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DormantTitan

> up $1000 biweekly 😱😱


boyfrombangalore

2G a month? How much did you borrow?


PantsOnHead88

If you ballpark at 4.5% now and 1.5% some time last year, that difference indicates a roughly 870k mortgage. Sizeable, but far from unheard of with house prices what they are.


Rinaldi363

Oh boy. Sounds like my friends mortgage amount. He’s on a 1.4% fixed, he has to renew in 1.5 years. He doesn’t seem concerned. I would be lol


PantsOnHead88

If he isn’t concerned because he can handle a few more points higher rate, good on him. If he isn’t concerned because he’s convinced it’s coming back down to a comparable level to what he started at… I hope he’s right and time will tell. But if so, he should probably at least be considering the possibility that it’ll be higher by his renewal and start planning for it.


Rinaldi363

If rates ever drop down to fixed 1% I will renew my mortgage haha


dancinadventures

*If money ever rains from the sky I will pick it up*


zeromussc

Right? Lol that's a no brainer. But taking max affordability on such a low rate ... Knowing renewals are every 5 years. That's why they created the stress test. It's also why there are people who went with B lenders only for reasons of affordability. That's something I worry about personally. And it's part of why I don't know that a correction would be one and done, and won't have a long tail that - even if a correction stalls out - won't be inflation adjusted a massive drop in real terms over the next few years.


Bintherereddat

I would be worried, but wont be at all surprised if rates are super low to get the economy going by then. Thats the length of an avg recession


homogenousmoss

The people at the bank basically said I was throwing my money away and I was being foolish. I took 7 and 10 years mortgages on all my buildings and the interest rate is between 2 and 3.8%. The earliest renews in 2026 the latest in 2029. That’s on 8 mortgages, yes I was barely breaking even with 10 years loan vs a 1-2 year where I would’ve made some money but at least now I’m not scrambling to find additional money.


Swimming_Mammoth_874

sorry, I am expecting to the rates ballpark at 5%+. Get ready for a wild ride.


PantsOnHead88

The 4.5 I indicated is current because the poster said their biweekly has already gone up by $1k. I’d be a little surprised if anyone in this thread doesn’t expect 5%+ in the near future because the banks had already almost guaranteed it would happen, and that was before the most recent round of inflation numbers came in (made it even more likely).


DaveBoyle1982

2,166.67 a month.


yow_central

Same boat - I'm fortunate that I can still manage a lot higher, but it's not fun.


[deleted]

My mortgage went from 2400 variable to 3700 variable. Cut a "deal" with scotia and locked to fixed 3800 a month for 5 yrs. No more expensive hobbies in the next 5 yrs but i can sleep better knowing it wont increase anymore...


Top-Land-2707

Everything I read says don’t lock in. Take the hit now and sometime in the next five years rates will come down and you’ll be ahead. I’m going with that thought process.


[deleted]

Yeah. Even if i lose in the next year, i still would like to have a peace of mind. My risk tolerance is not high


Ghune

That's a bet. That could go up and stay up for a few years


CloakedZarrius

The point is to protect against it going up another 1-2% and not coming down. While it is one of the possibilities, there are some people that will be very shocked if it stays at rates from 90-2000s. (4-10% range for variable)


RudianosTheSturdy

I'm in the same boat. Up $1900 total per month so far. We can cover it, but it pushes back early retirement by years. Hopefully the rates come down to something more reasonable soon.


delleh

The rates are still reasonable now


nostalia-nse7

This. Historically a good rate for Canada has been 5% prime, putting mortgage rates around 7% to balance investment in the country, with affordable housing. The reason we are in this whole mess is those historically low rates making people believe money is free, and $1M is just a number, and it’s a sure fire bet investment (real estate). When you are 9x the typical atomic family income in prime family-bearing years — that’s ridiculous. I recall my dad paying cash for our family home 30 years ago on a salary similar to what I make now, adjusted to inflation — and it was a good paying union job at the time. The house was 3x. Their house now for me would be 12-14x. In their mid-70s now, they’re going to live in that house until at least one of them leaves us — if it’s dad first, mom may downsize… but dad would just live his years out there quite happily.


inspektor31

That and straight up greed. The speed and amount of which housing prices skyrocketed in my city is nuts. It's not industry driven either. Prices started rising a bit and everyone jumped on board the money train. Realtors didn't help.


