Not so fab freebie

See my full review of the Ikea Strandmon.

 

People, I am uncomfortable.

It’s affecting me physically, financially and emotionally.

It all began at the start of the summer.

A colleague at work was downsizing. She had furniture–extremely well-made furniture–and she wanted it gone.

I said, “What I’m really looking for is a wing chair.”

She said, “I have a wing chair.”

I said, “I’ll pick it up on Thursday.”

Of course what I really meant was I’d convince Matt to go with me to pick it up on Thursday, as there was no way a wing chair would fit in my car. If you’ve read any of Victoria’s hilarious blog, Matt’s reaction is a lot like Paul’s (although the wing chair is not in any way the same as the kingdom mirror).

So with only slight jeopardy to my marriage, Matt was on board. After he carried the chair out of the house, loaded it, drove it home, carried it into our house and down the stairs to the basement, he stood there, looked at it, and said, “Do you like that fabric?”

I said, “Of course not. I’m going to recover it!” And then I sat down.

And he said, “What’s wrong?”

And very quietly I said, “It’s not the most comfortable.”

Matt was silent.

Since then, the chair has sat in the reading nook in the basement. Occasionally, I sit in it, hoping it’s gotten more comfortable. It hasn’t. I had a friend come over and test it for me. She agreed. It’s just not a comfortable chair.

Flowered wing chair

The seat is too shallow. The back is too straight and too short. The wings are too narrow. This is a sit up straight and balance your teacup on your knee type of chair (which I should have guessed from the fabric). This is not a slouch down, lay back, snuggle in and relax type of chair.

However, I found a chair that is exactly what I’m looking for.

Ikea Strandmon wing chair

Most of you are probably familiar with Strandmon from Ikea. This chair is extremely comfortable. The first time we met (before the uptight flowered one came into our lives), both Matt and I agreed that it is a great chair. You can sit sideways with your legs thrown over the arm and your head is still wonderfully supported by the wings–yes, I absolutely sat like this in the store. The back is the perfect angle to slouch a little bit but still be supported.

I want this chair.

But it’s Ikea. The chair that I have is probably full of hand-tied springs, high density foam and solid wood. There’s no way that Strandmon can match that. Plus, the chair that I have was just $25. Strandmon is $300. Twelve times more expensive!

Sure I’ve spent money on furniture before (hello most comfortable couch ever), but it’s always been a carefully researched decision into an “investment” or “adult” piece of furniture that will last us for years. You may say that $300 isn’t a lot to spend, but the rest of my furniture either came from garage sales or was made by me, so my threshold for sticker shock is pretty low.

The only way I can think of to make this work is to put Strandmon on my birthday list. September happens to be my birthday month. My family doesn’t typically do big extravagant expensive gifts for each other (and yes, in my world $300 is a lot to spend), but I think if all of my family members and Matt went in together, I would feel okay with them buying me Strandmon.

What do you think, family? Happy birthday to me?

Update: Check out if my birthday wish came true… and some more thoughts on the Standmon… in this post.

Update #2: See the finished reading nook here.

My pot problem

Hello. My name is Julia. And I have a pot problem.

It’s not what you think. In fact, it’s more like a problem with a pot.

You see, there’s this great window in the basement. It’s large, lets in lots of sunlight and has a great wide windowsill. I wanted to do a little display there. A vignette if you will. One of the features I wanted to include was a potted plant.

All of this was a rather vague idea until at a meeting at work everyone was given a plant. I selected a bright green ivy thinking to myself, “This would be perfect in a bright yellow pot on the windowsill in the basement.”

Never mind that I’m not good with plants, particularly houseplants, and my ability to keep this ivy alive was very much in doubt. I had a vision in my mind. I had to see it come to reality.

Unfortunately, my perfect pot was hard to find. Well, not really. I found it last fall. It was in the garden clearance section at Rona. And it was $12.99. Now I don’t know about you, but that seemed like a high price to pay for a ceramic pot, especially in the clearance section at the end of the season.

I walked away.

I came back every so often to check on it and see if the price had been reduced. I looked at other stores. I examined numerous yellow pots. I considered spray paint. Nothing matched up to the picture in my head.

