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One of the biggest gaps in personal finance can be found at the point in life where you’re handed the keys to the home you just bought. There’s endless commentary on saving down payments, arranging mortgages and figuring out much house you can afford. But what should you expect to spend on repairs and maintenance after you move in?

Sean Cooper, a mortgage broker and author of the bestselling book Burn Your Mortgage, offers some guidance on this in the latest Carrick on Money guest Q&A. He also tackles the question of variable- versus fixed-rate mortgages and the rise in house prices over the past year.

Q: Sean, could you afford to buy your own house at its current value? I’m hearing from plenty of new buyers who say the houses they bought in the past 12 to 24 months have risen in price to levels they couldn’t afford as a buyer right now.

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A: I bought my home back in August, 2012. Mind you, it was a different time back then. That being said, if I had to do it all over again, I think I could still afford a home at today’s prices. I probably couldn’t afford my house as my first property, but I could afford a home. It just comes down to setting realistic expectations.

Q: With prices being where they are today, do you think it’s still possible to do as you did in burning down your mortgage in a few years?

A: Sure, I think if someone was really motivated to burn their mortgage like me, they could. For those who have been fortunate enough not to have their income affected by COVID, the pandemic has made it a lot easier to save money. There’s a lot less temptation to spend with in-person shopping shut down in many places due to COVID lockdowns. Instead of letting your extra savings sit in a savings account and earn next to nothing, why not pay down your mortgage and get one step closer to financial freedom?

Q: You’ve blogged about some of the repairs you’ve done on your house. What can you advise young buyers on the costs of owning a home in terms of maintenance and upkeep?

A: A good rule of thumb is to budget about 1 per cent of your home’s value towards maintenance and repairs each year. As a homeowner, you want to ask yourself, what’s the most costly home repair that could happen? Usually that involves replacing the roof, the windows or the furnace. You want to keep a close eye on the big-ticket items, so you’re not blindsided when your furnace (that has been acting “funny” for a while) conks out in the middle of winter and you have to buy a new one.

Q: Fixed-rate or variable mortgage which is the right choice for buyers or renewers right now?

A: Fixed-rate mortgages are certainly very attractive right now. You can lock in for five years while mortgage rates are still near record lows. However, as I like to say to my clients, “the lowest rate can save you hundreds, but the wrong mortgage product can cost you thousands.” Choosing the best mortgage option is about a lot more than simply finding the lowest mortgage rate. Other factors like penalties matter, too. Fixed mortgages have among the highest penalties out there. If you think you might break your mortgage before the end of its term, you might opt for a variable rate instead. Although you’re giving up the certainty in terms of the mortgage rate and payment, your penalty is a lot more predictable. Usually, it’s only three months’ interest, which can be a lot less than fixed-rate mortgage penalties. If you’re a first-time homebuyer, fixed rate makes a lot of sense. If you’re renewing your mortgage, it’s a toss-up right now between fixed and variable. It really depends on how optimistic you are about the Canadian economy recovering post-COVID.

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Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.


Cast your vote below

The Stress Test podcast I co-host with Globe personal finance editor Roma Luciw has been nominated by The Webby Awards for Best Business Podcast. This means we were selected as one of five best in the world for this category.

We’re up for two awards, one of which is the People’s Voice Award. You can vote for us here.

It’s a huge honour for our little podcast, created entirely amid the pandemic to be in the running for a global award, and a testament to how much the show is resonating with listeners. We are currently recording Season 3, which launches in May.


Rob’s personal finance reading list

So you’re thinking of delaying CPP and OAS

Some excellent work by a veteran personal finance blogger on how much you need to have saved in order to delay your Canada Pension Plan retirement benefit and Old Age Security past age 65. The reward for delaying is a substantially higher payout.

The cost of putting your kids first

A look at how the financial and emotional burdens of having children have affected the lives of parents. The argument made here is that parents feel more responsibility than in previous generations to ensure their kids are successful and happy.

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House hunters, check out these cities

Macleans has produced a list of cities ranked by quality of life. Housing affordability was the most heavily weighted criteria. Atlantic Canada rules.

How to help friends and family with COVID-19

Families with COVID-19 experience offers suggestions for how you can help others in their position, like sending quick and easy meals and snacks.


Today’s financial tool

You can now view your Equifax credit score and report for free. It’s easy to sign up – took me less than five minutes.


The money-free zone

This song always puts me in a good mood – Wherever You Leadeth Me, by The Impressions. Off a really good album called The Young Mods’ Forgotten Story.


Tweet of the week

Read this thread from a veteran mortgage broker if you think the real estate market can keep booming like it has in the past year or so.


What I’ve been writing about

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

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Even more coverage from Rob Carrick:

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

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