Interest Rates on the Rise

[Duncan]

bump

only because i'm more interested in this thread than talking about sandwHiches (haha) and jogging 10km

[nature boy]

err... not sure if "being shrewd with what we've been given" is actually a biblical concept...

anyway, i still don't think rent is a bad thing. i think it's a chinese thing to say "because rent doesn't lead anywhere it's bad" as well. but consider how much less your rent is than a mortgage payment and how you could wisely invest those savings for bigger returns.

and don't forget with owning a house you're paying much more than just mortgage payments. you're paying maintenance, upkeep, and just owning a house when with rent you can just tell your landlord that such and such is broken.

[jeSteR]

True, but only if you were indeed making a 19% return on the money that you're saving on a mortgage and maintenance. Otherwise, if you extrapolate over the course of your lifetime, there is never a benefit to renting. Especially come retirement.

[[JT]]

out of curiosity where does this 19% come from?

[Keiho]

Another thing to throw in the mix...assuming you do decide to purchase a place, why would you not look into a variable rate mortgage? Pretty much all of the variable rates one I've seen are convertible to a fixed mortgage should you feel the need to. Variable rates are always lower than fixed, and could save you a bit of money on the interest on the get go.

As Fynn said, rates will not go up DRASTICALLY so ultimately, there's no real point in locking yourself into a fixed rate mortgage even in the next 2 to 5 years. It will rise that's a given, but it's not going to jump up from say 3 to 7% overnight. It's going to be by five basis points bit by bit...so if the rise in rate from say a 3 to a 3.5% worries you that much or will cause stress on your finances maybe you should reconsider purchasing?

[nature boy]

whoa kent's still on the forums?

[Duncan]

lol.. kent appears from thin air! awesome...

Anyways, yea, i'm curious as to where the 19% comes from. I have an idea, but basically, say i pay $500/mo for rent, and mortgage/utils/etc costs $1500/mo... i know it doesn't really work this way, but that means that i potentially have $1000 to invest while renting to make the most of what i have... i have to invest quite a bit to make that $500/mo rent worthwhile instead of using it towards purchasing a place where that $500/mo could bring me a return in my house...

I'm not that worried about rates rising... once again, i'm just weighing the options of buying now or later... it's just a question of when, and not if...

Chances are, yea, i might go variable, but the fixed rates were used as an example... maybe in an attempt to highlight worse case scenarios... Regardless of whether or not you think rates are going to rise that much, even rising 1% could be a huge difference over a 5 year term...

renting long term isn't an option i want to explore... i view a house as a retirement plan. once that thing is paid off, you can ask any 55-65 yr old, if they had a choice when they retire, would you rather have a house + retirement savings or no house + maybe a bit more retirement savings and i'm pretty sure 95% of the time you'd have the same answer... having a house when you retire is huge. You don't have to worry about costs of renting on a lower fixed income. if you have a house, you just pay maint/utils... and worse comes to worse, you sell the place and then rent off the profit you've made on your sale...

[joel]

i would say groceries bill > utilities. Not sure if you are already paying for groceries at home, but i would say for Joyce and I, groceries account for at minimum $200 a month. if not more.

[joel]

hydro bill (w/ electric space heating) probably averages around $50 a month in our tiny place. A full sized home i assumed would eat up more electricity.

Property tax varies depending on the city, but in burnaby for me it's around 1200-1300 a year.

Internet (no cable tv) = ~50$ a month too..

All totaled about 400/month on top of my mortgage payment.

[Duncan]

wow, you guys have a pretty low overhead ontop of your mortgage... $200/mo for groceries is pretty good for two people... with a toddler running around it'd probably cost a bit more... not much more but a bit more... i'd say for alicia/hayden/me, it'd be $300/mo easy...

i'm thinking hydo would be 50-100/mo, prop tax about 100-150/mo, and i'd probably splurge and get hd cable + internet so that'd be $100/mo..

that totaled up it'd be an extra $550-650/mo... plus strata (doubt i'd be able to afford a single detached) at most places i've looked at online are from $250-400... so say another 300 for strata (which i think is absurd), that means i'm going to run a monthly overhead for $850-950/mo... man that sucks... haha...

[joel]

Oh yeah, i forgot about strata, then there's home insurance, alarm system (if you want that)...

The maintenance will hurt a lot too... as you cant really predict them. If you need to call a plumber or electrician, etc...

[jeSteR]

[joel]

.... say wha?

[jeSteR]

Coles notes:

If you can afford to tough it out for the first 10 years. Buy, don't rent.

[Duncan]

that sorta made sense...

update though.. playing around with the numbers for my income vs expenses, i think with my single income not factoring in alicia's erratic income, we'd be scraping at the bottom of the barrel to make ends meet. well, that's if i don't give up luxuries like hd cable/internet/hockey etc, which i'm not sure i'm willing to give up. So either i buy and live week to week hoping alicia gets called in for work, or another option i've been contemplating is continue to rent, but buy now and rent my place out for a few years until my family is ready to sustain a mortgage. All the while someone who can't afford to buy will pay most of my mortgage for me and i'll pay the overhead costs like maint/strata/etc...

i wonder if buying and renting out is worthwhile exploring. As long as i can find a good tenant that is