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Although the housing market has cooled a little in many cities, there’s still a sense among young adults that they may never own a house. And so, they ask questions like this one:

Q: “I’m in my early-30s, and am only now starting to think about (possible) home ownership. How common is it for first-time homeowners to completely drain their savings to make a good down payment? At this point in time, that’s what I’m facing, and I’m not sure how ‘normal’ or financially responsible that would be.”

A: I have not seen any figures on this, so I’ll have to go with my gut here and say it is normal for first-time buyers to burn their savings to buy a home. It’s not just the down payment that eats up savings. Legal fees plus closing costs can add thousands to the bill.

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It may be normal to spend all your savings to buy a home, but it’s not financially responsible. Housing true believers will tell you that everyone struggles financially to get into a house, so don’t sweat it. But having no savings cushion at all when you own a home puts you at risk of having to go into debt to afford one of those repair or maintenance emergencies that are unavoidable when you own a home.

You’re ready to buy a house when you have a down payment, when you can afford all the closing and moving costs AND when you can keep at least a couple of thousand dollars back for emergencies. As a home owner of 25 or so years, I can tell those emergencies do happen.

If you need help figuring out whether that mortgage will leave you house poor, check out our Real Life Ratio calculator.

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Rob’s personal finance reading list…

Stocks for a TFSA

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A personal finance blogger lists five dividend stocks that he’s considering for his tax-free savings account and generates a lively debate with readers.

Life in a tiny condo

I wrote recently about how young adults are having trouble affording both rents and mortgage payments in the Toronto area. One solution is the tiny condo, accent on the tiny. Toronto Life recently interviewed a couple living in a two-storey, 450-square-foot condo.

Four regrettable financial mistakes

A blogger provides an honest accounting of four financial missteps that cost her thousands of dollars. Good to see someone warning about spending too much on weddings.

From the department of food gadgets

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An ode to food dehydrators. If you want to indulge yourself on one gadget for your kitchen this year, this might be the one.

Today’s financial tool/app

Planning your registered retirement savings plan contribution for the 2018 tax year? Here’s a calculator that can help show you how much tax you’ll save with an RRSP contribution. Of course, RRSPs work best when you reinvest those tax savings into the plan. Or, use them to pay down debt.

Ask Rob

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

What I’ve been writing about

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  • Credit cards get the hate, but HELOCs are the crushing debt
  • The problem with home equity lines of credit? Perma-debt
  • ETFs are good for your portfolio, but not if you do this (for Globe Unlimited subscribers)

More Carrick and money coverage

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