Advice to my Daughter
September 24, 2012
Recently I had the pleasure of walking my daughter down the aisle at her wedding. This short journey together certainly will be one of my cherished memories and life experiences. Upon reflection this simple physical act represented in summation the level of support that, as a parent and father, you give to your child. Within the first week of her being married I received the first question about mortgages and buying a home from my newly married daughter.
Based on my now over 30 years of mortgage lending experience this `FOB*` has decided to offer the following advice:
It is only natural to want to consider home ownership as being desirable. As a society it is stressed that home ownership is the fulfillment of one of our pre established lifetime goals. That said, the first step should be to truly have a close look at your own real shelter needs.
This look should include your current shelter situation, short term needs and future potential requirements. During this analysis process you should also take a close look at your potential career paths. This should also consider not only what part of town you may choose to live in but also any potential geographic location changes to your residence. During my own early career as a banker we as a family moved to assume new opportunities no less than six times back and forth over the three Western Provinces. Looking back on that time period your Mother and I have more than once said how fortunate we have been not to have purchased a home in some of the towns and cities we lived in. We have also lamented the sale of one home we sold in Victoria as a result of a job offer and move that I, at the time, felt that I could not say no to. Wanting to purchase a home rather than renting is only natural but unless you own your home free and clear of any debt you are simply renting the money (mortgage) rather the renting the realty. The only real difference is that with home ownership you assume all the financial maintenance costs and responsibilities in exchange for being able to participate in any growth in value. Historically this has proven to be a good trade off as we have in the past seen market values increase at rates that have far outpaced any financial cost of home ownership.
As for the current anticipated growth in the residential housing market most economists are predicting and in agreement that we will see slower growth in values than in past years. You will have many opportunities to enter the housing market over the coming years but your first questions must be:
1. Where do you choose and agree to live?
2. What truly is important to you both in a future home? This should look at both needs and wants.
3. The next part of the process is to closely look at the financial realities of home ownership.
What, Where and How…….
Paul E. Croy
*Father of the Bride