Personal Finance

new home or resale home - can afford both

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  • Apr 4th, 2013 7:53 pm
Jr. Member
Sep 19, 2010
113 posts
4 upvotes

new home or resale home - can afford both

Hi,

I am in a dilemma about my home purchase.

I am in a position to purchase a new detached home or a re-sale detached home. Both are in the price range of 385 - 410K.
The mortgage for both the properties fall within my budget.

The issue I have is that the new home needs a $40K deposit within 3 months which I don't have. I would need to pull out a loan of 20K to cover it which I don't think is a good idea.

The re-sale I can buy today because I will go with 10% downpayment and take the CMHC one time hit.

If I wait for another year (summer 2014), I will have the necessary 40K for a new home deposit and I will also possibly have the 20% required for the re-sale home.


I am a little worried about the housing market and about home prices increasing as well as mortgage rates increasing.

Currently, I live in a condo and I am almost getting tired of paying the maintenance costs.

Any advice?

Also, would you recommend a new home or a re-sale home (area is Brampton)? I don't like the unknowns of a new home. I like that fact that I can walk in a re-sale home and see exactly what I am getting. Please do provide some feedback.
23 replies
Deal Addict
Jul 11, 2010
1294 posts
329 upvotes
Toronto
Whether you go new or resale is a personal choice. To me the deciding factor would be structure. With a new home you can ask the builder for references for his previous buyers. You could call them and ask them about the finished product, if they have had any problems and how quickly did the builder address their concerns. Although most don't do it you could make a home inspection part of your offer.
With a resale you have to look at age of the house and rely upon the owner and real estate agents to be honest about any structural problems. A home inspector can advise you on the condition of the roof etc but they cannot look inside the walls.

You are concerned with paying maintenance costs. With home ownership there are many other costs.

Your home insurance will be more because of liability .
You will pay for your own electricity, gas and water bills. You probably will pay to rent the water heater. With aging infrastructures the homeowner will be facing future higher costs.
You will pay property taxes which will probably be higher than your taxes now.

You will have to set money aside yearly for unexpected expenses ie new roof or furnace etc
If you are not a do-it-yourselfer you will have to pay for any repairs or renovations.

I don't totally agree with your statement that you can see what you are getting in a resale. As I mentioned you cannot see inside the walls. Perhaps a paint job has covered up a water stain in a wall or ceiling which meant that water was leaking. Have their been any leaks through the foundation walls? Even a good home inspector may not pick these potential problems if they have been hidden. In Ontario these are called latent or hidden defects and by law must be disclosed to buyer as they could influence their decision to purchase or not.

Monthly house costs may not be any lower than your maintenance fees now.

My opinion is a new home will cost you less over the first 10 years or so.
Doug Boswell
i
Deal Addict
User avatar
Mar 23, 2011
2207 posts
1398 upvotes
Etobicoke
I hate new home construction. People buy a house from pictures. Would you buy a car without ever sitting in it and driving it?
Also, you have to deal with the area still being under construction around you and waiting a year or 2 for any defects that occur only to chase down the builder to fix them.
Re-sale, you look at the house, get a feel for the size, view and can have an inspector look it over to see what may or may not be wrong with it. Also i like the idea of seeing what the neighbourhood is like. You don't get that luxury from a patch of dirt.
I will agree that with re-sale there are also potentials for problems but buying a house new or not always has a risk.
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"It's better to be dead and cool...than alive and uncool!"
Deal Addict
May 30, 2012
4290 posts
2082 upvotes
BC
lessca wrote: Hi,

I am in a dilemma about my home purchase.

I am in a position to purchase a new detached home or a re-sale detached home. Both are in the price range of 385 - 410K.
The mortgage for both the properties fall within my budget.

The issue I have is that the new home needs a $40K deposit within 3 months which I don't have. I would need to pull out a loan of 20K to cover it which I don't think is a good idea.

The re-sale I can buy today because I will go with 10% downpayment and take the CMHC one time hit.

If I wait for another year (summer 2014), I will have the necessary 40K for a new home deposit and I will also possibly have the 20% required for the re-sale home.


I am a little worried about the housing market and about home prices increasing as well as mortgage rates increasing.

Currently, I live in a condo and I am almost getting tired of paying the maintenance costs.

Any advice?

