By Sheryl Smolkin
Buying a first home used to be a rite of passage for young people in their 20s and 30s. However, even for many millennials with well-paying jobs, buying property in large cities like Toronto or Vancouver has become an elusive dream.
But in smaller centres across the country purchasing a residence is a more practical and affordable option. Nevertheless, even though the sticker price is lower, owning a house is still a big commitment with many potential pitfalls.
That’s why we decided to chat with Saskatchewan Pension Plan’s Network Technician Stephen Neiszner (age 29) about his first foray into the real estate market in his home town of Kindersley, Saskatchewan
Q: Stephen, Saskatchewan Pension Plan in Kindersley was your first full-time employment after you graduated from college and you’ve worked there ever since. Where did you live before you bought your apartment?
A: I lived in a rented condo across the street from the Saskatchewan Pension Plan office.
Q: Why did you decide it was time to take the plunge?
A: I was looking on and off for about a year before I found my place. The thing that sparked it off was that the light in my bedroom was leaking and the landlord had no intention of fixing it.
Q: Tell me about the property you bought and how much it cost.
A: I bought a 1,000 square foot, 2-bedroom condo in a four-plex, with a small yard for $155,000.
Q: How much did you put down on the $150,000 purchase price?
A: My down payment was 13% of the purchase price, which is about $20,000.
Q: How long did it take you to save up that $20,000?
A: I started saving as soon as I moved into Kindersley in 2008.
Q: How much are your monthly mortgage payments? Are there also monthly condo fees?
A: I make payments every two weeks so my monthly mortgage payments are about $620. There are no condo fees, but I put away $100 from each paycheck just in case of any unexpected expenses. I pay for my own utilities.
Q: Are there any common expenses for services like clearing driveways and care of the yard?
A: Each unit takes care of their own section of the yard. We all pitch in to clean the sidewalks as required.
Q: What percentage of your monthly take-home pay do you actually spend on the mortgage?
A: It’s 27%.
Q: Does that leave you with enough money to also save for retirement and for other things?
A: Yes. I put $50 into my RRSPs every paycheck, $200 into my TFSA, and the amount of $100 for taxes and building upkeep goes into a high interest savings account.
Q: Okay. I imagine you’re also invested in Saskatchewan Pension Plans.
A: I am.
Q: Did you opt for a fixed rate of interest or a floating rate on your mortgage?
A: I went with a variable interest rate.
Q: What are the term and amortization period for your mortgage?
A: My mortgage term is 25 years and amortization period is five years.
Q: Are there any prepayment provisions in the mortgage? Do you plan to make lump sum payments to reduce the principal over time?
A: Yes. I am able to pay back as much as 20% of my original mortgage payment each year. In the future, I think it will be possible to make extra payments, but right now I’m still trying to balance my budget.
Q: How long ago did you actually buy your condo?
A: I bought it in December 2015.
Q: Ah, so it’s your first year. Were there any surprises before or after closing? Any expenses you didn’t budget for?
A: I had a large amount in my TFSA that I was able to pull for my closing expenses. The one thing that really got me was the setup fees for the utilities that I wasn’t expecting, which were almost $500.
Q: Wow. What about telephone? Are you all cell?
A: I am all cell.
Q: Have you ever regretted your decision to purchase an apartment?
A: No, not really. I knew there would be challenges and growing pains. To offset some of the costs, I recently acquired a roommate.
Q: That’s interesting. What advice would you have for potential first-time homeowners in their 20s or 30s? What things should they consider before they make the jump?
A: Save. When you think you have enough money, save some more. Don’t rush into anything. I looked at 20 places before I found this one. Ask a lot of questions, not only to your real estate agent, but to your bank, the home inspector, people you know around town, your parents and friends. Just ask questions.
Don’t be afraid to use the RRSP first-time home buyer’s program. I withdrew $10,000 or half my down payment from my RRSP under this plan. I have 15 years to pay back the interest free loan.
And also remember, budgeting isn’t just about your mortgage. You have to factor in utilities, vehicles, transportation, food, traveling and insurance. You’ll still want to take holidays, I’m sure. And I have to budget for a new water heater within the first year.
Q: That’s great. Thank you, Stephen. It was a pleasure to talk to you today. Enjoy your new home.
A: Thank you, Sheryl.
This is the edited version of the transcript of a podcast recorded in September 2016.