Interest Rates on the Rise

[nature boy]

hm, the article i read made a convincing argument for renting, but i forgot other reasons. i suppose the renter's market doesn't move around as much as the buyer's market, and if you don't like where you're renting then you can move as soon as a month rather than wait for a buyer.

i think it comes down to headache too. if you feel you can start up a household and maintain some sort of sanity then good for you. for us, i don't think we can manage the new job, new kid and new house at the same time (new job and new kid were hard enough). granted, it's been almost two years, but i think about the headache i have at work now the last thing i want to deal with is headache at home (or i should say MORE headache at home).

[joel]

since we are on the topic of homes, interest rates and mortgages.. I'd like to ask for some advice from some of you financially saavy people too.

My plan is to eventually move out of our tiny place and move into a larger home that could support more than just the two of us someday. Maybe 2-3 years down the road. Depending on our financial state I was thinking at that time we could keep our current place now and have the rent there cover most of it's own mortgage.

In the meantime I take the remainging of Joyce's and my savings and invest it so that we could manage a decent downpayment when we need to move out. Does this seem like a good plan or is it better off that I just dump all this extra savings into paying off the mortgage I already have.

Right now, I am just paying the rapid biweekly mortgage rate that i initially set and haven't made any further contributions than that.

[jeSteR]

Your scenario is actually VERY dependant on the numbers involved on the new place.

My general rule of thumb is if you're not making more than 10% return on your savings, lump sum pay off any mortgage first.

But again, that really only applies if you own just one place. The $$ numbers on the second place would greatly affect what you should do right now.

[joel]

Lets just throw out a ball park figure of 500k (100K down, 400K remaining for mortage)... not that I would be able to afford that in 2-3 years... or find a place for that price...

[jeSteR]

Yeah... but I need to know what $$$ you're comtemplating on either a down payment or lum sum pay down. You really do need all the info to make an educated choice on this one. Also the two % rates / balances on the mortgages. In this situation where it's paying off one loan vs minimizing another, the difference is very situationally dependant.

[joel]

ok so it would be like:
Home 1 (~55k paid, ~210 outsanding) 2.85% variable
Home 2 (100k down, 400k mortgage) ? dunno 4-5%
> 600k in total loans

or is it just retard to keep the first one?

[nature boy]

i think the problem here is that you bought the place you have now in a slightly higher market. the trend in the past 5 years or so was that buying for short term will end up in fail. it's always good to buy for long term as then all the numbers get muddled together and the movements in the market won't affect you as much.

having said that, it's clearly too late for that kind of advice, so i wonder if it'd be good for you (if at all possible with your 1.5 incomes) to buy the larger house when you can, but instead of selling your current place you rent it out for as much as your mortgage payments are (of course, i'm saying this without actually knowing your payments), which would basically give you that first place for free. but that's only if you can afford it.

i really think big questions like these should go to professional bankers who actually know what they're talking about. i'm sure many of us here on the board know a thing or two and can add a certain common sense, but i think there's a MUCH higher chance of someone inadvertently giving improper advice which could lead to a lot of trouble when dealing with real estate. this isn't a this or that game.

[Duncan]

but it could be a this or that game.. haha...

take out a 500k loan to buy a boat and sail away into the ocean or take out 500k to buy 25k toasts... lol...

it'd be interesting if we did a financial info session as part of a church function... I mean, maybe we can invite jairo to do a bankers talk to educate people on finances/mortgages... it's a good idea to get a pro in the discussion so we know what we're talking about isn't bad advice. I mean, we have "church talks" about everything from dating to workplace behaviour/evangelism. Why not finances?

[jeSteR]

[joel]

i think i can only do lump sum mortgage payments of 15% of original principal.. which is probably around 30k around it would take me at least 3 years to do it. But based on what you are saying it sounds like paying my current mortage should be my aim.

[jeSteR]

My personal money priority goes

1. Maximize RRSP Contribution
2. Maximize Tax Free Savings Account
3. Pay off Mortgage
4. Paper money investment management.
5. Income property management.

When my primary mortgage is paid off. 4 and 5 will probably reverse.

[jeSteR]

Oh yeah... need to fit in RESP now... probably between 4 and 5

[Duncan]

[nature boy]

[Wetundies]

I know someone who just sold a house with 3 mortgage helpers on a 2 level house. The basement is divided into 3 seperate units, so $700 for each unit. Upstairs has 3 bedrooms, so that's plenty for a small family. And now you can even add a Lane house, which could give you another rental unit.

20% downpayment is so you don't have to buy mortgage insurance. Variable rate is not like before, it used to be Prime -0.75% (for some it was at 1.25%), now it's prime plus 0.5% the last time i checked.

2.8% for 5 years is correct, cuz i just renewed a couple weeks ago at 2.2%.

The olympic village will be having a sale soon. Might as well get one, cuz your paying for it regardless.