Alberta called—What I wish I’d known before making the move

Now, almost a year in, I find myself struggling to keep up with all the monthly expenses of owning a home, with little left over for savings, debt repayment or fun. 

Here are some things I’d wish I’d known before buying my first home and some advice from a financial planner on preparing for such a big purchase and what to do if you find yourself in over your head.

5 things I wish I’d known before buying a home

1. “Affordable” doesn’t mean you’re ready to buy 

I was so concerned with rising prices and “getting in the market” before prices exploded in Alberta, I didn’t factor in the amount of money I would need. Because I was a first-time home buyer, I was able to withdraw money from my registered retirement savings plan (RRSP) for a down payment. But when the sunny one-bedroom condo I fell in love with came in slightly over what I qualified for from the bank, I had to throw in another $5,000 from my savings just to cover the purchase price. 

Other costs included a home inspection, condo document review and lawyer fees. And since I’d re-located across the country, I also had to pay for moving expenses and new furniture. 

My savings were almost completely depleted, and I hadn’t even moved in yet. It meant racking up five-figure debt in just a few short months to cover everything else. Taking the time to build up more of a cushion for unexpected up-front costs would have helped immensely. 

2. You should figure out your monthly budget before you purchase a home 

I was so excited to become a home owner that I bought a condo the first week I arrived in Calgary before I’d even received a paycheque from my new job. I had no idea what my take-home pay was going to be, therefore was guessing what I really could afford each month.

Once I did get paid and all the deductions had been taken off, I realized my budget was going to be a lot tighter than I anticipated. 

3. There’s more to the cost of home ownership than mortgage payments 

My bank qualified me for $318,000 and I spent every penny of it. Since I had put less than 20% down, I would also have to pay a premium for Canada Mortgage and Housing Corporation (CMHC) loan insurance.

I went for a five-year fixed, 25-year amortization rate of 5.89% (the lowest rate at the time). 

The Bank of Canada has cut rates four times since then, and if I had waited a few more months or gone for a variable-rate mortgage, my payments would have been significantly reduced.

The mortgage payment is also only one part of the cost. After I added all the bills like property taxes ($172), condo fees ($495), condo insurance ($27) and utilities ($86), I realized a smaller mortgage would have been much more sensible. I still had to factor in food, daily living expenses (basic necessities cost more in Calgary than Toronto) and transportation (since Calgary is so spread out you have to drive everywhere!). This leaves little room for savings, debt repayment or social activities.

4. You must do your due diligence when buying a property

I hired a third-party company to do an audit of the condo’s reserve fund and financials (another $415). Even though the expert told me the reserve fund wasn’t where it needed to be I bought the place anyway. I’ve already been hit with a special assessment (almost $1,400) to cover operational and reserve fund deficits and there will likely be more to come.

5. You should have a plan B 

After quickly burning through my savings and having to put pretty much everything on credit, I wish I’d had a plan beforehand on how to manage. Not only have I had to cut back on discretionary spending and say no to a lot of social outings, I’ve had a lot of sleepless nights worrying about money.

How to prepare for buying your first home

Kenneth Doll, a Certified Financial Planner (CFP) in Calgary, says it’s not uncommon for people to get in over their head when buying their first home. He says banks are in the business of lending money and the bigger a mortgage a new home buyer takes on, the more the bank makes on interest.

“I think more people than not will buy to the max that they can and then they end up having to be house poor or, God forbid, somebody loses a job or whatever, and then they’re really strapped,” says Doll.

While the CMHC recommends spending no more than 32% of gross income on housing, Doll says everyone’s situation is different. He advises aspiring home buyers to have a conversation with a financial planner to discuss their income, expenses, savings and debts to figure out much of a house they can really afford—as opposed to what the bank or a Google search says they can.

What to do if you become house-poor

“A lot of people focus too much on the shiny thing, which is the house, as opposed to all the expenses and what’s really involved,” he says. “There will be unexpected costs. Have more savings, try and put down 20% (to avoid CMHC insurance) but even more important, don’t buy more than you can realistically afford.”

For home owners who have overextended themselves (such as me), Doll says there are three things you can do: Sell your house and downsize, bring in additional income with a side hustle or cut expenses (which he acknowledges can be difficult to do with the current price of groceries and gas).

Doll says putting money aside for savings should also be a priority, even if someone has debt. He says contributing to an RRSP can be a good option because of the tax benefit. 

How I plan to get back on track financially

There are many things I wish I’d known before moving to Alberta from Ontario to buy my first home but now must do everything I can to get back on financial track.

I’ve taken Doll’s advice on bringing in extra income (like freelance writing) and am getting creative on how to cut expenses (walks with friends instead of nights out, cooking at home, etc.). Since Calgary is such a hot market, the potential to sell for more than I paid is also an option, as is re-financing my mortgage for a lower rate (factoring in the penalties for breaking my mortgage early).

I know it won’t be an easy road ahead but hope all the sacrifices will be worth it. In the meantime, I will enjoy coming home to a beautiful place I call my own.

Read more about home ownership:

• The Canadian mortgage stress test, explained
• Find the best mortgage rates in Canada
• Why are mortgages so expensive in Canada?
• The complete guide for first-time home buyers in Canada

About Sheri Block

Sheri Block is a freelance journalist who has covered everything from celebrity red carpets to cancer research. She has a journalism degree from the University of Regina.