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Discussion Starter #1
We are in our young 20's and our first home purchase together (I have owned a property in the past)

We want to know what is the financially smart thing to do right now in our situation.

We make an annual combined salary just over $100,000k

Both student loans paid in full, wedding paid in full, zero debt, 2 full time careers.

We have purchased a house north of Toronto new development for $500,000.

$50,000 has been put down as a deposit on the house.

Our house closes in 6 months and we have about $20,000 in savings right now, with 6 months to save money.

We do not want to pay CMHC, but probably will have aboout $40,000-$50,000in savings by closing with about $30,000 in a LOC.

Would you go with a downpayment of 10% and ay the CMHC.

or should we dip into our LOC to cover up the 20%? and live with basically no money in the savings accounts with a little debt to avoid CMHC?

What would you advise?
 

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Yeah I agree.

The risk to keep in mind if that adversity strikes between down payment time and when you build up your savings in the future (how will this be possible with this type of mortgage?), you will have less credit available to you and no cash. So you will immediately be using credit to pay the basics. Not good.

Had you of posted here earlier, I would have recommended that you hold off on your purchase for a year to build up more savings for yourself so as to 1) avoid CHMC and 2) have a safety cushion in case something happens right after you move in. Sh-t happens.

Welcome to the forum btw!
 

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Discussion Starter #5
Thanks.....

However waiting longer is no fun plus renting to me right now is wasting money. Our property was purchased at $500k and now selling closer to $600k, I dont think it was a poor investment, just GTA pricing is so high!

Basically is it better to move in with a 10-15% downpayment and a $20-$30k in the bank for an emergency fund and put extra towards principal but pay CMHC.

or

Put 20% down have no money in the bank no savings and live off LOC but avoid CMHC.
 

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Also - since you are both financailly disciplined, any lender should be fawning over you and your business. Now is the time for them to forge a relationship with you. So - if you are going to have a large mortgage you should be very determined to get the best rate/package available. Local managers only have so much to offer but any lenders' 'roving mortgage specialists' can usually do much better. They can get you a low rate and waive a bunch of up front costs. Definately shop around and let them know that you are. I ended up with another lending institution altogether and apart from the great rate, I am being treated like a king and get really excellent service.

I would recommend you and your partner take a good look at your financial services and costs/fes and see where you can get further perks/costs waived so your savings includes more than just a great mortgage rate.

Good luck.
 

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I second that motion. Shop around for an FI when getting your mortgage. Go with 20% down. Look at an accelerated repayment schedule too. With your combined income and savings discipline, you can look forward to a secure financial future.

Welcome to our forum. How far north?
 

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CMHC Insurance is a very large extra charge and because it's added to your mortgage people don't realize how much extra they have to pay over time.

It's probably better to go the LOC route.
 

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Does that insurance keeps existing until you have completely paid off the mortgage?
that's a good question... if a home-owner still doesn't have 20% equity in their home by the time it comes to renew their mortgage, do they have to pay CMHC again?
 

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Does that insurance keeps existing until you have completely paid off the mortgage?
Yes.

w0nger said:
that's a good question... if a home-owner still doesn't have 20% equity in their home by the time it comes to renew their mortgage, do they have to pay CMHC again?
No

My question is this: What happens if you buy your house at $500k. Mortgage is $400K (No CMHC) on five year term.

Five years passes, your mortgage term is up and needs a renewal. Housing market has dropped, house is worth $250K, mortgage is still $350k+?? :confused:
 

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I suppose it depends on how the CMHC insurance is paid for.
If it is rolled into the principal amount of the mortgage, it will get amortized like the rest of it and you will be paying for it until the last payment.
Or you can make that payment up-front and not roll it into the mortgage.
I guess lenders quietly roll it into the principal because that works better for them, unless you tell them not to.
 

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Five years passes, your mortgage term is up and needs a renewal. Housing market has dropped, house is worth $250K, mortgage is still $350k+?? :confused:
Yep. It's the inherent risk of owning real estate. You are responsible to pay back the bank, whatever they handed over to purchase the house on closing day.

Apartments do not carry this risk.
 

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If it is feasible, you may want to have the (not always comfortable) conversation with your relatives that may be able to lend to you at or close to inflation. Write up a short term contract where the payments are defined and scheduled and the interest added. It sounds like your relatives will recognize you and your spouse are financially responsible and reliable and that they WILL get their money back, on full, on schedule.

Figure out how much you'll save yourselves in the upcoming months and ask for the rest.

If this is not feasible, use the LOC and pay it off ASAP (as it sounds like you would).

Avoid this tax at all cost either way you approach it.

Congrats on the new house!
 

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Discussion Starter #18
family help is not an option.....

I was reading that there is a 10% refund to CMHC when buying an energy star home, which ours qualifies.....small silver lining.

What if we paid the full CMHC penalty up front without adding to mortgage, does that make more financial sense?

It seems unsubstanable to not need CMHC without going into serious LOC debt, in our situation.

That sucks!
 

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I suppose it depends on how the CMHC insurance is paid for.
If it is rolled into the principal amount of the mortgage, it will get amortized like the rest of it and you will be paying for it until the last payment.
Or you can make that payment up-front and not roll it into the mortgage.
I guess lenders quietly roll it into the principal because that works better for them, unless you tell them not to.
From what I understand from what you wrote is that the insurance fee is just a one initial, one-time fee.
 
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