003 – Buying a House

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003 - Buying a HouseIs buying a house one of the best and most important investments you can make? Is it true what people say about owning and renting, that ownership is always a better option?

In this episode of Using Your Power, David Andrew Wiebe and Maveen Kaura explore what it means to buy a home.

Podcast Highlights:

  • 00:00 – Intro
  • 00:13 – Closing the open loop – buying a home
  • 00:32 – Why do you want to buy a home?
  • 03:14 – Separate work space
  • 07:00 – We are in different places
  • 09:12 – What are the common mortgage terms and down payments?
  • 11:05 – Why buy a home
  • 18:13 – How it’s not an asset
  • 19:54 – Having a mortgage
  • 22:51 – Planning extra payments
  • 22:58 – Market crash and investing
  • 27:05 – Paying off your mortgage faster
  • 30:04 – Not prepared to buy a home?
  • 32:31 – Security in buying a home
  • 34:03 – When is the right time to purchase a home?
  • 38:28 – Summary of the show and outro

Transcription: Buying a House

David: Welcome to Using Your Power. I’m David Andrew Wiebe and joining me as always is…

Maveen: I’m Maveen Kaura.

David: Well how you doing Maveen?

Maveen: I’m doing very well David. How are you?

David: I’m good thanks. We’re back with another episode and we thought we would close another open loop that we created in the previous episode, which was about buying a home. It’s a pretty interesting subject and I think there’s more to it then maybe most people would assume. So why don’t we get into it.

Maveen: Absolutely. A good place to start is understand maybe why you want to buy a home?

David: Yeah, why would you want to buy a home. I think for a lot of people that comes up when their families growing. So, when a couple chooses to have a baby and then they decide they want to move out of that little basement suite there in and have a separate room for their baby, I think that’s an often a very common point at which you make the decision to buy home for a lot of people.

Maveen: It’s definitely experience. I mean a lot of people also rent in this market as well, and you know they could rent the whole home, the basement right suits as well, like you said, and they can even rent condos. You know buying a home allows you to buy the condos or even trailers, potentially right. It depends on what you want your lifestyle to be and how you see that for yourself.

David: Well I think you mentioned a keyword there which was lifestyle. I think for many people it’s also a lifestyle decision. How would I like to live and the house is often part of that decision because the size of the home and how it’s setup you. Would you want to run a business out of your home? Would you want to run a studio out of your home? Like your wife is doing, Mav, with the working out or like a the gym setup. So, depending on those kinds of hobbies your interest in your business also kind of play into what kind of home would I want to live in.

Maveen: Absolutely, that and the area you want your home to be in. You know community makes a big difference. You know, are there schools available for kids or if you don’t have kids at the time. There’s so many different factors that do go into purchasing a home.

David: Yeah tons. When it comes right down to it, me why would I want to buy home? Well it’s obvious, I don’t want to continue recording podcast in this little basement room, that’s also my bedroom.

Maveen: You know what its work for you David. I know for sure. Sometimes being in a rental location for the short term it’s never a bad thing, right. As long as you’re able to start putting money away. And you’re finding something that you want in the area you want to be in the future right. It is a calculated step that you have to take when you are buying a home. So, it’s not something that most people go out on a whim and just go you know throw a whole bunch of money down on the first day they see a home right. It does take a lot of thinking and putting a plan together before you know finally have that great day when you first move into your brand-new place.

David: Yeah exactly and there have been a lot of great benefits to being here and you’re like you said, it does work for me. I’m looking forward to having a place in which there is some natural sunlight and like I separate my office for my bedroom. But you know there is some certain efficiencies to that as well. You wake up you’re right next to your works pace and so guess what you can go to work right away, if that’s what you want to do.

Maveen: Well the nice thing is you might get up in the middle night and you might have this inspirational thought and you need to start recording. It’s right your room right now and you can start doing that right away. I know I’ve connected with a fellow podcaster, Donald Kelly at The Sales Evangelist, and he uses his bedroom closet for when I spoke to him at that time as his recording studio. So, the nice thing about having a recording studio part of your business it doesn’t have to have its own room. I mean obviously, it’s great to have its own with you can, but there are many you know positive things that come out of having it in your bedroom too.

David: You might not know this, there’s also a good acoustic reasons to have, recording studio in your in your closet because if you have clothing up in there, it acts as an absorption. So, it reduces the sound reflections and makes it easier to record your voice. And that’s usually what does podcasters try to do, we try to eliminate as much background noise as possible and just keep the focus on the voices, almost as if we were in a radio studio or something like that.