Finally, this spring, I snapped. I pulled into Rona on my way home from work one evening, strode into the store, picked up my pot and bought it. With tax, it was close to $15. For a ceramic pot. Granted, it was a ceramic pot in the perfect style, of the perfect size, of the perfect shade of yellow.

I stuck my ivy in it and plopped the whole thing onto the windowsill. And it’s perfect. It matches my mental image.

Yellow pot with ivy in it on a windowsill

I still begrudge paying $15 for a pot, but I do admit that seeing the ivy–which somehow is still surviving–makes me happy.

I’ve never consciously “decorated” a house before, so I’m finding it tough to spend money on decorative elements, which seem somewhat frivolous to me. I have no hesitation about pulling out my wallet when it comes to big ticket items like construction supplies or, ahem, pets.

Is it weird that I spent nearly 6 months thinking about a ceramic pot? Do I have a problem? What’s your usual spending threshold for decorative items? How do you justify buying pretty things for your house?

All about farm property taxes

The first installment for our 2013 property taxes are due this week. I realize this topic will not apply to some readers, but I decided to write this post anyways, as our experience may be helpful to some of you.

Property taxes on a rural property can be a bit complicated. However, it’s worth it to seek out rebate programs, as the savings can be significant.

For us, the farm is divided into three parcels: residential, agricultural and conservation.

Large hayfields

The residential section is exactly the same as most people’s property taxes. It includes the house and one acre of land immediately around it. These are taxed at the regular residential rate.

The agricultural section of the property is the fields. These are classified under the farm property class and are taxed at 25% of the residential rate.

The conservation section of the property is the woods and marshland. For us, this adds up to 42 acres that is classified as “provincially significant wetland.” Under the Conservation Land Tax Incentive Program, these acres are tax exempt as incentive to maintain them as natural areas.

None of these tax rebate programs are automatic, as we discovered last year. Previous owners had let the rebates lapse, and between 2010 and 2011, the property taxes nearly doubled. The whole 129 acres was being taxed at the residential rate–ouch.

The residential classification was still in place when we took possession of the farm last March. We went to work right away to apply for the rebates that were available to us. What we learned is there is no single point of contact for farm property taxes.

Farm property tax paperwork

The Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) handles applications for the Farm Property Class Tax Rate. Operations such as tree farms, animal farms, greenhouse operations or crop farms like ours count under this class of property. The farm must simply generate at least $7,000 of income a year. The most important part of the application is the Farm Business Registration Number. Since we do not farm the property ourselves, the farmer who rents our fields has to complete this portion of our application and supply his registration number.

The Ministry of Natural Resources (MNR) manages the Conservation Land Tax Incentive Program. Most of our property is restricted under the local conservation authority. However, this does not automatically qualify us for the CLTIP. The Ministry has to deem a property—or a section of it—as provincially significant. Fortunately, our property was already in the MNR’s system, so we just had to apply for the rebate.

Marsh in the winter

We also went through our local municipality for a few other adjustments specific to the house itself: their records showed a mobile home on the property and a working indoor pool, both of which did not exist and which impacted the value of our house. After the “demolition” of the mobile home and the pool, our taxes decreased by a whopping $257.56–hey, I’ll take whatever I can get.

The Municipal Property Assessment Corporation (MPAC) is the overarching organization in Ontario that manages everyone’s property taxes. Approvals from the city, OMAFRA and MNR flowed through to MPAC, which pulled all of the information together, determined our tax rate and notified the city of what we should be billed.

The flow of applications, approvals and adjustments is very, very slow. Our applications went to the various organizations last spring. I followed up monthly by phone to make sure all of our applications were wending their way through the system and no information was missing.

Some of the approvals came through in the summer. However, none of the adjustments were applied at the city level until the fall. We paid three installments at the full residential rate—ouch again. However, by the end of the year when the reclassifications finally came through, we had a huge surplus on our account—so much so that we didn’t have to pay our last installment and the city still sent us a cheque at the end of the year.

Now heading into the 2013 tax year, all of the rebates are in place, and the quarterly tax bills are very manageable. In fact, the amount of property tax that we’re going to pay this year is equivalent to what we paid when we were living in our little house in the city.

