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Franks Happy Place posted:General formula for housing costs is no more than 30% your gross (pre-tax) salary. That tends to change as your income goes up, of course, but it's a good rule to keep you from getting into trouble. LemonDrizzle fucked around with this message at 23:57 on Feb 5, 2014 |
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Feb 5, 2014 22:44
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I've heard something along the lines of one week's pay = one month's rent, although I've never actually thought about whether that's too much or if you could afford a bit more.
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Feb 5, 2014 23:55
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I've been advised by several people now not to put a huge down payment down on the house, rather to keep more money on hand and invest it into something to have a diversified portfolio. My question is: What is the reason for not paying down the house as fast as humanly possible? As soon as the mortgage is paid off the amount of cash we'd have on hand would be ludicrous and we could invest at that point. Also the faster you pay it down the less interest you pay. Is it really better to not pay down quickly?
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Feb 6, 2014 01:24
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Arabidopsis posted:Is it really better to not pay down quickly? If your investment returns are more than the interest on your mortgage it's better to keep them, rather than pay cash for the house. Example: Say you have a $100,000 investment portfolio that returns a modest 5% a year after fees etc. You're looking to buy a house for exactly 100k and the bank offers you a mortgage at 3.75% interest per year. In the first year, the mortgage will cost you around $3,750, and the portfolio will make you around $5,000, meaning you ended up with an extra $1,250, or $100/month. Nice. If you liquidate your investments and pay cash for the house your mortgage will cost you zero, but your return on investment will also be zero, so you get an extra $0/month.  This is, of course, highly simplified. There may also be other reasons to keep investments, such as the fact that houses are immobile, illiquid and take time and money to sell, while mutual funds are highly mobile and sell (essentially) on demand and at a negligible cost.
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Feb 6, 2014 01:47
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Arabidopsis posted:I've been advised by several people now not to put a huge down payment down on the house, rather to keep more money on hand and invest it into something to have a diversified portfolio. Because it's putting all the eggs in a single illiquid basket which does not provide any income. Also to go back to the diversified stock investment option you have the option with dividend payments to just buy more stocks which can cause a nice compounding effect over time especially if the stock is undervalued but has decent dividend yield.
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Feb 6, 2014 01:47
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The tradeoff is in comparing the money you save on interest with a larger down payment versus the interest you yourself would earn by instead investing the money elsewhere. My mortgage for example is 3 1/8% - a fair amount less in fact since it's tax deductable. I can earn more than that as part of a fairly low risk diversified investment portfolio, so I do so.
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Feb 6, 2014 01:49
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ductonius posted:If your investment returns are more than the interest on your mortgage it's better to keep them, rather than pay cash for the house. Don't forget tax impact. If 5% is an after-tax return this is correct, but if it's a before tax return the line is closer, depending on how the return is characterized. However, the argument above doesn't take into account risk v. reward. By paying off your mortgage you're essentially increasing your investment in real estate, but, this particular investment has a guaranteed return of your mortgage rate (this is comparable to after tax in Canada since it's not deductible), so you need to have a view that your investment alternative has a risk-adjusted return which is better than that. Before someone has a fit that you're actually getting your expected total return on the property and not your mortgage rate, that's not true as you're already entitled to all of your return less the mortgage rate, as you've already made the ownership decision and so the return there is irrelevant. By paying your mortgage you're just buying the portion of your return which would otherwise go to the bank. This is why it can be seen as essentially risk free from your perspective (unless you're willing to go bankrupt!). To be clear, this is not me saying real estate is risk free - only that paying your mortgage is once you've made the decision to have one. Using the example above, if you put a $1000 payment into your mortgage, you are guaranteed to be better off by 3.75%, while buying a stock that returns 5% leaves you with the risk that it returns 0% or -10% (or +10%, whatever). The takeaway is that you should ultimately do what your own risk tolerance makes you comfortable with. If you're comfortable with a relatively riskier 5% (or 6% or whatever) return then you should keep your money invested, but if you feel like having a larger mortgage will make you uncomfortable, then paying your mortgage is a totally viable option. e: the arguments about liquidity / mobility of the house are only partially applicable - if you go upside-down on your mortgage your other assets are at risk anyways unless they're in registered accounts in which case you couldn't use them for this.