Maveen: That very cool, I never actually knew that before, so you taught me something different.

David: Some people who record from home. I know rappers that actually prefer bathrooms because there are certain acoustic effect to bathrooms as well. They are a little more reflective, but then you know, it may have this is the kind of things you learn as a home recordist.

Maveen: Absolutely, so it’s always in your basement, isn’t it?

David: The bathroom is not necessary in your basement. You know you’re right. Any recordings that I’ve done in the last few years has always been in a basement. Even when my own my own home the recording studio was in the basement. So, there you go.

Maveen: What’s interesting he said you know having a home studio. Myself have set that up in a bedroom that will eventually be for one of my kids. But right now, it’s set up as a home office and you know that’s what we’re using right now is a separate room, in the home. You know we’ve had the blessing to be able to purchase a four-bedroom home. That was part of the reason. Like you mention my wife is getting into you know being a personal trainer that’s part of it, was to have that gym setup. Part of it was we wanted to be able to have that home office as well. Kind of separated. I know we’re at two different places in our life right now and you know that’s kind of a neat place to come from in conversation as well because our experiences are very different.

I’ve sold homes as well, which you know, and that’s how I meet you and I’ve had the opportunity to go through the process with clients and I’ve had the opportunity to go through the process as a home buyer. You’ve had the same type of experiences as well on the purchasing side.

David: Yeah for sure. Part of it is that I probably could leverage myself and by home. That’s just not something that I want to do. I’m very conservative now with my finances and it to an extent it is something that I learned from network marketing. How I handle my finances now is not very different than the values i was taught so a part of that is maybe it’s not the best decision or the worst decision depending on who you are and what your goals are. For me, I don’t think buying a house is the best decision for me, right now because it just adds a lot to my plate to worry about.

Maveen: Absolutely, you know it does depend David on your circumstances. Right now, everybody is in different places in their life and some people listening to actual maybe you already own a home.

David: I’m sure many do.

Maveen: Yeah and potentially looking for a second home or rental home. Maybe even a cottage right. So, everybody’s at different places and you know some people don’t want to own a home and would rather just travel around the world right and not be tied to any one location because truthfully you know why do we live in Calgary? You know, our parents decided to move here and we’ve kind of chosen to stay in the same community as they decided to move. You traveled and I’ve traveled and you know there’s a lot of places I’ve found that I wouldn’t mind moving to tomorrow if I could.

David: Well absolutely. I don’t know if it’s this whole thing of, well for one thing it’s probably a little bit tricky to move right. Sometimes it’s more effort more money and more resources and more time then maybe were willing to give it at any one point. But then uprooting to and moving to another place also could mean a change in profession or having to find new jobs or in the case if you move outside of Canada then you might have to get some kind of work visa, or other documentation in order to work in countries outside from the one you’re in. If you’re working primary online, like I am, I guess you could be a little bit more mobile. I found that’s not necessarily reason to the mobile but it may be it provides a bit of an excuse for me to be able to have that freedom in a sense.

Maveen: You know David, I can’t wait for the day that we get to sit on the beach and record because we’ll just be able to do that for a few minutes and that maybe an hour half an hour show whatever we decide to do there and then we go back out and enjoy the beach. That so would give us that mobile freedom that being an entrepreneur should give you. Part of that is you know making the right choices before and after.

David: Wow that’s a huge point even when it comes to buying a home. Making the right choices. Considering your circumstances and your financial capacity. I think one of the things a\ lot of people leave out in making this massive financial decision is considering what the implications are over the next 20, 30 and 40 years. What are the common mortgage terms, Maveen?

Maveen: I’ve seen typically 25 to 30 years.

David: 25 to 30 years. Basically, what you’re saying is you can pay that for the next twenty-five years. You’re guaranteeing, you’re giving your word saying, “I can pay that one thousand dollars or two thousand dollars a month,” or whatever it is for the next 25 to 30 years. That’s the actual commitment that you’re making to the bank and you’re making the bank much, much richer in the process.

Maveen: Well absolutely. Especially when you’re paying at you know it a low interest rate on a home, sometimes, two, three, four percent depending on your financial circumstances. Could be higher but you know let’s go with you know about the average out there. Prime plus or prime minus, you know, something but it does give you the option to have that flexibility make those monthly payments. Now the banks do allow you to put an additional twenty-percent payment down. Now, we’re talking from Canada here, our USA listeners and our worldwide listeners may have something little bit different that they experience with their banking system. But it’s very similar if you look at the bit the whole picture.

