Quote:

---

Originally posted by seenappa

Hello CD Home hunters,

I recently came across the below calculations from a mortgage specialist. Here's the gist of our calculations:
If you buy a 200K house with a 5% down payment, the final mortgage amount Comes to 195,225$ including the CMHE fee of 5225$.
Then the monthly mortgage comes to 1,192$ at the current rate of interest of 5.50 for 25years period.

Out of this $1,192 about 885$ goes towards Interest!! and remaining 307$ goes towards reducing the main principal amount.
In other words the 885$ simply vanishes into Thin air into the pockets of the banks/money lenders. Not to mention the other additional expenses like heating, hydro, maintenance fees etc etc.

I currently pay 850$ rent on apt which covers all heating, water, parking etc etc. Bas! Hogaya kaam. Everything else is savings.

It became very clear to me that contributing a maximum down payment amount will ensure that less money is eaten by the banks. I am now working towards getting as much amount as possible. This above information was an real eye opener for me.

1) What do you guys think of the above scenario? Was it an eye opener for you?

2) How much percentage are you planning to putdown for down payment?

3) Any other suggestions to avoid losing your money in this “black hole” (bank)? Real estate experts may kindly provide their inputs.

Fire away…

Seenappa

---

-----------------------------------------------------------------


Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada

I think whether one should wait to save 25% down payment depends on
1. How long it is going to take to save that much?
2. What is the appreciation rate of the property over that period of time?

I personally think that in the present scenario if you can put down 5-10% downpayment, you should buy and then prepay the max. that is allowed without penalty (lot of mortgages allow you to pay 15% of the mortgage annually - it is negotiable) - so when you get your bonuses/extra lump sum monies, you can feed them in the mortgage thereby reducing the outstanding principal (hence interest) while capitalizing on the property appreciation.

Just my 2 cents

Chandresh,
Very detailed calculations for Down payment 5%.
Do you have similiar figures for Down payment of 10%?
At what % of downpayment does the principal and interest amount be 50% each?


Pramod:
As you said, It makes sense to plan for a minimum of 10% downpayment.
we have no control over the interest rate. what we can control is the amount of "less money we can borrow from the bank".

rashmig:
'1. How long it is going to take to save that much?'

True. But, if you are spending around 2,000$ on a house monthly, where will you find the money to save and payback your full mortagage?

whereas, In a rental apartment you can pay just 850$ on house(rental) and the rest of the monthly salary will be your savings towards a Big downpayment.

One of the common complaints among my friends who have purchased a house is that their heart skips a beat everytime their bank balance falls below the mortagage amount.
some of them even feel that its wise to sell their present big house, collect the savings and move back to a condo.

just my naiya paisa,

seenappa

Quote:

---

Originally posted by seenappa

Chandresh,
Very detailed calculations for Down payment 5%.
Do you have similiar figures for Down payment of 10%?

---

Quote:

---

Originally posted by seenappa

At what % of downpayment does the principal and interest amount be 50% each?

---

-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!

Quote:

---

Originally posted by seenappa

Chandresh,
Very detailed calculations for Down payment 5%.
Do you have similiar figures for Down payment of 10%?
At what % of downpayment does the principal and interest amount be 50% each?

---

My bad!


Hiren's post made me think again and I found one error in my spreadsheet. Will revise the calculations and submit later.

Chandresh

-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!

Quote:

---

Originally posted by hchheda

Quote:

---

Originally posted by seenappa

Chandresh,
Very detailed calculations for Down payment 5%.
Do you have similiar figures for Down payment of 10%?
At what % of downpayment does the principal and interest amount be 50% each?

---

Just my opinion (not as talented as chandresh), for the initial 3-5 yr period, you will always have more interest vs principal, no matter your down payment. Hypothetically, you can skew the down payment:term:interest figures to make it 50/50..but that will be impractical...

my 2 pennies..

Hiren

---

-----------------------------------------------------------------
Chandresh

Advice is free – lessons I charge for!!