REAL ESTATE DECISION-MAKING CAN BE SCARY FOR ANY BUDGET
House prices can make or break you financially so it’s important to know your finances inside-out and make a decision to purchase a home based on affordability and sanity.
Everyone knows that house prices have not burst as expected rather they have exploded and keep going up which means first-time buyers and graduates are struggling to slip into the housing market.
Living in the Greater Toronto Area (GTA) I’ve seen some of the most expensive real estate in Ontario. Back in the UK house prices were and still are astronomical in comparison to what you can buy in Canada. I was never one to complain about house prices in Canada until I started earning a pay cheque and life in Ontario kicked in.
When you are a tourist from out-of-town where the money is practically double and house prices are high it’s easy to get excited about the prospects of owning a gorgeous home with space. Although I didn’t struggle to sell my house in the UK when I moved to Canada the current owner is struggling and has been for years to sell because no one can afford the house prices.
There are so many houses on the market and the same goes for Canada. Come March every year signs are popping up all over the neighbourhoods with the snow barely melted. When we bought our home in 2009 for $265,000 that was far under the amount our mortgage company allowed us to borrow. House prices at the time crashed along with the stock market so we quietly slipped in while we had the opportunity. This window of opportunity did not last long as house prices started to creep back up with-in the next 6 months.
Just 5 years later we are mortgage free and not contemplating moving at this time because house prices are very high and we won’t get much more in a house apart from possibly another mortgage. The only way we will move is if we move out of this expensive city to a smaller town or out into the countryside.
House Prices and our Budget
Something is our there for everyone who is looking to buy a house but the worst thing you can do is let house prices take a back seat to reality. There are more properties for sale than ever these days and I’m betting many people are struggling to keep up with the bills of owning a big house. With so many new housing developments going in buyers are rushing in to get the brand new house even if it’s the most expensive real estate.
Buying a house at the top of your budget range is a HUGE mistake in my opinion but that doesn’t stop people from becoming house poor on their own agenda. It’s simple math really but for those of you who care more about how other people will view your new investment get ready to sink or swim if something should happen in your world.
My wife and I always follow house prices especially in our current neighbourhood since we really like it around here. A 1600 sq ft house on our street just sold for over $500,000 and it was purchased 5 years ago for slightly over $300,000. Other houses in our neighbourhood are much more expensive up to $1.3 million as they are bigger but don’t necessarily sit on as large of a piece of land as you’d expect.
If you want to get into an all brick decent built house with over 2000 sq feet expect to pay in the high $600,000-$million dollar range. If you want a cookie cutter home you may be able to squeeze it with just over $500,000. You get what you pay for. Current house prices are pushing this frugal family back inside because we don’t want another mortgage only to get a few hundred square feet of extra living space with those perks we gave up as first time buyers to safeguard our financial situation.
When we were looking at houses to buy the house prices were a huge influence in our decision-making process. I remember looking at houses for $199,000 at the bottom of our real estate budget range just to see what we could get. We didn’t want to get in over our heads and rightfully so because we were just starting our careers or shall I say, starting over since I was a new permanent resident in Canada trying to pave the way.
Being realistic about our wants was what we had to do which is hard for those buyers who have blinders on and want it all. Sometimes all it takes is real estate marketing, house staging and someone to motivate a sale and before you know you’ve bought yourself a house even though you’ll be living tight with your money.
If you plan to have kids down the road you’re just asking for trouble. Your income may increase, debt decrease or increase but predicting the future is a deadly mission to try and gauge current financial availability based on future improvements in income levels.
Let your decision(s) be the only influence in putting a offer in on a house.
We knew we would find our house but we may have to give up some things like a triple garage, finished basement, land, custom-built house or simply a house that was dated. Millennial and Gen X (which we belong to) folks are home buyers who want flashy and modern and with high house prices a realistic budget would squeeze them into an older fixer-upper, new townhouse or condo.
I remember when we bought our house we had an $80,000 down-payment and found out how much our mortgage would be and was still stunned at the high costs of owning a home. We got lucky though and if it were any other year we would have paid far more to buy a house.
