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Old 02-08-2012, 02:49 PM   #11 (permalink)
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One good way is to do some extremely simplified math yourself.

Figure out what your paycheck is. Most people can live pretty comfortably (and still handle emergencies and occasional purchases) not spending more than 25% of their monthly income on their mortgage

If you take home $36k/yr, that is $3,000 a month. $750 of that to mortgage, which is $9,000 a year mortgage payments (ignoring other fees and taxes, etc).

$9,000/year * 25 years = $225,000.00 Subtract out interest and other miscellaneous costs (insurance, etc) and I would say that you could realistically purchase a ~$150,000 house and live fairly comfortably if you did not have any other large debt hanging over your head.

$750/month for mortgage, ~$300/month for utilities, ~$300 a month going into savings, ~$300/month car payment leaves about ~$1000 a month left over for food, clothes, vacations, movies, cell phones, etc.

I know a lot of people say that paying rent is 'throwing money away'. It depends on how you look at it. Housing in this country is a bit of a racket and the system is rigged. The banks and fat cats own all of the land, the houses on it and hold all the deeds/titles. The people who end up completely owning their house and the land it is on are in the minority. It is possible to play the market and turn a profit selling property... but the money you get comes from another Joe Schmoe and more often than not gets given right back to the bank as a down payment on your next purchase.

The system is rigged because the government (who collects taxes after you pay your mortgage) sees to it that the banks who act as everyone's landlords can't really lose. When the market gets bad enough, Congress starts passing TARP bills... giving your tax money to the same banks collecting rent from you.

It almost doesn't matter whether you rent. If you have enough money then you can rent a 3 bedroom house just as easily as a 1-bedroom apartment. The advantages to building equity and credit mostly come into play when you want to either:
1. Borrow more money (for a large purchase or investment)
2. Cash out and/or retire.

I am oversimplifying, of course. I rent right now... but whenever someone asks me if I am interested in buying a place I always ask myself what I would really be gaining since I will probably have to pay some kind of monthly fee (be it rent or a mortgage) for the rest of my life.

Hmm, maybe I should save up and buy a hovel in Costa Rica and live the good life instead
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Old 02-08-2012, 03:26 PM   #12 (permalink)
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i'm still new to the real world, i just graduated university and have been at an entry-level position just shy of a year now. i'm not making much and i don't know if i can afford a house without giving up my social life due to financial restrictions. $150,000 is not alot here in alberta, that will get you an apartment, or a "condo" which is basically an apartment with hardfloor upgrades. up here, to get a decent place, it's gonna run you around $250k. but what you outlined makes it a little more clear on what i can calculate to give a rough idea what i need to clear a month to be comfortable. stil is gonna be harder than i thought
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Old 02-08-2012, 03:26 PM   #13 (permalink)
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If you're serious about purchasing a house do the following BEFORE you start looking:

-Find a good real estate agent. A lot of people would rather not use one because technically you are just "giving" them money but as a first time home buyer knowing nothing about it I would recommend finding and agent. Most agents are lazy because all they do is show you houses which you are interested in, make you sign documents and negotiate offers with the seller. Finding a good one can be tough. When shopping for an agent don't sign anything until you are satisfied you want that person as your agent because what they will make you sign is a legally binding document that indicates you must use that person as an agent for a certain period of time and that person will get paid X% of the value of your purchase. A good agent will help you look for homes - not the other way around, and be very good at negotiating lower prices. A good agent will not try to rush or urge or persuade you in any way regarding the purchase of your home unless you ask for it. A good agent will get you all the information regarding the history of the place you are looking at. A good agent is one that you can trust. If you don't want to use an agent do the next step

-Find a good lawyer. If you're not going to use a real estate agent, find an amazing lawyer who will sit down with you and teach you everything you need to know about buying a house and all the documents required. Lawyers do most of the work involved with purchasing a home. With an amazing lawyer and some knowledge with home buying (you can read books and do some other research) you will save money by not using an agent.

-Mortgage shopping. Find out which institution you want to use. Most people use the institution that offers the best rate. Go to that institution and actually get a pre-approved mortgage. You can tell them you are looking to buy a home but want to know what you can afford. It's good for a certain number of days but the key is they will look at your situation and give you a number. That is the number you should be using when looking for a home because although you may think you can afford a certain amount the institution may not give it to you. You don't want to be stuck in the situation where you make an offer, put a deposit and then find out the institution won't approve the mortgage amount. To be approved for higher mortgage amounts make sure you have no debt. Get rid of credit card debt FIRST, then any unsecured loans, then your car and then secured loans. If you have zero credit card debt then you are fine. Credit card debt will destroy your mortgage amount.

-Home inspector. Find a good one. One that will actually climb on the roof and not look at it from the ground with binoculars. Someone willing to get dirty and climb into that nasty attic to look at the insulation.

