e49 - Are YOU a first time home buyer?

[00:00:02] You've landed on the Mortgage Life podcast where we strive to bring you mortgage-related info that's easy to understand. We have conversations with market experts to bring you timely updates because there's one certainty in this industry things change I'm Mindy Boudlin, and I'm Pete Salamosi

[00:00:25] Welcome to the Mortgage Life podcast We are recording. We're recording Welcome. Oh, no, we already did that part welcome to the Mortgage Life Welcome again So welcome to the Mortgage Life This is a new background

[00:00:48] so Mindy and I are recording this here in Vernon because she's here visiting from Victoria. Yes, thank you And if you're watching this so you might be listening to this on

[00:01:01] Podcast or if you're watching it. We're also on YouTube so you could see this and you'll see that I have Ridiculously long hair because I'm just trying to grow it out. So don't mind that Please are you going for the mullet or?

[00:01:16] I hope not just one big overall. Are you trying to get my hair peeked is that what's happening? So today we're talking about First-time home buyers now we have mentioned first-time home buyers in a previous episode which was Episode 17

[00:01:34] re-recorded in two years ago 2022 and at that time we did an episode that was Heavy on the programs, right? So it was pretty technical And one thing we've learned about the programs they change

[00:01:51] So a couple of those things have changed and we thought well, we can re-record that But why don't we just talk in more in general about What it means to be a first-time home buyer

[00:02:00] And maybe things that a first-time home buyer should think about when they're thinking about buying a house, right? So if you are thinking of buying a home and this is potentially your first home You probably have a lot of questions like what are all the costs involved?

[00:02:14] Like let's start with that. What are all the costs involved in owning a home? I know it's a great question because no longer you do you just you know send your e-transfer for your rent payment on the

[00:02:24] First right so one thing's a rent payment then you think about the mortgage payments So yes, of course you have a mortgage. There is a payment But one thing to remember with a mortgage payment is is principal and interest right so interest is the cost the expense

[00:02:39] The principal portion is actually going back into your pocket It's like you're putting a little bit of equity back into your house each month So even though your rent payment and your mortgage payment may both be 2200

[00:02:50] It's actually more advantageous to have that mortgage payment because again a portion of that principal goes back into your pocket Some people like to call it a forced savings account There you go. We could call it that so that's an easy number to calculate

[00:03:03] Your mortgage broker or Mindy and I can certainly help you with figuring out how much you can afford And what that mortgage payment would look like now? What else like we've obviously there's more to owning a home than just the mortgage payment

[00:03:16] Yeah, so other fixed costs your property taxes Um, so every year you get uh your hosts in bc. Let's just stick to bc for now to keep it simple You get a bc assessment in the mail

[00:03:28] It tells you what they say their land and your home value is and then each municipality has a different Uh mill rate So it's the number that they times the assessed value by to get your annual property tax Amount right and so for most municipalities in bc

[00:03:46] That is payable typically right around mid-year So for most places that's about july 2nd because the 1st is a holiday So usually they'll say it's uh due on july 2nd Some municipalities have seen extend to the beginning of august

[00:04:01] So it could be sometime in the middle of the year, but that's typically when it's due And uh just a point on property taxes you can listen to our property tax episode

[00:04:10] But don't forget to apply for the homeowner grant right so the homeowner grant just really quickly is Reduction in the amount that you owe for property taxes and it can be a few different amounts depending on where in the province you are

[00:04:24] The lower mainland gets a little bit less for the homeowner's grant Outside of the lower mainland and capital regional. I think uh, you'll get a little bit higher homeowner grant And there's also an age grant

[00:04:36] So if you're considered to be a senior then you also get a little bit more of a grant as well Yes, and you only get the grant on your primary residence So another cost of home ownership that you could also have as a renter is home insurance

[00:04:52] So as an owner you have to get a home insurance package Obviously to ensure your home, but you also get content as part of that Whereas at a renter you typically would just get your renter or your contents coverage

[00:05:05] We did one of our first episodes. I think was a home insurance um A whole entire podcast episode on home insurance if you wanted to go back and listen to that But it is another one of those annual costs that comes with home ownership right

[00:05:20] So uh to give you a bit of a sense of it because if you've Obviously if you've never done to home, you don't really know but uh in terms of insurance the renter's insurance tends to be a little bit less

[00:05:32] So I would say probably less than a hundred dollars per month for a year sometimes even significantly less if it's like a condo or something Uh, and if you're owning a home and let's say it's a very large home You're a very wealthy first-time home buyer