David: So what you’re saying is there’s oftentimes a limit to the down payment you can make?

Maveen: Well the down payment, as well as the monthly payments. Down payment at least in Calgary, Canada, where we are, you can do up to twenty percent and you know and as low as five percent when purchasing a home.

David: What if you wanted to make a larger down payment?

Maveen: You still could, absolutely, but most people you know on a safe for example, on a Six Hundred Thousand Dollar home don’t have a hundred and twenty thousand plus laying around that they can throw on a home.

David: Gotcha. So why don’t we talk a little bit about the benefits of home offers. Why would you buy a home, which is kind of similar to the question you asked earlier, but now let’s look at it from the perspective of what benefits does it offer you that you wouldn’t be interested in buying a home.

Maveen: Absolutely you know my first experience on buying a home was when I was a little kid. Now I did buy that home when I was a little kid. I wish I could of. It was my parents. It was in the late seventies turning into the eighties, my parents were brand-new from India and they bought a home and they had bought a second home. The and the second home they bought was for a rental. So, they can rent that out and make some extra money. There are options on doing that a lot of people do, do that today. If you look at people like Robert Kiyosaki he talks about that in his book, Rich Dad, Poor Dad. Having those rentals and money-making ventures.

David: Right, that’s one of the reasons why I guess people buy a home. If their comfort and if they are used to having a home in the first place. So, a person that goes from selling a home they are maybe less inclined to move into an apartment or condo and will move to another home. Or maybe immigrants coming from another country, would first see if a home is something that they could afford here in Calgary.

Maveen: Absolutely, you know most people, I think when they do come over from anywhere, they typically end up in a rental situation. I believe there are rules, even if you’re new to the country, you have to still follow. You have to be in the country for a certain amount of time. Even if you’re putting a 20-percent down payment, the money has to be shown where its coming from. You know just all the other logistics that the banks require, which we don’t kind of makes sense. You know they don’t want you taking money that you have laundered and buying homes and stuff. So they’re protecting themselves right. Just like I was saying when I had that first experience when my parents had that home, but during the eighties there’s a recession and you know they lost their home. In about ninety two or so we moved to Calgary and first thing we did was rent a home. When you came from Japan was the first thing your parents did? Do you remember?

David: Yeah, well when we came back from Japan, my dad had already passed away. So it’s just my mom. My mom decided that we could stay or figured out that we could stay in Barrhead, Alberta with her parents for a couple months. We finished school sort to speak. My sister and I, the way the school system works in Japan is the spring is the beginning of the school year and the end of the school year, instead of summer being the beginning on the end of the school year here in North America or Canada. Yeah, so my sister and I had already kind of finished our grades but we went back a grade for a couple months. So, I finished grade eight and I took grade eight for a couple months again in Canada, just acclimate is the basic idea. Then of course over the summer my mom that made a decision about where to go and I think she was just debating between Edmonton or Calgary and Calgary is what we landed on. Because of my dad passing away we did have an inheritance of sorts and so my mom did buy a house at that point and I guess it makes sense too because she was looking to run a bed-and-breakfast.

Maveen: Very cool and that’s another type of business that you can run in a home.

David: Yes, exactly. So, in addition to myself and my sister each having separate rooms and my mom having a separate room, it was the kind of house where we had a lot of other rooms, so we could rent it out to people or just have bed and breakfast guests especially during the summer when stampedes happening.

Maveen: Excellent.

David: Yeah, so that’s probably my first experience. Well, I don’t know if it’s my first experience with buying a home. You know when I was first born, I’m sure I was in a home in Camrose, Alberta. I don’t know what the exact situation was though because I was still very young. I only live there until I was five years old and I turned six shortly after moving to Japan. In Japan, we were in an apartment for quite a while until my dad finally did rent. I guess we rented a home when I was in grade 4 and then we stayed in that home until I was in grade eight basically.

Maveen: Right. That makes sense what you just said here. You said you had lived in an apartment and the funny thing is nowadays apartments are just now called condominiums and now they charge you condo fees, to live in an apartment. So it’s a pretty interesting how that transition has happened in the home industry. Made me think about that laugh at it. Because I’ve lived in apartments to growing up and you know they were great option. You have a lot of people who have very similar lifestyles. Maybe a little bit lower wages or potentially just new to the country. That was at least my situation with my parents and it was a really good option you know to kind of keep that rent low and live in an area where you have just hundreds of people kind of crammed into one place. So, it’s a very interesting that you said that to.