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Feb 6, 2014 02:33
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Thanks for this advice folks. I think we'd prefer the rapid pay-down route. I ran some numbers and if we, for example, put a 50k down payment down (instead of 100k) and invested that 50k it would take us 3 years longer to pay off the mortgage (for a total of 12 years). Assuming a 6% return on our investment we'd profit 50k over that period, but some of those profits would get eaten up by additional interest payments. As I calculated it, we'd come out slightly ahead by paying 50k down, 50k invested (although as the above poster noted, I didn't factor in taxes on the returns from those investments). We're not big money wheelers and dealers, we just really like this particular house and would want to pay it off ASAP so we could put shitloads of money in the bank after that. I just wanted to make sure this wasn't an obviously stupid move.
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Feb 6, 2014 03:27
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Arabidopsis posted:Thanks for this advice folks. I think we'd prefer the rapid pay-down route. I ran some numbers and if we, for example, put a 50k down payment down (instead of 100k) and invested that 50k it would take us 3 years longer to pay off the mortgage (for a total of 12 years). Assuming a 6% return on our investment we'd profit 50k over that period, but some of those profits would get eaten up by additional interest payments. Kalenn covered this implicitly to some extent, but don't forget tax implications of your TFSA/RRSP contributions. Shovelling every last nickel into your mortgage potentially means you're foregoing many years of tax-free growth and/or reduced taxable income. It's potentially far higher than a foregone 6% return viewed in that light. That would depend on your specific income situation of course. Personally, I think a stuffed TFSA (that gets topped up every January) is a worthy and wise goal for every adult Canadian with the means, irrespective of mortgage status. And with a high marginal rate, an RRSP likely makes sense too.
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Feb 6, 2014 04:19
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Lexicon posted:Kalenn covered this implicitly to some extent, but don't forget tax implications of your TFSA/RRSP contributions. Shovelling every last nickel into your mortgage potentially means you're foregoing many years of tax-free growth and/or reduced taxable income. It's potentially far higher than a foregone 6% return viewed in that light. That would depend on your specific income situation of course. Appreciate the nod but I actually missed/forgot this and agree, to the extent you had RRSP contribution room (or TFSA), you should really consider maxing these out first. If nothing else, you get 20-45% of your RRSP investments back on your tax return (depending on your tax bracket) so in Arabidopsis' $100,000 case, they could put (hypothetically) $25K in an RRSP and still have $80+K to put into the downpayment. TFSA doesn't give you the up-front tax savings meaning it's a direct reduction in your downpayment, but the tax free status basically means you can take your before-tax earnings of your investments for the purpose of comparing with the mortgage rate when deciding on the trade-off. Sounds like Arabidopsis' investment profile is biased to lower risk and return so the TFSA might be marginal as a trade-off against incremental mortgage. For someone with a riskier and higher returning investment profile, the trade-off will be weighted more heavily towards the TFSA and keeping a larger mortgage.
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Feb 6, 2014 11:54
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Even the Chinese media is interested in the impending burst of the Canadian housing bubble. http://english.cntv.cn/program/bizasiaamerica/20140206/101518.shtml I happen to be looking myself right now, though I'm in Winnipeg and it seems that at least parts of the city are a bit insulated from the impending doom elsewhere. Or at the very least, it doesn't have as far to fall as it's pretty easy here to find a three bedroom (all above grade) house for under $200,000. But I am kicking myself for not having a look at a house that was 30 minutes out of town on just shy of eight acres of land for $117,600. Bit of a fixer-upper but for 2100 square feet but considering that I like tools and driving, I'm having a bit of not-buyers remorse.
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Feb 7, 2014 05:28
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Antifreeze Head posted:Even the Chinese media is interested in the impending burst of the Canadian housing bubble. What's the job market/life like in Winnipeg? It's always been high on my list of cities I'd potentially move to.
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Feb 7, 2014 06:45
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sitchensis posted:What's the job market/life like in Winnipeg? It's always been high on my list of cities I'd potentially move to. Give it a try, you don't want the mosquitoes to starve.
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Feb 7, 2014 06:50
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Antifreeze Head posted:But I am kicking myself for not having a look at a house that was 30 minutes out of town on just shy of eight acres of land for $117,600. Bit of a fixer-upper but for 2100 square feet but considering that I like tools and driving, I'm having a bit of not-buyers remorse. This is why I'll probably retire to the prairies rather than BC. Outside of the sub-arctic, or towns of less than 1000, hours from civilization, that doesn't exist here anywhere. Hell, chucklefucks want $500,000 for their air-access-only collapsing log cabin in bumblefuck nowhere in this circus of a province.
