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From Renter to Homeowner, need help coping with worries

Romantic UndeadRomantic Undead Registered User regular
edited March 2016 in Help / Advice Forum
Hi guys!

I'm a dude in my mid thirties, married with a 2 year old girl. My wife and I have decided that it's way past time that we quit renting our home and looked into buying one for ourselves. We have been looking at houses and have some money saved for a deposit and, on paper, it looks like we're all set to go, but I'm still wracked with worries and I am afraid I might be making a huge mistake.

Background:
- I'm Canadian (Ottawa, Ontario region)
- I'm a federal government employee, making ~60k a year (Canadian, natch), my wife works part time retail in the evenings and takes care of baby during the day. (no daycare)
- I've never owned any property before (unless you count a car)
- I'm not very handy. I would be pretty much relying entirely on contractors to assist with home maintenance, and I know that that can become treacherous at times.
- We've calculated how much a mortgage repayment plan would cost us, as well as property taxes, and utilities (which we already pay anyways where we rent) and we can afford it, but I'm sure there's a multitude of less obvious costs that we're not considering.
- I'm absolutely nervous that, as soon as we move, the house we'll choose will fall apart around our ears and we'll be stuck in a Money Pit situation.
- I have become too accustomed to the no-hassle nature of being a renter: When things go wrong, call the landlord, he'll fix it!

Anyways, just looking for general advice and reassurances. I'm getting conflicting information, some people saying that it isn't wise to buy right now anyways, and that seeing a house as an investment in this economy is largely a myth. Please let me know what you think, PAers!

3DS FC: 1547-5210-6531
Romantic Undead on

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    HefflingHeffling No Pic EverRegistered User regular
    If you're planning on living in that location for at least 5 years, then home ownership is generally better financially than renting (based on a 30-year loan and relatively close renting and mortgage costs). You'll build up enough equity such that, unless the housing market tanks, you can recoup your investment at a minimum.

    Part of the home purchasing process, at least in the US, is to hire a professional home inspector. These are persons who know the building codes very well, and do a very thorough one-day examination of the home. I've always been present for the home inspection, which lets the inspector tell you all of the little details that are opinion based and thus wouldn't go into the report. They test everything; from water taps to light switches and outlets, and even the HVAC.

    Most home repairs can be handled without the use of an expensive professional like a plumber. YouTube provides tons of how-to videos, mix in a little elbow grease and you'll find you can do much more than you thought! If you look at how to do something and think it's too complicated, you still have the option of paying to have the work performed.

    Work I've learned to do myself:

    * Basic plumbing, like cleaning the traps and patching leaks.
    * Replacing the hood over the range in the kitchen (surprisingly easy).
    * Rewired the outside AC unit and built a guard around the wiring (dogs chewed it up).
    * Installed about 120 m^2 of hardwood flooring.

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    MrTLiciousMrTLicious Registered User regular
    Just should note that the 5-year benchmark is in the American environment which heavily subsidizes home ownership. I have no idea what the Canadian system does or what other differences there are so that number may vary.

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    PantshandshakePantshandshake Registered User regular
    I don't know about Canada, but in the US your mortgage lender is going to require that you maintain property insurance. I would advise that your insurance coverage be based on your mortgage amount, rather than your property value.

    As far as your other concerns go:
    - Youtube is super helpful for maintenance things. I mean, aside from general stuff, I think most people have to use some kind of contractor at some point. Unless you can replace your own roof.
    - I'm fairly convinced that, for the most part, seeing a house as an investment went out the window before our generation (I'm 36) got to the point where we could own a house. But that's a moot point, you buy it because ownership is better than renting for more reasons than sound financial investment.
    - In my experience, owning a home is a near constant battle against entropy. You're always going to have something to fix, update, build, or tear down.
    - Have a thorough inspection before you buy!
    - That old 'Have 6 months worth of living expenses saved up' thing becomes even more important when you own a home. Don't rush into purchasing a house with all your moneys.

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    GonmunGonmun He keeps kickin' me in the dickRegistered User regular
    Hi guys!

    I'm a dude in my mid thirties, married with a 2 year old girl. My wife and I have decided that it's way past time that we quit renting our home and looked into buying one for ourselves. We have been looking at houses and have some money saved for a deposit and, on paper, it looks like we're all set to go, but I'm still wracked with worries and I am afraid I might be making a huge mistake.