Our $9 TV

It sounds like an episode of extreme couponing. Customer goes into a store. Cash register rings up a charge of $819.24. Customer opens wallet and pays $9.24.

Well, we’re not extreme couponers, but this is exactly what happened when Matt went to buy the new TV for our basement.

50 inch LG LED TV with DIY network on the screen

You know I had to put DIY Network on the screen for this photo

So how did he do it? It’s all about the points.

For years, Matt has had a Sears Mastercard. He liked it because he could redeem his points for gas or restaurant gift cards. But then everything changed. A couple of years ago, Sears decided that points could only be spent at Sears. We don’t shop at Sears a lot (at all), so Matt’s been building up his point balance for a long time.

Knowing that we wanted a second TV for the basement, Matt decided that this purchase was the chance to finally use his points. He did his research to figure out what TV he wanted. He cashed in his points for a couple of gift cards. He watched for sales. And then it happened.

A 50-inch LED LG TV came on sale. The total price after tax (including Ontario’s special e-tax) came to $819.24. He plunked down $810 in gift cards and charged the rest to his Sears Mastercard.

Bill for a new TV

Depending on how you look at it, the TV cost either $9 or $81,000–the amount of money Matt had to spend to earn all of his points. Buying on points is definitely not a quick process.

I should also say that while Matt and I use our credit cards often, we pay off the balance in full every month, so there are no interest charges and we didn’t go into debt to buy our $9 TV.

Have you ever bought anything on points? Are there any extreme couponers out there? What’s your favourite rewards program for collecting points? What’s the best deal you’ve ever found?

Financing the farm

It’s been a year since we bought the farm, and this month I’m revisiting some of our experiences from the purchase.

When we last left our heroes, they were standing in the snow next to a sold sign smiling giddily because they had just bought a farm.

In reality, they had a conditional sales agreement on a farm. In order to actually close the deal, they had to pay for the farm, which meant a mortgage.

Consumer mortgage application

Finding a lender for the farm was a bit like finding the perfect property–frustrating, trying, drawn out, complicated… although [spoiler alert] ultimately successful.

Matt and I had gone to our bank and been pre-approved before we ever started looking at farms. However, now that we had found our farm, we had to convert our pre-approval into an actual approval. And according to our conditional offer, we had eight days to firm up financing.

What we discovered was that in the case of a rural property a pre-approval is mostly hypothetical. Turning it into reality is another matter entirely.

Banks, and really most lenders, like cookie cutter. They have forms and check boxes and mathematical formulas. A 129-acre farm with a modest house, a massive barn, a semi-rickety driveshed, a bunch of hay fields and a few acres of forest doesn’t fit their molds.

Posted interest rates don’t apply. Nor do minimum down payments. Hoops and hurdles are placed in your path. Acrobatics–and lots and lots of paperwork–are required.

Signed offer in hand, we headed to our bank. To cover all of our bases, we also visited a credit union where Matt’s Dad is a member and connected with a mortgage broker recommended by our real estate agent.

Here’s what our options were:

  • The bank: Throughout our dealings with our bank, we felt like they were trying to make things as difficult as possible so that Matt and I would just go away. Even though we weren’t planning on working the farm, they wouldn’t give us a residential mortgage. Everything had to go through their small business line of products. And the interest rate was a full percent higher than what other residential customers were getting.
  • The credit union: Service was great, and we really felt like our staff person was working with us to make the mortgage happen. They would do a residential mortgage, but the interest rate wasn’t any better than at the bank.
  • The mortgage broker: For the most part the broker struck out. Even though Matt and I were a good credit risk and the farm had no big issues, lenders didn’t want to step outside of their little boxes. He did manage to find one major bank willing to give us a residential mortgage. The snag was that the bank saw the “needs TLC” description in the real estate listing and wanted to hold back a portion of our loan conditional on us installing a new heating system and new roof within 120 days of taking possession.

So there was no clear front runner among our three options.

The biggest hurdle in securing financing was that every single lender wanted an appraisal. A real live person had to visit the farm, walk around and say how much it was worth. Except he’d only look at the house plus 5 acres. Maybe 10 if we were lucky.

