How 2 Millennials Who Earn $50K/Year Built Their First Home (And Saved Money)
Why don’t we just build a house?
My fiancé said after viewing yet another house that we didn’t want to buy. I shot down the idea as I always did because “nobody builds the first house they own.” It was 2019 and my partner and I were searching for our first home together and it wasn’t as fun as I (foolishly) thought it was going to be. Fast-forward to 2021 and we are settled into our newly built home, comfortably making mortgage payments despite being partially laid off due to the pandemic.
Let’s Start From The Top
To start, I will acknowledge that both my fiancé and I had the privilege of having no student debt at the time we started saving for a house. I was able to come out of my degree with minimal debt as I had a small amount of financial support from an RESP my parents had funded, applied for many and received (a few) scholarships, and worked throughout my undergraduate degree program. When I completed my degree, my number one priority was paying off my student line of credit to avoid interest and, by setting aside the majority of each paycheck, I was able to erase that debt after about six months. On the other hand, my partner went through a college apprenticeship for a trade program as well as worked while he completed his education, therefore not acquiring any student debt, allowing him to start saving at a much younger age.
The second thing I would like to acknowledge is that my partner and I are not high-income earners; instead, we fall into the mid-income range. For a couple of years after my degree, I bounced around from various term and seasonal positions in my field as I gained experience. Eventually, a term position turned into a permanent position and I started earning a steady income with a salary of just under $50,000 and some benefits to go along with it.
Meanwhile, my partner had bought into a business in his trade and was making slightly more than I was. A 50k salary was a lot of money to me since I was accustomed to living strictly on a student budget. Instead of changing my spending habits to match my new income, I started hoarding money in my checking account because I loved seeing my account balance grow. Although that was not the smartest financial strategy (and I know now that I should’ve taken advantage of (high-interest savings accounts) I started to feel like I was getting ahead financially.
That brings us to the start of 2019 and the start of a very long (COVID extended) engagement. My partner popped the question on New Year’s Eve and I happily said “Yes!” We were excited to get married, but first, we needed a place of our own — free of roommates. The time for house hunting was upon us! Luckily, my partner and I have pretty similar spending habits as we both come from mid-income families and were raised quite frugally. Therefore, we both already had some savings (yes, my “savings” was still sitting in my checking account making 0% interest) that could go towards the purchase of a home. After browsing through local real estate ads and getting a pre-approval from the bank we decided the maximum amount we could comfortably afford a mortgage on was around $250,000.
[Author’s Note: It is important to note that we do not live in a large urban center, so we are fortunate enough to not have to deal with the outrageous housing markets in places such as Toronto, Vancouver, or other large cities throughout Canada.]
In the spring of 2019 we went to our first home viewing and found ourselves a knowledgeable realtor. Over the next few months, we viewed a number of houses that were within our budget and it quickly became clear that unless we were willing to put a lot of work (and more money) into our first house, we weren’t going to find a home suited to our needs. To be clear, we aren’t afraid to put in the work – my partner’s first home was a fixer-upper owned with his brother and we had just finished renovating it – but we didn’t want to spend most of our budget on a home that would still require more money invested into it. My fiancé was also tired of living in an old house where every minor renovation turned into a large expense in order to get things up to code, and so he suggested building a new home.
So How Did We Get Here?
That brings us back to the “We can’t build our first home! We’re not rich!” response. During this entire “home buying/ home watching process,” we kept saving money and keeping an eye on the local market. By early 2020, after a few more months of searching and a declined offer on a house we both really liked, I finally started to seriously consider my fiancé’s idea of building a home. We weren’t having any luck finding a house and we both really wanted to have our own place by the time of our wedding (which was scheduled for July 2020). So we started looking for a lot (of land to build on) to purchase within our budget, instead of a house. One night, as we cooked supper together, we began looking at cabin floor plans (typically smaller than house plans but more unique) and somehow within an hour of casual online searching, we found a floor plan we both liked.
After searching for a home for almost a year we learned that it was realistic to build a brand new home for less than we were willing to spend on an older house that likely required renovations.
We took the cabin design to a reputable local contractor to get a quote and to our surprise the amount was under our original budget. Yes, you read that correctly — after searching for a home for almost a year we learned that it was realistic to build a brand new home for less than we were willing to spend on an older house that likely required renovations. Of course, there were compromises with this, for example, though we both want kids we decided to only build a two-bedroom as that would fit our current needs, we also were going to be living in town versus in the country where we both originally wanted to live. We’d also be doing all the landscaping and painting the house ourselves (luckily my mom is a painter and was happy to help.) Not only was the quote within our budget, the contractor also had a vacant lot for sale that was perfect for us.
The Process & Cost Breakdown
After meeting with the contractor everything happened quickly! At this point we knew our wedding wasn’t going to be happening in 2020 due to the pandemic and as upsetting as that was there was also an upside — the $10,000 we had set aside for the wedding was now available for the build!
We purchased the vacant lot for $35,500 using our wedding & home savings. By purchasing the lot outright and getting it transferred to our name prior to construction we saved over $2000 in land transfer tax. Also, since the lot was in our name and fully paid for, we could use the land equity towards our down payment on the construction.
Together with the land equity and the remainder of our home savings we were able to put 20% down on our mortgage for the build – this saved us over $7000 that would have gone to mortgage insurance on the loan.
[Author’s Note: Not so fun fact: In Canada if your down payment is less than 20% of the purchase price you are required to get mortgage insurance on your loan]. By doing the research to find out how we could avoid certain fees we were able to put more money towards the actual build and therefore lower our overall mortgage amount.
Although dealing with the bank and sorting out all the financial paperwork was hectic, the most stressful part was that the day we signed the mortgage papers I learned I would be temporarily laid off from my job due to budget cuts caused by the pandemic. However, with backup plans in mind we took a chance and continued on with building our home Fortunately, I was only laid off for 20 days and I’m now back to working full time. My fiancé’s business was also hurt by the pandemic, but since it is an essential service, he was able to continue to work. After all the financial paperwork was completed and the plans were finalized the actual construction of our home happened very fast. We bought the lot in March, in April the frame of our house was up, in August we were painting, and by September we had moved into our new home for two.
Home Builder’s Guilt (on top of the joy, of course)
Sometimes I have this guilty feeling that I have to justify having a new house since we are young and it’s my first home. However, it is important to realize that our home actually costs less than most of the homes we looked at on the market. At the end of the day we are happy with the compromises we made in order to get a house we are happy in and a mortgage that is realistic for our financial situation. I know that I am extremely fortunate and that my story to homeownership isn’t a realistic story for everyone, but maybe the takeaway is that the financial ideas or dreams you never considered as realistic may actually be more attainable than once thought.
Check out all of the fun pics (from the ground up) for our home building process:
Images via Author / Jessica Boss