    Background:
    - I'm Canadian (Ottawa, Ontario region)
    - I'm a federal government employee, making ~60k a year (Canadian, natch), my wife works part time retail in the evenings and takes care of baby during the day. (no daycare)
    - I've never owned any property before (unless you count a car)
    - I'm not very handy. I would be pretty much relying entirely on contractors to assist with home maintenance, and I know that that can become treacherous at times.
    - We've calculated how much a mortgage repayment plan would cost us, as well as property taxes, and utilities (which we already pay anyways where we rent) and we can afford it, but I'm sure there's a multitude of less obvious costs that we're not considering.
    - I'm absolutely nervous that, as soon as we move, the house we'll choose will fall apart around our ears and we'll be stuck in a Money Pit situation.
    - I have become too accustomed to the no-hassle nature of being a renter: When things go wrong, call the landlord, he'll fix it!

    Anyways, just looking for general advice and reassurances. I'm getting conflicting information, some people saying that it isn't wise to buy right now anyways, and that seeing a house as an investment in this economy is largely a myth. Please let me know what you think, PAers!

    Congrats!

    I live in Moncton, NB and just bought a house a little over a year ago after renting for a LONG time. I had a lot of the same worries, as did my wife. But I'll try and help out a bit with some of those worries.

    One thing to consider as well since this is your first time buying a house is that you guys can claim the first-time home buyers credit on your taxes for next year which will be a nice little bit you can claim (I think it's $5000 or something like that).

    I'm not overly handy myself (my wife is actually a bit more so then me) but a lot of stuff is surprisingly do-able for ordinary folks. We were able to replace a sink, faucets and a toilet in our bathroom by ourselves. Stuff like painting is of course pretty standard for most folks. With regards to electrical I would definitely suggest a contractor of some sort if you are in need of anything like that and definitely look into checking references or very reputable folks in your area.

    The one huge thing I will say if you are interested in a house is to get a home inspection. It will assuage a LOT of your fears and do not skimp out. I have a guy that I had used for a couple of inspections and has been awesome with us. In face he even deducted $100 the second time we used him which was nice so we got the infrared done as well with him to check the walls, ceiling, etc. It also gives you some leverage when it comes time to put in an offer. You can request for work to be done or money back on closing to do things.

    Another thing to consider that isn't really talked about a lot is closing costs. Sometimes you can get the seller to include that in the closing where they will give you a portion back to pay for it or just outright pay it themselves upon closing. Just make sure to have the funds put aside should you need to pay for it yourselves.

    If there are any questions you have though feel free to shoot me a PM and I'll do my best to try and help out.

    Oh, one last thing since you mentioned utilities. If you are looking into trying to reduce consumption there are two big things I would suggest. 1) LED bulbs. If you can, replace all the bulbs in your home with those when you move in. It might not seem like much but it can really save over time. 2) If the house you buy doesn't already have one definitely look into getting quotes for a mini-split heat pump to see about a purchase plus improvements for your mortgage. We have a Fujitsi that provides heat in the winter and A/C in the summer and it has saved us a ton on power. My usage going from my apartment (which was drafty as hell to begin with) to my house with a heat pump literally got cut by more than half from the previous year.

    Hope this helps and good luck house hunting!

    desc wrote: »
    ~ * swole patrol flying roundhouse kick top performer recognition: April 2014 * ~
    If you have a sec, check out my podcast: War and Beast Twitter Facebook
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    Romantic UndeadRomantic Undead Registered User regular
    I don't know about Canada, but in the US your mortgage lender is going to require that you maintain property insurance. I would advise that your insurance coverage be based on your mortgage amount, rather than your property value.

    As far as your other concerns go:
    - Youtube is super helpful for maintenance things. I mean, aside from general stuff, I think most people have to use some kind of contractor at some point. Unless you can replace your own roof.
    - I'm fairly convinced that, for the most part, seeing a house as an investment went out the window before our generation (I'm 36) got to the point where we could own a house. But that's a moot point, you buy it because ownership is better than renting for more reasons than sound financial investment.
    - In my experience, owning a home is a near constant battle against entropy. You're always going to have something to fix, update, build, or tear down.
    - Have a thorough inspection before you buy!
    - That old 'Have 6 months worth of living expenses saved up' thing becomes even more important when you own a home. Don't rush into purchasing a house with all your moneys.

    Yeah, great point. Our savings aren't where they should be right now, and that's another huge concern for us. One of the reasons we're thinking of buying is because we're starting to feel fleeced on rent, and we're getting frustrated by the fact that the money we're spending there is not ours. We could get a mortgage instead, spend (considerably) less per month on payments than what we're spending now on rent, and that money is still ours.

