Personal Finance

What would you recommend in this situation?

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  • Apr 12th, 2012 10:49 am
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Newbie
Apr 9, 2012
52 posts
London

What would you recommend in this situation?

My girlfriend and I both own homes, We've decided to move in together so we chose to sell my house and both live in her house and I'll pay her for half of her house so we would be splitting it 50/50. After commission,lawyers, and fees I'm left with about 90k after my house sold. Half of her home is about 84k but she has a closed mortgage and we don't want any penalty fee's. She's allowed to do prepayments of about 30k a year and her bi-weekly payments are already maximized. What would be the best way to get the house paid off as soon as possible without incurring any penalties. And what should I do in the meantime with my money?

Thanks
11 replies
Sr. Member
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Sep 4, 2007
611 posts
80 upvotes
Orange Key holder in…
Have you topped up your RRSPs and TFSAs?

Any out standing CCs?
Deal Expert
Aug 2, 2001
18945 posts
10527 upvotes
The best advice is to speak to your mortgage lender about the terms and conditions within your girlfriends mortgage. They will be able to tell you of all the prepayment options available; I don't think anyone here can help you with that without seeing the contract.

As to what to do with your excess money - pay down your debt and, if the money is meant to be used in the short term (such as paying off the remainder of the mortgage in a couple years) invest in stuff with very low risk. While the return isn't high it will keep your principle guaranteed. You could invest in something like dividend paying stocks but there is no guarantee that their share price will stay the same/go up by the time you want to sell.
Newbie
Apr 9, 2012
52 posts
London
dvd5 wrote: Have you topped up your RRSPs and TFSAs?

Any out standing CCs?

I have no tfsas and quite a bit of room in rrsp. I have no debts.
Newbie
Apr 9, 2012
52 posts
London
TrevorK wrote: The best advice is to speak to your mortgage lender about the terms and conditions within your girlfriends mortgage. They will be able to tell you of all the prepayment options available; I don't think anyone here can help you with that without seeing the contract.

As to what to do with your excess money - pay down your debt and, if the money is meant to be used in the short term (such as paying off the remainder of the mortgage in a couple years) invest in stuff with very low risk. While the return isn't high it will keep your principle guaranteed. You could invest in something like dividend paying stocks but there is no guarantee that their share price will stay the same/go up by the time you want to sell.
There is 3 years left on her term and she can increase payments by 20%/yr and 25%/yr. Prepayments. Is it best just to max out her prepayments whenever possible until its paid off and keep my money in something low risk until then?

BTW- I have no debt.

Thanks
Newbie
Nov 16, 2008
13 posts
2 upvotes
GTA
cheapjerk13 wrote: My girlfriend and I both own homes, We've decided to move in together so we chose to sell my house and both live in her house and I'll pay her for half of her house so we would be splitting it 50/50. After commission,lawyers, and fees I'm left with about 90k after my house sold. Half of her home is about 84k but she has a closed mortgage and we don't want any penalty fee's. She's allowed to do prepayments of about 30k a year and her bi-weekly payments are already maximized. What would be the best way to get the house paid off as soon as possible without incurring any penalties. And what should I do in the meantime with my money?

Thanks

I know it is not my business, but have you legally protected yourself incase the relationship does not work? How will you get your money back if you breakup? Is your name now on the Deed? Do you have a written agreement that was reviewed by your & her lawyer of what you walk away with?
Deal Addict
May 14, 2010
1065 posts
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Halifax
shouldn't you be looking at all options, including paying penalties for cost savings?
Deal Addict
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Jan 2, 2012
4596 posts
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Toronto
RandomCDN wrote: shouldn't you be looking at all options, including paying penalties for cost savings?

+1.

Many times paying the penalties now, will actually save you more money compared to the interest you'll pay over the long term.

A few years back i switched mortgage companies and paid some big cancelation fees, but since then have more than made up for that with the savings in my lower interest rate. Just takes a simple effort to work through the calculations for both scenarios to see if it's worth it.
Newbie
Apr 9, 2012
52 posts
London
Tomb22raider wrote: I know it is not my business, but have you legally protected yourself incase the relationship does not work? How will you get your money back if you breakup? Is your name now on the Deed? Do you have a written agreement that was reviewed by your & her lawyer of what you walk away with?
Valid question! My house just Sold, and I won't be moving into my girlfriends for another month or so, but we do plan on getting my name on the deed and doing up a written agreement for sure!
Newbie
Apr 9, 2012
52 posts
London
RandomCDN wrote: shouldn't you be looking at all options, including paying penalties for cost savings?

You are absolutely correct, I was just thinking about that this morning before I read your reply. I'll have to find out what the penalty is and do some math to see If I may be further ahead paying the penalty.
Deal Expert
Aug 2, 2001
18945 posts
10527 upvotes
cheapjerk13 wrote: There is 3 years left on her term and she can increase payments by 20%/yr and 25%/yr. Prepayments. Is it best just to max out her prepayments whenever possible until its paid off and keep my money in something low risk until then?

BTW- I have no debt.

Thanks
I would calculate the cost of paying the mortgage out completely versus paying out the payments over three years. As well, if the bank charges you any fees for adding your name to the mortgage (I am unsure if you add your name to the title if you need to add your name to the mortgage of the property, I never used a traditional mortgage so that I don't have experience with) add that in.

I would suspect that just paying it over three years would be the cheapest option because of the penalty. But the only way to know is to know the numbers in your mortgage docs.


The bank should definitely be able to run both scenarios for you. As well as inform you if changing the name on the title means you have to pay them a fee for something on their end (as almost everything they do has a fee).
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Jan 2, 2012
4596 posts
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Toronto
TrevorK wrote: I would suspect that just paying it over three years would be the cheapest option because of the penalty. But the only way to know is to know the numbers in your mortgage docs.

A while back when i cancelled my mortgage (at the time with PC Financial) to a new one, PC basically charged me 3 months worth of interest. I've heard this is a standard calc mortgages use.

And you dont need to do many calcs before determining paying only 3 months of interest is better than paying 3 years!!

Doing a partial payment over the max allowed amount would be the same. They'll charge a penalty equivalent to so many months of interest. But if it results in you shortening your amortization period by a significant amount, then its totally worth it in the longrun.

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