Mortgage and House Update
A while ago I wrote about whether or not or not we would prepay a mortgage and how much our downpayment would be. We decided on putting 25% down, under a 5 fixed rate mortgage with bi-weekly payments. As new homebuyers, we weren't really sure what we were getting into. The house that we purchased is an older home and we knew that we could have have some unforeseen repair bills. We ended up putting half of our net worth into the house and have kept the the other have invested in a diversified portfolio including RRSPs. Keeping some cash outside the mortgage ensured we would not be cash poor and have some flexibility. We plan to make aggressive prepayments every year. Our goal is to be mortgage free on this property in 7 to 10 years.
posted by Frugal Canadian @ 3/22/2007 08:16:00 AM
4 Comments:
Enjoying the old house so far???
Sounds like a great plan.
I think going for the fixed rate for 5 years is going to be something you will be very happy that you did. I can't see rates staying down.
Going for something that you can see paying back in a 7-10 year time frame means that you've really chosen a home that is below your means, which I don't think a lot of people appreciate how important that is in terms of ensuring economic security in a low interest rate environment.
I'm in Vancouver and housing costs are so high here I think most people would be hard pressed to find a home they could pay back in that kind of time frame. I did a search on houses for $300k or less and I found 6, 3 of them boarded up in the pictures and all of them at least an hour drive into Vancouver, and ranging in size where 4 were under 1000 sq ft, two look like 33 ft lots but with more living space, 1250 sq ft and 1742 sq ft.
Switching the search criteria to a townhouse I found 11 under $300k in Burnaby, 10 2-bedroom and 1 1-bedroom. Right at the $300k mark you can get 1200 sq. ft. 2-bedroom and 7 years old. At $275k you get 875 sq ft and 23 years old.
You'd have to pay about $2400/month to pay a $225k mortgage back in 10 years at about 5%.
Nice post and nice plan to save money.
It's really important to save money so that if there's important things to buy you have savings.
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