    However, the points you made about saving and the battle against entropy are certainly huge considerations for me. I hate stress and the thought of having to constantly worry about the state of my home, without the cushion of just being able to call someone else to fix it is (to my embarassement) a huge source of anxiety for me.

    Oh, by the way, I forgot to mention that I do have some family support. My father is a licensed home inspector, so he'll be assisting us with that, so I have that going for me, which is nice. :P

    3DS FC: 1547-5210-6531
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    bowenbowen How you doin'? Registered User regular
    edited March 2016
    Fixing things around the house is easy. It's very unlikely the house will fall around you unless you choose a shitty house, or ignore issues.

    Things you should leave to bonded/licensed/insured professionals: Roofs, main electric, rough plumbing

    Don't ignore problems or they will quickly spiral out of control.

    With buying don't buy a house with a mortgage equal to your rent. What you're ultimately looking for is keeping that same 'float' that landlords do for repairs. So the $1000 a month you might pay, for instance, might actually be a $400 a month mortgage with $200 a month in property taxes. Then that extra $400 a month the landlord might use for repairs and profit. $400 a month is a bit steep, but, they need profit and you don't, so maybe shoot for something that gives you $200 extra a month.

    Also account for things you don't pay for in rent now. Water/Utilities you're not paying (trash, mail delivery, heat, hot water, LP/Natural Gas), taxes, so on and so forth. So those might run you an extra $100-200 a month, and maybe more.

    But all in all, if you make sure you're storing that "extra" away for the inevitable furnace or hot water tank failure, you'll be okay, and will probably enjoy it far more than renting since it's yours. Whoops you spilled wine on the carpet, don't have to worry about them keeping your $5000 deposit and fight in court about it. Nope you can just rip it out and put in hardwoods instead!

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    LaOsLaOs SaskatoonRegistered User regular
    You essentially will still have that cushion of just being able to call someone else to fix it. You'll just have to pay that person for it. But there's basically always someone you can call to fix your things. Plumbers, electricians, general contractors, etc. You can still have the "problem? call someone and it's fixed" lifestyle; you'll just have to be the one paying those bills now.

    As for the rest, I think the other posters have it covered pretty well. If you're planning to stay in the same location for at least five years, it's generally a good idea to look into buying. Rates are nice and low right now, too, so that's really nice.

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    zepherinzepherin Russian warship, go fuck yourself Registered User regular
    Also when you are doing your inspection, have the inspector call out how old major repair items are as part of the inspection.
    Furnace
    AC
    Water heater
    Dish Washer
    Other Appliances
    General age of house (because that is roof electrical plumbing)
    If the furnace, AC, Dishwasher or water heater is over 10 years old, just plan to replace them year one. Especially the water heater and dish washer. It's a 600-800 USD job to replace a standrad US water heater in most areas. It's a 15k-20k repair if one of those shits the bed, same with Dish Washer.
    AC and Furnace giving out is just really inconvenient because having someone come out when it is 95 degrees to replace your AC, the cost doubles, same with 30 degrees to replace your furnace. Generally when it is moderate out have those done because HVAC people aren't going to be as busy.

    If the house is over 30 years old, plan on replacing the roof, probably the electrical, maybe the plumbing.

    Houses are not good investment vehicles if you plan on selling the house in 5 years. Houses are great investment vehicles if you are planning on selling your house in 30-40 years. Rent paid is rent lost. Mortgage paid is equity gained.

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    hsuhsu Registered User regular
    edited March 2016
    My number one tip: make sure you have at least 4 months of living expenses in your bank (preferably 6 months), even after purchasing your house. Aka, don't pour all your liquid cash into your house.

    Things crop up, and the best way to deal with them is to fix them now, not try to wait it out, and the only way you can do that is to have a savings buffer, and the only way to have that savings buffer is to not spend it all on the down payment.

    Note that "not spending all your money on a down payment" typically means buying a smaller house than you would like to.

    I've had to get a bathroom repaired, replace a main drain pipe, replace a water heater, repair a furnace, and buy a new washer/dryer in the past 5 years. All on a house that I thought was in "move in" condition. Without decent savings that I purposefully didn't use as a down payment on the house, some of those fixes might have been pushed off, which would've been even more expensive accidents just waiting to happen.

    hsu on
    iTNdmYl.png
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    DjeetDjeet Registered User regular
    edited March 2016
    A common metric for determining rent vs buy is whether the going price to buy a house exceeds 15X the annual rent such a house can command. You could use such a metric to determine if the housing market is too hot in your area and also if your landlord is fleecing you.