Today home buyers are faced with even higher house prices and we couldn’t imagine what first-time home-buyers are paying just to own a home. I don’t think we would buy a house in the city we live in today if all we could afford is a condo or townhouse. There is nothing wrong with either but it’s our personal preference to own a fully detached home. This was why we opted to rent a room until the time was right and our down-payment was reasonable to get us the detached home we wanted.
Although my wife at the time of buying our house was making more money than I was we decided to budget our expenses on one income and that was mine at $15/hr. I know it was very low back then but it made sense to us just in case something happened.
If my wife got pregnant and went on maternity leave was a huge consideration. What if one of us lost our jobs or got injured? Shockingly my wife did lose her job due to downsizing and now stays home with our son. This is fine now that we don’t have a mortgage and I make far more money than I did in my new grad days. Times are tough, but they can get better.
To be fair we didn’t use an actual budget either. We just scribbled down approximate numbers on paper to make sure they’d work and used an online mortgage calculator. We don’t recommend that today as we could have made some big mistakes due to budget miscalculations.
It wasn’t until 2012 when I started Canadian Budget Binder that our budget came to life. We still use that budget today and offer it to our fans for free because we know that it helps us and hope it can help others without the added cost of paying for a simple excel budget from other websites.
Benefits of House Prices Below Your Budget
Have you ever driven by a house and asked yourself who on earth would buy that house? The realization is that almost every house will eventually sell as there will always be a buyer. Every buyer has a budget which means that they may purchase the home on a hill or with a sloped driveway, no back-garden etc. because that’s what they can afford. Sometimes you have to give-up the extras just to get into the real estate market.
Not everyone gets hung up on the details of must-haves in a home especially if they want in the housing market. There’s nothing better than knowing that you will be fine financially if something were to happen. You can’t put that stress relief on the likes of a house which can bend your budget on month to month waiting for a pay to be deposited. It’s not a fun place to be.
If you can’t afford a house with a reasonable down-payment then rent until you can. Run the numbers ten times to make sure you have the safe numbers in a budget with one income coming in. This is what we did. There is no rush to buy a house, ever.
Related: Buying vs. Renting
When you buy a house that your budget says you can afford without being house poor…
- You get a house you can afford on one income if you are a couple or less than if you are a single homeowner.
- You have less financial stress depending on your other debts
- You enter into a housing market that easily sells because of affordability
- Possibility to pay your mortgage off faster because you can save more
- Less to maintain on a smaller house than if you had bought a bigger one and with lower bills
If we went the whole nine yards with house prices back in 2009 we would have seen ourselves in a house that would have cost us up to $800,000. This is what the mortgage lender was willing to lend us given our financial situation and income level at the time. For a young couple that amount of money sent visions of the “good life” running through our minds. Thankfully we didn’t get caught up in the what could have been a bad scenario.
My wife would have lost her job months after buying the house which meant we would have had to pay for a mortgage of $800,000-$80,000= $720,000 @3.95 % interest (our interest rate at the time), 5 year fixed rate, 25 year mortgage on my $15/hour wage. YIKES!!
My wife wouldn’t have been able to stay home with our son either which would have meant day care costs, higher clothing allowance, second vehicle, insurance premium hike and a higher budget for gasoline. The devastation of job loss shortly after buying our first home as a couple had a direct impact on my wife too and with that came guilt.
Even though we still had emergency savings in the bank that would have seen us through for a year or two there was no way that we could have kept a house that expensive without making extra money. This likely would have put stress on our marriage and overall just wouldn’t have been a smart move to make for us as a couple. That doesn’t mean it would kill us it just means things could get rocky.
Couples who fight about money and then divorce because of it either have too much debt or don’t know how to say no when spending money to work on the issue. Money is certainly a relationship killer when there isn’t much to go around and the debt is out of control.
