laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:22:36 GMT -5
So mortgages in Canada are a bit different. We can't get a mortgage contract that lasts 25 or 30 years. We get mortgages with terms up to 5 years.
The mortgage term is the length of time your mortgage contract is in effect. This includes everything your mortgage contract outlines, including the interest rate. Terms can range from just a few months to five years or longer.
At the end of each term, you must renew your mortgage. You’ll likely require multiple terms to repay your mortgage in full. If you pay your mortgage balance at the end of your term, you don’t need to renew your mortgage.
My current interest rate is 1.99%. When I need to renew it will go to almost 7%. I have the money in investments, about. $150,000, to pay it off but it will severely deplete my investments. If I stick to my current amortization I will have 20 years left and would have to renew every 5 years. I hope to retire in 7 years. If I pay off the house I would end up with about $275,000 in tax free investments, monthly bills that are covered by government pensions and about $1200/mth net revenue from boarders.
Would you pay off the house?
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busymom
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Post by busymom on Dec 5, 2023 11:29:22 GMT -5
Is there a penalty there for paying your mortgage off early, if you renew your mortgage? Also, what kind of return are you getting on your investments right now?
If it were me, I'd probably do the math to figure out how to pay off the mortgage in 7 years, so once you retire you will not have to worry about a mortgage.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:36:12 GMT -5
Is there a penalty there for paying your mortgage off early, if you renew your mortgage? Also, what kind of return are you getting on your investments right now? If it were me, I'd probably do the math to figure out how to pay off the mortgage in 7 years, so once you retire you will not have to worry about a mortgage. No penalty if I pay it off when it is naturally up for renewal. There is a penalty between renewals. Basically you pay the interest you would have paid over the rest of the contract. My investments are index funds. They are doing good right now but your guess is as good as mine how they would do over the next 7 years.
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jerseygirl
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Post by jerseygirl on Dec 5, 2023 11:46:38 GMT -5
I’d pay it off Too many unknowns and paperwork etc to keep mortgage till the end. That stinks having to get new mortgage every 5 years
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:51:12 GMT -5
I’d pay it off Too many unknowns and paperwork etc to keep mortgage till the end. That stinks having to get new mortgage every 5 years It really does. I'm not sure how our "socialist" country ended up with a system that lets the banks exploit homeowners this way.
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busymom
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Post by busymom on Dec 5, 2023 11:51:53 GMT -5
That sucks about the penalty between renewals. If your investments are only doing so-so, I'm leaning towards paying it off now. Our mortgage allows us to pay it off early, with no penalty. We're throwing extra at our mortgage right now, in the attempt to pay it off before DH retires. There's enough of the "unknown" here after retirement. Like, how much health insurance could cost.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:54:19 GMT -5
There's enough of the "unknown" here after retirement. Like, how much health insurance could cost. Universal Healthcare helps a lot! It doesn't cover everything but it covers the most common things.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:57:14 GMT -5
As a side note, I renewed a year early last time. Even with paying the penalty I saved $20,000 over the term than if I waited. The interest rates went up about 4% in that year.
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Artemis Windsong
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Post by Artemis Windsong on Dec 5, 2023 11:57:48 GMT -5
I would suggest either paying it off or doubling your monthly payments while at 1.9% to by down the cost then pay it off when renewal comes. Afterward, repay yourself as if you were the lender. Including the 7% bump, if that suits you.
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busymom
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Post by busymom on Dec 5, 2023 11:59:15 GMT -5
There's enough of the "unknown" here after retirement. Like, how much health insurance could cost. Universal Healthcare helps a lot! It doesn't cover everything but it covers the most common things. If they ever "loosen" the rules on citizenship there, I hope you'll message me. I'd LOVE to live where healthcare is a priority, and not an afterthought. (My cousin is married to a Canadian citizen, who has done what is required every year to hang onto her citizenship.) If Trump gets back in office (God forbid) you'll probably have a line at the border.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 11:59:55 GMT -5
I would suggest either paying it off or doubling your monthly payments while at 1.9% to by down the cost then pay it off when renewal comes. Afterward, repay yourself as if you were the lender. Including the 7% bump, if that suits you.
