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Very few Canadian 22-year olds own their home. At 25, I can now say that it has been one of the best personal and financial decisions I’ve made in my life. Now, I should admit right up front that I couldn’t have made this leap without a little bit of help. I should also put a little asterisk next to my initial statements, because it runs contrary to the advice that I often give to young people out there today.
Many “experts” state rushing into homeownership is a mistake for young people – and it is… most of the time. Renting or holding down the couch in your parents’ basement gives young people the chance to be more flexible with their housing options, grow their down payment, and/or get a little more life experience before taking on the challenges that come with buying a house or condo. All of that being said, there are some instances where owning the roof over your head makes a lot of sense. My situation was one such scenario.
In the summer of ’10 (doesn’t really have the same ring as ’69 does it?) I had just graduated university and was proudly clutching a Bachelor of Education Degree. Suddenly I was vaulted into adult life (because let’s be honest, going to class a few hours every day isn’t really an “adult life”) and thrust into a job market where the demand for my services was roughly equivalent to that of a tailor living in a nudist colony. Humanities teachers are a dime-a-dozen in every urban centre across Canada right now, and since I’m more of a country boy at heart anyway, I started throwing out my résumé to every small town I could find on Google Maps (and a few that didn’t even show up). After several interviews where I was told I was cool, just not cool enough, I finally tricked a school division into hiring me. The only catch was that it was about four hours away from Winnipeg, where I had lived for the past five years. The decision to move in order to pursue my teaching career has proven to be a wise choice as several of the people I graduated with are still having trouble getting traction in the Winnipeg job market.
Rent vs Buy
After I accepted the job, I was quickly smacked in the face by having to make a series of important decisions that I was ill informed about. All that I really knew was that I had to live somewhere and I subsequently scoured the Web looking for a swanky bachelor pad in my new rural community. It rapidly became apparent that the options for renting were few and far between. One potential landlord explained to me that there just wasn’t much demand for rental properties in town because house prices were so low. This got me thinking about the previously ridiculous notion of becoming a real-life grown-up and buying an actual house. At that point my knowledge about real estate and mortgages consisted of knowing that I would have to borrow money from somewhere and the hopes that my stack of empties downstairs could cover a down payment.
Related: Buy vs Rent Debate
Climbing the Debt-Free Mountain
My journey to home ownership at twenty-two had actually started several years before the day I decided to look into this whole mortgage thing. It began back in high school when I worked several jobs and applied for dozens of scholarships in order to give myself a fighting chance at getting a post-secondary education without being buried in student debt. Because I grew up rurally, I didn’t have the option to stay at home while pursuing my studies, but my parents were able to provide some financial support through the RESP they had in place for me. While my account balance was essentially $0 when I graduated in the spring of 2010, I didn’t have any red ink on my net worth statement either. The importance of graduating debt-free despite my ignorance of all things personal finance cannot be overestimated. It provided me with a lot of flexibility that other students didn’t have, and gave me a serious head start on figuring out the Rubik’s cube that is being a productive member of society.
“You Want to Buy a What?!”
After a few phone calls, I came across a house that was a four minute commute from the school I would be working at. The basic 980 sq. ft. bungalow with a finished basement, large yard, and huge garage suddenly became the house of my dreams. As I sped read through blogs and bank websites I became certain that I could make this leap – now I just had to convince everyone else in my life that a young adult with a couch’s worth of spare change in his bank account had a sane plan to buy a house. After pleading, begging, arguing, and cajoling, I finally brought everyone onside with my plan to purchase my own little piece of heaven on Manitoba’s prairies for $105K. After working long hours all summer and banking almost 100% of my paycheque, I got a little help from my fiancée (who at the time was the most understanding long-term girlfriend ever) and my parents on the down payment. I was ready to sign a forest’s worth of trees and start worrying about young whippersnappers trespassing on my lawn.
Related: Financing Your Home Purchase
Real Estate Mogul-dom
My core reasons for purchasing the house revolved around lifestyle considerations and the high value I place on stability. I also knew that I was walking into an extremely secure salary, and had a pretty good support network I could lean on in a pinch. The interesting thing is that it has turned out to be a pretty good investment as well as fulfilling my need for stability. When I compare my hypothetical renting costs to my current situation, I’m definitely way ahead of the game (mostly due to the relatively low purchase price of the house). As a bonus, the recent commodity explosion in the region since I’ve moved here has increased our (my fiancée has since moved in with me) house’s value by 30-40%.
Some Advice for Young People:
1) Consider going rural to start your career – it can provide a major financial boost to begin your life.
2) If you think there is even a slim chance you might soon be looking to purchase a house, begin the process of learning about mortgage-related terms such as down payments, amortization tables, CMHC insurance etc., and make some initial inquiries into getting pre-approved for a mortgage at your preferred financial institution.
3) Become familiar with closing costs – the extent to which they stretched my already-thin budget was not much fun.
4) Consider home-maintenance expenses when deciding whether to buy or rent, as well as which home you eventually close the deal on.
Owning a home isn’t for everyone, and it certainly isn’t something that young people should rush into without doing some homework first. For me, it’s been a great experience and a pretty decent financial investment as well.
This post content is sponsored by Royal Bank of Canada, however the views and opinions expressed herein represent my own and not those of Royal Bank of Canada or any other party and do not constitute financial, legal, or other advice.