topped up, this + retirement are really the only two big savings goals I see myself working towards for a while. I love to travel, so that’ll always be part of my budget, too… but the big money needs to get thrown at these two causes. My goal for 2015 is to set aside at least 13% of my income for both (26% total), then throw anything extra into this new account. I should be able to save $6,750 no problem, but set a stretch goal of $8,000. (Hopefully freelance can help!)
All of this is to say that I opened another tax-free investment fund and named it “Question Mark”. Of course, the goal is homeownership, but something about “Question Mark” makes saving for it feel so much more exciting. I do want to buy a home. I want real estate to be part of my investment portfolio. But I don’t know when, or where it’ll be located, or what it’ll look like or if I’ll buy it with anyone else. I just know it’ll happen one day; until then, I’m saving for one big question mark!
I’m curious to hear everyone’s thoughts about/journeys into homeownership. Are you a homeowner? Do you want to be? How long did it take to save up a down payment? And tell me about your first home!