question regarding mortgage?

[Red_Liner740]

Because they will not always be 2 to 3%. We're approaching the peak of the housing bubble and the bank of Canada has been threatening prime interest rate hikes for a while now to get the market to cool off. They know raising the rate might stagnate the market and are holding off but it WILL happen and happen soon.

a rise of a few interest points makes a drastic change to your monthly/bi-weekly rate. My friend didnt believe me until i crunched some numbers for him on an online calculator.

a 300k mortgage amortized to 25 years @ 2.2 interest rate comes out to be $1300 a month. Changing the interest rate to 5% jump the payment to $1745.

Thats a $450 jump!! Historically the mortgage rates have, in the past dacade, gone as high as 6.25% and the average over the last decade has been 4.65%.

In fact, if you look at the history of Bank of Canada interest rate over the last 50 years here:

http://canadabubble.com/charts/bank-of-canada-interest-rate-history.html

...you will realize that we are currently at a record low. It has nowhere to go but up. So why not pay off the principal as quickly as possible to ease the burden not IF, but WHEN the interest rates go back up. All you have to do is ask yourself whether you can sustain your mortgage at 5%, 8%, how about 18%, record high in 1982. Remember that you have this sucker for the next two decades...Do you truly believe that we can have 3% prime for the next two decades? With the economic situation now where every institution and its mother is up to their eyeballs in debt?

Why would i risk the chance of that happening vs risking it on the market as well? Whats that saying? A bird in the hand is worth two in the bush. A mortgage is a guaranteed risk that must be paid off....risking it on the stock market is not.

That extra PIA to budget the accelerated bi-weekly vs monthly would be a much better benefit. Crunch the numbers, they won't lie.

Aside from that, what's the hurry to pay down a 2-3% mortgage when that money could be invested earning you 5-7% ? Real estate appreciation isn't as quickly moving as it once was and unless you're in an extremely desirable area, I doubt your house price has moved much the past couple of years.

TLDR: What's the hurry to pay off the mortgage when rates are so low?

 

[crankcall]

Because they will not always be 2 to 3%.4.65%.

we are currently at a record low. It has nowhere to go but up.



Theres the advice that counts, most folks are into a mortgage for 17-30yrs, the numbers will move around. Getting as much out of the principle as fast as possible makes sense.
There arent a lot of investments paying 5-6% that are liquid and reliable AFAIK right now. There is good debt and bad debt, but at the end of the day its still all debt.

 

[Roasted]

I think the idea is that you invest the money into something that gives you a higher return and once interest rates go up you dump all the money you have saved into the mortgage but let's be real.........by than you will have spent all that cash on hookers and blow and your savings will be zero

 

[daisoman]

Living at home with parents and i have an investment property.

35 years with a variable mortgage of prime -0.9.

Currently have tenants paying $1500/month and my payments with property taxes are $620/bi weekly.

Going to move in with my fiancé end of the year to a pre-fab condo in oakville. What do you guys think? Anything I should consider?

 

[Gary]

Going to move in with my fiancé end of the year to a pre-fab condo in oakville. What do you guys think? Anything I should consider?

Birth control, a pre-nup & a good lawyer.

Cheers.

 

[Roasted]

Living at home with parents and i have an investment property.

I have friends that have done this and I honestly DO NOT get it. Do people not value independence and living on their own at all anymore? The reason I stayed with my parents as long as I did was to save for a down payment. As soon as I had that I moved the hell out. Financially it might be a good move but let's be real here, living with parents sucks and YES, you are a looser that needs to grow up if you do this. And this is coming from someone that moved out at 29......I KNEW I was a looser. No denying that.

 

[Lightcycle]

Moving out of your parent's home is a very western anglo-saxon concept.

Three generations living under one roof is the norm for many cultures. Frugality and familial loyalty trumps independence and personal identity.

 

[kellen]

My point is paying more often will save you a lot more than paying more. Lets say my mortgage is 700 a month, if I break that up to weekly payments instead of monthly I save a large amount of time off my mortgage vs adding an extra 75$ a month. I'd rather pay 175$ every week to make up that $700 and have my 25 year mortgage paid in 17 years than pay an extra 75$ a month to save 1 year. With weekly payments my monthly cost is the same and I don't have to find extra $ or do with out compared to the scenario suggested by star boy. Not many people have the 300k to lay out but paint less more often saves more than paying more less often

Lol paying more often or paying more. Totally different

 

[eastcoast_gsx]

Moving out of your parent's home is a very western anglo-saxon concept.

Three generations living under one roof is the norm for many cultures. Frugality and familial loyalty trumps independence and personal identity.

I will take independance and personal identity over frugality and familial loyality any day of the week... And so will my kids

I was out at 18 (yes, I am counting school) and never went back... Not because I was forced... but because I wanted to.

Could also be why the western anglo-saxon countries rule the planet....

 

[Brian P]

Could also be why the western anglo-saxon countries rule the planet....

Better be careful with that statement ... the Chinese economy is arguably on par with the US economy, and it's growing, and the US economy isn't.

Anyway, the difference between paying weekly or paying monthly is much smaller with low interest rates than it is with higher rates.

If you have more than 10 - 15 years left on your mortgage then I'd suggest taking a 5 year rate that gives flexible repayment, work out what the monthly payments would be if the interest rate were 6% (or more, if you choose), and set it up to pay that per month (or weekly, if you choose).