Our advice is to let house prices influence your real estate budget but don’t go overboard when it comes to stretching the budget to the max. Don’t listen to what your real estate agent tells you that you can afford just because the bank will give you a high mortgage either. Once the buy and sell transaction is done they walk away with their commission and you have to pay the bills, not them. The last thing you’d want is to be stuck in a situation like the above and possibly lose everything you’ve worked so hard for.
How did house prices influence your decisions when shopping for real estate?
What did I do this week?
This week I was able to squeeze in a few trips to the park with the wife and son which resulted in one dirty little piggy. Our son has a new-found passion for swimming in the rocks, sand and wood chips. You wouldn’t know he’s only coming up for 20 months old the way he rips through the park on his own. He just adores it and I can see plenty of trips there this summer.
I did managed to put fertilizer on the grass this week and organize more of the garage although I have much more to do. I also need to sand and seal the deck again this year before I put out the deck and sun-room furniture. In the next couple of weeks I’ll be putting grass seed on the lawn to keep up with the lovely grass we’ve been fortunate to have over the past 3 years.
That being said I’ve been working on my professional resume so hopefully I’ll have some good news in the upcoming month. Fingers crossed!!
How was your week?
Awesome posts I published this week
Just in case you’ve missed any of my blog posts this week I will share them all below. If you are looking for past Saturday Weekend Review posts scroll down to the bottom of this post where I will list up to 5 previous weeks for you to read.
If you have a question that you would like to ask Mr.CBB fill out the Contact Mr.CBB form on the blog home page and I’ll do my best to reply to each one. If you want to share a story via a Fan Question please ensure that there is minimum 500 words and lots of details…we love details! I’m more than happy to chat via email to bring your story to life.
New: If your story submission gets chosen and published you will be entered into a yearly draw for a $25 Gift Card or $25 CDN via PayPal if you are from the USA.
Right now CBB is posting Tuesday (Grocery Game Challenge), Thursday (Personal Finance Post), Saturday (Personal Finance and Weekly Wrap-Up and a Frugal Recipe on Sunday!
Top performing CBB Post this week : How much should my Grocery Budget Be?
- VarageSale App is the Newest and Safest Way to Garage Sale
- Strange Things People Do At The Grocery Store To Save Money
- Homemade Potato Waffles
You got WHAT for HOW Much?
Submit your Deal or Brag:
Saving money while grocery shopping is essential in the CBB family and that’s why we share our grocery shops every week in The Grocery Game Challenge .
Join the Budget Brag Challenge 2016 and WIN!!!
What I love the most is when my fans share their amazing shops with me whether it be groceries or other deals they find at a garage sale, online or freebies! In 2016 if you send me your Budget Brag you will automatically get entered into a yearly draw for a surprise gift card.
If your Budget Brag gets chosen you get an extra ballot! So start sending in your brags with a photo and tell me about your deals. If you are from the USA and win I will PayPal you the money in CDN dollars. Open to Canada and USA only.
Email me at canadianbudgetbinder@yahoo.(ca) < remove brackets) or fill out my contact form by Friday each week to have your brag considered for the Saturday post.
This week Jen Peacock is back in action on the garage sale scene and has already sent in one of I’m sure many of her amazing finds this season.
Hi Mr.CBB and Fans,
I’m back and ready to share any deals I can find this summer starting with this.
Here are this weeks garage sale deals:
- Shake cup $.25
- Lego building table with Lego pieces $7 (they were asking $10). This is probably worth $50-$60 or more.
Awesome deal Jen and yes the Lego table would cost far more than $7 to purchase all of that Lego included. Awesome score!!
Making a difference (MAD)
Welcome to the 2016 Making A Difference series! Join the networking movement of Personal Finance Bloggers around the world. If you are a personal finance blogger (anywhere around the world) and would like your blog to be MAD featured simply drop me an email and I’ll explain the process to you. I’m currently booking for May/June 2016!
This is my way of giving back to the personal finance community through networking and sharing knowledge with my fans. Today it is my pleasure to share with you the blog, Two Monkeys Travel Group.