David: Yeah and let’s not necessarily compare the apartments that we have here, to the ones in Japan, because the one we were living in wasn’t a whole lot bigger than this room.

Maveen: Just first some visual were probably in about a 10 by 13 size room I’d say. About 130 square feet.

David: This room also has a nice big deep closet too but yeah it’s not massive. It’s a big room as far as bedrooms go. It’s probably bigger than what a lot of people have.

Maveen: Absolutely but just to give some perspective to our listeners because they are not in the guys room right now and they can’t really what we’re sitting in here. So, it does give them a good idea of what a room in Japan looks like and that’s you know for what I’m seeing right now David, that’s interesting that you know. I was in a castle I guess in my apartment.

David: Most likely. There’s two bedrooms, there’s a living room, there’s a kitchen and there’s a bathroom. They still had all those things but they were small in Japan.

Maveen: Well the Japanese people are efficient from what I understand about the Japanese people. So, it kind of makes sense.

David: Yeah very much. I guess what way you said earlier to about you know living apartment first and then moving into a home that’s pretty much exactly the progression that we took at that point. That might also be telling because my dad was a professor at a Bible College in Canada when I was growing up. So, I’m sure that pays a ton right.

Maveen: Yeah it absolutely does. It fills up the bank account quick.

David: Oh man the money just comes rolling in when you’re a Bible professor. Go and do that people.

Maveen: Get some other advice if you can.

David: Yeah definitely consult a professional, if at all possible, about your financial future.

Yeah well those are some interesting considerations of buying a home. Robert Kiyosaki, you brought him up earlier, and one of the things that he says and to a large part I do agree with him, although I think we can definitely offer a balanced perspective, if we were so inclined. A house is not an asset, it’s not an investment vehicle or at least it’s not a very good investment vehicle. What do you think?

Maveen: Yes, depending on definitely on how you look at your house. I mean your house, you are paying interest on it, like we said earlier, and you know over the years that it takes to pay off the house, in most cases you’ve probably almost paid double what you bought the house for. Because the interest is compounded and you’re paying for it and most people don’t put down that twenty percent. At least in my view point for what I’ve seen working in the home industry. When I was working at the bank same thing, you don’t see people having that twenty percent sitting in their accounts, so they can make those larger payments. They are still paying additional home mortgage fees on top of that as well because they are not putting hat twenty percent down. So, they have to buy insurance on the home payment. Which I find is an interesting thing to but if you can put down that twenty percent and bring down that payment as well as the amount of interest you’re going to be paying on that home it can definitely be a great value but you know if you’re not able to do that because any reason you are unable to make those payments and put that twenty percent down. Overtime I don’t think that home is a great asset.

David: Yeah, I’m wondering because there’s just so many people out there that look at the purchase of a home as some kind of investment right. I feel like it isn’t a great investment vehicle maybe even a mutual fund would be a better investment opportunity than a home potentially because even if you sell it for more than you bought it for which is common. But if you’re just going to buy another home aren’t you buying another more expensive home.

Maveen: You’re 100% right there David. The funny thing is you get a mortgage. Do you know what mortgage means?

David: Yeah, I do. It is two words “mort and gage” which means death grip.

Maveen: Absolutely, so you have a death grip on yourself for 25 years or potentially 30 years because most people don’t have a plan to pay off that home faster. You know myself and my wife we’ve decided to put an extra twenty percent towards our monthly or in this case bi-weekly payment so we can drive our mortgage down from 25 years. And I believe now it’s about 18 years just by you know making that small payment change.

David: So, what you’re saying if you’re willing and able you can pay down your mortgage faster?

Maveen: Absolutely, it’s in your benefit right and although you don’t own your home quite yet. Miss a payment and see who owns the home you live in. The l bank does still until you pay it off. If you’re able to make those extra payments and you can actually go to your financial advisor and typically they’ll show you exactly if you put down you know an extra twenty percent or an extra five hundred dollars. Even a hundred bucks a month, what that means for you. Whatever you can afford. They will show you the numbers and work out the math for you. It is really easy. Typically, a mortgage calculator will do that for you.

David: Doesn’t mean you have to make a ton of extra money if you wanted to put more money towards the mortgage? O is that just a matter of planning it out in advance and looking at your finances? I’m making this much money per month. I need to make this much money per month to make an additional twenty-percent mortgage payment.

Maveen: Great question David. One of the things I know is when I was working in the home industry as well as the banking industry, the banks don’t typically allow you to overextend yourself. Now that’s a different story, you know back in 2008 we had the financial crash.

David: Subprime lending.

Maveen: Absolutely and we can see that in the movie The Big Short, that there’s a lot of things going on where people were putting next to nothing down and buying these homes or qualifying for homes that there was absolutely no way they can pay these homes off. A lot of people are doing that and you know that’s a part of the reason we had the market crash in 2008 and 2009. And a fall out again, with oil kind of been the same idea. Even three years ago.

David: Why does something like that happen do you think? Like where we not smart enough? Had somebody not figured out that this was coming in advance of the major meltdown that we went through in 2008?

Maveen: That’s a good question David. I know one of the things we can get into is a huge discussion on the interests of banks and insurance companies and oil companies and governments. There’s a lot of different people who have an invested interest in this, right. One of the ways if you want to control people, and maybe just getting off topic a little, but if you want to control people it is really that word “mort and gage” Death grip. Have a grip on people so they can’t make decisions for themselves and what happens is then the government starts passing laws and you’re too busy trying to make a living and you know trying to live fist to fist and hand-to-mouth. Sometimes, you don’t got time to pay attention so these things start happening and it is a way for companies take your money, right. Same thing as you mentioned about mutual funds, earlier, they can be a great investment. Absolutely, but the thing where you put your money if you don’t control the outcome of, you get to go through the ups and downs with the changes in the market.

David: Very interesting. I think as we have seen in The Big Short, there probably were people who knew in advance and even capitalized on the subprime lending just because other people or other banks and financial institutions were naive and didn’t think that there could be a major collapse but a lot of people kind of saw the impending doom and what was going to happen. So that’s pretty interesting as well and I totally agree, I think you have control over where your money goes and the first thing that somebody at a bank tells you to invest your money into may not be the best investment vehicle.

Maveen: Absolutely, one of the things you just said is the banks and these companies really are looking out for themselves and you have to look out for yourself. So when you’re you know being told to invest your money here or invest your money mutual funds or GIC or 401k for the USA friends here you. Wherever you invest your money understand why you’re putting your money in there. I know part of buying home, for example, when I was younger in my teens, I started out putting some money away into are RRSP’s or 401k’s and we were told that we can take that money out and use it to buy your first home but with the catch that you have to put money back into the RRSP within a given amount of time. Now those options are great but if you don’t have the ability to put money back into your RRSP then you’re going to be penalized by the banks. At that time was interesting that you know if you can’t even afford to buy a home with that twenty percent or more, how are you possibly going to put that money back if you’re only putting down five percent, in some cases.

David: Does that option still exist these days?

Maveen: You know, I would have to look into it. I’m not hundred percent sure. That was probably 10 years to 12 years ago now. But I think there are still options similar to that.

David: And for our USA friends RRSP would that be like 401 K?

Maveen: Absolutely.

David: It’s the same idea basically. Very interesting so there are really different ways of buying a home or a really kind of problem solving. Maybe you could borrow, maybe credit or like the option you just described was taken from your RRSP and putting it into your home. Banks are good at problem solving, although it’s for their benefit. Might be because they have interest in trying to sell you a product that they make a lot of money on and as we know a mortgage would be something that they’d probably make a ton of money on. That’s why you know I don’t necessarily believe in making the banks richer.

Maveen: The funny thing is you hit on something that made me think. Try to pay off your mortgage faster. You know you will be penalized pay because you are trying to pay off your mortgage faster. Because if you pay off your mortgage too fast the banks don’t like that. They allow you to put a certain amount of money down. So instead of my extra twenty percent payments, if I want to do thirty percent, I’m not allowed to. Now the reason is the banks have calculated how much money they’re going to make on you, in that 25 year mortgage. Now if you win the lottery, lets say by chance you want to pay off your mortgage, hey if you win the lottery, you win 50 million, you may not care about the interest. But if you come into some money maybe through inheritance and you want to put some extra money down if it’s over the allowed amount then typically you’re going to get penalized. Especially if your trying to pay off that house and you don’t have many more interest because they’ve calculated how much money they’re going to make, and how much they’re going to make after they lend it out.