-Other things you want to keep in mind. You will need at least 10K (5K for seller and 5K for your agent) for a deposit. That's pretty much a standard when you make your offer and goes towards the down payment of your home which is also part both the buying and selling agents' fees. Obviously, the higher the deposit the more likely you will get the place because they know you are serious. Other cash you will need is for lawyer's fees, land transfer tax (which is included in the lawyer fee), rest of down payment (goes to lawyer, in trust), home inspection fees, and deposit for utilities for setting up a new account or transferring an existing account (some lawyers may do this for you and include the costs in the lawyers fee but it is not policy for them to do it - they do it if they are nice).

-If you have a scanner that will come in handy. I remember going to kinkos at 11pm at night to make scans and it was a pain.

-Don't overpay for a place - just because you have your heart set on a place you may get drawn into a bidding war. Know when to walk away.

-After you purchase you home you will still need cash for anything you will want to do to the place. Once you buy your place people will come buy claiming this and that about your furnace and hot water tank. Be polite and let them do their spiel but DON'T SIGN ANYTHING. There are a lot of scammers out there.

I'm excited for you because I went through all of this last year. It's stressful FOR SURE but then you will have a place you can call home.
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Old 02-08-2012, 03:45 PM   #14 (permalink)
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man, i'm stressed about just thinking about it. i have it good at home right now, parents are proud of me because i'm done school, i have a job. pay is whatever. monday to friday desk job...not the greatest but it's better than making $15/hr doing retail and working weekends. but my dad's telling me to start thinking about buying a house and i've been doing research and it's stressful seeing the potential bills rack up and i don't even have a house yet and especially when i'm paying off my car too, it gives me not much to work with after my fixed costs are covered.

so all in all, i need about 10% down payment for the house, and another 10K for the agent and lawyer. my friend's friend is an agent so i'm gonna use him, i know i can trust him. i've helped him with a few things in the past so he's on the giving end for favors now so that's not too bad there...
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Old 02-08-2012, 03:57 PM   #15 (permalink)
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Also, what Tarzanman wrote is correct.

You have to ask yourself why you want to purchase a home. Renting will almost always be cheaper when comparing to the same type of place. Your home will become your equity only when you sell it. If you are living in it, you have tied up your cash. However, what most people cannot do is put away their money they are saving from renting and not touch it for 25 years plus.

Sure you can put the money you save into RRSP's but remember, RRSP is NOT tax free as some people think. It is a tax deferral. You will pay income tax on it when you withdraw it as RRIF when you retire.

Since your friend is an agent, he will be a valuable source of information.
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Old 02-08-2012, 04:00 PM   #16 (permalink)
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man, i'm stressed about just thinking about it. i have it good at home right now, parents are proud of me because i'm done school, i have a job. pay is whatever. monday to friday desk job...not the greatest but it's better than making $15/hr doing retail and working weekends. but my dad's telling me to start thinking about buying a house and i've been doing research and it's stressful seeing the potential bills rack up and i don't even have a house yet and especially when i'm paying off my car too, it gives me not much to work with after my fixed costs are covered.

so all in all, i need about 10% down payment for the house, and another 10K for the agent and lawyer. my friend's friend is an agent so i'm gonna use him, i know i can trust him. i've helped him with a few things in the past so he's on the giving end for favors now so that's not too bad there...
Hopefully someone with more real estate experience can chime in here. Your dad wants you to get a place now because if you can manage the payments then you'll be able to pull enough money/equity out of a sale down the road to make getting into a new place easier.

Whether you decide to buy or not is something you'll have to figure out yourself. If you decide to rent, then I would recommend renting rooms in houses instead of living at an apt. In most cases, you don't have to worry about leasing offices bugging you every 6-12 months about renewing and you don't have to fight for parking or mess with carrying your trash a quarter-mile away to the community dumpster.
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Old 02-08-2012, 04:07 PM   #17 (permalink)
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Originally Posted by newnew View Post
man, i'm stressed about just thinking about it. i have it good at home right now, parents are proud of me because i'm done school, i have a job. pay is whatever. monday to friday desk job...not the greatest but it's better than making $15/hr doing retail and working weekends. but my dad's telling me to start thinking about buying a house and i've been doing research and it's stressful seeing the potential bills rack up and i don't even have a house yet and especially when i'm paying off my car too, it gives me not much to work with after my fixed costs are covered.

so all in all, i need about 10% down payment for the house, and another 10K for the agent and lawyer. my friend's friend is an agent so i'm gonna use him, i know i can trust him. i've helped him with a few things in the past so he's on the giving end for favors now so that's not too bad there...
Don't stress. I bought two years ago after looking for a year and a half. On a $142K purchase price, I had to come up with about $13-14K TOTAL. I seem to have more an more disposable income, now. You can write off mortgage interest(I use to get no tax return, now I get a buttload). My realtor was useless for finding something I was interested in. I had to look daily and ask him to take me to them. He totally had my back when submitting all of the forms, contracts, etc. Oh, and 2 to 3 times your gross annual salary is probably the price range you can afford with 2 times being a breeze and 3 times needing some spending discipline.

Steve
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Old 02-08-2012, 04:19 PM   #18 (permalink)
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so all in all, i need about 10% down payment for the house, and another 10K for the agent and lawyer. my friend's friend is an agent so i'm gonna use him, i know i can trust him. i've helped him with a few things in the past so he's on the giving end for favors now so that's not too bad there...
Seller pays real estate fees in Canada. Alberta land transfer tax is next to nothing. You'll need about $3-5k in closing costs MAX in Alberta for a first home. Some brand new homes include everything (lawyer too).