A big part of the appraisal was looking online for comparable properties, which meant that since the appraiser was only evaluating 5-10 acres, he was looking for anything in the 1 and 15 acre range. Now maybe I place more value on land than other people do, but somehow in my mind 5 acres doesn’t compare to 129 acres.

It was important to us that the whole property be valued properly. All of the lenders would only give us a mortgage for up to 80% of the appraised amount, so if the appraisal came back too low, we could be in the situation where we might not be able to afford the farm.

Aside: The 80% loan speaks to my earlier comment about minimum down payments not applying to farm purchases. While in Canada people are able to purchase houses with as little as 5% down, if you buy a farm, your lender is going to want 20% minimum.

Anyways, the other huge frustration with the whole appraisal process is that the lender ordered it, required us to do it, kept the report and wouldn’t show us a copy, but required us to pay for it. I managed to speak with the appraiser our bank wanted to send out to the property and when I asked him how much the appraisal was going to cost he refused to tell me!

The appraisal ended up being the tipping point for us.

I managed to get the credit union to agree to appraise the full 129 acres–at a cost to us of $762.75. Given the urgent deadline of firming up our financing within a week, we gave their appraiser the green light to head out to the property.

The day our conditions expired, the appraiser’s report showed up at the credit union. Even though we hadn’t signed the final paperwork, we went ahead and waived the conditions on our offer. And by the way, the appraisal came out more than $60,000 higher than we had paid for the farm. Phew!

The day after we waived the conditions, a bank contacted by our mortgage broker came forward with a firm commitment for a residential mortgage at a half percent less than the credit union was offering.
Mortgage Loan Offer paperwork

Though he had no obligation to do so, our broker gave us the paperwork from the bank, so that we were able to take it to the credit union and use it to negotiate a better interest rate. The great service from our broker and our mortgage specialist at the credit union made what was an extremely frustrating process slightly less painful.

Some lessons learned for securing a mortgage for a rural property:

  1. Give yourself as much time as you can to finalize your financing. We had had lots of conversations with the bank throughout our property search, well before we ever placed our offer on the farm. We had some idea of what would be required to secure the mortgage. However, the financing was much more complicated than we could have ever dreamed. We squeaked in just under the deadline to waive our conditions.
  2. Have all of your financial information documented in detail and carry it with you at all times–extra hard copies as well as electronic files you can email. All of the lenders required three years of tax statements for both of us. In addition, we each supplied pay stubs and personal statements detailing our assets and income. Having all of our numbers on hand ensured we didn’t add any extra delays to the process.
  3. Consider working with a mortgage broker. Our broker’s contacts and experience were invaluable. He was a fabulous advocate for us and it was very helpful to have someone who was willing to explain the intricacies of mortgage conditions and vet any documents we received.
  4. Shop around. Don’t settle for the first offer you receive and consider alternatives to traditional banks. Even when you receive an offer, go back to the lender and ask for exactly what you want. You might not get everything, but you may be able to do a little better. Ask lots of questions and make sure you understand exactly what you’re getting.
  5. Be prepared for some extra expenses just because you want a rural property: you’ll likely face a bigger down payment, higher interest rate and appraisal fees.

For Matt and me, the extra expenses were worth it because we got the farm of our dreams. I can’t say the frustration was necessary, but we made it through.

Climbing the property ladder

Everybody knows about the property ladder. Scrape your pennies together to buy a house and get on the bottom rung of the ladder. Eventually use the equity from your first house to move up the ladder until you’re able to (hopefully) afford to buy the house of your dreams.

The other week, I had the opportunity to talk to the Toronto Star about Matt’s and my experience with the mortgage on our first house. As I was preparing for the interview, it occurred to me that the lessons we learned might be interesting to some of you too.

Our first house got us onto the property ladder. It set us up to buy the farm and begin building our forever house. However, in order to go from our starter house to the farm, we had to skip a few rungs along the climb.

We were able to move up the property ladder quickly because when Matt and I sold our first house, we owned it free and clear. We had no mortgage.

For two 30-year-olds to pay off their first house in four and a half years is a bit unusual.