This will do two things. First, it'll get you used to higher interest rates, so that when it comes up for renewal 5 years from now, you're already used to making a higher payment. Second, it'll pay down your principal faster so that if rates go up or the housing market goes down, you won't be affected as much and are less likely to end up underwater.

 

[klr_guy]

I have friends that have done this and I honestly DO NOT get it. Do people not value independence and living on their own at all anymore? The reason I stayed with my parents as long as I did was to save for a down payment. As soon as I had that I moved the hell out. Financially it might be a good move but let's be real here, living with parents sucks and YES, you are a looser that needs to grow up if you do this. And this is coming from someone that moved out at 29......I KNEW I was a looser. No denying that.

You were a loser not a looser - just trying to help

 

[Roasted]

You were a loser not a looser - just trying to help

I ALWAYS misspell that word cause the spelling makes ZERO sense to me. How is one 'o' pronounced like a long 'U'? Makes zero sense. Can you think of any other words in the english language spelled like this that are pronounced like that? The English language is retarded sometimes.

 

[Red695]

I do real estate prospecting and own a few investment properties including a fourplex. I never mortgage with banks because the rates are generally no where near as competitive. I have a very good broker who colours outside the lines, if you will and I will lock in when we see a raise in rates coming. For now I invest the difference I save between what I would be paying if I had fixed mortgage rates and make 12% annually through high interest, low risk loans to commercial builders. I have no desire to ever pay off any of my mortgages at these rates. I refinance regularly and take money out against my properties to fund other investments that earn more.

 

[Lightcycle]

I refinance regularly and take money out against my properties to fund other investments that earn more.

Unfortunately, you're in the extreme minority:

I refinance regularly and take money out against my properties to buy beer, party and shop for useless $ht for my motorcycle.

What MostPeopleOnHere should do is pay down the mortgage because it's the only form of forced savings they're ever going to be exposed to.

 

[Red695]

Unfortunately, you're in the extreme minority on this board:



What MostPeopleOnHere should do is pay down the mortgage because it's the only form of forced savings they're ever going to be exposed to.

I suppose I tend to be an idealist...even when it comes to the capacity and capabilities of others. It is possible, just like selling everything and living on a motorcycle and traveling around the world.

 

[daisoman]

I have friends that have done this and I honestly DO NOT get it. Do people not value independence and living on their own at all anymore? The reason I stayed with my parents as long as I did was to save for a down payment. As soon as I had that I moved the hell out. Financially it might be a good move but let's be real here, living with parents sucks and YES, you are a looser that needs to grow up if you do this. And this is coming from someone that moved out at 29......I KNEW I was a looser. No denying that.

You don't get a lot of things it seems. Closed minded perhaps? Its simple really, even though I had the resources to come up with the down payment(2 jobs for 2 years) it would of been the monthly payments that got me to the poor house. I calculated my monthly salary and the amount it takes to be a home owner and that left me with very little money leftover. In this real estate economy we currently are living in, its almost impossible to live on a single blue collar wage. Even with dual income with my RN fiancé it will be just enough to be comfortable. Before you go saying my priorities are messed up and I should sell my bike and not go out. Well I waited until i was over 25 and my rates are $72/month. Also fortunately my Cbr will probably sell for almost the same price I bought it for in year or two.

 

[daisoman]

Oh and I'm 26 so I'll be 27 when I move out. So still not as big of a "looser" as you lol

 

[Fingolfin]

Oh and I'm 26 so I'll be 27 when I move out. So still not as big of a "looser" as you lol

you're asking for financial/life advice from a bunch of strangers on the internet... trust me... you're in the same class...

 

[daisoman]

you're asking for financial/life advice from a bunch of strangers on the internet... trust me... you're in the same class...

Lol wanted a biker point of view of home ownership. All I've gotten are parents and co-workers advice.

 

[Brian P]

Living at home with parents and i have an investment property.

35 years with a variable mortgage of prime -0.9.

Currently have tenants paying $1500/month and my payments with property taxes are $620/bi weekly.

Going to move in with my fiancé end of the year to a pre-fab condo in oakville. What do you guys think? Anything I should consider?

Per year, you are paying 26 x 620 = 16,120 and collecting in 12 x 1500 = 18,000 so it is cash flow positive, on the surface. This is good, and part of that cash flow is paying down principal (slowly), which is also good.

There are a few things to consider with regards to rental properties which are why I have never done it (other than renting out a room in my house). One is the possibility that you will have to do some maintenance from time to time. You have a little bit of room to cover this. Another is the possibility that the tenants wreck the place. Another is that the tenants move out with 30 days notice and you can't find suitable new tenants (or the replacement tenants wreck the place). Another is that the tenants stop paying - and the Landlord and Tenant Act is heavily biased in favor of the tenants, leaving you, the landlord, in the lurch. Another is that interest rates go up and put you underwater.

If the value of the property is above what you owe, so that you are above water, then the sudden tenant move-out situation is not a big problem, unless there is a market crash. Personally, I do not think interest rates are going anywhere for at least another year. The US Fed has stated that they will not be increasing rates until the US unemployment rate drops to a certain number that I have forgotten, which I do not see happening in the foreseeable future, and Canadian rates are sure to follow US rates. But with your 35 year mortgage ... interest rates are sure to go up sometime within that, and probably in the earlier part of that. 35 years is a long time.

If the tenants are good, you might as well carry on with this arrangement as long as it lasts, and then when it ends for whatever reason, either sell it, or if you can't, just move in yourself - you already own it.