Here's the main thing you have to think about. If you stay in a place for 5 years, you're pretty much guaranteed to break even (ie. the increase will offset real estate fees, moving fees, etc.). Every house I've lived in has been CHEAPER than equivalent rent on the same place. Interest rates are VERY low right now, and prices have leveled or corrected themselves. There are still people that think there's a housing bubble in Canada right now, but given the state of the Alberta economy I don't see us crashing any time soon.

Take your time. Don't get stressed. You're the buyer with the money, so have fun with it. What do you really want in a place?
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Old 02-08-2012, 04:29 PM   #19 (permalink)
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Originally Posted by Tarzanman View Post
Hopefully someone with more real estate experience can chime in here. Your dad wants you to get a place now because if you can manage the payments then you'll be able to pull enough money/equity out of a sale down the road to make getting into a new place easier.

Whether you decide to buy or not is something you'll have to figure out yourself. If you decide to rent, then I would recommend renting rooms in houses instead of living at an apt. In most cases, you don't have to worry about leasing offices bugging you every 6-12 months about renewing and you don't have to fight for parking or mess with carrying your trash a quarter-mile away to the community dumpster.
i don't wanna rent because to me that's a waste of money, in the end you have no equity when you decide to "sell". that may be a traditional way of thinking but i would like to believe that when i pay for something over a period of time i'd like to see what i have/am potentially gained/gaining.

i know it's the same case as leasing a car, you can either return it or pay off the remainer due on the vehicle after 4 years. i financed my car, leasing to me is just an expensive way of renting it...but you get the jist of my mentality...whether it be bad or good, i guess that's for you guys to decide...haha




Quote:
Originally Posted by Kapn.K View Post
Don't stress. I bought two years ago after looking for a year and a half. On a $142K purchase price, I had to come up with about $13-14K TOTAL. I seem to have more an more disposable income, now. You can write off mortgage interest(I use to get no tax return, now I get a buttload). My realtor was useless for finding something I was interested in. I had to look daily and ask him to take me to them. He totally had my back when submitting all of the forms, contracts, etc. Oh, and 2 to 3 times your gross annual salary is probably the price range you can afford with 2 times being a breeze and 3 times needing some spending discipline.

Steve
the housing market in the states is substantially cheaper than up here in canada...$150K will land you an amazing property home down there while up here it gets you nothing but a ghetto apartment. double my salady is basically $90K, you're not gonna get anything for $90K, better off renting.


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Originally Posted by Clarion View Post
Also, what Tarzanman wrote is correct.

You have to ask yourself why you want to purchase a home. Renting will almost always be cheaper when comparing to the same type of place. Your home will become your equity only when you sell it. If you are living in it, you have tied up your cash. However, what most people cannot do is put away their money they are saving from renting and not touch it for 25 years plus.

Sure you can put the money you save into RRSP's but remember, RRSP is NOT tax free as some people think. It is a tax deferral. You will pay income tax on it when you withdraw it as RRIF when you retire.

Since your friend is an agent, he will be a valuable source of information.
No i understand the whole RRSP and TSFA ordeal, i did a fair bit of research in that as well. You might already know this but you can also pull your RRSP out tax-free IF you go under the first home buyer's "act" i guess you can call it. which is basically you being able to pull out your RRSP and put it directly into a downpayment for a house without any tax penalty, you do have to pay the interest on it though but it's over the course of 15 years, so it's next to nil.

So come tax season, you can drop a lump sum into RRSP, go below the tax bracket so you get an awesome amount of $$ back from the government and then pull out the RRSP and use that for your down payment + whatever you get back from the government for your new home...*BOOM*. of course easier said than done...
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Old 02-08-2012, 04:33 PM   #20 (permalink)
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Seller pays real estate fees in Canada. Alberta land transfer tax is next to nothing. You'll need about $3-5k in closing costs MAX in Alberta for a first home. Some brand new homes include everything (lawyer too).

Here's the main thing you have to think about. If you stay in a place for 5 years, you're pretty much guaranteed to break even (ie. the increase will offset real estate fees, moving fees, etc.). Every house I've lived in has been CHEAPER than equivalent rent on the same place. Interest rates are VERY low right now, and prices have leveled or corrected themselves. There are still people that think there's a housing bubble in Canada right now, but given the state of the Alberta economy I don't see us crashing any time soon.

Take your time. Don't get stressed. You're the buyer with the money, so have fun with it. What do you really want in a place?
well...i've never really thought about it in too deep because like i said, i only just started thinking about the financial part of buying a house before actually looking into what i wanted. but i think ideally, i like the "bachelor" design of the condos. 1 master bedroom, 1.5 bathrooms. would want a garage or underground parking. good parking outside the area (so i guess that excludes downtown). if i were to go townhouse i'd like it to be detached. house parties get kind of rowdy when they happen, don't want anyone banging on the wall telling me to shut up. i'm not really sure what else there is to consider even though i know there's tons of options.
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