Hello CBB readers,
Two Monkeys Travel Group – Community Travel Blog is a travel blog and website started by Kach Medina Umandap from the Philippines and Jonathan Howe from the UK, sharing their experience and knowledge of travelling the world since 2013. We quickly grew into a valuable source of inspiring travel stories, advice, itineraries and travel guides, with the aim of demonstrating how to live a sustainable life of travel, whilst living your own definition of success.
We have a unique travel style which is a blend of luxury and adventure – seeking out the most incredible experiences on foot, mountain bike, motorbike, up mountains, through rivers and out of aeroplanes, before arriving at a luxury hotel, to be soothed back to life with a spa, a massage and some fine food!
We are now a Community Travel Blog and Travel Website with over twenty amazing travel writers and contributors located all over the world – Asia, Europe, USA, Canada and South America.
The goal of Two Monkeys Travel – Community Travel Blog is to create and grow a leading community travel and lifestyle resource, which offers valuable information, opportunity and inspiration, as well as being a forum where our travel writers and fellow travelers can help and inspire each other to live their dreams.
Om and love
My best recipe find
Food and grocery shopping are relevant to us because food is a large part of the budget which people struggle the most with. We all have to eat to survive but just because we have a budget doesn’t mean we can’t eat delicious home-cooked meals that are drool-worthy.
Not only will you save money but you will be proud of what you’ve accomplished and you’ll see that from the smiles on those you feed.
For the past 2 years I’ve had a second Facebook page called The Free Recipe Depot where I exclusively share recipes from Food Bloggers around the world. I also share recipes on the blog on Sunday either made by home cook and mom Nicola Don or myself.
This week our Top Recipe Pick goes to Sally from Sally’s Baking Addiction for these 30 minute Homemade Whole Wheat Pretzels.
You can add cinnamon sugar on top or dip them in your favourite sauces. Pretzels and honey mustard are a perfect pair.
So if you’re craving some hot buttery pretzels you know where an easy recipe is to get your fix on!! I’m pretty sure if I made a batch of these you’d have to roll me out of the house because I’d be eating them all.
Top DIY project
When I saw this Easy DIY Toilet Paper Roll Cell Phone Holder over at Creative Homemaking I just had to share it.
It takes second so to see the simplicity in this craft project which is brilliant. The best part is you are using an item that would typically be recycled or tossed in the garbage bin. You can expect to pay next to nothing to complete this project.
I may just make this for the wife who keeps losing her phone. Great job Petro, this is a winner.
Editor’s Choice weekly read
Every week I will pick a blog post of the week from around the web that I found interesting and want to share with all of you. Please head on over and give the post a read and let them know that Mr. CBB sent you if you comment. Thanks.
Editor’s pick (That’s me Mr.CBB) This week I read a post by Ty over at Get Rich Quickish about Why Everything You Own Is Garbage. It’s certainly an eye-opening post about how we value life and possessions and what we should be focusing more of our energy on. Great read!
The things people Google
Every week I get thousands of people visit Canadian Budget Binder because they did a search online and found my blog. Any spelling errors below are because I share with you the exact way they typed their search engine query to land on my blog. Some of them are serious and others are meant to have a laugh.
- Supermarket customer stealing sandwiches and stuffing under clothes– Clearly someone is either hungry or gets off on stealing sandwiches. My guess is the person is hungry but stealing never solves anything.
- Tasting something at the grocery store stealing– If you are supposed to pay for it and you don’t then yes that is stealing and against the law.
- Live Poor and Save Money– I don’t know if I’d go to such extremes but I’m sure people do
- Man spends all his money on gadgets but nothing for the home– Haha, I guess you married a gadget guy not a DIY’er
That’s all the fun for this week, thanks for dropping by.
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- The Saturday Weekend Review #165: Frugal Easter Traditions We’ve Started As A Family
- The Saturday Weekend Review #166: The Dollar Store Should Be Called The Dollars Store
- The Saturday Weekend Review #167: Spring Cleaning Parents Team Up Early To Save on Home Repairs
- The Saturday Weekend Review #168: 5 Garage Sale Staging Secrets To Help You Sell Your Stuff