Also, would you recommend a new home or a re-sale home (area is Brampton)? I don't like the unknowns of a new home. I like that fact that I can walk in a re-sale home and see exactly what I am getting. Please do provide some feedback.
did you not see all those "50% plus RE market crash" floating around ?? did you not read all the charts... quotes... and statistical analysis??? do you not believe them?? why are you still buying??

someone is gonna comment on the "take the CMHC one time hit" very soon....
Jr. Member
Sep 19, 2010
113 posts
4 upvotes
@dougboswell I totally agree with what you say. When I said with a resale house, I can see what I get. I meant the physical layout, rooms, neighbourhood, etc. I agree there are plenty of unknowns in a re-sale house that could be hidden from an inspector too. So far my realtor has been honest with me pointing out issues with a home. He advised me against one house because of the numerous cracks in the basement which was filled up the owner and explained to me what it meant.

Yes, I have heard that home ownership costs creep up as time passes and one need to stash away from funds each year for it too. I also realize that water consumption, dryer, air conditioning etc will need to be used miserly in order to avoid high bills.

I understand the benefits of living in a condo but my concerns is the investment aspect. It's always mentioned that homes are a better investment than condos and paying condo fees is like flush money down the drain.

I understand that the maintenance costs in new home will be low over the first 10 years.

Is it ok to wait for another to purchase a new home? will prices for houses remain stable and rates remain low?

@sherman51 Yes, exactly my points. I agree with you and that's why dilemma. None of the builders have a model homes so all you see is drawings and layout. It's so scary. I have seen some of the homes built by the builder in the same area and I am not happy with it while some are good. I really don't know what I would get.
The re-sale homes I am looking at are in the 4-7 years range so I am assuming they won't be too bad.
Jr. Member
Sep 19, 2010
113 posts
4 upvotes
@iownyou Yes, I have read some of them. I need a place to stay condo, detach home, town home, etc. It will be long term investment and if the market crashes in the near future hopefully in the next 20 years it comes back up. I am not buying with the intention of making money from it now rather I would live in it for a long time and hopefully sell it when I much older. All I have been reading is that paying condo fees for a long time is waste of money and a bad investment in the long run. The same money could be used to own a larger home which holds a larger value too. This making me think that it's time to move on. I don't know if this is right or wrong. just what i feel.
Deal Fanatic
User avatar
Feb 7, 2008
5861 posts
777 upvotes
Ottawa
lessca wrote: @iownyou Yes, I have read some of them. I need a place to stay condo, detach home, town home, etc. It will be long term investment and if the market crashes in the near future hopefully in the next 20 years it comes back up. I am not buying with the intention of making money from it now rather I would live in it for a long time and hopefully sell it when I much older. All I have been reading is that paying condo fees for a long time is waste of money and a bad investment in the long run. The same money could be used to own a larger home which holds a larger value too. This making me think that it's time to move on. I don't know if this is right or wrong. just what i feel.
The crashers will disagree but I think you are using a sensible approach. They love to assume everything is an investment and if it drops next year by 10% it's the end of the world. For someone wanting to own the home for 10-20 years, all this crash talk is a minor hiccup in the big scheme of things.

What I would do is ignore all the crash talk and concentrate on the people wanting to answer your initial question.

As for new build or resale, it depends on how you feel about things. I've heard arguments for both sides from friends and it all comes down to personal preference.

If you think you are very picky and finding exactly what you want may be difficult in a resale, then perhaps you should go new build. But this brings with it uncertainty and depending on the builder some hassle in getting everything done right.

With a resale, you know what you are getting into. If you can find what you want in a resale then in my mind there is much less uncertainty but you lose the Tarion warranty that you would get with the new build (depending on the age of the home).

I bought resale because I heard horror stories from a few of the builders in Ottawa from friends who bought new and that kind of turned me off new builds.
Deal Expert
User avatar
Oct 19, 2003
20241 posts
8367 upvotes
Toronto (Bloor West …
I live in an ~80 year old house and love it. I do not know anybody who lives in really high end million+ dollar construction but the new houses I have been in really don't seem to be built very well right down to obvious to a laypersons eyes details. I just wouldn't trust the long term prospects of homes built to average budgets today. That's just me, though.

Old houses have their limitations for what people expect these days in terms of layouts, relative room sizes such as small kitchens and relatively low ceiling height in basements, lack of "ensuite" bathrooms etc. which you may or may not be under the impression are essential things. Of course all can be changed by major renovation or building additions etc. and I think you would be left with something of far better quality than what you get from a "builder" churning out the cookie cutter new developments.