Stinky63

THIS! I’m thinking folks on a variable may wish to pay penalty to get out and go into 5 year fixed. Rates still at historical low levels


DrOctopusMD

They are reasonable rates, but when we had rates like that for the 90s and 00s, the principal they were applied to was much, much lower. Going from 2% to 6% on your mortgage is way more damaging to someone than going from 10 to 14%. Even though it's the same number of points increase, the latter increases your monthly interest payment by 40%. The former *triples it*.


Lavaine170

They are, but many people bought more house than they can really afford based on historically low rates, and now they're literally paying the price. It's good that many of the people on this thread were prepared and have been able to absorb the increases, but so many are basically fucked right now.


Eddyjoe6

They won’t


RudianosTheSturdy

I guess "soon" is relative. I mean in the next few years, rather than being a decade or two of insane rates and mega recession.


Eddyjoe6

The thing is, these rate are completely reasonable. It is completely unreasonable to think that 0.25% interest rates are something that can be maintained for any length of time, let alone be revisited soon. The last decade has seen some of the lowest interest rates in history and now they are returning to more reasonable levels. If anyone based financial decisions on historic low interest rates then they’ve made a very unwise calculation and will need to revisit their budget asap as rates will most likely not be returning to pandemic levels in the next decade, or two, or possibly ever.


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tourdelmundo

The entire developed world got drunk on cheap credit and it may be a generational adjustment for all of us.


zeromussc

You're not wrong. Then there's people like my wife who see the word debt and are immediately freaked out. Because of stories from her grandparents, and her parents who were born when her grandparents were near 40. So you've got one generation that grew up in the 30s, and another that entered adulthood in the 80s. And our millenial sweet spot of graduating into/around the 2008 recession. Canada not walloped nearly so hard, but certainly we saw what happens when you graduate a year after shit blows up in the economy. I remember working at best Buy, went from number 1 sales volume store in the country in Ottawa to crickets over a 2 year period. The future shop shutting down, me a part timer being laid off, it was rough.


helixflush

Blows my mind seeing how many people were losing their minds when rates climbed above 3%.


armour666

A family member was saying we could have vouch a much larger place for the amount of mortgage we were approved for. But I based our payments on what we could afford at 5.5% because when we bought 5 years ago I felt the ultra low interest wouldn’t go on for ever.


Captobvious75

This is why I stayed in my townhome. All my neighbours jumped into $1million homes at cheap rates. Can’t wait to see the fallout in 3-5 years when renewals occur.


Pope_Squirrely

Fall out should be 1 million dollar homes in the current market going to closer to 600k. That’s when you pounce!


Captobvious75

That is my plan lol


Confident-Advance656

Good plan. One thing though. The house you are in will drop in value as well. Best move (if you can swing it), swll and rent for 3 yrs 🤷‍♂️


astral__monk

Please don't plan on this hope. The rates have been unrealistically low for the last decade. 4-6% is about a historical norm as best I can tell. And it has gone much, much higher in decades previous. We've all been spoiled by the post 2008 crash bottom floor rates and we are all going to need a reset on what is "normal" as a society.


RudianosTheSturdy

You're forgetting to take debt ratio into account. A 5% rate today is equivalent to a 15% rate in the 80s because the debt level is so much higher. What matters isn't the interest percentage, it's the strain on the average borrower from monthly payments. Even the BoC says that anything over 2-3% puts substantial downwards pressure on the economy. That wasn't the case in the past.


zeromussc

But you also need to remember that as rates go up, the credit availability dries up, and as is the case whenever this happens, people and businesses in significant debt go bankrupt. And that kinda deleverages the economy. Which means that 3% could go from being broken to stable once the bad credit is out of the system. It's the entire point of raising rates after all. Mind you they don't want to raise them so high a massive % of folks default. But they do want to raise them high enough to remove liquidity and therefore demand from the overall system. The sweet spot would be to get to a point where a "normal" 3% overnight rate is sustainable such that maneuvers that put it down to 2% from 3% is stimulative without having to go as low as 0.25 to have the same effect. I assume the goal is to avoid being painted into a corner again.


johnny11235

But again, that’s on folks who overleveraged themselves. It is sad that many will lose their homes, but that’s not an excuse to return to unreasonably low rates. We’ve been kicking the can down the road for too long, it’s time to pay the piper.


