[famdizel]

Hello all,

Last year we put a deposit on new home in Milton that is scheduled to close in a few months from now. I was completely clueless at the time, motivated by wanted the biggest house I can afford and encouraged by the idea real estate prices will always go up. Looking back now, I feel that I acted foolishly and could have made better choices. I'm concerned we've stretched ourselves thin and would become house poor.

We rent in Mississauga, both work in Toronto and have a new born baby, My wife is on mat leave so our combined family income at this moment is 90K.
The house cost %380,000, Our mortgage is $304,000 at current variable rates amortized over 40 years. Bad idea I know but we don't plan on making minimum payments. Our payment model is based accelerated by-weekly payments @ 6% interest amortized over 25 years. This would give us a +2% buffer in case interest rates go up while allowing us to decrease our payments in the event of an unexpected expense.

Now in the event inerest rates rise higher than we factored and our incomes don't improve, we would be screwed. And if home prices fall we would be stuck having to pay more than the property is worth. So where is the silver lining here?

 

[carturo15]

If you are planning to stay at this home for a long time, do not assume a mortgage with variable rate, unless you can find a product which is variable but you can convert it at anytime to fixed. Do not worry, you made a good decision buying that house, Milton is a good area with a lot of potential, very close to Mississauga and Toronto. If your combined income is $90.000 you should have a cash flow after taxes of aprox $5.800 monthly and the carrying costs for your house should be something aroud $2.500, so I think you are fine. Do not worry, just make sure to find a good mortgage broker who can give you the best mortgage for you, and do not take mortgages for 40 years, that is good for investors but not for your own house, remember that interests on primary residence are not deductible.

 

[dpylyp]

First Time Buyer

Your title says it all.

Relax, we tend to over think the situation.

1) You need a place to live
2) Toronto GTA is a destination
3) Prices are fluid. They change based on demand.
4) Unemployment is down I believe under 6 %
5) Mississauga and Milton are thriving growing communities
6) Immigration and migration of people brings them into the Golden Horseshoe
7) interest rates do not appear to be double digits. ( I see 4.23% Var. vs Fixed)

You will spend a bit of money on the back yard and fence and BBQ and patio.
Enjoy the benefits of home ownership and a young family and yard.

 

[Observer Walt]

Relax, we tend to overthink the situation.

True, and good advice.

If you have reported everything correctly, I don't see a problem. Your payments seem to be within a reasonable budget. You mortgaged 80% of value and thus avoided insurance premiums. Although I am not a fan of 40-year amortizations, you claim that your actual payments will be based on 25 years, which is reasonable by anyone's standard and leaves you some breathing room.

As someone already said, be aware of timing and conditions to switch from the variable rate to a fixed rate. I do not have a problem with a variable rate in today's rate environment, but the time will come that you will want to lock in.

All sounds reasonably good so far. Enjoy the new house and neighbourhood.

 

[buyproperty12]

I think You have to contact real estate consultant why because the prices are changing frequently only the lenders can know the exact prices and rental prices. My advice immediately do the things as you want otherwise you will face some serious problems it can spoil your financial credit.

 

[Therion]

I would seriously look at locking in your mortgage in the next few months for a 5-year fixed plan. Interest rates will bottom very soon, and hopefully as the banks become more liquid, it will drop the fixed rates into the 4.5 -5.5% range, which should decrease your interest payments significantly. Even if you can't get below 6%, at least you will have peace of mind knowing exactly how much you have to pay every month.

A $380k house on a $90k income does mean you will have to be very careful with money, and try to save some just in case. However, if your wife goes back to work in the next couple of years, you should have an easier time making the payments.

 

[Toronto_Lawyer]

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