When my wife and I bought our first home in 2003, we knew we wouldn’t be there forever. The two bedroom , one bathroom starter home was just that, a place for us to settle down and start a family. After our daughter was born in 2009, we started thinking about upgrading to a bigger place.
We took a look at the new show homes in the city and got the urge to build our dream house. The price on the new house was $420,000 and we only had $60,000 available for a down payment.
When we got home and crunched the numbers, realized this wasn’t going to be the best financial decision. So we resisted the temptation to buy right away and ended up waiting another 8 months before we built our new house. Here’s why:
Not enough savings . We didn’t have much savings, so we were relying on our existing home equity for the down payment. This would be risky if we didn’t sell for the right price – plus we had to factor in real estate fees and closing costs. With less than 20 per cent down, we’d be faced with CMHC premiums of up to $7,500. We wanted to save more money and avoid paying these fees.
Uncertain budget . My wife was on maternity leave and we planned for her to stay home full time. We knew that upgrading our house would not only mean a bigger mortgage payment, but also higher property taxes and utility costs. It was important for us to get used to living on one income for at least a year before we upgraded our housing.
We really wanted to build this house, but didn’t want to make a mistake that could set us back financially for years. We put together a realistic plan to help achieve our goal of buying a new home within 12 to 18 months.
We planned to save $2,000 a month for 18 months, which would bring our total down payment to nearly $100,000. Using a monthly budget kept our expenses in line, and we stayed focused on our goal by avoiding any big ticket purchases like new furniture and expensive electronics.
I also started a personal finance blog and picked up some freelance writing work on the side. This eventually helped to replace my wife’s income and gave us some breathing room.
We moved into our new house last summer and put over 20 per cent down on our home. Waiting to buy was the right decision and it’s gratifying to know we can live comfortably and continue to save without housing costs eating up most of our budget.