Old houses also have upsides that you just can't get any more such as, depending of course on location and luck of the draw - generous lot sizes with ample back yards and frontage, greater privacy in the form of lot design that isn't always centered around getting the most square footage onto the smallest amount of space, better locations that are closer to diversified and unique retail strips and easy access to proper public transportation.

The decision is more than get something new or get something old, it is a lifestyle choice.
Sr. Member
Nov 3, 2009
599 posts
273 upvotes
One thing to keep in mind with a new home sale is that new homes don't (generally) come appointed with everything you need, whereas the used home may. For example, a used home may have air conditioning, a pool, a shed or a deck, most new homes don't. Your used home will come with a fully sodded lawn, paved driveway, towel racks and bookshelf placed in the corner where it just makes sense.

All of these things, if not included, cost money, take time and hassle. So buying a used home takes care of that.

Then again, with a new home you can take the time to make things just as you might like them. And, perhaps you'd prefer the lesser maintenance that comes with a smaller lot.

Then again, new homes often close later than expected, whereas a used house is more likely to close on the originally agreed upon date.

Then again...

Ultimately, it comes up to you. My preference: Used, for reasons stated in the first paragraph.
Jr. Member
Sep 19, 2010
113 posts
4 upvotes
@scott your reasons are exactly why I almost inclined to go with a re-sale home. All the re-sale homes that I have seen so far have everything I would typically need. The new homes especially mattamy are basic and everything you add to it costs money.

my dilemma is whether to wait for another year to save up for the 20% to avoid the CMHC or just go ahead bite the bullet now.

I was in the market last year around November and similar homes are listed now for atleast $15-20K lower. Will the market go down further within a year?

I have seen something really nice for $385K. It fits all our requirements. I just don't want to rush into it and feel stupid later.

We also consider new townhomes for a bit. But I wasn't sure paying $360-370 for a townhome.
Deal Addict
Aug 14, 2007
2434 posts
328 upvotes
Waterloo
lessca wrote: my dilemma is whether to wait for another year to save up for the 20% to avoid the CMHC or just go ahead bite the bullet now.

I was in the market last year around November and similar homes are listed now for atleast $15-20K lower. Will the market go down further within a year?

I have seen something really nice for $385K. It fits all our requirements. I just don't want to rush into it and feel stupid later.
Yes, but if it goes up 15-20k in the next year you will feel stupid too right? No one has a crystal ball, and like you said you are in it for the long haul.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
lessca wrote: ...
my dilemma is whether to wait for another year to save up for the 20% to avoid the CMHC or just go ahead bite the bullet now.

I was in the market last year around November and similar homes are listed now for atleast $15-20K lower. ...
Regardless of what some people are suggesting on the forum, all evidence is pointing to a RE slowdown i.e lower prices. You mention that you are already seeing prices that are down 15-20k from last year and if you can save additonal money so you save a few percent on CMHC, what's wrong with that?

I say you should wait another year and save more money to use as a down payment.
Banned
User avatar
Mar 31, 2010
1948 posts
441 upvotes
I sense a lot of frustration coming from many if the users who posted above
You made it clear that YOU HAVE TO BUY.
Your question refers to just what type of property
Why would one bring the crashers in the equation it is hard to explain other than by out of frustration
The reality is that the RE market is not looking good and you as buyer are one of the very few means to prove that the things are still normal
They also know better that anybody else that the things are not normal for two reasons:
-they can see the effects on their own pockets
-many of them have access to MLS

Do not be surprised if you receive messages from users (other than the posters in this thread) to offer you their services
They might use their alter ego (aka business account, the cleaner profile) for this so don't buy that
RE Market melting down: YtoD GTA $volumes -4%, YtoD Toronto $volumes -7%. Read more here. Admins please read this before you consider further requests to ban me. If you are on this list do not expect replies.
Deal Fanatic
User avatar
Dec 10, 2008
5211 posts
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The thing with new homes is that they're filled with contractor grade materials. They're no built for the long term. Paint, windows, flooring materials, pipes, siding, etc.
Let's hug it out
Deal Fanatic
User avatar
Feb 7, 2008
5861 posts
777 upvotes
Ottawa
PF4RedFlag wrote: I sense a lot of frustration coming from many if the users who posted above
You made it clear that YOU HAVE TO BUY.
Your question refers to just what type of property
Why would one bring the crashers in the equation it is hard to explain other than by out of frustration
The reality is that the RE market is not looking good and you as buyer are one of the very few means to prove that the things are still normal
They also know better that anybody else that the things are not normal for two reasons:
-they can see the effects on their own pockets
-many of them have access to MLS

Do not be surprised if you receive messages from users (other than the posters in this thread) to offer you their services
They might use their alter ego (aka business account, the cleaner profile) for this so don't buy that
And thanks for adding absolutely nothing of value to this thread.