If I do pay it off the plan is the deferred mortgage payment goes right into investments.
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Artemis Windsong
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Post by Artemis Windsong on Dec 5, 2023 12:03:17 GMT -5
This forces homeowners into lining the pockets of the mortgagers. What a rip off! I have CA friends who will only rent!
"There is a penalty between renewal s. Basically you pay the interest you would have paid over the rest of the contract."
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steph08
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Post by steph08 on Dec 5, 2023 12:04:47 GMT -5
7% is a lot - that's got to be like a $400 bump in the monthly payment or so.
That interest rate is right at the cusp of where I'd pay it off as well.
If your job is stable and you have a healthy emergency fund, and you want to get that albatross off your back, pay it off.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 12:16:39 GMT -5
This forces homeowners into lining the pockets of the mortgagers. What a rip off! I have CA friends who will only rent!
"There is a penalty between renewal s. Basically you pay the interest you would have paid over the rest of the contract." Exactly!!! And if you did get a good interest rate, like I have right now, you are forced to renew when the rates are higher. This is a big thing in Canada right now. Economists are predicting a lot of people losing their homes over the next couple of years because of having to renew.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 12:18:42 GMT -5
I would suggest either paying it off or doubling your monthly payments while at 1.9% to by down the cost then pay it off when renewal comes. I don't want to put money into it while I have the 1.99%. My investments would have a better return and when the time comes I can use it pay it off.
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Post by minnesotapaintlady on Dec 5, 2023 12:58:34 GMT -5
How much longer do you have at 1.99%?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Dec 5, 2023 12:59:16 GMT -5
So mortgages in Canada are a bit different. We can't get a mortgage contract that lasts 25 or 30 years. We get mortgages with terms up to 5 years. The mortgage term is the length of time your mortgage contract is in effect. This includes everything your mortgage contract outlines, including the interest rate. Terms can range from just a few months to five years or longer. At the end of each term, you must renew your mortgage. You’ll likely require multiple terms to repay your mortgage in full. If you pay your mortgage balance at the end of your term, you don’t need to renew your mortgage. My current interest rate is 1.99%. When I need to renew it will go to almost 7%. I have the money in investments, about. $150,000, to pay it off but it will severely deplete my investments. If I stick to my current amortization I will have 20 years left and would have to renew every 5 years. I hope to retire in 7 years. If I pay off the house I would end up with about $275,000 in tax free investments, monthly bills that are covered by government pensions and about $1200 net revenue from boarders. Would you pay off the house? 7% is kind of on the cusp of which way will turn out 'better' in terms of total returns. Given your interest in retiring soon, I'd pay it off and be done with it. then redirect the mortgage payment amount into the market monthly.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Dec 5, 2023 13:00:25 GMT -5
I would suggest either paying it off or doubling your monthly payments while at 1.9% to by down the cost then pay it off when renewal comes. I don't want to put money into it while I have the 1.99%. My investments would have a better return and when the time comes I can use it pay it off. yes - obviously ride the 1.99% as long as you can. Once at 7%, I'd pay off - or configure payments so that they would end with retirement at the least.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 13:09:47 GMT -5
How much longer do you have at 1.99%? A little over 2 years. I know I'm projecting a bit but this is a major shift in thinking for me. I would need to adjust a couple of things for this to be a comfortable move. All the articles about mortgage payments doubling here in Canada have me thinking.
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azucena
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Post by azucena on Dec 5, 2023 13:12:57 GMT -5
How much longer do you have at 1.99%? A little over 2 years. I know I'm projecting a bit but this is a major shift in thinking for me. I would need to adjust a couple of things for this to be a comfortable move. All the articles about mortgage payments doubling here in Canada have me thinking. The 7% is known and locked 2 yrs in advance? I've read that the Fed is going to lower interest rates a few times next yr. Betting Canada follows suit.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 13:15:29 GMT -5
A little over 2 years. I know I'm projecting a bit but this is a major shift in thinking for me. I would need to adjust a couple of things for this to be a comfortable move. All the articles about mortgage payments doubling here in Canada have me thinking. The 7% is known and locked 2 yrs in advance? I've read that the Fed is going to lower interest rates a few times next yr. Betting Canada follows suit. I hope so. I hope I'm preparing for the worst but the best happens. ETS - it's not known and locked, I'm going by a lot of the reporting I'm seeing here. And I just don't see the banks letting all those mortgages renew at low rates. Remember everyone with a mortgage HAS to renew within a 5 year period.
