Buying our first property: The preparation phase

While planning our #CynOliWedding, we also had to figure out our living situation post-wedding since we were living separately when we got engaged back in 2019. After long discussions, we decided we wanted to become property owners.

Buying your first property can be a long and stressful process IF you are not prepared and don't have the right tools. I often joke and say that I only started to get grey hairs AFTER Oli proposed, because suddenly we had to plan so many things during our engagement year.

I know there are a lot of resources out on the internet to get yourself ready, but I wanted to share with you what it was like for us, and the advice I would give to new home buyers. So here it goes...

1. Your partner will become your roommate: do you know what to expect?

Before Oli proposed, we had talked about our values and our point of view on a lot of matters such as : family life, priorities, money management, raising kids, expectations of gender roles, etc...Not just the serious stuff by the way. Like I remember the timing at which farting in each other's presence would become acceptable was a big conversation for us on which we disagreed on by the way! :)

I think it is really important for these conversations to happen beforehand, so you can plan ahead and manage expectations.

2. To buy or to rent: that is the question

We both wanted to buy but the vision was slightly different. My vision was to go straight for the single family home, where I saw myself raising dogs and kids from birth to graduation; collecting memories and renovating it to make it our dream home. That's how I saw my parents do it so it became my vision too. But then there was always the question of where would I buy : Will I raise my kids and spend the rest of my life in Canada?

Oli's vision of owning a home was slightly different - one based on financial strategy instead of sentiments, lol. So after many discussions, we decided to adopt a house-hacking strategy and become owner-occupied multi-family property investors for now (lol you might have to read that again). In simpler and explicit terms, we decided to buy a triplex and live in it. This house-hacking strategy allows the rent from the other apartments to help us pay the mortgage on the property or give us a revenue to keep up with maintenance. At the end of the mortgage term, the building can then become a source of income.

That being said, deciding to rent vs buy is not a bad idea either. Buying a property is a form of investment. If you are renting, what I understood is that you need to make sure to invest your money - spending it on things that will not appreciate and letting it sit in your bank account is probably not the best thing you can do. You should invest in things that will give you similar or better returns than real estate. You can still invest in real estate without owning a property by the way - check out real estate investment trust and crowdfunding. They say the best thing to do is to diversify your investments. So if owning a property is not part of your plan, I think that's totally fine as long as you have other plans to grow wealth and to have financial security. I strongly encourage you to check out resources on how to invest your money. And remember the English proverb:

Don't put all your eggs in one basket!

3. Financial limits and requirements: do the math and research!

Now that the important questions had been discussed in terms of expectations and vision, and I made Oli swear to do the dishes for the rest of his life haha, it was time to crunch in the numbers. If you don't know the financial requirements and your financial limit, well my friend <<ou chire!>> (it could be your downfall ).

Before 2019, I was the person who at the end of the year, wouldn't know where the heck my money went, how much I made, saved or spent. Luckily, I am not a big spender by nature, but there was no money management on my part to make it grow, and that is no way to live my friend. If you are like the old me, don't worry because it's never too late to make some changes to create new healthy habits. A BUDGET is one of your best tool and you will want to keep your eye on your credit score.

Why you should watch you credit score like a hawk:

Your credit score is the key to funding opportunities, and can be an important factor is other aspects such as job applications. I wish someone had emphasized this to me 10 years ago! You see, before 2019 I had never seen my credit score and I couldn't care less. I did not owe any money to anyone, so I thought: "I owe nothing, I have good credit, right?" WRONG! what killed me were late payments, because like I said, keeping track of my money or payments was last on my priority list. I used to be intimidated by anything finance related, but I now realize I shouldn't be. It is crucial to have a handle on your personal finance.

So, I had to learn how to increase my credit score after not caring about it for...well never. And so can you! Tricks like: automating payments and bills to avoid late payments, staying below 30% of your credit limits, and diversifying your credit portfolio can help.

Your financing from the bank:

If you don't plan on paying your new place in cash, you will need a mortgage contract which is a loan from the bank or money institution to buy your property. Before you make an offer on a property, it is important to know, based on your job status, salary and credit history what the bank is willing to lend you. Based on our experience, here is what I can tell you regarding the mortgage:

• Know your true limit: Say your mortgage pre-approval is for $500,000. DO NOT go looking for houses that are selling for that price !!!! You'll see why when you see all the expenses new home buyers need to budget for in the next section;

• Shop around for the lowest interest rates - make the smartest move for yourself. <<Nou pa egare!>>

• Added to your other needs, how well to you respect you budget rules? What percentage of your take-home income are the mortgage payments? Also consider worst-case scenarios like this: If the higher earning partner loses his/her job temporarily, can the other manage the payments? for how long?

• The more you can put on your down payment up front, the less you will need to pay on mortgage payments later. So how much liquid savings do you have to spare on your down payment? They recommend 20% of the property selling price. The minimum for a triplex is 10% and it varies based on the property type.

• Consult a mortgage broker to answer specific questions related to your specific situation. For instance in our case, we needed to know that the requirements are different for business owners/consultants vs. employees.

Expenses to budget for when buying a property:

As I mentioned before, a budget is your number one tool (shout out to my brother who got me started on setting up mine - thanks bro!). How I see it, a budget is a tool that allows you to analyze the future scenario you want to be in, and helps you plan to get there. In your budget, consider all expenses and savings associated with the new property and if needed, start saving for that project by shifting your money around.

Here is a list of expenses to consider beside the mortgage payments and down payment when buying a new property:

Before the offer

• Inspection fees (~200$)

A few days ahead of the closing date (one-time payments):

• Down payment (5-20% of asking price)

• Mortgage loan insurance premium (SCHL)

• Notary fees (1500 - 1800$)

• Moving fees (~200$ - don't buy boxes, get them for free!)

• Property transfer tax (Taxe de Bienvenue)

After closing (recurring payments)

• Mortgage payments

• Municipal and school taxes

• Property insurance and other optional insurances

• Maintenance fees or co-ownership fees for condos that you set aside when needed

• Furniture and appliances

Oli and I actually found out about some of these expenses later in the process. Forgotten expenses and unexpected expenses are part of the reasons why it's a good idea not to reach your financial limit stated on the financing pre-approval when it comes to the selling value of your new property (approved for 500k? then maybe consider buying a 350k property to comfortably live under your financial limits).

Final words: Be prepared

Becoming a property owner is a big investment and it comes with more maintenance and responsibilities compared to renting a home. So, take the time to do your research and get yo $h!t in order before you buy! Ideally, you should have the cash saved up to pay more than the minimum on your down payment, have little or no debt, have a good credit score to qualify for low loan rates, and be ready to do the work associated with being a property owner and/or landlord.

If you are a home owner what advice do you have for new home buyers getting ready to purchase their new home - particularly in the Canadian context? Let me know in the comments.

Thank you for reading. I hope this was helpful, and be sure to come back for the Hunting phase of buying your first home coming soon on the blog.

With love,

- Cyn