By Sheryl Smolkin
If you think you can’t possibly afford to buy a home or that paying off your mortgage is a pipe dream, Burn Your Mortgage is the must-read book of the year. Today I’m pleased to be interviewing author Sean Cooper for savewithspp.com.
By day, Sean is a mild-mannered senior pension analyst at a global consulting firm. By night he is a prolific personal finance journalist, who has been featured in major publications, including the Toronto Star, the Globe and Mail and MoneySense. He has also appeared on Global News, CBC, CP24 and CTV News Network.
Thanks for agreeing to chat with us today Sean.
My pleasure, Sheryl.
Q: As a 20 something, why did you decide to buy a house?
A: Well I guess a lot of people strive for home ownership. My parents were my biggest influence. We always owned a home growing up, so I thought that owning a home was kind of the path to financial freedom.
Q: How much did your home cost, and how much was your down payment?
A: I purchased my home in August 2012 for $425,000 dollars. My down payment was $170,000, leaving me with a mortgage of $255,000. I didn’t go out and spend the massive amount the bank approved me for. I could have spent over $500,000 dollars but I found a house with everything that I needed for $425,000 and because of that I was able to pay off my mortgage in three years.
Q: How on earth did you save a down payment of $170,000 dollars? How long did it take you to save it, and how many hours a week did you have to work to do so?
A: Yes, it was definitely a sizable down payment for one person. I pretty much started saving my down payment while I was in university. I was able to graduate debt free from university and while I was there, I was working as a financial journalist. I was also working at the MBA office, and employed part-time at a supermarket. When I got my full-time job I was saving probably 75%-80% of my paycheck. I wasn’t living at home rent free. I was actually paying my mother rent.
Q: Kudos for your determination and stamina. Do you think working three jobs is actually a practical option for most people, particularly if they have young families?
A: No. As I emphasize in the book, that’s how I paid off my mortgage as a financial journalist on top of working at my full time job. While for somebody like me who is single it makes sense, it’s probably not realistic if you have a spouse and children. But there are plenty of things you can do to save money.
Q: Many people again think they would never, never be able to save up enough for a down payment. Can you give a couple of hints or tips that you give readers in your book that will help them escalate their savings?
A: Definitely. First of all, you absolutely have to be realistic with your home buying expectations. You can’t expect to be able to buy the exact same house that you grew up in with three or four bedrooms and two stories. But you can at least get your foot in the door of the real estate market by perhaps buying a condo, or a town house, and building up equity, and hopefully moving up one day. Think about creative living arrangements. Rent a cheaper place than a downtown condo. Find a roommate.
Q: How can prospective home buyers use registered plans like their RRSP or TFSA to beef up their savings and get tax breaks?
A: If you are a first time home buyer, I definitely encourage you to use the home buyers plan. The government allows you to withdraw $25,000 dollars from your RRSP tax-free (it has to be repaid within 15 years). If you are buying with your spouse, that’s $50 000 dollars you can take out together. That’s a great way to get into the housing market. The caution I can offer is when you withdraw the money, make sure that you fill in the correct forms so you are not taxed on the withdrawal. If you’re not a first time home buyer, then I would definitely encourage you to use a Tax Free Savings Account, because it’s very flexible, and although you don’t get a tax refund, the balance in the plan accumulates tax-free.
Q: After shelter, which means mortgage and rent, food is a pretty expensive cost. How can people manage their food costs while still eating a healthy, varied diet?
A: I offer a few tips in my book. First of all, try to buy items like cereal and rice in bulk and on sale. Another tip I offer is to buy in season. I probably wouldn’t buy cherries during the winter because they would cost me a small fortune. Try to buy apples instead, and during the summer if you enjoy watermelon, definitely buy it then. Try to be smart with your spending, and that way you can cut back on your grocery bill considerably.
Q: I enjoyed the section in your book about love, money, and relationships. Can you share some hints about how couples can manage dating and wedding costs, to free up more money for their house?
A: People like to spend a fair amount on their weddings these days, and there’s nothing wrong with that, but you just have to consider your financial future, and how that’s going to affect it. Also, when it comes to dating, make sure that you and your potential partner are financially compatible and have similar financial goals. For example, one might be a saver while the other is a spender. Sit down and make sure both of you are on the same page financially, and then find common financial goals, and work towards them.
Q: How can prospective home buyers determine how much they can actually afford?
A: If you are ready to start house hunting, I would definitely encourage you to get pre- approved for a mortgage. Basically, the bank will tell you how much money you can afford on a home. That way you don’t waste time looking at houses out of your price range. However, just because the bank says you can spend $800,000 doesn’t necessarily mean you have to spend that much.
Also don’t forget you will have to pay for utilities, property taxes, and home insurance plus repairs and maintenance. Come up with a mock budget ahead of time, and see how that will affect your current lifestyle. I would say if over 50% of your month income is going towards housing, that’s too much.
Try to kind of balance home ownership with your other financial goals, whether they are saving towards retirement, or even going on a vacation. That way all of your money won’t be going towards your house, and you will actually be able to afford to have fun and save towards other goals as well.
Q: You’re living in the basement and you rented the first floor. Why did you decide to do that, instead of vice versa?
A: Well I’m just one person living on my own, and upstairs there are three bedrooms and two bathrooms. I wouldn’t know what to do with all the space, so it made sense to live in the basement, because to be honest I lived in basement apartments for several years before that, so it wasn’t really much of an adjustment. I mean, personally I’d rather rent out the main floor than get a second or third job. It’s all about kind of maximizing all of the space that you have, and looking for extra ways to earn income.
Q: We rented the basement in our first house. Why did you decide to write the book?
A: When I paid off my mortgage, a lot of people reached out to me for home buying advice. In the media, there seems to be a lot of, I guess, negativity surrounding real estate and big cities.
I always hear that the average house costs over a million dollars in Toronto and Vancouver. It seems like for millennials home ownership is really out of reach. I wanted to write a book to really inspire them and show them that home ownership is still a realistic dream, and it is still achievable if you are willing to be smart about your finances.
Q: Congratulations Sean. It’s a great book. I’m sure people reading and listening to this podcast will want to run out and buy it. Where can they get a copy?
A: They can order a copy on Amazon. It will also be available in Chapters and other major book stores across Canada.
Well that’s very exciting. Good luck.
Thanks so much.
You can purchase Burn Your Mortgage by Sean Cooper on Amazon.
This is an edited transcript of a podcast interview conducted in February 2017.