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Feb 7, 2014 07:17
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Rime posted:This is why I'll probably retire to the prairies rather than BC. Outside of the sub-arctic, or towns of less than 1000, hours from civilization, that doesn't exist here anywhere. Hell, chucklefucks want $500,000 for their air-access-only collapsing log cabin in bumblefuck nowhere in this circus of a province. If that's the kind of thing you want, Ladner might be right up your alley. Not sure what the housing prices are like there, but it's quiet suburbia with outskirts of farmland, and a 30 minute drive to the city. It's also boring as all hell for a kid to grow up in.
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Feb 7, 2014 07:28
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Sometimes when there isn't an express bus from the ferry the bus has to go through ladner... it seems like a place people go to give up. I always feel depressed there.
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Feb 7, 2014 07:31
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Baronjutter posted:Sometimes when there isn't an express bus from the ferry the bus has to go through ladner... it seems like a place people go to give up. I always feel depressed there. I hated it. My folks love it. It takes a certain kind of mentality to enjoy quiet towns I think and I just don't have it in me. Get out young or die there seems appropriate.
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Feb 7, 2014 07:36
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sitchensis posted:What's the job market/life like in Winnipeg? It's always been high on my list of cities I'd potentially move to. What the Get out
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Feb 7, 2014 07:37
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sitchensis posted:What's the job market/life like in Winnipeg? It's always been high on my list of cities I'd potentially move to. Yes, the mosquitoes can get a bit much outside of the city, but the local government is aggressive with spraying for them so within the perimeter they aren't that bad. But if you have strong feelings against Malathion, this city may not be for you. They aren't kidding when they call it Winterpeg. We were somewhere in the neighbourhood of -40 to -45 with the wind chill for several days in January. I think the real temperatures were at least ten degrees colder than normal, or if it wasn't far below seasonal we were getting hit with 5-10 centimeters of snow. Whatever the polar vortex was for you, we had it first, we had it longer and we had it colder. But there's a bunch of people here from India and the Philippines, and they manage, so you'd figure it out. For jobs, Manitoba has among the lower of unemployment rates across the country (usually among the three best)and Winnipeg is probably pretty close to there. Naturally employability will depend greatly on your skill set, but engineers appreciate our aerospace industry and if you'd rather work on an assembly line making busses or tractors, we have that covered too. There always seems to be a shortage of nurses and people that can effectively throw a football. I strongly urge you to apply to the Winnipeg Football Club if you can throw a football, they'll pretty much hire anyone at this point. For culture we have a great provincial museum, will soon have the only national museum outside of the capital region and an art gallery that is probably impressive. Ballet, opera, theatre, other regular amenities of a large city, probably one of the best baseball parks outside of affiliated ball (and better than many in), something about rivers if that's your thing and a restaurant chain where we use racist slurs to order hamburgers. And we have our hockey team back, which we generally consider to be the official sign that we're a Big Boy city like Edmonton, and not a dirty hovel like Regina or Hamilton. There's that whole "Murder Capital" thing but it will probably only catch up with you if you feel like getting involved in the illegal drug trade. We largely got that "Car Theft Capital" thing sorted out by mandatory immobilizers on some makes/model and with a few key arrests. We're rather proud of the "Slurpee Capital" thing, which means you'll have it made in the shade here as an endocrinologist because we'll have so much adult onset diabetes it won't be funny. You'd probably want to visit before you move, but I don't think you'd find it totally disagreeable unless you hate flatness, have a strong love of efficient public transit systems or insist that a city's downtown area must contain a grocery store.
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Feb 7, 2014 07:47
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I'm living in Phoenix right now and planning on moving back to Winnipeg this year. I agree that Winnipeg's transit could be better, but it's definitely not a bad system. I had to leave my car and cab it home 8 miles. Took me 2 hours to get my car the next morning by bus, and the place is on the same street as my house, just a straight shot 8 miles down! Winnipeg transit is a dream compared to here. If you're downtown for a concert or game, you at least have a reliable way of making it home. Some of the Winnipeg prices are definitely shocking compared to Phoenix, but I'm hoping to rent for a while in Winnipeg before I decide on anything permanent. The whole home-ownership experience is really kind of grueling for a single person.
