Saving for a down payment, what is better?

[FraserB]

When I'm done school in 1.5 years I think I'll be making 50k (estimated) right out the door, I figure that with living like a hermit for a few years in a low rent appt I can get a 30k down payment saved in 5 years time and then still make a mortgage payment, easier if I rent a room out to help pay.

Or just live at home for a year after school, save everything except basic needs and then get my own place right away.

Is this a realistic situation? I'd be willing to lose out on the "luxuries" for those few years, nice car, parties, poker etc.. to get there. Or just live at home for a year after school, save everything except basic needs and then get my own place right away.

How long did you guys save for your dp? What percentage of income went to the savings?

[eblend]

I am confused, you say you think you will be making ~50k per year and in 5 years you will only be able to save 30k? If that is the case that is terrible money management. 30k out of 250k worth of income...If it was me I would be close to 110-130k saved.

Anyways, maybe I am not understanding what you mean exactly, but regardless, stay with your parents as much as you can as you can save FAST when you have no real expenses to worry about.

If you don't save at least 20% downpayment then you got to worry about the CMHC too.

For me I have been saving for about 3 years and I would say 60% of my income went to savings (when I was renting for 2 years), and like 90% when I was living with parents. Saved up about 60k during that time (would have had more had I not bought my car with cash outright)

[speedog]

For both posters - so this is assuming that there are no costs involved when living with your parents. You're living at their place rent free? Also not contributing to the food/grocery bills in their household? Heating/electricity/cable/phone/internet bills?

I suppose if you can live at home for a couple of years for free, then saving a lot of money like eblend is talking about is possible. But living with Mom and Dad under their roof - I dunno. It's kind of cool to have true independence, no?

[tsi_neal]

I dont agree that 110-130k is realistic or possible. but I do agree that 30k is definatly low.

50,000 /yr less taxes = 33000 in pocket / 12 = 2750 in pocket each month. Less rent, less food, less entertainment (lets face it even living cheaply you need some), less other bills (phone, car, cable, etc). IMO saving ~1000/mo is reasonable. 60k in 5 years.

The question of living with the parents really can only be answered by the individual. Makes sense for some and is totally unacceptable for others. IMO a year or two of independance is worth not owning a house for an additional year or two, but to each their own...

[Xtrema]

Originally posted by eblend
I am confused, you say you think you will be making ~50k per year and in 5 years you will only be able to save 30k? If that is the case that is terrible money management. 30k out of 250k worth of income...If it was me I would be close to 110-130k saved.

That's a lot of savings which can't be done if you want to have a life.

[Meback]

I am in the same situation as you. I just finished school in June and have been working since. I am making ~50k and is saving the money towards a down payment.

I am fortunate that I don't have to pay rent and utilities as I have chosen to live at home for the time being. Parents are okay with it, and would like to keep me around for as long as they can (Asian folks). I am trying to save approximately 120k down payment and will probably be able to obtain that within the next two years.

I suggest you do the same. It is a real advantage finically. Resist the temptation to spurge on nice cars, nice clothes, and fancy toys, but don¡¦t forget to spend money on what matters like yourself and family. When it¡¦s all said and done you will be years ahead of your peers.

Good luck.

[Jlude]

Originally posted by eblend
I am confused, you say you think you will be making ~50k per year and in 5 years you will only be able to save 30k? If that is the case that is terrible money management. 30k out of 250k worth of income...If it was me I would be close to 110-130k saved.

Anyways, maybe I am not understanding what you mean exactly, but regardless, stay with your parents as much as you can as you can save FAST when you have no real expenses to worry about.

If you don't save at least 20% downpayment then you got to worry about the CMHC too.

For me I have been saving for about 3 years and I would say 60% of my income went to savings (when I was renting for 2 years), and like 90% when I was living with parents. Saved up about 60k during that time (would have had more had I not bought my car with cash outright)

I think your numbers are pulled from a cloud... to think he's gonna have 130k saved in 5 years from a 50k a year job.

[whodiman]

100k in 5 years is VERY doable if you're willing to make the sacrifices. When i was living in Vancouver 6 years ago i was making 37k/year as a single guy and putting away 1200/mth. i NEVER went on any trips nor did i ever buy anything and i drove a super cheap car but the goal was to put away money for the house i have now. If you want to take vacations and have a car payment it's not going to happen. It's up to you what's more important.

[speedog]

Originally posted by Meback
I am in the same situation as you. I just finished school in June and have been working since. I am making ~50k and is saving the money towards a down payment.

I am fortunate that I don't have to pay rent and utilities as I have chosen to live at home for the time being. Parents are okay with it, and would like to keep me around for as long as they can (Asian folks). I am trying to save approximately 120k down payment and will probably be able to obtain that within the next two years.

