It’s about 10:30 right now, I’m sitting at my desk at work wishing I had a profitable side hustle and unsuccessfully wracking my brain for ideas. I’m sipping on an iced coffee because I’m exhausted from my mundane life and for whatever reason iced coffee seems to be a better vehicle for caffeine to enter my bloodstream than hot coffee, even though it’s -20 outside. Yes, I’m drinking iced coffee in winter in Canada- sue me. For whatever reason, when I drink iced coffee, it makes me feel like I can do anything. My thoughts feel so sharp and I feel like I have 8 arms and I just get so much shit accomplished. You should see my fingers flying on the keyboard right now. Hot coffee just doesn’t have that effect. On the downside, my heart races, my hands shake and I can’t sit in one place for too long but oh well, it’s all for the greater good.
There’s something that I’ve been obsessed with the last couple of days and I want to share it with you. That something is a condo. Now, I don’t know what property prices are like where you live but where I live, they’re pretty decent. I live in a pretty affluent part of my city so the prices are a little higher there than in other parts but it’s for a good reason- the properties in my neighborhood are incredible. I have always said that I won’t buy a house and I stand by that right now. I don’t need a house. I just need a place that has enough space for me, my boyfriend, and our hypothetical golden retriever. I think that a condo would be perfect for us.
I’m going to tell you a bit about the condo we are looking at (oh you didn’t ask? That’s ok, I’m going to tell you anyway). Its about 1200 square feet and it is BEAUTIFUL. Everything is really modern inside, the first level has a half bathroom, living room, dining room, and a kitchen… get this…. WITH A PANTRY. A PANTRY FOLKS. The upstairs is three bedrooms with a walk-in closet and en suite off the master bedroom and another full bathroom upstairs. The appliance package is beautiful black appliances with a little laundry room upstairs beside the bathroom. There is also a balcony off the dining room.
Lets just take a moment to appreciate this place. I honestly just cannot get over how amazing and perfect it could be for us.
How much does this cost, you might wonder. About $300,000. To a 22 year old (freshly 22 I might add), this is a LOT of money. This would be a lot of money to anyone. However, when you think about it broken up over 25 years, it becomes a lot less scary. The scary thing to me currently is the fact that I’m throwing away rent money every month when I could be investing in real estate.
Bear in mind that it would be both my boyfriend and I who are paying and we are also talking about renting out one of the rooms to someone we know which would knock even more money off of the mortgage. We would likely just pay extra into the mortgage so that we could pay it off sooner and pay less interest.
I also just started reading about things like private mortgage insurance, land transfer tax, and lawyer fees. It’s all very overwhelming, especially since this is my first time hearing about any of this. Why didn’t I learn this in high school?
I am going to relay to you what I know about mortgages so far. This is not meant to be a guide at all because I am not an expert. I just want to be able to take others on my journey because I’m so excited!
Down Payment This is a term that most people are familiar with but, if you’re not, that’s ok. The down payment is the amount of money that you will pay upfront on your new property. It will be upwards of 5% of the total price of your property. If we take the condo I’m looking at, for example, which is $300,000 here are the down payments:
Now, what does this mean. How does it affect you as a buyer if you put down a smaller/larger down payment. Well, your monthly payment to pay down your mortgage will differ depending on how much your down payment is. If you only put down a 5% down payment, your monthly mortgage payments are going to be much higher than if you put down 20%. Think of it like this: if you paid for the property up front (eg. your down payment was 300,000) your mortgage payments would be zero dollars a month. So the closer you get to paying off that 300,000 with your down payment, the lower your monthly payments will be.
If you pay below 20% there will be extra fees added on. This is called PMI (Private mortgage insurance). We will talk about this later. But, basically, the more you can pay upfront, the better you will be in the long run. Especially because that’s less money that you’ll have to pay interest on. Again, I am not telling you what to do but this is what I have gathered from my experience so far.
I had never heard of this before I started researching mortgages. Basically the amortization period is the length of your mortgage. The longer the period, the more time you have to pay off your mortgage and the lower your monthly payments will be. The downside to longer amortization periods is that the amount of interest you’re going to have to pay on your mortgage loan will be higher.
This is the percentage you will be paying in interest on top of your actual mortgage. As if you aren’t already paying enough, your going to have to pay a percentage on top of that.
Land Transfer Tax
In some places you have to pay an additional ‘land transfer tax’. There can be provincial and municipal tax. Basically it is a percentage of the price of your home/condo. Again, as if the property wasn’t expensive enough. Also, as you can tell by the fact that it is ‘provincial’ land transfer tax’ I’m talking about Canada. I am Canadian and am therefore providing information about purchasing property in Canada. I’m sure a lot of this can apply to the states too but bear in mind I’m speaking about Canadian things.
These are some basic things you should know about a mortgage. This is not all encompassing and it’s not a step by step explanation BUT it is meant to help you understand some of the terms that come along with buying a property. I hope that some of this has helped. I am not an expert at all but this is what I’ve learned so far in my journey.
There is much more where this came from so please stay tuned by subscribing to my blog to come on my condo buying adventure with me!