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Feb 7, 2014 13:28
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Rime posted:This is why I'll probably retire to the prairies rather than BC. Outside of the sub-arctic, or towns of less than 1000, hours from civilization, that doesn't exist here anywhere. Hell, chucklefucks want $500,000 for their air-access-only collapsing log cabin in bumblefuck nowhere in this circus of a province. You should check out the east coast. Rural Nova scotia is insane. Dirt cheap outside of halifax, mild climate due to the ocean. look at this poo poo http://www.kijiji.ca/v-house-for-sale/city-of-halifax/3-howe-st-lockeport-borden-rhyno/552646757
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Feb 7, 2014 18:47
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The maritimes are great if you like incest and dimwits
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Feb 7, 2014 19:04
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Cultural Imperial posted:The maritimes are great if you like incest and dimwits This is probably a horribly ignorant thing to say, but it's always struck me that Canada really doesn't really have that many places worth living (said from the perspective of someone who really likes urban amenities not to mention employment). I mean, lots of choices if you like camping and 'small town charm', but that really doesn't do it for me.
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Feb 7, 2014 19:13
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Icemakor posted:You should check out the east coast. Rural Nova scotia is insane. Dirt cheap outside of halifax, mild climate due to the ocean. Pfft, why buy that when you could literally purchase the old City Hall of Pictou N.S. for $150,000? Or for a bit more money, a historical Inn in downtown Pictou for only $350,000
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Feb 7, 2014 19:49
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Lexicon posted:This is probably a horribly ignorant thing to say, but it's always struck me that Canada really doesn't really have that many places worth living (said from the perspective of someone who really likes urban amenities not to mention employment). I mean, lots of choices if you like camping and 'small town charm', but that really doesn't do it for me. I agree but this also applies to pretty much every country, doesn't it?
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Feb 7, 2014 20:12
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jet sanchEz posted:I agree but this also applies to pretty much every country, doesn't it? Yeah, fair point.
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Feb 7, 2014 20:17
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Lexicon posted:This is probably a horribly ignorant thing to say, but it's always struck me that Canada really doesn't really have that many places worth living (said from the perspective of someone who really likes urban amenities not to mention employment). I mean, lots of choices if you like camping and 'small town charm', but that really doesn't do it for me. When you consider that speaking in terms of geography, climate and economic distribution we're essentially Russia, it's not entirely surprising.
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Feb 7, 2014 20:20
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Rime posted:When you consider that speaking in terms of geography, climate and economic distribution we're essentially Russia, it's not entirely surprising. A couple brutally expensive and over-rated cities in the far west and the rest a horrible wasteland of frozen dying industrial cities and miserable farm towns everywhere else. Pretty much lines up.
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Feb 7, 2014 20:25
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Lexicon posted:This is probably a horribly ignorant thing to say, but it's always struck me that Canada really doesn't really have that many places worth living (said from the perspective of someone who really likes urban amenities not to mention employment). I mean, lots of choices if you like camping and 'small town charm', but that really doesn't do it for me. Maybe I'm just getting old, but I don't really understand the appeal to living in a giant city anymore. Ignoring jobs, which is a huge thing to ignore admittedly, what do you get in a large city? Traffic, sprawl, crowding, rude people, pollution, stupid real estate prices? For what in return? Some decent concerts and a hockey team? This is coming from someone who lived in London UK for 3 years and have been in Montreal for the last 5 years. I couldn't be loving happier moving back to a smaller city. Everyone goes on about how fantastic Montreal is, but gently caress it sucks actually living here. The infrastructure sucks, MY TAXES, rude people, the government at all levels is beyond horrible. I couldn't imagine raising kids downtown in a big city, but then again I grew up in a small city so I'm biased. quote:The maritimes are great if you like incest and dimwits Is that you Stephen Harper?
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Feb 7, 2014 21:38
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mik posted:Maybe I'm just getting old, but I don't really understand the appeal to living in a giant city anymore. Ignoring jobs, which is a huge thing to ignore admittedly, what do you get in a large city? Traffic, sprawl, crowding, rude people, pollution, stupid real estate prices? For what in return? Some decent concerts and a hockey team? This is coming from someone who lived in London UK for 3 years and have been in Montreal for the last 5 years. I couldn't be loving happier moving back to a smaller city. Everyone goes on about how fantastic Montreal is, but gently caress it sucks actually living here. The infrastructure sucks, MY TAXES, rude people, the government at all levels is beyond horrible. I couldn't imagine raising kids downtown in a big city, but then again I grew up in a small city so I'm biased. I hold the mutually contradictory viewpoint of not being all that keen on the general public's bullshit (rudeness and so on as you mention), but really enjoying cities and the hustle/bustle therein (and crucially, being anonymous within said hustle/bustle). Also, for me it is crucial to not have to drive every time you need a drat jug of milk or anything else. I suppose I just really buy into the whole 'urbanist aesthetic' thing that's in vogue these days. I should probably just find a way to relocate to Manhattan.
