People often ask me for my secret to financial success. Some ideas come to mind: A hot market tip, a lottery win or a massive inheritance.
Dream on! If there is a single secret it is this — buy a home and stay there.
But I am seeing a trend towards the short-term home purchase — the plan being to stay for a couple of years, turn a profit and move up. Wrongo!
Obviously, some are forced to relocate for employment or other reasons, but moving as a choice is a big impediment to the goal of a mortgage-free home, preferably within 25 years of purchase.
Let’s just talk about the cost of moving. It is incredibly expensive to bid your nest adieu and move to a new one.
From real estate and legal fees to decorating, repairing or updating both the sale home and the new one, the money mounts up. Then there are moving costs, GST on new homes, utility hookups and, increasingly, land transfer taxes.
Depending on the cost and the condition of both houses, moving within a city can total $15,000 to $35,000 and more.
Typically, purchase costs get added to the mortgage so it’s easy to minimize the sum in your mind.
Frequently lenders encourage buyers to apply for a home equity line of credit to pay for the “soft” costs of redecorating and purchasing new appliances. And often home buyers extend their amortization in order to keep monthly payments the same.
Such a strategy may make you feel more comfortable but the real result is reduced equity in the home, more interest paid over the amortization period and a longer road to reach the mortgage-free dream.
Try to think about a home as you would a lifetime mate.
Falling in love for life, whether with a house or a human, pays off financially and emotionally over time. Even if you must wait to buy that “for-life” home, staying put is the secret to financial success.
Alison’s Money Rule:
The real secret to financial success, a secure future and a debt-free retirement lies in the roof over your head.
– Alison Griffiths is a financial journalist, author and host of Maxed Out on the W Network. Write to her at alison@alisongriffiths.ca.
