Ask the Expert
Arguing over money? He wants a new roof, but you want a hot tub. You want a Ping-Pong table, he wants a Mini Cooper. No matter how big or small your dispute, we'll settle it for you. (We won't publish your last name.) Send your dilemma to firstname.lastname@example.org
Wayne, 46, and Susan, 51, Calgary
Did this couple foul up their finances by selling their home last year? She wanted to move closer to her troubled teen's school, so they're renting in a ritzy part of town. He wants to buy a house now before Calgary booms again. Real estate: investment or insanity?
HE SAYS: GET BACK IN THE GAME
It wasn't my idea to move in the first place - we sold our Northwest condo townhouse last year for $150,000 so that my 17-year-old stepdaughter could be closer to a new high school in the Marda Loop area. Home prices in this neighbourhood are beyond our reach, so we're renting at $1,600 a month. I hate the idea of throwing our money away, and I'd like to buy again as soon as possible - especially since interest rates are starting to rise. I'd like to get an urban house farther south for around $400,000. There are fixer-uppers for less, but we're not keen on renovations. With our income, we'd have to put a good chunk of our savings down to afford the mortgage. Susan wants a condo in a high-rise, but I can't stand the lack of privacy and cramped space. In my mind, we made a huge mistake and the only way out of this mess is to get back in the market right away.
SHE SAYS: WAIT FOR A DEAL
I'm really afraid to buy right now with prices so high, but Wayne seems to think they'll go even higher. I'd like to keep renting for a while longer and get an inner-city condo when they hopefully become affordable - but Wayne doesn't like apartment-style living. I hesitate to sacrifice our savings for the house he wants and put all our financial eggs in one basket. We've got two teenage children heading to university soon - my daughter and his 19-year-old son, who lives in Toronto with his mother - and what about retirement? I haven't worked for five years, mainly so I can stay home for my daughter. She's had academic troubles, and despite the new school, she still needs constant monitoring and guidance to keep her on track to graduate this spring. I'd like to start working again, maybe freelancing part-time from home. The only bright side of all this: We had a $40,000 line of credit that we were able to pay off when we sold our house, so we're starting fresh.
Occupations: He's a journeyman plumber, she's an unemployed former advertising executive
Kids: A daughter, 17, and a son, 19
Annual household income: $70,000 (all his)
Assets: $200,000 in GICs (mostly proceeds from the sale of their house); $40,000 in Wayne's RRSP, $80,000 in Susan's pension (eligible at the age of 60)
Rent: $1,600 a month
THE ADVICE: JUMP BACK IN
Financial Expert Kelley Keehn
There are a few issues to address. First, will Calgary's housing market heat up? No one can say for sure, but according to Calgary's Real Estate Board, the number of single-family homes sold in February, 2011, increased by 13 per cent over last year. And the average price of a single family home increased by 2 per cent from January, 2011, to February, 2011.
There's no predicting whether any real-estate market will boom, so let's look at some other criteria. You moved because Susan wanted to be closer to her daughter's school. As Susan isn't working, I think renting is a waste of money for the convenience of saving a commute.
Lastly, I agree with Wayne that you should get back into the market, but Susan is right that you shouldn't be house poor doing so. If you sold your town house last year for $150,000, why do you now need to buy a place for $400,000? The mortgage, property taxes and utilities, with a $200,000 down payment at current rates and a 25-year amortization, wouldn't be that much more than your current rent (estimated at $1,867 monthly), but I don't understand why you want to pay that much.
My advice: Opt for a less expensive home in a good neighbourhood that is outside the expensive city core, as Susan has the time to commute and her daughter isn't going to be in high school for much longer. If you purchase a home for $300,000, using only $100,000 as a down payment, you can allocate some monthly cash flow to saving for the kids' education and your retirement. Get a good adviser on your side and get the rest of your $100,000 out of a guaranteed investment certificate and allocated in investments working for you - you're not even beating inflation after tax in a GIC.
Kelley Keehn is the host of W Network's Burn My Mortgage ( kelleykeehn.com).
Cash Clash is now on Facebook.
Follow us on Twitter: