In 2011, two years after migrating to Canada we decided that it’s time to buy our own home. It’s not our first time to own a property having owned our home in England and luckily managed to get out of it during the 2008 housing market crash.
Upon arrival in Canada, we were fortunate to have regular full time jobs as Registered Nurses. We have No debts at that time and always maintain an excellent credit score of above 800. At that time, the mortgage prime rate was 3%. We opted for the variable rate which was prime - 0.85% which was a great rate during that time.
Weighing the pros and cons of Owning
Advantages of owning a home:
- Build equity over time
- Tax free benefits on capital gains if it’s your primary home
- Decorate and make changes to your home the way you want
- Not fearful of being evicted by your landlord when he/she want to sell the property
- Have family and guest over anytime at your comfort
Disadvantages of owning a home:
- Lifetime financial obligation such as property taxes and insurance
- Increased monthly payments if rates go up.
- Unexpected costly repairs
Despite the disadvantages we feel that there are many advantages to having our own home. We decided to buy a single family detached home for our growing family. We were excited to be homeowners again. It was located in a very safe neighborhood, and have great neighbors. Not to mention, our home has created so many fond memories - families, friends, guests gathering, and overnight stay overs.
Initially, we thought we made the right decisions. However, as soon as the honeymoon stage of homeownership wears off, little by little we see the cracks and distress of our decision. As a result, we noticed we just spend most of our time at work, doing extra shifts, and overtime hours to pay our ever-increasing bills.
In effect, since we put all our life savings into the house, we were left out with no buffer at all. In other words, we feel that we were simply starting again from scratch - building our savings, emergency fund, and starting investing. Thus, we were basically living paycheck to paycheck.
Unprepared Truth of Having a Home
Unknowingly, the financial obligations that comes with home ownership has led to so much stress in our lives. The bickering and constant arguments happen on a more of a frequent basis not because of falling out of our relationship. Essentially, its due to the misguided decisions we made that led to our insurmountable financial obligations.
Above all, the most compelling evidence is that I was no longer happy and lost my drive with the job that I love the most, working as an ICU nurse. Numerous times I remembered, I was driving to work not knowing how I got there. I am at a breaking point - physically and mentally unfit. To sum up, I was extremely burned out. Time to call it quits!
One of the biggest decisions of my life
After so much reflection and consultation with my family, it made me conclude that this is not healthy for me and for them. Finally, I made the biggest decision to leave my very stable job with good benefits and excellent pension and sold our home in 2015.
The last 3 years before leaving my job, I was already making $100K annually on average on my own income alone at being on the top of the salary scale for RN’s in BC. This was a decision that wasn’t taken lightly as I tried to figure out what I really want in life and probably the most important one. I was very thankful to my family who has given their full support during this very difficult time.
Eventually, I took a sabbatical leave from my profession. I’ve travelled and stayed a few months back home in the Philippines, visited my family in the US, and just spent quality time with my family here in Canada. Furthermore, this was also the opportunity that I needed. I try to keep myself in shape by exercising and going to the gym regularly.
In addition, I spent most of my time reviewing our current financial situation, family cash flow (flow of money - assets vs. liabilities), and building other sources of income. Consequently, I became very passionate in building passive income monthly through investing in the stock market focusing on dividend growth stocks rather than actively working only. At the same time, we embraced minimalism and frugality.
Fast forward 2017, I have found a regained and renewed energy, a lot happier and satisfied, even more closer to my family. Finally, I had a clearer direction to our long term goals. Under those circumstances, I decided to go back to work in my chosen profession in a casual position or reduced hours.
If you ask, if I could retire at that time and be financially independent? Probably!
In fact, I didn't even have a 6 nor 7 figure net worth at that time. However, knowing that there are countries where we can live comfortably with less, is very valuable and advantageous information to us, as we don’t need to aim extremely big goals in our personal net worth. I am 100% certain that we can live on $1,000 of monthly passive income in many parts of the world. In short, I firmly believe we have so many options if we have to make that decision in the future.
What are the lessons learned on buying our first home in Canada?
Here’s the “miss-takes” when buying our first home:
1. Putting a huge deposit of 20% in our purchase.
We’ve decided to put in a 20% deposit to avoid the CHMC insurance and bring down our monthly amortization. We made a huge sacrifice and put all of our life savings into buying this home.
At that time, we understood that by doing such we built up equity quicker and were potentially able to pay it off sooner.
2. Making extra payments bi-weekly. We made additional payments of $500 biweekly to expedite the term of our home loan.
3. Buying a big house more than you actually need. The house we bought is a single family home. 5 bedrooms, a den, and 3 baths which is about 3400 sq. ft., huge yard and double garage.
4. Accumulate more liabilities. Since we have ample space in the house, we need to fill those and start buying more toys and material things to fill the empty rooms.
5. Buy two cars to fill those double car garage. Although this was a necessity as we work in different hospitals, and we have to drive the kids to school and other activities but could have been avoided if we made the right decision in the first place.
My Final Thoughts
Hindsight is always 20/20. Here’s what we could have done differently.
1. Only make a minimum deposit of 5% and invest the difference. If you stay in your home longer and believe that your home will increase in value over time then you will profit from capital appreciation from the value of your property by the time you decide to sell your home even just making a small deposit.
We could have kept the bulk of our life savings and invested in dividend stocks that generate passive income instead of those funds tied in an Illiquid asset which is our home.
2. Do not make extra payments or accelerated payments and pay monthly only. Again invest the difference in assets that generate regular passive income such as dividend growth stocks.
3. Buy a cheaper and smaller house enough for our family. The other option we had at the time, was to buy a home with a mortgage helper but because of the nature of our jobs as shift workers we decided against the hassle of having tenants and enjoy our own privacy.
4. We could avoid accumulating so much liabilities and material things if we chose to buy a smaller home.
5. We could eliminate the need to get two cars if we only bought a home closer to the sky train or within walking distance to our work place.
On the whole, Taking a career break was the most crucial and important decision I’ve made at that stage of my life. Something that I would forever say - the decision that made a difference. Otherwise, I would not be able to share this story today.
Disclaimer: This blog post represents my opinion only and should not be considered as a recommendation. Whatever decisions you make, you should exercise due diligence.