    As a renter you got 1 guy who might be fleecing you, as a homeowner who will outsource repairs you got every person you contract repairs to potentially fleecing you. Since your dad is a home inspector you should ask him for some referrals to plumbers, electricians, HVAC, roofers and possibly a structural engineer. While you don't necessarily always get what you pay for, good people in trades aren't cheap.

    One thing I'd have done differently is after a thorough inspection report from a home inspector (if that didnt report anything major) I'd get a plumber, an electrician, and an HVAC guy to do a once over or survey and brief me to current situation and what may potentially cause problems down the road.

    If you want to try your hand at being handy make sure you know when to call a professional. For example, I can tackle the bathroom sink cause even if it takes me 2 weekends it's NBD. There are shutoff valves, and there are other sinks to use in case I get lost in the weeds. If I have to throw in the towel and hire a plumber, well it is not an emergency. If I'm working on the tub/shower and break a valve and have to shut off water service to the house so I don't flood the bathroom or crawlspace, then that has to be handled right now, and I'm at the mercy of the plumber as to time and price.

    Djeet on
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    JebusUDJebusUD Adventure! Candy IslandRegistered User regular
    If you aren't super savvy on home maintenance then you probably want to buy a house that is in good repair, and will require little less. So you might look to pay a little more up front and get something that isn't a pile of junk, if that is possible. After you see a few houses it will really start to stand out which ones are a head above the others. Look for people that took really good care of it.

    I don't know how mortgages work in Canada, but in the US you want to save up at least 5% for a down payment and ideally 20% as you avoid private mortgage insurance at that amount, which can drop your payment another hundred or more.

    And as a general warning, the market can be really nerve wracking. If it is anything like here, you will be having to jump on an opportunity in a day or less to actually get the house. So prepare yourself for that.

    and I wonder about my neighbors even though I don't have them
    but they're listening to every word I say
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    Romantic UndeadRomantic Undead Registered User regular
    Well, update time:

    My wife and I met with a financial advisour at our bank to see what kind of mortgage we'd be eligible for. At first, it was promising, with our savings and my stable income, the advisour told us we could be eligible for as much as $285k. Unfortunately, I didn't pass a credit check. I only recently paid off a massive credit card debt that I had, and I've missed a couple of payments on my student loans, so there you go. The advisour told us to try again if/when my wife gets full time work. But, in the meantime, this is a dream that will have to sit on the shelf a little while longer.

    Thanks anyways for all the advice, guys! You're awesome, as usual!

    3DS FC: 1547-5210-6531
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    bowenbowen How you doin'? Registered User regular
    :bro:

    I know those feels.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    GonmunGonmun He keeps kickin' me in the dickRegistered User regular
    Well, update time:

    My wife and I met with a financial advisour at our bank to see what kind of mortgage we'd be eligible for. At first, it was promising, with our savings and my stable income, the advisour told us we could be eligible for as much as $285k. Unfortunately, I didn't pass a credit check. I only recently paid off a massive credit card debt that I had, and I've missed a couple of payments on my student loans, so there you go. The advisour told us to try again if/when my wife gets full time work. But, in the meantime, this is a dream that will have to sit on the shelf a little while longer.

    Thanks anyways for all the advice, guys! You're awesome, as usual!

    Sorry to hear. :(

    Just work on making sure you don't miss any more payments and things should start looking up for you in a year or two.

    desc wrote: »
    ~ * swole patrol flying roundhouse kick top performer recognition: April 2014 * ~
    If you have a sec, check out my podcast: War and Beast Twitter Facebook
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    Romantic UndeadRomantic Undead Registered User regular
    Gonmun wrote: »
    Well, update time:

    My wife and I met with a financial advisour at our bank to see what kind of mortgage we'd be eligible for. At first, it was promising, with our savings and my stable income, the advisour told us we could be eligible for as much as $285k. Unfortunately, I didn't pass a credit check. I only recently paid off a massive credit card debt that I had, and I've missed a couple of payments on my student loans, so there you go. The advisour told us to try again if/when my wife gets full time work. But, in the meantime, this is a dream that will have to sit on the shelf a little while longer.

    Thanks anyways for all the advice, guys! You're awesome, as usual!

    Sorry to hear. :(

    Just work on making sure you don't miss any more payments and things should start looking up for you in a year or two.