We didn’t win the lottery, no relative left us a big inheritance, we work regular jobs and earn average salaries, and our parents didn’t give us money to purchase either our first house or the farm.

So how did we pay off our mortgage early?

First, we bought a house we could afford. When we went to the bank to be pre-approved for our mortgage, we were astounded by how much we qualified to borrow. It was close to twice the amount we were expecting to spend. It’s easy to be sucked into spending more than you planned, especially if the bank says that you can. Be disciplined and stick to your budget.

The other thing that we did at the very start was to put down the biggest down payment we could. For Matt and me that was 25%. The hardest part of buying a house for many young first time buyers is building up their savings to make the down payment.

Fortunately, Matt and I were able to live with our parents and pay little or no rent. We saved and economized, and when we were ready to buy the house, we had enough (in my case just enough) to put 25% down. Making the largest down payment you can at the beginning puts you much further ahead in paying off your mortgage over the long term.

The biggest thing that helped us to pay off our mortgage in four and a half years was taking advantage of the accelerated payment plans our bank allowed. To start, we chose a “weekly rapid” plan where we made a payment every single Friday for a total of 52 payments a year. The amount of the payment was determined by taking what we would have paid monthly, dividing it by four and then paying that amount each week. This works out to basically making 13 months of payments rather than 12.

I remember sitting in the bank going over the payment options with the mortgage advisor and her showing us that by making just one extra month of payments a year, we would pay off our 25 year mortgage in 21 years. That was an easy choice for us.

However, 21 years wasn’t fast enough.

The other option we took advantage of was to make lump sum payments directly against the principal of our mortgage. For our bank, the maximum they allowed was 15% per year. Every single year, Matt and I took full advantage of this, and every single year we knocked roughly another 5 years off our mortgage.

I’m not saying it was easy to see that much money going out of my bank account each year, but getting a printout showing our mortgage would be done in 15, 8, and then 3 years did soften the sting.

Mortgage statement

The Amortization Period line at the bottom is the one to keep your eye on.

Most banks will also allow you to increase the the amount of your weekly (or biweekly or monthly) payments. We did eventually bump up our weekly installments, but for the most part we focused on saving for the annual lump sum payments.

With any financial situation, I think it’s really important to watch your numbers and understand exactly where your money is going. We requested extra statements from the bank that showed the breakdown of exactly how much of our weekly payments went towards principal and how much was interest. When the ratio finally crossed 50-50 with even just a few more dollars going towards principal than interest, that was cause for celebration. We also kept an eye on the amortization period that changed every time we made a lump sum payment and carefully read our annual statements.

Interest and principal mortgage payments

It will likely take a few years, but eventually you will pay more principal than interest.

Because we know our numbers, we know that we paid just over $20,000 in interest on our mortgage. This is versus nearly $200,000 in interest we would have paid if we stuck with the bank’s schedule and taken the full 25 years to pay off our mortgage.

Despite Matt’s and my focus on our mortgage, we did try to keep a balance in our life. Prioritizing our mortgage was important to us, but having a life was too. In the time that we owned our first house, we got married (and paid for our wedding), traveled, furnished our house and renovated. If we had put all of our money towards only our mortgage, I don’t think we would have enjoyed our house in the same way we were able to.

So here are my five tips for how we paid off our mortgage in less than five years:

  1. Buy the house you can afford.
  2. Put as much down as you can.
  3. Take advantage of accelerated and lump sum payment plans.
  4. Watch your numbers.
  5. Prioritize what’s important to you.

Now at the farm, we have a mortgage again, and it’s much bigger than it was on our first house. However, it’s still affordable for us. We’ve again chosen an accelerated payment plan of 13 months of payments per year. And we’re already planning on making a lump sum payment before the end of the year. (Note, lump sum payments are usually calendar year, not mortgage year, so even though we’ve only owned the farm for 8 months, we can still make a payment against the principal).

Our first house put us on the property ladder, and the strong financial foundation we built by paying off our mortgage early allowed us to quickly move up the ladder.

We won’t pay the farm off in five years like we did at our first house, but we’re not satisfied to wait the full term of our mortgage either.

Now it’s your turn. Do you have a mortgage? What’s your approach to payments? Any tips to share?