David: So, you’re trying to do them a favor by ensuring that you’re actually going to pay off the total amount of the mortgage and now they’re penalizing you for giving them more money earlier?

Maveen: Yeah or paying off the mortgage right. Think about what we said earlier if you’re making, on let’s say a six hundred thousand dollar home, let’s say the interest they make is two hundred thousand, as an example, If a bank can take your interest and then lend that interest out before they get it because it’s money they’re getting. Their lending out 20 times that money and now you’ve paid it off. They don’t have that money in their back pocket. So you’ve actually put them in a hard place. It’s in it’s an interesting thing I find.

David: And maybe it’s very similar to the way credit cards work which is minimum payments. Why do minimum payments exist? I think they’re calculating the fact that we’re not going to be paying back that money right away so making a trickle of money coming in, is better for them, than you paying at all off at once, right.

Maveen: Absolutely, I think you hit their right. So, if people are only making minimum payments, typically you may find that those people maybe they do own a home and have bought home but they might be having a tough time making those payments and keeping up with their bills because now they have this. The home is probably your largest monthly payment. So, if you’re only making your minimum payment you’re probably not necessarily in the best place. Now there might be a strategic reason you do these things. It could be an accounting thing, your account says that you need to do this in order to benefit somehow on your taxes. But the majority of the people I think as I said earlier are living hand-to-mouth out there because not understanding what buying a house really means and the responsibility that it comes with.

David: So, let me get this straight the bank actually makes an assessment of you based on the last five maybe ten years of your financial history makes a recommendation for you. And you’re saying that there’s still a lot of people that are not prepared to buy home?

Maveen: I believe so. From what I’ve seen. I worked in a bank for six years. I sold homes for two years. It’s interesting what you get to see on a daily basis. I mean I can get into stories of people coming into the banks and wanting money that are older than me. My heart went out to them you know these older ladies would come in come at the end of each month wanting they’re wanting their monthly checks and their social security and old-age pension. And because it was one day too early when they came in. They had more money in the bank. It was a very interesting to see where their decisions had taken them. So having a plan to buy a house is huge.

David: Right and I think it’s also a lesson in the sense that your past is not a very good predictor of your future income.

Maveen: Absolutely not and you said it perfectly. When I bought my home, I had a job and right now I don’t. That income that they calculated is past income which I don’t have anymore. I have different income.

David: And that’s something that can happen to just about anyone, right?

Even if you love your job perhaps you could be let go and is evidence to suggest that something like eight to nine career transitions happen in a lifetime. I know for a fact Maveen that you’ve been in sales a lot but even within sales you’ve had many multiple jobs to this point.

Maveen: Absolutely and I think we were calculating before we started talking here on episode 3. The last five years I’ve had five different career paths and all being in sales and very interesting one of the things I’ve always tried to do is trying to take something from each job, and learn something that I could apply back to my real life. If I can say it that way. One of the thing was buying a home because I did work for a homebuilder and I did work for a bank and I did work for an insurance company, All those industries are typically areas we require knowledge in, if you’re about to buy a home.

David: But how is this possible, is the company not supposed to take care of you give you? Give you a raise every year? Give you a Golden Pen when you’re near retirement age? Are we not supposed to have this lifelong, secure career that brings you to the point where you can afford a home. Is that not how it works.

Maveen: In most cases you would think that wouldn’t you, but like you said, if you’re going to have seven or eight career paths, and I’ve had five in five years, I think those times have definitely changed. But what we are being preached to had consistently stayed the same. You know go to school, get a good job, buy a home or start your family. Those are the same things that they’ve been preaching since the thirties or forties again in the industrial revolution but now when you’re looking at the technology revolution things have changed. Our decisions before we buy a home and after we buy a home have to be calculated decisions.

David: Makes sense, so you gotta plan well.

Maveen: Yes.

David: If you have an interruption and income that could be a problem, that could be difficult to get over because now you are still owing that money but if you have no money coming in you’re unable to pay it, unless you have savings or investments or other things and then even that is going to dry up at some point.

Maveen: Yeah. I know from our conversations we’ve had David, we’ve talked extensively about buying a home or renting. In your situation and in my situation. Why don’t we go through a little scenario here. Lets changeup the little bit.

David: Great idea.

Maveen: Let’s see what steps you would take when it comes to the right time for buying a home.