    Yeah, I feel like it's one of those catch-22 situations: I want to find a way to build equity and save money by not having to pay so much rent so I can more easily manage my finances, but in order to do that, I have to already have a stellar financial record.

    For the curious, I currently pay $1185 a month on rent, which does not include utilities or renter's insurance. Once you factor those in, that's half of my monthly salary going into basic living expenses.
    According to our calculations, monthly payment on a mortgage for a house in the price range we were looking at would be $650 a month (give or take), but then we'd have to factor in property taxes, and whatever maintenance costs we may need to pay. Still much, much less than what we're currently paying, and that money is still, basically, our own. Frustrating that by the time we're able to make that a reality, well, I will have already gotten my debt under control, so this becomes more of a bonus (which is still nice) rather than a relief, (which we could really use right now).

    Anyways, we'll refocus our efforts on getting my wife some full time work and getting my student loans in good standing, and we'll try again in a while.

    3DS FC: 1547-5210-6531
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    bowenbowen How you doin'? Registered User regular
    Exact same boat as you. Exact same.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    CaedwyrCaedwyr Registered User regular
    edited March 2016
    I am a recent homebuyer in a Canadian market and I can probably provide some useful insight into the process and some of the things that you need to think about for the next time around.
    • Are you considering purchasing a house or a condo? If a condo, then look into if leaky apartments are a problem in your area. In Vancouver and a number of other regions, pretty much all apartments/condos build between 1980 and 2000 have a high chance of having major issues with water leaking into areas where it shouldn't. This is due to several problems introduced by changes in the building code during this time. Since municipal building codes are based on the National Building Code, this may be a problem in your area as well.
    • In Canada, if your downpayment is less than 20% of the total purchase price then you will be required to obtain Canadian Housing Mortgage Corporation (CHMC) mortgage insurance. If you can manage the larger downpayment it also tends to open up some longer terms for the mortgage as well (up to 30 instead of 25 I think)
    • The advice I received was to take the longest mortgage repayment period I could get (we went for 30) and then just pay the mortgage back at a higher rate. Most mortgage lenders allow you to pay 20% higher on your monthly payments and also to pay back up to a % of the original mortgage amount once per year. This means that if things change at work, you have more wiggle-room and space to breath than if you were close to maxed out on the shorter duration mortgage.
    • Also, it was recommended that we set up bi-weekly payments (every 14 days) to coincide with my pay cycle at work. This gives an extra 2 payments per year over the monthly pay cycle or 2-per-month pay cycles.
    • When talking to mortgage providers, consider looking into a creditline mortgage. You have a line of credit set up when you sign the mortgage and for each dollar you pay off on the mortgage, the line of credit increases by the same amount. This can make it much easier to purchase things like vehicles and other large expenditures at a later date, frequently at much better interest rates than you would have available otherwise. We went with a secured line of credit which gave us interest rates of 3% on the line of credit (we got 2.6% on our mortgage). The unsecured line of credits we saw were in the 7-8% range. (Secured means that if you default on the line of credit, the bank can foreclose on the house).
    • The line of credit should only be used for big ticket "needs" and not day to day expenses or "wants" like vacations. Treat it like a credit card where you want to pay it off each month, but structured like a debit card.
    • Don't forget about property transfer taxes. Depending on the market, prices may push you beyond the first time homebuyer credit limits and you may end up being responsible for the whole thing. We had a surprise extra $9800 tax bill because I forgot to take it into account (I was aware but didn't do anything about it or look into it.)
    • For house maintenance, I have been told that for non-strata properties (freehold), you typically want to budget about $100/mo to keep the property in good shape.
    • When shopping for a house, try visiting the area/location at other times of the day. Morning (to see what the commute would be like) and how loud, evening, weekend, etc. This gives you a better idea what it would be like to live there.
    • For houses, you typically have to balance location, convenience and size. Don't discount the extra time and cost for something further out. In addition to the extra hour per day commute, my wife and I were looking at the cost of an extra vehicle (and at least one replacement over the life of the mortgage) if we purchased something further out in the suburbs compared to something closer in. I've also had a bunch of long-time homeowners say that in the end, no matter how nice the house, location/neighbourhood was the most important factor in their enjoyment of a home on a day to day basis.

    I could go on much longer, but if you have any questions feel free to @ me or send me a PM. This is all still fairly fresh in my mind and there's a hundred small things that you need to keep in mind when buying a new home.

    Caedwyr on
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