I suggest you do the same. It is a real advantage finically. Resist the temptation to spurge on nice cars, nice clothes, and fancy toys, but don¡¦t forget to spend money on what matters like yourself and family. When it¡¦s all said and done you will be years ahead of your peers.

Good luck. You're making ~50k gross a year and are going to save 120k within the next two years? Even if you started saving in July of 2009, that seems like just a bit of a stretch. July, 2009 to January 2012 is 31 months and using the limited math I know, it just doesn't seem possible - at $50k gross a year, you'd be good for $129K over those 31 months. That is of course if you've figured out a way to not pay taxes, EI, CPP and such.

Of course, I am probably way off base here what with my limited math skills and all.

[ercchry]

to me his wording is saying $50K NET/year (OP's wording)

which in that case the 130k would be possible (since he will be probably making around what? 5% more each year?)

for me my plan is to save enough to get a place that is in a good area with 2 or more bedrooms, at which point i will rent out a room or two to friends to cover costs till i am at a point in my life that i want to settle down... then gf and i will both sell our places and get our own together... with either almost no mortgage or just a giant house :bigpimp:

[Cos]

Originally posted by Meback
I am in the same situation as you. I just finished school in June and have been working since. I am making ~50k and is saving the money towards a down payment.

I am fortunate that I don't have to pay rent and utilities as I have chosen to live at home for the time being. Parents are okay with it, and would like to keep me around for as long as they can (Asian folks). I am trying to save approximately 120k down payment and will probably be able to obtain that within the next two years.

I suggest you do the same. It is a real advantage finically. Resist the temptation to spurge on nice cars, nice clothes, and fancy toys, but don¡¦t forget to spend money on what matters like yourself and family. When it¡¦s all said and done you will be years ahead of your peers.

Good luck. How are going going go save 120,000 in 2 years when you bring home 33,000 in real income a year?

[Crymson]

Honestly.

Big wages will come later. I went and doubled my salary within 5 years out of college. I regret not doing the trips and having the throwing around money when i was younger than having it now.

Live at home, party your ass off for a year -- take a crazy vacation, buy rounds at the bar. You deserve it - you went to school and got a good job in order to have a better life, not miserly save so you can haul your ass into suburban hell.

AFter a year or 6 months at home go rent a place with a few buddies who are doing the same thing (DONT go back and rent with kids in school).

You'll be making 75k 3 years out of college, and you'll ahve 20g in the bank.

Best of both worlds.

PS. buy a used suv for ski trips, don't buy a sports car.

[Kloubek]

Originally posted by eblend

Anyways, maybe I am not understanding what you mean exactly, but regardless, stay with your parents as much as you can as you can save FAST when you have no real expenses to worry about.


This is EXACTLY what you need to read.

The reason people don't pay off houses much, much sooner than they do is because they cannot devote all their money towards the mortgage due to living expenses. If you have those covered, and you don't waste your money for a couple of years, you will have a good-sized downpayment, no problem.

[barmanjay]

Hind sight for me is 20/20 with a divorce, 4 kids and fiancee,.... so take my advice.


Save up as much as you can, live at home and pay off as much for a house as possible.

Bury your nose for 2-3 years and devote as much money towards a house as possible.

You can still party hard at 27-30.

This way your monthly mortgage payments will be much less and you will be able to afford to take those trips anytime you want instead of thinking back to when you (were younger) before you bought.

There will come to a point where you will have a spouse and the likelyhood of her working is only 50%

So you can see,.. having as much paid off in your house is very beneficial.

5% down on 400k house over 35 years at 3.7% = $1610/mo
10%/400k/35yr/3.7% = $1525/mo
20%..... = $1355/mo
25% = $1270
30% = $1185
40% = $1015
50% = $847

Lets say it takes you 3 years to save up $100,000 with your nose buried in it.

it'll take you 35 years to pay off a $100,000 mortgage at $425/month - $77,788 goes towards interest payments


Can you see where this is all going?

I wish I did this when I was younger instead of piss everything away on crap.

[eblend]

To all the people who say it isn't possible to save, yes it is, and to anyone who thinks I was not having any fun, think again, in the time I saved all that money I travelled 7 different asian contries for 7 weeks, went to Japan 3 times, went to europe for a month...I still saved money. It is all about how you save. I don't buy small cheap crap that has no significance, I save for the big stuff. Asia trip, 10k in 7 weeks, car paid in cash, 25k, bought a house with over 100k down (wife helped with this as well as she had some money). It is all about what you think is important, I had fun when I was younger since I saved as much as I could so I could afford to have fun, and not spend it on $300 dollar pair of jeans which are made in the same factory by the same child who makes the pair from bluenotes.

