Real Estate

Are we planning on spending too much?

  • Last Updated:
  • Feb 25th, 2017 10:10 pm
Newbie
Aug 30, 2011
12 posts

Are we planning on spending too much?

My wife and i decided that our max budget should be 800k for new home...
Total house income before taxes $160k.
estimated take home of $114k.
estimated to make $200k if we sell today.
$80k cash, no debt.
wifes car $380 biweekly for the next 4yrs, i have a company car allowed to use for personal.
2 kids, day care soon, estimated 2k a month.
24 replies
Deal Guru
Dec 11, 2008
13068 posts
3758 upvotes
Are you saying your mortgage will be $800k? What will be your mortgage?
Deal Addict
Jul 6, 2005
4451 posts
2140 upvotes
Toronto
Sounds like mortgage will be $600k if they transfer $200k equity from existing property as a downpayment.

Also sounds like mortgage could be as low as $520k if they use the $80k cash on hand as part of downpayment.

I would say its doable, but childcare costs for 2 kids definitely adds up... Almost like an additional mortgage payment.

I'd only enter thia buying scenario if the 2 jobs were VERY stable (ie: recession proof... Public sector, union jobs).

I'd be too risk adverse to take on that level of mortgage with jobs in the private sector
Newbie
Aug 30, 2011
12 posts
600k mortgage, i was thinking 200k down and with 80k cash we have a very good buffer. When the vehicle is paid off then that can go towards savings or mortgage payments. Our jobs are professionals i would say pretty secure, but i know anything can happen.
Deal Guru
Dec 11, 2008
13068 posts
3758 upvotes
It depends on your risk and your spending habits and where you want to be in 5, 10 , 20 years.

What do you spend now and what will change? More activities for kids? More/less travel? RESP?

It's certainly doable, but will it get you to your financial and life goals?
Newbie
Aug 30, 2011
12 posts
We both have investments through work and i always beleived my home as an investment, even if i sell in 20 years for the same amount i buy for today. All goes well we will advance in our careers, my wife has a lot of room for advancement. As far as getting to our goals, ive run the numbers and its looks good. I guess its always hard to get a line on what other people do in this case.
Deal Addict
Jan 1, 2013
2126 posts
1449 upvotes
Durham
TDS calculator will say thats fine. I have the same family income and I could not fathom a $600,000 mortgage. I have a $340,000 mortgage and find it very comfortable and we can afford vacations, kids activities etc. With that income, I cannot see much financial freedom, if any at all. But thats just me. Similar income as your family, 2 kids etc. You will be very stretched.
Jr. Member
Jun 8, 2009
153 posts
46 upvotes
Toronto
ga_zander wrote: 600k mortgage, i was thinking 200k down and with 80k cash we have a very good buffer. When the vehicle is paid off then that can go towards savings or mortgage payments. Our jobs are professionals i would say pretty secure, but i know anything can happen.
Remember land transfer tax will take a chunk of your buffer. If you are buying in Toronto, it's about 23,000, if not it is around 12,000.
You also did not mention any other debts, such as credit card payment. Unless you are one of the few who pays in full each month.
Newbie
Aug 30, 2011
12 posts
cc paid in full every month, only car and current mortgage... Ran all numbers through a budget spreadsheet and it says we should have 8k left over annually and another 9k when car is paid off.. Im in pickering and planning on buying in pickering...
Newbie
Aug 30, 2011
12 posts
kkhan15... Whats your annual savings like? Do you have kids in daycare?
Member
Feb 23, 2009
284 posts
19 upvotes
Toronto
Financially does not look like a good plan. Especially with two kids in daycare.

Why are you selling?
Newbie
Aug 30, 2011
12 posts
We have a small detatch, and with twins, need more space, was planning on 1 kid at a time...
Deal Guru
Dec 11, 2008
13068 posts
3758 upvotes
I am DINK with 200k gross and we save a little over 5k a month and we feel that is good enough. We also have defined benefit pensions too.

I don't think I'd be comfortable with less than 2k savings a month. Considering we are estimating our retirement spending will come to about 5k a month.
Newbie
Aug 30, 2011
12 posts
We have defined plans as well... I dont see my self in a 4 bedeoom house when retired, i would sell and downsize. Currently we have about 130k is rrsp/pension, with 5% a year from my salary and my wife does 6%... I would say were on target for retirement... I have 30yrs to retirement. and my wife 39.
Newbie
Aug 17, 2015
59 posts
14 upvotes
Toronto, ON
Seems like the right path if you do indeed need the space, after your car payments you should be more comfortable with payments as that is taking a good chunk of your income.
Deal Addict
Jan 1, 2013
2126 posts
1449 upvotes
Durham
ga_zander wrote: kkhan15... Whats your annual savings like? Do you have kids in daycare?
Our savings are at $12,000/yr. We use a HELOC for emergency and vacations then pay it off. My kids are 8 and 6 and both in daycare. I have a defined plan as well. My wife will get government pension.

You will not find a 4 bedroom that you desire in Pickering for $800k. You can't go off of the MLS listing anymore. For $800 you may have to start looking further East. But hey everyone has their personal preference and also spend differently. If you are very conservative, it may be doable, just not in Pickering.
Deal Guru
Dec 11, 2008
13068 posts
3758 upvotes
ga_zander wrote: We have defined plans as well... I dont see my self in a 4 bedeoom house when retired, i would sell and downsize. Currently we have about 130k is rrsp/pension, with 5% a year from my salary and my wife does 6%... I would say were on target for retirement... I have 30yrs to retirement. and my wife 39.
Oh that may explain it. We plan to retire at 55-56. We are 34 right now.

I think we have about $60k in RRSP. Don't know about pension as they are defined, I will get enough to cover our expenses and my partner will have a bit as extra spending. We've been aggressively paying down the house instead so it will be paid off in 3-4 years.
Deal Addict
Jan 31, 2016
1008 posts
710 upvotes
Daycare, school trips, braces, sports, birthday parties, etc.... Add up. I remember trying to budget like you before my kids were in daycare. I wish someone told me I was too conservative at that time as I was only really looking at the fee structure. 2k sounds about right fro daycare only until they go to before/after school care which is still approx. $25-30 ea.

My kids just stopped going to daycare after 11 yrs.... I feel like I won the lottery and the stress relief is even more valuable.

Look east of Pickering my friend. I can point you to some good daycares.
Those who dance are considered insane by those who cannot hear the music - Carlin
Deal Addict
User avatar
Dec 12, 2006
4360 posts
585 upvotes
Messed Up Area
Why not use the 80k and just pay off wifes vehicle which will be much less than the 40k if kept payments,. Then no debt. Sell home with with 200k prophit plus 40-45k savings now, use 160k on downpayment on new house to avoid insurance. Minus about 20k taxes, lawyer/etc....you will still have about 60k cash for 640k mortgage giving you alot of wiggle room form your 13k net a month income and approximately a 3 k mortgage payment less than 30% income.

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