Personal Finance

Advise needed regarding mortgage- moving in a different bigger house

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  • Aug 30th, 2013 11:02 pm
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Jr. Member
Apr 23, 2012
105 posts
32 upvotes

Advise needed regarding mortgage- moving in a different bigger house

Hello everyone,
I have been following the various threads trying to decide on what to do.
Current situation: Mortgage balance 62k; House is worth 250k; Mortgage is with CIBC, got 2 % cash back at the time, matures in July 2017 (it was a 7 year term); rate is 4.9% (I know quite high, was done in 2010); Prepyament options are 10%/year and 100% for each payment.
Household income: 105k (between me and wife); owe 16K on car (I have 0% financing so no rush there). Wife has excellent credit score, I am new to Canada but my credit score is not that high yet; I am however on the mortgage.
Refinancing was not an option that I wanted to explore as there were no savings due to small size of mortgage.
Scenario 1: Pay the current mortgage down within the next 2 years with the prepayment options - Interest + cash back penalty will be around 6k - buy another house when I am done mid 2015, sell current house at that time.
Scenario 2: Pay the current mortgage on regular payments, time it to finish paying it off exactly when it matures. The additional couple of years make the interest payable to be around 6k as well. Buy a new house in 2017.
Scenario 3: Buy new house now, take out another mortgage, pay penalties...but that would limit my self-imposed affordability to 460K (as opposed to 500k in a couple of years or 2017 etc).

I am not comfortable taking a mortgage more than 250k. I know we could qualify for a lot more but I don't want to be in the "too much of a house" bandwagon. Our family is composed of 3 members right now and we might have a second child. We plan on living in Saskatoon.

Scenario 1 sets me free to buy another house as soon as 2015. Affordable house is 490K at 2015 house prices. Move in and possibly get a touch of somehow lower rates (hopefully lower than 4.9%)
Scenario 2 sets no urgency. Buy another house in 2017, save some more money in the meantime.. Affordable house will be $500k at 2017 price...however the mortgage rates will probably be higher by then which can limit again the affordability.
Scenario 3 limits our affordability due to the extra 62K + 8K penalties (including the cash back) but it will give us the best rates ( I do believe that the rates will slowly climb up in the next years anyway).

Any advice based on the above is greatly appreciated! I am here to learn!
3 replies
Jr. Member
Apr 23, 2012
105 posts
32 upvotes
Anybody has any thoughts in this? I am sure I can learn from something from someone's point of view.
Deal Addict
Jan 11, 2004
1277 posts
161 upvotes
Check if your mortgage is portable. Do the calculations @ 4.9% interest depending on your penalty it may be worth it to refinance now into a lower rate. So that will make your decision much easier.

Buy a house when it is right for you and at a price level that you can afford.
Jr. Member
Apr 23, 2012
105 posts
32 upvotes
Thank you GonePostal. I did meet with the bank today and the mortgage is portable. That would be the only way to avoid paying the penalties (as calculated today, they would be 2800+ 3660 cash back=5460). It would blend the old rate with the new rate for the new amount and the mortgage would still mature in July 2017. For giggles, I asked her what is the best rate they can offer me right now and she mentioned 3.59%for a brand new 5 year mortgage..which seems quite high based from the numbers posted in the Mortgages Thread.

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