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Buying a Second Home – Where Do I Start?

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You’ve already been through the process once and bought your first home. But now your mortgage is up for renewal or you’ve outgrown your house or for any other number of reasons, you’ve decided it’s time to move onto your next house. Because you’ve done it before, you know how the process works. But there are some things that you should consider with your second house that you didn’t need to with your first.

Budget vs Pre-Approval – yes there can be a difference

Buying your second house, generally means you will be spending more than you did on your first. So one of the first things you should do, like with any big purchase, is figure out your budget – what you can actually afford to spend. Yes, you will get pre-approved for a mortgage to find out how much money your lender is willing to give you, but there can be a HUGE difference between this amount and what you can afford to spend. Before you even think about contacting a realtor, you should sit down and look at your budget to see how much extra you can afford and what that extra amount going towards your mortgage could mean for the rest of your budget. It may mean that you will have less money to go on vacations or you need to reduce your discretionary spending. Talking to your financial advisor is another great way to figure out how much extra mortgage you can personally afford.

Stick to your budget – don’t even see the carrot

Once you figure out what you can afford, you need to make sure your realtor knows that amount and sticks to it. It’s so easy to fall in love with the 3,000 sq ft open concept house with the huge restaurant style kitchen with granite countertops, stainless steel appliances, dual temperature wine fridge, four bedrooms, finished basement, etc. You may even begin bargaining with yourself to justify the  price tag that is $50,000 above what you can afford. The easy solution? Make sure your realtor knows that you do not want to see anything above your budget. On a side note, if anyone is selling a house like I just described, please let me know…

Figure out what you need  – what does your dream home have?

You’ve learned a lot, and maybe sacrificed a few things, with your first house and those learnings will really help you figure out what you need for this new house. Maybe it’s more space, more bedrooms, a garage (attached or unattached), walk-in closets, a breakfast nook, office, multiple bathrooms, a bonus room, a finished basement, etc. The list of options is endless for things you could want in a new house, but you need to really decide what your non-negotiables are. Maybe you need a separate bedroom for each of your two kids and you also want to have a guest room for family that comes to visit and you need an office space because you work from home, plus your master bedroom. So you need a 5 bedroom house. You don’t want guests having to walk all the way upstairs to use the bathroom, so you need a main floor bathroom. If you live in Saskatchewan, you probably need a garage.

The clearer you can be on what you need in a house, the easier it will be for your realtor to find you the perfect one.

Settling vs Compromising – it’s all a matter of perspective

We all want that diamond in the rough – the perfect house with everything on our wish list that is below budget. But very few of us will actually get it right off the bat. The key is in shifting your perspective. Maybe that means getting an older house for a lower amount that with a bit of work can become your dream home? Perhaps it means getting a bit less square footage so that you can get the big backyard? Maybe it’s considering moving out of your desired neighbourhood? None of these things need to be considered as settling because it’s all about compromising and deciding what’s most important for you.

Ready to start looking?

  1. Make a list of things you find yourself saying “I wish I had…” in your current house.
  2. Check out current listings in your area to see what’s available and what you do and don’t like.
  3. Try out a mortgage calculator, like this one, to see what different mortgage amounts would mean for monthly payments.
  4. Talk to your financial advisor for help figuring out what you can afford

Good luck in your home search!

What I Learned From Buying a House During COVID-19

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Sorry, Dorothy – repeating “there’s no place like home” will not wake you up from the nightmare that 2020 has trapped us in BUT there may be no time like the present to look into buying a new home during a global pandemic. After years of saving (and with a lot of help from our 2020 trip budget), my husband and I were able to buy our first house together. If you are wondering what it is like to house hunt during a worldwide virus outbreak – it was a different experience but one that I am happy I did and learned a lot from. This is what I learned from buying a house during COVID-19.

The Search

When you start getting serious about looking for a house, you start thinking about your criteria. How many bedrooms do you want? What end of the city do you want to live? To reno or not to reno? For us, our dream home originally came complete with an open concept, finished basement and a garage, but quarantine caused us to move some other things up in priority. For example, a home office became suddenly mandatory after I spent months hunched over on a wooden seat at the island in my kitchen. My point is, a few things changed, but it is important to assess what are your must-haves and what has some wiggle room to change.

We had to be very selective when physically viewing houses for a couple reasons. For starters, open house viewings were now a thing of the past so we had to book an appointment to be able to visit. Second, there were procedures put in place to make the experience of buying a home during COVID-19 safe for both us house hunters and the home owners. For example:

  • Prior to entering, we had to participate in a questionnaire to consent that we did not have any symptoms and have not traveled within the past 14 days
  • Out of respect and safety for the home owners, we were told to touch minimal things and whatever we did touch was disinfected afterwards
  • We made sure to keep our 6 feet distance from our realtor, which is hard to do when viewing a house

If anything, these procedures made us feel that both sides were being respected, provided a safe environment and really didn’t add that much more time. It did however, encourage us to really make the most of our time at each location and be very intentional and thorough to decide if this home was an option for us. Overall, it was different – but we found our home!

The Payment

COVID-19 or no COVID-19, figuring out your financing is a big component when you’re making one of the most expensive purchases of your life. You need to know how much you can comfortably afford with your mortgage and bills all factored in, furnishing your new home, plus, you’ve got to eat! For us, as big travelers in a travel ban world, we were able to reallocate our savings for trips for this year into furnishing our home. My advice would be to review what has changed in your finances or savings during COVID-19 and how that will adjust going forward – there is no shame in changing up your plans!

One very important bonus right now for those looking to buy a new home is that the interest rates are low. That’s great news for buyers as the cost of borrowing is much lower so you’ll pay a lot less in the long run. Now more than ever, it is incredibly important to shop around before locking in your lender and the terms of your mortgage. This rate finder tool from Rate Hub gives you a one-stop shop to compare mortgage rates from the Big Banks. But don’t just choose one from there, make sure to shop around via other options like your local credit union or the financial institution you work with for your day-to-day banking. Your financial advisor will be able to work with you to find a mortgage that fits your overall financial well-being and some may even offer lower rates altogether.

Here’s a hot tip for buying a house during COVID-19 that I learned from my realtor: when chatting with your financial institution, be sure to ask what they offer for an interest rate guarantee. An interest rate guarantee or mortgage rate hold, is locking in a specific rate for a certain number of days, so you will be guaranteed that rate even if they go up during your house hunting journey. This is important right now because as the market recovers from COVID-19, the interest rate will continue to rise back up so placing a hold on these low rates will buy you some time to make sure you are being thorough in your house search.

Even if the mortgage rate goes down, some financial institutions will honor the decreased rate. I will admit, I had a mini celebration each time I saw the rate drop before we officially signed our documents. For more helpful tidbits on mortgages during COVID-19, visit this blog we published earlier this month on how COVID-19 affects the renewal of your mortgage.

The Closure

Closing costs and the process it takes can be the most frustrating part of purchasing a home. Although, I wish it was under different circumstances, some of these processes have become quite efficient during COVID-19. Typically, once you are ready to sign on the dotted line – you end up having to do that many times and over many appointments across the city. Because of COVID-19, we were able to sign almost everything digitally including realtor agreements, mortgage documents, insurance and even signing the offer. There were some signatures needed in person with our lawyer but with the new procedures in place – it was quick, easy and safe!

Buying a house during COVID-19 maybe wasn’t the norm, but I was happy with the process and found it much more streamlined. It has been super exciting and has been a source of light in an otherwise dark time. Now we can reminisce on the Facetime bloopers with our realtor and cheers to building back up that trip fund over a distanced drink on our patio!