I went for a five-year fixed, 25-year amortization rate of 5.89% (the lowest rate at the time).
The Bank of Canada has cut rates four times since then, and if I had waited a few more months or gone for a variable-rate mortgage, my payments would have been significantly reduced.
The mortgage payment is also only one part of the cost. After I added all the bills like property taxes ($172), condo fees ($495), condo insurance ($27) and utilities ($86), I realized a smaller mortgage would have been much more sensible. I still had to factor in food, daily living expenses (basic necessities cost more in Calgary than Toronto) and transportation (since Calgary is so spread out you have to drive everywhere!). This leaves little room for savings, debt repayment or social activities.
4. You must do your due diligence when buying a property
I hired a third-party company to do an audit of the condo’s reserve fund and financials (another $415). Even though the expert told me the reserve fund wasn’t where it needed to be I bought the place anyway. I’ve already been hit with a special assessment (almost $1,400) to cover operational and reserve fund deficits and there will likely be more to come.
5. You should have a plan B
After quickly burning through my savings and having to put pretty much everything on credit, I wish I’d had a plan beforehand on how to manage. Not only have I had to cut back on discretionary spending and say no to a lot of social outings, I’ve had a lot of sleepless nights worrying about money.
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Kenneth Doll, a Certified Financial Planner (CFP) in Calgary, says it’s not uncommon for people to get in over their head when buying their first home. He says banks are in the business of lending money and the bigger a mortgage a new home buyer takes on, the more the bank makes on interest.
“I think more people than not will buy to the max that they can and then they end up having to be house poor or, God forbid, somebody loses a job or whatever, and then they’re really strapped,” says Doll.
While the CMHC recommends spending no more than 32% of gross income on housing, Doll says everyone’s situation is different. He advises aspiring home buyers to have a conversation with a financial planner to discuss their income, expenses, savings and debts to figure out much of a house they can really afford—as opposed to what the bank or a Google search says they can.