[00:05:46] You could be paying up to four or five hundred dollars per month So the policy could be up to five or six thousand dollars for the year So depending on where you are the size of the home and a variety of other factors

[00:05:58] You could see a fairly minimal expense or it could be a significant expense And then this kind of leads into the stratophy's so another cost here if you own a condo a townhouse even some Uh standalone homes are stratified Where you will have a like a stratophy

[00:06:17] It's a shared expense for shared property Yeah, and in that stratophy will be insurance for the building like a shared insurance policy as well So the insurance is a big part of it But stratophy's another cost that a owner would bear and not typically a renter

[00:06:34] I think I've actually seen a couple times where landlords have charged Tenants their stratophy's but for the most part it's an owner cost crazy. So stratophy's I remember This is going back 20 plus years, but stratophy's

[00:06:50] They could be fairly minimal like I remember some seeing some that were less than a hundred dollars per month Yeah, I think those days are gone So nowadays typically most stratas are being a lot more fiscally

[00:07:02] Responsible and they're actually looking at the variety of things that they'll have to keep maintain and and potentially upgrade over time so things like the roof or the siding or insulation or a variety of other bits and pieces of that

[00:07:14] Property that would have to be maintained. So now typically I think on the cheaper side We might see stratophy's around the 300 dollars per month mark and depending on where you are Bigger cities can have much more expensive properties with higher maintenance

[00:07:30] And those could be up in the kind of high hundreds. So you could see 800 or 900 dollars per month Yes, they are coming in again insurance rates have gone up which are a big part of those stratophy's that I've what I've seen recently anyways Um repairs and maintenance, right?

[00:07:47] So, that's actually a good segue from strata because strata typically covers the building repairs and maintenance But if you own your own home Then repairs maintenance. Yeah, you can't call up your landlord at 8 p.m. And complain about the burnt out light bulb

[00:08:02] And light bulbs are not too bad because those are pretty easy to replace and pretty cheap But you also have to think ahead and kind of like what I was talking about with the uh, the stratas

[00:08:11] They're looking at the larger expenditures that may go over time. So things like the roof A lot of people May see this at especially at real estate time that they might think well How old is the hot water tank?

[00:08:23] So like, you know a typical hot water tank could be a few thousand dollars to replace Yeah, absolutely. And that's why that home inspection is important when you're looking to purchase but Yeah, roof age hot water tank. Is it tankless? Was it changed more than 12 years ago?

[00:08:38] Any sort of maintenance that you haven't seen all those things Now become your responsibilities. So there's the physical cost But there's also that sort of organizational ability to get all those things done Right So make sure to plan and maybe even set aside a little bit of money

[00:08:57] From each paycheck to have a safety security Savings account for things that come up in terms of repairs and maintenance You know, it's a good idea to be prepared Absolutely. Yeah, so that's that's kind of a general sense of the the cost that we'd see on

[00:09:13] Home ownership may not be exclusive. It probably we've missed a few things but those are the major items that will come up but I always like to think of like home ownership as an alternative to Something else like what are we doing instead of owning a home?

[00:09:30] And most people as they kind of grow up they're living with their parents So that's that's one potential alternative But I'm sure that if you're at the point where you're thinking about owning your own home

[00:09:41] You may have outlived the fact that you don't want to live in your parents home anymore This is true. I have seen more often where People will actually stay living with their parents for longer than maybe

[00:09:55] They would have 20 years ago just because again the real estate prices have come up And it's taking a little bit longer to save for that down payment

[00:10:03] But yeah, so you're in your your parents basement or you're living with your roommate that comes home at 2 in the morning or You know, you want to explore home ownership? This is this is legit So yeah, so living with your parents living with a roommate

[00:10:18] Renting an apartment renting a house renting a suite couch surfing It goes for living in your vw event Yeah, and you could live potentially anywhere but there's obviously Costs and benefits to any one of those things and rent

[00:10:36] Lately especially has actually become quite expensive. We know that through the the cpi numbers through the bank of canada We see that rents have increased seven eight nine percent year over year So what used to be a fairly simple rent of a few hundred dollars? Maybe now

[00:10:54] thousands so It's one of the reasons that people will oftentimes bat around the idea of either renting or owning So take a look at the various things that are out there and you know use your Your abilities to save to kind of get to that down payment

[00:11:12] So that you can then move into home ownership if that's where you want to go Yeah, two things to think about remember you've got to have a down payment You've got to be able to income qualify for a mortgage, right?

