Posted on: 22-11-04 16:06:13
Hi
We are planning to move to Canada shortly and by God's grace we have around 200K. Is it advisable to buy a house or condo for about 150K and pay full cash down or go for mortgage. My job prospects there may not be bright, minimum is what am counting initially, having this in mind your input will be much appreciated.
Thank you in advance.
Zeas
In case you want a condo, getting it for 150k might be a difficult, if not impossible proposition. However, that is a good amount to put and you will have to take a very small mortgage portion, if at all.
However, you can go for total equity mortgage whereby a bank is ready to provide you a mortgage/line of credit combination upto the full value of the house. So even after putting 150k, if you need some money, you can draw it from your line of credit, which keeps on growing as you keep paying your mortgage amount.
Chandresh
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Chandresh
Advice is free – lessons I charge for!!
My personal opinion --
If you think your job prospects are not very promising, then going for a house/condo purchase right after landing may be risky.
It might be better to rent an apartment and test the waters for a while.
150K is a very big amount of money and putting it into a volatile market like real estate right away is risky, especially if you are not familiar with the local housing market.
Why not wait out the winters in an apartment, and test your job prospects first.
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
I agree with pratickm. Also, if you think job prospects are not good, why don't you make that money work for you by investing it in some business venture?
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Diogenes
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The Cynic
As I am in a similar situation I have been thinking in these lines for quite sometime but unable to come to a conclusion. While it is true that more down payment is better but the problem for me is USD is too weak now and so any potential savings in interest will be taken away by the conversion loss.
Having said that I believe if your savings are in CAD and you intend to live in Canada for good, then there is no point in waiting. Better to purchase once and for all...and then for the roz ka roti one can always do odd jobs...No mortgage sword hanging on ones head.
But then Should one go for a a condo which is a bit expensive to maintain and slow in appreciation as against a semi detached or detached house..
I am still thinking..............or waiting for experts advise.
Quote:This is not exactly true.
Orginally posted by ValBetter to purchase once and for all...and then for the roz ka roti one can always do odd jobs...No mortgage sword hanging on ones head.
Other than your monthly mortgage payment, there are several other expenses that "hang" over your head when you purchase a house/condo.
Without an assured source of income, one may find it difficult to take care of all such recurring expenses that come with home ownership.
For example, in the case of condo, there is condo fees.
In the case of house, there is property taxes, heating, electricity bills, etc.
It is wrong to believe that you can pay cash and be done with it once and for all.
I don't see any benefit in paying yearly property taxes and montly heating/electricity bills out of one's savings.
The only time this is reasonable is when one is retired.
My $0.02 CAD
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Quote:
Orginally posted by Val
As I am in a similar situation I have been thinking in these lines for quite sometime but unable to come to a conclusion. While it is true that more down payment is better but the problem for me is USD is too weak now and so any potential savings in interest will be taken away by the conversion loss.
Having said that I believe if your savings are in CAD and you intend to live in Canada for good, then there is no point in waiting. Better to purchase once and for all...and then for the roz ka roti one can always do odd jobs...No mortgage sword hanging on ones head.
But then Should one go for a a condo which is a bit expensive to maintain and slow in appreciation as against a semi detached or detached house..
I am still thinking..............or waiting for experts advise.
Val,
You are right. If the savings are in CAD and you have the required down payment, and are here for good then you should go for the house/condo depending on your lifestyle and family needs. It is always good to put 25% down payments so that you can save on the CMHC mortgage insurance costs which sometimes can be substantial depending on the percentage of down payment and the amount of mortgage you are looking for.
The CMHC/GE mortgage insurace premiums are as follows:
5% down payment.....................3.25% of mortgage amount
10% down payment......................2.00% of mortgage amount
15% down payment......................1.75 % of mortgage amount
25% down payment........................nil
Moreover, you have to pay 8% tax on the premium amount plus $165 CMHC application fee.
Now suppose you buy a house for $200,000 then by putting 5% down payment you would have to pay a total of $6,175 in insurace premium, $494 in 8% PST on premiums and $165 CMHC application fee.
Similarly, if you put $20,000 as down payment then insurance premium is reduced to $3600 only and the tax is reduced to $ 288 and the application fee remains the same.
By putting 25% down payment instead of 5% down payment you would save a total of $6,834 and hundreds of dollars in interest over the time of your mortgage. Please note that these calculations are based on a purchase price of $200,000 and would differ either way depending on the cost price of the condo or house you plan to buy.
Now you can find out how much loss you would have in USD to CAD conversion and whether that would be significant in comparison to these costs if you decide to put 25% down payment and convert your USD savings int CAD.
Any questions, you can either PM me or email me at
Good Luck
Let us suppose you buy a house
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
