So I did have a question come up about why I didn’t buy “the biggest house I could afford”, as per the so-called sage advice of others around me and from banks (naturally .. because we all know they have ZERO interest in making sure you have a mortgage tied to them for the next 30 years right!?).
They knew that if we bought our place, we could have definitely put down more money and purchased a much larger one.
Well, we didn’t try to overreach to buy a penthouse to be saddled with debt, for a place that we don’t really need all the space of, to also see that it come with higher yearly condo fees and not to mention the property TAXES we’d have to pay.
I was pre-approved by the bank, on my single income, for a $600,000 mortgage.
Can you believe that?
I was personally, and individually approved for $600,000 MORTGAGE.
I can’t even comprehend having a debt equal to my net worth right now.
It boggled my mind, but my bank was willing to front me 600 Gs, and with that mortgage, plus the fact that we had $600,000 in cash to pay for our home, we could have more than afforded a $1.2 million dollar home or penthouse somewhere.
We instead, decided on a few things ahead of time:
1. We are really not into debt.
We don’t enjoy owing people money, and the ones who seem to have a lot of money appearances-wise, are usually the ones with mothballs in their bank accounts.
That, I know.
Even if it makes no rational sense with such low interest rates, keep in mind that in Canada, rates renew every 5 years (I think? or is it 10?).. which means that we don’t get that nice “locked-in” 3% rate for the duration of our 30 year mortgage AND we cannot write off the mortgage interest on our taxes.
2. We decided ahead of time what our priorities were.
We wanted enough space. Not too much if it was going to cost us (and it did).
What does enough space mean?
We sat down, and sketched it out of what our “ideal” house (FOR US) would look like and have, ignoring design elements:
We talked endlessly about the merits and downfalls of a one or a two bedroom place, and whether one or two parking spaces would be our deal breaker.
I think we thought about this so hard, we were sick of it at the end.
In the end, our priorities were that we were in a good well-located central location rather than somewhere far flung due to the nature of our jobs changing locations constantly, and that we needed at least two bedrooms and two parking spots.
We could be flexible on the bedrooms but not the parking spots as I was willing to give up space at home to be able to have a spot inside in covered parking due to the vicious winters we get although if it was just not possible to find a place with two spots but it checked off every other box, I was willing to concede to just one spot and then to rent the spot instead.
I wasn’t even focused on detailed things like: Oh it needs a bathtub (I don’t care), but I do know it needed a bathtub for resale value — something I learned from selling two of my parents’ houses.
We really thought about resale value of the place as well, and two spots is far more appealing than one (obviously, as we bought a place and paid a slight premium for one with two spots when there was a huge range of places with only one available).
3. We considered that Little Bun would not live with us forever
Not that we would kick out our little baby (and did not plan on having any more), but more that he would eventually get older, and move out to live on his own and leave us as empty nesters.
This is the reason why we said that one bedroom would be okay as well – it would only for 20-ish years and then the rest of the time it would be still big enough for the two of us.
(OMG we would have the bed back for ourselves and no more Squealy BUN!)
We would have sucked it up and lived like that, if everything else was checked – two spots, great spot, reasonable price… it was all a give and take, squishy sort of deal.
The only thing we did not cave on was our $600,000 limit.
It’s the cash we had as a “max” together, and we both did not want to take a mortgage, although we could have if it was truly something we wanted.
We really only wanted to spend $400,000 initially but then to get the second spot, and the right location, with two bedrooms, we upped it to $600,000, although I would have gone as high as $700,000, keeping in mind the Welcome To Your New House taxes (thanks Canada..), notary fees and moving in costs.
We were firm, early on, to not buy what we could not afford.
$600,000 to us, for our area, was MORE than enough to buy everything we wanted, and we would have heavily compromised on a few things (not all), if $600,000 was not realistic as a budget.
We were adamant to not be in debt. It would be such a mentally freeing load off our backs to not think: I owe _____ every month, that we knew we would just make do with what we had, rather than using that $600,000 to get an additional $2 million for a place.
Yes. That’s right.
If we had put down the $600,000 as a down payment, we could have gotten a $2 million dollar mortgage on top of the $600,000 which would have given us $2.6 million as a home price.
…. and whatever for?
I couldn’t even imagine owing that much to anyone, so we both said: No thank you.