Personal Finance

Moving to Canada(BC). Home buying and general financial planning advice needed

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  • Jan 24th, 2012 10:55 am
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Newbie
Jan 18, 2012
2 posts
VANCOUVER

Moving to Canada(BC). Home buying and general financial planning advice needed

Hi,

Sorry in advance for long post, but I definitely don't want to mark start of my Canadian life with financial screw up, hence will try to give as much details as possible.

I'm moving (back) to Vancouver BC after several years spent in US.
I'm trying to figure what's the best financial strategy to achieve my goals.

Current savings are
1) approx 60k CAD worth of RRSP investments (which is useless as investment at moment, as they show no growth at all)
2) approx 250k USD in stock (mostly) options (some) and cash. These are in US.

Goals
1) I want buy a house in Vancouver within next year and ready to pay anywhere between $600k-$800k
2) Build wealth :)

Household annual income is around $200k-$250k, of which around 5-8k a month I'll have to spare. It's not distributed evenly throughout the year though.

My initial plan was
1) convert all saving into (Canadian) cash
2) take additional 50k (me and my wife) from RRSP for HBP
3) use all that for down payment
4) get open mortgage (which has pretty high interest rate btw)
5) spend 100% of free money paying it back
6) Pay what's in order back to RRSP

That would get me mortgage-free house in uner 5 yrs.

Now, seeing low mortgage interest rate (2.99% 5yrs fixed I hear?) it occurred to me that my first thought probably is not the best one.

So corrected one would be
1) Get _minimal_ downpayment for selected house (20% that is), that will include 50k from RRSP
2) Get mortgage for some 10-15 yrs
3) Take my time paying back mortgage and RRSP debt
4) Top RRSP
5) Top TFSA
6) Invest rest of money _somewhere_

I'm first time home buyer, and first time personal financial planner in Canada :) hence in bad need for advice.

So questions I have are
1) Should I buy the house now or wait (where's BC real estate market heading?)
2) What should be strategy for downpayment and mortgage?
3) How to allocate whatever will be left from current savings (should I move it to Canada or leave in US?)
4) How to allocate whatever remains from earnings after mortgage and RRSP payments?

Any advice or educational pointers will be appreciated.

Thanks!
6 replies
Sr. Member
Oct 21, 2005
615 posts
95 upvotes
London
Seem to me you need a financial advisor :-) I don't know how to answer all of your questions, I tried to cheery pick a few:

> 1) Should I buy the house now or wait (where's BC real estate market heading?)
There is not right or wrong answer to this question depend who you ask. No one can help you but yourself to answer this question, do some research. Remember, don't ask a realtor! Seriously.


> 2) What should be strategy for downpayment and mortgage?

If you have enough funds, should go for 20% down to avoid cmhc insurance.
Newbie
Jan 18, 2012
2 posts
VANCOUVER
thanks for advice!
never used financial advisors:
- how much do they charge for consultation?
- how do I pick a good one? - I figure it's pretty hard to understand who's good and who's bad in advance :)

and yes, when I mentioned "minimal downpayment" I mean 20% to avoid insurance.


thanks!
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
FirstTimeCanadian wrote: thanks for advice!
never used financial advisors:
- how much do they charge for consultation?
- how do I pick a good one? - I figure it's pretty hard to understand who's good and who's bad in advance :)

and yes, when I mentioned "minimal downpayment" I mean 20% to avoid insurance.


thanks!

Pick an advisor who isn't tied to a financial institution/product. You should be able to find someone who charges for time alone.

25% of down payment would make sense.
Deal Fanatic
Oct 7, 2007
9404 posts
5374 upvotes
I don't have a crystal ball or anything but I would not recommend anyone to buy a home in Vancouver right now. The reason is that I believe house prices are at their highest which means they have a greater probability of going down then they do going up or staying the course. While there are a variety of factors that are driving house prices up, I believe our low mortgage rates are a significant factor. As soon as these rates go up (which they will, it is just a matter of when), house prices will have nowhere to go but down. I bought my place in Vancouver before the recent hysteria but couldn't imagine buying something today. Even a 5 or 10% correction on a large purchase price, is relatively significant. If it were me, I would rent in the interim and see what progresses.

Just my two cents.
Deal Addict
User avatar
Nov 3, 2002
1321 posts
68 upvotes
Ottawa
FirstTimeCanadian wrote: Goals
1) I want buy a house in Vancouver within next year and ready to pay anywhere between $600k-$800k
2) Build wealth :)

If you're moving to Vancouver I don't think your two goals are compatible. You are basically saying that you want to go in to debt for about 2x - 3x your current net worth. That's called putting all your eggs in one basket. Not only that, but you're buying in to a bubble with severely inflated asset prices, at a point in time where interest rates have nowhere to go but up. Lots of people will probably tell you that the housing market will not crash anywhere as bad as in the U.S., and that we will get a slow correction. Well fine, but even if that's the case, you will still be the proud owner of a half million dollar asset sitting there stagnating in price.
Deal Fanatic
User avatar
Mar 20, 2009
8862 posts
2693 upvotes
Vancouver
A financial advisor sounds like a good idea.

You aren't going to get much of a house in Vancouver for $800,000. You'll have to go out to a distant suburb or settle for a small townhouse to stay within that budget. You might need to re-think your housing costs.

It's possible that housing prices might drop, but the Vancouver market is driven by long-term supply and demand, a point that pundits from other regions always seem to miss. People move here for the climate and culture, many from Asia. The economy isn't enjoying any kind of short-term boom here, so it's not going to go bust suddenly for that reason either. The biggest factors are interest rates and government policy on borrowing, but keep in mind that many of the immigrants coming to the Vancouver region pay cash for very expensive houses rather than borrowing, so house prices here are quite resilient. A short-term drop of 10% doesn't mean much if you are expecting +100% over the next 10 years - sales volumes crash in a downturn, but people just hold on and wait.

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