David: What is the steps I would take? I think the way I view home ownership now is that i would put as little burden on myself as possible. So option A would be to save up enough money to pay for the home outright.

Maveen: So you’re saying you would want to pay 100 percent of the value of the home up front.

David: That’s right.

Maveen: Okay, how many people do that typically David?

David: Probably, a very small percentage.

Maveen: Okay, just want to make sure. I know you’re go-getter and I know that’s your plan and I know what your plan is, so I know for you, it’s definitely doable. But I just wanted to make clear that not everybody out there is able to do that.

David: Definitely, I think it’s a hard thing for just about anybody to accomplish. You know there’s costs associated with the home, even if not for the mortgage and that’s what I’m looking at. I remember all the crazy costs. There were taxes, there was utilities and if that wasn’t enough then you had broken utilities in your home that you had to replace. That’s what I’m looking at from experience from having a home, which I didn’t talk much about that in this episode but from having owned a home for about nine years that’s what I learned. I didn’t like having all that pressure and all that out go. I didn’t want three, four, five grand flying out of my bank account every month. That was that was a decision that I had to make for myself. That’s just option A. Option B, was to pay as much as possible upfront. Maybe not a hundred percent but have a very short-term mortgage, so it would be easy for me to stick to the plan and paid off sooner rather than later.

Maveen: And there’s benefits as well not putting one hundred percent down on a home because that money obviously can be used potentially different business ventures, as well. So it is a calculated decision on how much money you want to put down.

David: Yeah and I’d say there’s one other plausible alternative for me, which is Plan C. Saving up more than enough money to we’re having a mortgage is not a big deal. So maybe I could reduce it up front with massive a down payment and then I would feel secure knowing that even if have to pay the mortgage for the next 5, 10 or 15 years or whatever, I’ve got more than enough money safe to wear that’s not a problem. So, that’s kind of a distant option C.

Maveen: You know, like we were saying there’s ways that your accountant, when you start getting accounting and financing, they may suggest that you take those expenses and use them as write-offs potentially for your business. Because you have a home-based business and it might be a great idea at this point. So, there are so many things you have to consider and like you said life changes, and as those changes happen, you have to keep reviewing your plan and how you plan to make those payments on your home. And if there’s no stress on it, then what doesn’t matter if this changes today, no problem I have it for tomorrow. It is a good idea, I think, you have there.

David: Yeah and I guess one other consideration which is kind of off the radar right now, but totally possible in the future, which is that I marry and then we a make decision together to buy a home. Hopefully I’ve fulfilled one of A-B-C at that point or between the two of us it’s easily manageable.

Maveen: I think you hit on something that’s so important. Buying a house is a joint decision, especially if you’re with somebody. If you’re not with somebody, you should still try to make a joint decision. Perhaps with yourself and somebody you talk to you know not just your finance guy at the bank. Talk to some friends and find out from people who own a home, what it really means and takes to own a home. Like they say, other people’s experiences is the best experience and other people’s lack of experience can still be a good learning point.

David: Definitely, well this is a deep topic I feel like I’ve learned a lot. I’m sure our listener have as well.

Maveen: I know I can keep going on this topic. I have tons of knowledge and we can use on a different episode in the future.

David: Awesome, maybe we should do another part to this whole thing about buying a home. I think what we can close by saying that it is a decision you have to make with responsibility. Having some kind of long-term plan in mind not just the next year but thinking about if you have a 25 to 30 year mortgage, as most people will, what are you going to do? How are you going to manage those payments? What about unexpected expenses? What about taxes and utilities? What about things breaking down? There’s a lot of things to think about.

Maveen: Buying a home is probably the most expensive decision you’ll probably ever make, other than maybe divorce. It is a pretty expensive decision and understanding how you’re going to accomplish paying off your home. You’re right the job market is not always going to provide. Even being an entrepreneur and if you have your own small business and you’re not creating the type of income you need, it will be very hard. We know those incomes fluctuate. So, really understand what kind of money. What kind of savings plan you need will make a big difference when you buy your home. So, those are the kind of the thoughts I would have as well.

David: That’s a very fair point. So, as usual we are obligated to say that we are not financial accountants and we can’t give you advice as far as whether to buy a home. Whether to not buy a home, but I think it’s something that you need to think about when you’re choosing to use your power. So, check us out online at UsingYourPower.Com.

The post 003 – Buying a House appeared first on UsingYourPower.com | with David Andrew Wiebe & Maveen Kaura.

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