[00:11:21] So those are the two pieces that we're finding are taking Buyers a little bit longer right now to get there but once they do They've had that goal in mind. They've set their intention. They work towards it and they're successful

[00:11:33] So that's right. Yeah, and and why what are the benefits? Why should I own a home? Why can't I just rent for the rest of my life and that's fine? Absolutely if that's

[00:11:43] Your prerogative that is that's a great option, but there are some benefits to owning a home. That's true So a number one Benefit that most people will tend to kind of reference whenever they're talking about home ownership

[00:11:56] Is the fact that you have an asset that appreciates in value You have the potential for price appreciation. So like you can kind of sit on the house And if the market goes up you end up with kind of more money tucked away in that home savings

[00:12:14] In your pocket Yeah, and then you see people start kind of you've heard of the expression the property ladder Right so they get their get the foot in their door at the first home They build the equity the principal payments each month the property is appreciating

[00:12:27] In a few years down the road. They can get into the next home and we see it all the time It's it's legit. It happens. Absolutely I I for sure had that exact same ladder happen in my life first place was a very small condo $52,000 purchase price

[00:12:44] $52,000 could you imagine? This explains how old I am times that by 10 That's right. So and then from there it was a small house and then a duplex so like there there definitely is a property ladder and You go through it because

[00:13:00] Especially here in the open organ. We were very fortunate to see property values increased So that kind of led to where that came from But in addition to the benefit of of that property ladder, what's another thing? Well, another thing that comes to mind is stability

[00:13:15] You know, there's so much media attention around The the sort of the housing crisis and rents and landlords and changes to the landlord and tenant act and Can a landlord take possession of a home? How many months they need to give so

[00:13:30] So what happens and we see this all the time? So many of our first-time home buyer files are clients who call us up and say I need to be out by September 1st What do I do? Right? So when you own a home

[00:13:43] Assuming you're making your mortgage payments. It's yours That's exactly it. So if you want to be in that place for years and years Let's say your kids are going to school and you're right next to the school

[00:13:55] That's a fantastic way to provide that stability and knowing that you're going to be there for That period of your life. Unfortunately, like many says with rentals It's really challenging. There there's a lot of movement today and and potentially

[00:14:09] There's a variety of reasons that you could be evicted. So There you have it What else? Oh one of the ones that I really love and I'm looking at my notes here because it's I'm a note guy

[00:14:21] You can make it your own so when you own your own home if you want to change the If you want to paint your room a certain color if you want the trim to be wood versus white

[00:14:32] You can do all that. So customization you can make it yours Do what you want with it as long as you can afford it and you can pay for the things There's a lot of things that you can actually do that also help increase the value

[00:14:45] So if you're going to do that, you know, look at kitchens and bathrooms to start But like you have the ability to make it yours. Whereas a lot of times in rentals It's not necessarily the case. Yeah aside from

[00:14:58] Yes, I mean sometimes landlords let you paint but not really, you know Because then they have to kind of go in and remediate it if they don't like your pink walls But yeah, I mean you buy a home and again as a first-time home buyer

[00:15:10] You might be looking at something that needs to be slightly renovated a slight fixer upper. We'll call it But you can go in and you can you can retile the bathrooms. You can change the countertops You can paint the cabinetry or put in new cabinetry because it's yours

[00:15:24] And that's that leads into the next comment, which is out of ownership It's yours. This is something that you've had to work hard to achieve And it's tangible people can see it You know, this is my home. Look at my new

[00:15:38] Look at my new, you know bathroom that I just renovated look at my beautiful backyard Look at my my fire pit area. That's all yours. That is something you've worked hard to achieve Yeah, and if you're uh, someone who is resourceful

[00:15:51] Oftentimes, uh, you can find really good deals on a variety of things So for instance, if you want to renovate your bathroom, you might go to Ikea to find a mirror You might go to a countertop place to find discount countertops that

[00:16:05] Happen to be your exact style in courts And you can kind of do all those little bits and pieces and you can make that Home yours you can provide that pride of ownership and you can do it fairly reasonably as long as you're resourceful Yep

[00:16:21] I think one of the last things that I wanted to say on this is that When you own your own home, you can also be really selective in where you're living And in some neighborhoods and perhaps some municipalities

