One of my colleagues was talking today about their mortgage. They have a mortgage of approx. $600,000 on a house worth ~$1MM in Ottawa that is coming up for renewal in the next ~8 months. (at that point he will have 20 yrs left of a 25 years amort.)
He’s been paying 3.34% interest rate and their monthly outlay is $2,945 monthly or $35,340 annually.
If he could renew right now without penalty, his current options would be in the range of 5.34% which would amount to $3,607 monthly or $43,284 annually. This would result in ~$8,000+ in additional annual expenses, or $40,000 over the next five years.
Even worse, if the rates continue to rise as they are expected to do so, he may be presented with a much less favorable option. Should that be in the range of 7.34%, his annual mortgage expenses will balloon to $51,948 annually, which is a whopping ~$16,000+in annual expenses; or $80,000 over the next five years.
Neither option is affordable to him; he’s essentially going to become “house poor”. This is the reality of purchasing the absolute biggest home that he could afford at the time when interest rates were at all-time lows.
If you have mortgage renewals coming up, make sure that you are proactive in assessing their impact on your financials. We’re beginning to snap back to reality and a lot of people are going to be faced with sobering new financial situations. Best prepare yourself for what that means and ensure that you have a plan as to how to best address your new monthly costs.
The new Tesla Model 3 is only $35K? That’s at least what their advertising would like you to believe. It’s only a “bit more” expensive than your last vehicle purchase. Maybe it’s finally time to get on that; you’ll save so much money on gas too!
Last year, my friend bought a cottage for $180K. His down payment was 25%, or $45K. This year he boasted to me that he had made $18K in a year off the cottage. It was recently appraised at $195K (+$15K equity) and he rented it out a few times this summer to earn $3K in additional cashflow. Not a bad return right? $18K total. If only it was true…![checklist-628x363[1]](https://blog.amplifiedinvestments.com/wp-content/uploads/2015/10/checklist-628x3631.jpg)
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