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Feb 7, 2014 21:49
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Pro-tip: live in a building that is mostly retirees, they are the most fun to be neighbours with. Until they die next door and have no visitors. Then it's sad, and smells.
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Feb 7, 2014 22:09
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I've always preferred to have my place in a building with more older people than not. If I want to party I can go to the social districts, but when I'm at home I don't want my entryway to smell like stale beer and/or have homeless drunks sleeping on it. Re: Winnipeg, don't ever go there it's awful and pointless.
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Feb 7, 2014 22:39
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Yeah I'm in a "working professional" building so it's mostly responsible 30+ people. There's a few lovely looking 20-somethings but otherwise it's ok. No sound complaints at all, ever. The worst is that the people below us seem to buy long expired meat or road kill then burn the poo poo out of it. Almost every night at dinner time it's either the smell of burning nasty meat or cheap "hungry man" style frozen food garbage. Lately even in the mornings and lunch it's a strong burning smell. I'm guessing they spilled something on their stove and have been too lazy to clean it so just let it burn. I keep trying to creep on other tenants coming in so I can see which ones go to that door, so I can judge them. Renting owns though.
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Feb 7, 2014 22:44
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mik posted:Maybe I'm just getting old, but I don't really understand the appeal to living in a giant city anymore. Ignoring jobs, which is a huge thing to ignore admittedly, what do you get in a large city? Traffic, sprawl, crowding, rude people, pollution, stupid real estate prices? For what in return? Some decent concerts and a hockey team? This is coming from someone who lived in London UK for 3 years and have been in Montreal for the last 5 years. I couldn't be loving happier moving back to a smaller city. Everyone goes on about how fantastic Montreal is, but gently caress it sucks actually living here. The infrastructure sucks, MY TAXES, rude people, the government at all levels is beyond horrible. I couldn't imagine raising kids downtown in a big city, but then again I grew up in a small city so I'm biased. Every kind of store imaginable is within walking distance, I can take transit or bike to work, lots of cultural stuff, lots of restaurants and cafes, and I've never had any real issues with rudeness, most people I deal with are quite nice and personable. Personally I can't imagine not living in a big city.
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Feb 7, 2014 23:05
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I can go weeks without ever getting into a car or stepping on public transit, and yet I want for nothing. One of many reasons why I love living downtown.
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Feb 7, 2014 23:10
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Lobok posted:I can go weeks without ever getting into a car or stepping on public transit, and yet I want for nothing. One of many reasons why I love living downtown. Yeah, this is really the bottom line. And it only seems to get better the larger the city is - I mean London (real London) has a shop that sells nothing but chess pieces for Christ's sake. I get that cities aren't for everyone, but I don't think you can go wrong with that level of diversity in services/amenities/etc.
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Feb 7, 2014 23:24
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The social circles are what do it for most people. I mean, if you're living in Clearwater and nobody there likes rock climbing, you're poo poo out of luck and will have to travel to get any climbing in. Kelowna or Vancouver? Hop on Meetup.com and find the local climbing group. Goes for basically any hobby/interest you can dream up.
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Feb 7, 2014 23:34
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There's only two other people that live in my entire apartment building (I think there's about 16 units) on a permanent basis. Sunday night through Friday afternoon it's almost always just the four of us in the building. It's really, really awesome. Hooray for the rich Weekend Warriors from Vancouver that just leave their places empty all week.
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Feb 7, 2014 23:44
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I love living in a building full of retirees. My floor is The Cat Floor. Nearly every unit has a cat, and in the summer they mingle in the hallway as people prop their doors open for the breeze.  Compare this to the previous place I lived, which was right next to a college. I had drunks trying to pick fights with me as I left for overnight work at least once a week. If people get drunk here, they keep to themselves.
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Feb 8, 2014 05:11
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Icemakor posted:You should check out the east coast. Rural Nova scotia is insane. Dirt cheap outside of halifax, mild climate due to the ocean. Pffft you call that dirt cheap? Cape Breton is where it's at for dirt cheap. http://www.kijiji.ca/v-house-for-sa...gationFlag=true
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Feb 8, 2014 13:10
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