[00:16:33] You might find that rentals kind of exist in one place or another And may not exist in and necessarily the place that you want to be When it comes to home ownership, you have quite a bit to choose from in terms of where you want to live Now

[00:16:48] That's all good and sometimes Gonna have to talk about some of the drawbacks to home ownership And this kind of leads into one of those drawbacks Which is that even if you do find A place that you really want to live it might be very expensive

[00:17:03] So that location thing is is both a benefit in that you can find it But it could also be a drawback and that it could be very expensive. So keep that in mind when it comes to the location Yes, I found in moving from the Yukon to BC

[00:17:18] I learned to bring cash, you know, there are the property transfer tax, etc It's expensive. It is to get in it. And this is why it pays to be diligent. It pays to have a plan it pays to save

[00:17:30] These things actually do turn into successful home purchases. So And then not only that, I mean you can plan and be as organized as you want But what if you're in your new home and all of a sudden? Yeah, the hot water tank goes

[00:17:43] Or, you know, there's a fire or something unexpected costs can arise And as we mentioned earlier, there's no landlord to call. It's you Right, so exactly. So that cost is borne by you. So Being prepared for an eventual

[00:18:01] Repair or a bit of maintenance or an insurance claim is really important Yeah, yeah We were talking a little bit about location and sometimes again in terms of location

[00:18:14] You may not necessarily find the the home that you're looking for in a particular location or that that location may be too expensive So just to reiterate that it's not always easy to find that Specific location or municipality if you want to live in a particular area

[00:18:29] Let's say Vancouver, you might find that bernieby might be more affordable Or you might have to kind of move out into the valley where things are More affordable and the same could be said in a market that that we just came out of a couple years ago

[00:18:41] It was a really hot market In those cases there's just not enough listings, right? So even though you want to live in a neighborhood and you can afford to live in a neighborhood, there's nothing for sale

[00:18:51] Um, so we saw that I saw that when I moved to victoria when I was house shopping I think there was eight houses for sale in the neighborhood. I wanted. I'm like, this is not fair So yeah, there's there's a few factors at play there

[00:19:01] Totally and we've talked a little bit about how A lot of times we've seen the property values here in bc, especially Increase over time. Well, one of the other potential drawbacks to own owning a home Is that property values can also go down?

[00:19:17] And so you could see your investment and your equity potentially decrease over time It's something to be aware of it doesn't happen too often and oftentimes if we look long term And we we kind of smooth out the bumps in the market. We see that there is

[00:19:32] Appreciation over time, but if you're looking in different markets across canada potentially I know alberta sees a little bit more fluctuations. The prairie provinces do as well You may actually see that the amount that you bought a house for

[00:19:46] One year may actually be more than what you could sell it for today. Yeah Yeah Yeah Something to think about with strata's i'm thinking here I was even thinking about the province when they changed certain rules, but specifically with strata

[00:20:02] So again, this is a scenario if you're living in a condominium or a townhouse The strata is run by a volunteer council And I mean obviously they have to stay within legal parameters, but they can make changes like they can come in and say

[00:20:17] No more umbrellas on the patios or you know now there's no noise after 9 p.m. Or you know, whatever it may be So that's one of those pieces that you have to be cognizant of is it's it's almost like yeah

[00:20:29] You're free and you're a homeowner, but you are still bound by these rules in this strata, right? So yeah, that's another potential drawback if you're buying in a strata complex You may find that what you originally bought may not necessarily meet your needs today

[00:20:44] Or if those rules do change that It might not necessarily be what you originally thought so just be aware of that or get yourself a spot on the strata council Yeah, you could do that gosh

[00:20:57] Because we all need more to do yeah, but yeah, it's like hurting cats. Anyways Um So lots to think about right lots of pros lots of cons. I feel like some of these could kind of go either way for renting or owning

[00:21:10] Um, again, you know how much how much time how much equity? Uh, where are you at in life? Yeah, long-term plans goals these things all factor into these decisions Right and when it comes to those variety of programs that are available to first-time home buyers

[00:21:28] They're there. There's gonna be the rsp withdrawal program. There's a few others. There's a first home savings account Listen back to our episode that episode 17 on first-time home buyers and the programs that are available And if you have questions, just come ask us

[00:21:43] We're happy to help and walk you through this But at least this gives you a few different questions to ask and things to consider before you take that step to your first home awesome

[00:21:54] This is the mortgage life we look forward to continuing the conversation. So come back and listen