You even mentioned that the OP's question refers only to what type of property and you didn't answer it yourself. Isn't that the pot calling the kettle black?
Sr. Member
User avatar
Oct 8, 2005
811 posts
38 upvotes
lessca wrote: Hi,

I am in a dilemma about my home purchase.

I am in a position to purchase a new detached home or a re-sale detached home. Both are in the price range of 385 - 410K.
The mortgage for both the properties fall within my budget.

The issue I have is that the new home needs a $40K deposit within 3 months which I don't have. I would need to pull out a loan of 20K to cover it which I don't think is a good idea.

The re-sale I can buy today because I will go with 10% downpayment and take the CMHC one time hit.

If I wait for another year (summer 2014), I will have the necessary 40K for a new home deposit and I will also possibly have the 20% required for the re-sale home.


I am a little worried about the housing market and about home prices increasing as well as mortgage rates increasing.

Currently, I live in a condo and I am almost getting tired of paying the maintenance costs.

Any advice?

Also, would you recommend a new home or a re-sale home (area is Brampton)? I don't like the unknowns of a new home. I like that fact that I can walk in a re-sale home and see exactly what I am getting. Please do provide some feedback.
so looking at the low end of 385k that's 77k for 20% down.....if you can save that in one year then not sure what your worrying about
Deal Expert
User avatar
Jul 30, 2007
33237 posts
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Toronto
If you really like the newly construction home, then talk to the builder to have smaller installment and longer time to pay the required deposit. Normally, builder will and can work with your situation.
Banned
User avatar
Mar 31, 2010
1948 posts
441 upvotes
TripleHelix wrote: And thanks for adding absolutely nothing of value to this thread.

You even mentioned that the OP's question refers only to what type of property and you didn't answer it yourself. Isn't that the pot calling the kettle black?
I wonder why you did not say the same when you saw this
iownyou wrote: did you not see all those "50% plus RE market crash" floating around ?? did you not read all the charts... quotes... and statistical analysis??? do you not believe them?? why are you still buying??

someone is gonna comment on the "take the CMHC one time hit" very soon....

Kid, leave me alone, trying to bite me every time you see my messages is not going to work
I already explained you that I am not going to fight with you any more.

To translate you what happened above I will just say this: if iownothing did not post his frustration I wouldn't have to be drawing you a picture now to explain you what happened. You also made some comments there out of frustration. However the market is not going to turn around because of your comments.
You have had hard numbers, sales down like never before and prices still holding because of low inventory. As we speak the inventory is going up like crazy so expect the average price skewing that we have seen so far to disappear

To get back on topic, the decision regarding the type of house he wants depends on so many factors that trying to give him advice without knowing anything about his situation would be useless.
RE Market melting down: YtoD GTA $volumes -4%, YtoD Toronto $volumes -7%. Read more here. Admins please read this before you consider further requests to ban me. If you are on this list do not expect replies.
Deal Expert
User avatar
Oct 19, 2003
20241 posts
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Toronto (Bloor West …
Vladimir wrote: Yes, but if it goes up 15-20k in the next year you will feel stupid too right? No one has a crystal ball, and like you said you are in it for the long haul.
When I bought my house a couple of years ago, I paid pretty dearly for it being where it is... at the time people kept telling me "don't do it, it's gonna crash!", in the years following prices have gone where in my neighborhood? ... yeah up, every year since, I would have been living with my inlaws forever as we had already sold our condo at King and Spadina. At least where I am, if prices go down by any significant amount people are just not going to sell... unless it is estate sales. If you live somewhere with a high turnover, it's probably different but this street is nuts.. the houses are all around 80 years old and almost everybody on the street is only the 2nd or 3rd owner.

It almost seems like all of the people on this forum that go around flapping doomsday opinions nonstop are just trying to create a self fulfilling prophecy for themselves.
Deal Expert
User avatar
Jul 5, 2004
27438 posts
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I wouldn't worry about a real estate slow down. You say you live in a condo, so you're going to have to sell your condo before you buy. Sure, if prices drop 10% next year, then you'll save 10% on a house, but you'll lose 10% on your condo. It balances out in the end. If you want a house right now and no longer want to live in a condo, then buy a house. CMHC fees really aren't that expensive and it's a small price to pay to have your own house.

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