Anyone who thinks it is impossible just doesn't want to try hard enough. I just turned 26, drive a nice car, have a house, all the toys I could possibly want (electronics are my toys) and going to china for 3 weeks at the end of the year, so I think it is definatelly possible, ohh and don't forget, my wife is going to school right now and has been for the last little while, I have been living my lifestyle and supporting her for 3 years, I think I am doing alright...and I don't make much more then 50k NET.

[Cos]

^^ Teach me then.

[max_boost]

From KG:


ANYTHING IS POSSIBLE!!!! haha

Depends how extreme you want to get.

To save you need to minimize your expenses. Starting cutting stuff out. Start using substitutable goods. Clip coupons. But yeah, nothing beats moving home. No rent FTW.

[Mys73ri0]

50k gross = 38k net (http://www.taxtips.ca/calculators/taxcalculator.htm)

38k/12 months = 3160 net/month

monthly expenses
rent = 800
car insurance= 120
gas = 60
cell phone = 40
internet = 40
Groceries/food = 300

NET savings = 1800/month

1 years worth of savings = 21,600
5 years = $108,000

Before your eyes turn to $$$$ signs, these are conservative estimates, there's nothing in there for entertainment, emergencies (car break down etc), or RRSP contributions. If you are really interested in saving for a house, sit down and do a similar calculation for yourself.

The 2 largest factors in deciding how much you can save are up in the air. Your salary when you graduate. You may THINK you can earn that much but that may not be the case when it comes time to graduate. Secondly, you haven't decided as to whether or not you're staying at home which is a huge factor in your expenses.

[Jlude]

Fuck, I wish I was as good with money as some of you claim to be.

I spend so much...

[Cos]

Originally posted by Jlude
Fuck, I wish I was as good with money as some of you claim to be.

I spend so much...

Haha I was thinking the same thing. I know most people are in MUCH worse situations then I am but I feel like a consumerist pig in this thread.

[FraserB]

Thanks for all the replies. Like I said, I'm still a ways from grad and I'll be going into a very shaky (at the moment) field. Even though it's still far off I'll try to convince the parents to keep for another year and save a bunch after school.

Is buying a condo and then upgrading to a house after a few years a bad idea?

[sexualbanana]

First of all, since I've been in the same boat for years I strongly suggest you track your expenses/income for a year. If you're living rent/utility-free that's all the better but that will give you an idea of what your savings and expenditures are like (it also makes for a good money saving device when you have to write things down and you realize how much you've already spent that week/month).

Once you get about 3 months worth, start gathering info on mortgage costs, cell phone/utility costs. Factor that in and you'll have a general idea of what your finances will be like come graduation/real-life time.

I categorized mine into food, entertainment, and work-related expenses (also to keep track of expense cheques) vs. semi-monthly paycheques. Doesn't have to be fancy, any monkey should be able to come up with a half-decent spread sheet in Excel.

[speedog]

Read up on Barmanjay's post, he's spot on. Problem is that when one is young, it's very, very difficult not to enjoy that spare change.

[Cos]

Originally posted by FraserB
Thanks for all the replies. Like I said, I'm still a ways from grad and I'll be going into a very shaky (at the moment) field. Even though it's still far off I'll try to convince the parents to keep for another year and save a bunch after school.

Is buying a condo and then upgrading to a house after a few years a bad idea?

Always better to buy as big as you can go (from a resale and longevity point of view anyways).

House > Townhouse
townhouse > condo
condo > trailer
trailer > renting
renting > living at home
living at home > bum

[ercchry]

on a single income a house its pretty hard to do in this town... im thinking 2 bedroom townhouse/condo (i hate condos though) for 5 years then house... 180k mortgage over 25 years... ~25k in principal (compaired to ~14k over 35 :nut: ) that plus the 30k or so down payment i will want to have x2 (since the gf will have about the same at that time) will be ~110k down for a house in 5 years without even worrying about what the market is doing (but really if you are buying in the same market this does not really matter)

so 2 bedroom 210k condo now.... 500k house in 5 years... (maybe more if i rent out a room for 5 years)

[whodiman]

Originally posted by sexualbanana
First of all, since I've been in the same boat for years I strongly suggest you track your expenses/income for a year. If you're living rent/utility-free that's all the better but that will give you an idea of what your savings and expenditures are like (it also makes for a good money saving device when you have to write things down and you realize how much you've already spent that week/month).

Once you get about 3 months worth, start gathering info on mortgage costs, cell phone/utility costs. Factor that in and you'll have a general idea of what your finances will be like come graduation/real-life time.

I categorized mine into food, entertainment, and work-related expenses (also to keep track of expense cheques) vs. semi-monthly paycheques. Doesn't have to be fancy, any monkey should be able to come up with a half-decent spread sheet in Excel.