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Post by minnesotapaintlady on Dec 5, 2023 13:37:56 GMT -5
How much longer do you have at 1.99%? A little over 2 years. I know I'm projecting a bit but this is a major shift in thinking for me. I would need to adjust a couple of things for this to be a comfortable move. All the articles about mortgage payments doubling here in Canada have me thinking. Well, in that case, do whatever adjusting you need to do, and hope for the best. I really don't see a return to the sub 3% loans though. That was an anomaly. Historically 6-7% has always been a lot closer to the norm.
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Cookies Galore
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Post by Cookies Galore on Dec 5, 2023 17:15:48 GMT -5
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Opti
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Post by Opti on Dec 5, 2023 17:49:11 GMT -5
I’d pay it off Too many unknowns and paperwork etc to keep mortgage till the end. That stinks having to get new mortgage every 5 years It really does. I'm not sure how our "socialist" country ended up with a system that lets the banks exploit homeowners this way. Every country is different because of how they try to manage home ownership and the resulting impact to the country's economy. There is nothing wrong with a 5 yr mortgage dance if everyone has to do it. Its tougher in France and Germany. many mortgages start at 40 yrs (or did) and owning a home can be a legacy family thing unless you are rich. What I would do? Plan for the renewal. Is it 1 year from now, two years, more? Set aside money to give you options. And I glanced at the NY Times article. Since I have been through at least three run ups in NJ home prices and two hard crashes, I am sure some of the reasoning is BS. I live in CNJ. People always hold onto their homes when they can't sell for the price they want. This always happens. It is different in CA, FL, and NJ partly because of the foreclosure laws. How you are permitted to close on a house, etc. There have been lots of selling and bailing here in my piece of CNJ prior to about half of the Fed raises we have had. I have seen people put properties on the market waiting for their price. And I saw the flipper economy come out in person when I had to sell my house at a loss. So so many locals came out of nowhere to lowball me on behalf of the family business or make FIL proud. I had to settle my first house at a loss because the timing of my divorce. The saga of my second house is a book on its own. Big loss and no stock losses or business losses at the time to make the whole thing a little less bitter. Which reminds me I need to find the person I know that seems to always have divine right timing for houses and house appreciation. He's from outside the US.
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Opti
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Post by Opti on Dec 5, 2023 18:17:00 GMT -5
The 30-year mortgage is the most popular mortgage in the U.S. and has been offered for over 5 decades (source MS Bing) Personally I am glad we have moved on from the founding of our country. When all you had to do is clear off your land, save the trees to build your house. And of course, kill or drive off all the native people who used to live there or use the land. But no mortgages.
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laterbloomer
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Post by laterbloomer on Dec 5, 2023 20:01:24 GMT -5
I'd love to read the article but I don't have a subscription
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debthaven
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Post by debthaven on Dec 6, 2023 16:18:50 GMT -5
Its tougher in France and Germany. many mortgages start at 40 yrs (or did) and owning a home can be a legacy family thing unless you are rich.
They start at 15 years in France. They used to go up to 40 years but they don't anymore, now it's 25 max (legally). laterbloomer the UK (where two of my kids live) has the same system. It sucks!!! Personally I wouldn't pay your mortgage off yet, I'd just keep accumulating as much as you can in high-interest savings, and then see how things go when your current rate expires in 2 years. Hopefully interest rates will have dropped again by then. I wouldn't want to deplete my savings by 150K at this point. You still have time (7 years before retirement). Good luck!!!
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TheOtherMe
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Post by TheOtherMe on Dec 6, 2023 18:26:20 GMT -5
This must be what DN1 was talking about when he said mortgages were not like they were in the US. He didn't go in to any more detail.
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❤ mollymouser ❤
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Post by ❤ mollymouser ❤ on Dec 10, 2023 1:56:45 GMT -5
I'd pay it off before I had to start paying 7% (or more) interest.
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