Tracking your expenses are huge!! Last year i estimated my spendings and figured we spent about 3200/mth (including mortgage). after the first month of tracking we realized it was closer to 4500/mth. wake up call! This is the first step in figuring out where you are and what you need to do to reach your goal.

15 years ago i pissed away tons of cash into my car and car stereo. wouldn't have even had that money but i got a settlment for a motorcycle accident. if only i had invested that instead........probalby wouldn't even have a mortgage now.

Being married helps...not necessarily because you make more money but you have less incentive to buy stupid things and go out as much (maybe a sign of getting old). My wife and I only net about 70k/year but we were renting out a bedroom for the last 18 months , have no car payment, take no trips and paid off 85k off the mortgage in that time period. You may struggle getting the wife to agree to this but once you start getting results the cooperation becomes easier.

[kaput]

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[Meback]

Originally posted by Cos
How are going going go save 120,000 in 2 years when you bring home 33,000 in real income a year?

I should have made it clear that I am not starting with ZERO savings. I have been working since I was 15 starting at minium wage and was able to pay for my own education, buy my own car, and save money on the side.

[masoncgy]

Originally posted by kaput
I don't understand why so many young people rush into getting locked down with a mortgage. It's great to start planning and saving as early as possible, but I bet very few people at that age know what they really want in life. You might come to realize that the money you have for a down payment would be better spent on something else.

In the end, buying a home isn't as important as just having a good chunk of money stashed away for a rainy day. One is always better off with a healthy savings account... even if that money isn't used as a downpayment. The problem is, most people don't save money and spend way too much... hence the problems we see today.

Life is too good at throwing nasty curve balls at us... might as well be prepared.


Originally posted by kaput
What if you decide after a couple years that the carreer path you're on isn't for you? What if you lose your job after a year or two and haven't got enough experience to find another one? Maybe you decide to go back to school for something different? Maybe you decide to go to grad school? Maybe you decide to start a business of your own? Maybe you realize that you want to travel for a year? Maybe you decide that Calgary isn't where you belong and want to move to another city? What if you get someone knocked up (whether accidental or not) and have to start supporting a family?

Life is full of 'what if's'... no one has a crystal ball. One just needs to make the decisions that seem the best at that time... and then deal with any subsequent consequences as they arise.

'What if's' should never deter someone from saving money or buying their own home though. We wouldn't accomplish much as a society if we were hindered by life's unanswered questions.


Originally posted by kaput
Everyones situation is unique, but I know and hear of lots of people who bought a house within a year or two of graduating and have since realized that they want to do other things in life but can't. Renting isn't as terrible as people say... and I used to be one of those people who saw it as a bad decision.

Being overextended or house poor is a personal choice. One can still save money, purchase a home and live a comfortable life without being strapped... it's all about how wise one is with their money.

I could live a much more extravagant lifestyle... but what for? I prefer never having to worry when my next paycheck is coming and I like the ability to stash away the majority of my income every month.

Tomorrow isn't going to be any easier... might as well be prepared. Sure, I could die tomorrow and not have had the pleasure of enjoying that money... but there's a good chance I could live a long life and I want to be comfortable all the way through.

When the average Canadian household debt is $96,000... you know there is an extremely serious problem in this country.

[Mar]

I just wrote off all my student loan interest payments, books, tuition, everything from school and got back $6500 at tax time. Pooled with a friend and we bought a house together, easy as that.

[kaput]

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[ercchry]

Originally posted by kaput


I agree somewhat, but I think there are too many 'what ifs' when you are 20-25 years old (and these days even from 25-30 in more and more cases) to make good decisions just because they seem best at the time. People at that age are still developing who they are and priorities can change incredibly quickly, whereas home ownership is a long term commitment that I believe many young people make before they are truly ready for it. I liken it to getting married right after graduating high school before you know what you want from life.

why is it long term? you can always sell... unless something crazy happens to the market... but then regardless of age.. all are screwed

[Criticull]

Originally posted by Meback
I am in the same situation as you. I just finished school in June and have been working since. I am making ~50k and is saving the money towards a down payment.

I am fortunate that I don't have to pay rent and utilities as I have chosen to live at home for the time being. Parents are okay with it, and would like to keep me around for as long as they can (Asian folks). I am trying to save approximately 120k down payment and will probably be able to obtain that within the next two years.

I suggest you do the same. It is a real advantage finically. Resist the temptation to spurge on nice cars, nice clothes, and fancy toys, but don¡¦t forget to spend money on what matters like yourself and family. When it¡¦s all said and done you will be years ahead of your peers.

Good luck.

How do you save 120k when you are making 135k gross over the 2.7 years you're referring to having worked?

edit: nm, saw your response above.

[kaput]

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