RudianosTheSturdy

If by pay the piper you mean have total economic collapse as the entire middle class loses all equity, their homes, and their jobs, and small businesses across the country go under due to accumulated debt during a government enforced lockdown, then... I guess? As someone who voted liberal, I believe that if this happens, the liberals won't win another election for at least a decade. It will be the worst recession this country has ever seen.


HousingThrowAway1092

This is bullshit fear mongering. A real estate market correction won't collapse the middle class. Runaway real estate prices caused by rock bottom interest rates were erasing the concept of middle class for Canadians guilty of being born too late. A meaningful market correction is crucial for the long-term wellbeing of the Canadian economy. Higher interest rates are necessary to get inflation in control. Canadian household debt is insanely high compared to the rest of the western world. Canada's housing market has become a debt fueled pyramid scheme and if we don't have a market correction, future generations will be screwed.


CarRamRob

You realize only like 5% of the middle class entered the housing market in the last few years right? Half of them could take a 50% drawdown in home prices and still have leftover equity in their homes. Yes, it blows for the people who entered at the last moment and are getting fucked, but the alternative is let every single person get fucked with inflation. So it’s time to cut bait and move on


OhDeerFren

No, it's not just on them. If lots of people have more debt, smaller increases to the interest rate will have much larger impacts on consumer spending. That will mean that the BoC does not have to raise the rate as high to achieve its desired effect


yow_central

"down" is also relative. Suspect we won't get pandemic rates again til there's another big financial collapse. Lower than today though, might be possible in the next year or two depending on who you believe (whoever has the best crystal ball). Lots of fixed people will also be in trouble when they renew.


RudianosTheSturdy

Yep, 100%. Definitely not expecting 0.25% rates, but 2-3% would be nice.


ZippityZerpDerp

Hooooly crap. How much was your house?!?


Sudden-Team2415

The amount of people in this thread who don't understand the 40+ year amortization thing just shows how dumb even supposed "personal finance" experts in this sub are. If original mortgage payment was $2500/month on 25 year amortization with 1.5% variable. And the interest rates go up to 4.5%. While OPs payment is fixed at $2500/month still. The amortization would go from 25 years to like 70 years. That's such basic math and how things work. Trigger rate is the point in which the amortization = infinity years. Because fixed payments do not cover interest


averagecyclone

On the flip side, wouldnt ammoritzation come down if he renews when rates are lower again?


OrneryPin1542

Yes, or when the rates lower.


laviamaska

With a higher payment, yes. The bank could try to get you back on track for the original 25 years, or refinance for a new 25 years to make payments a bit lower


AwkwardYak4

not if they took the FTHBi, the mortgage has to keep the original date, or the FTHBi has to be bought out albeit at a lower amount edit, FTHBi can also give permission to extend the term but that is not guaranteed


therhythm6562

What is FTHBi


marnas86

Well there’s two: An SEM (shared equity mortgage) program, and also the reduced down-payment requirement. I ended up doing both, which you can by contributing exactly 14.99% of home value as down payment, getting the CMHC to contribute 5% as the SEM and then getting the rest of the home purchase financing via a bank mortgage.


kittywrastler

First time home buyer incentive


OrneryPin1542

Basically there are 4 components: - the rate - the remaining amount - the amortization - the payment amount If one moves, 1 or 2 or 3 of the others must move to make it even. If rates go up, you can pay more to reduce the owing balance and/or increase the amortization period and/or payment.


losther2

No. He has static payment based on really lowest interest rate already. Most likely, payments won't ever be lower than this because of interest rate. If he pay his principal down then, it can be lower in the future. Considering most recent owner are just paying the interest on mortgages.


Sudden-Team2415

The payments won't go down but the amortization will, if interest rates go back down. And if rates go back down to where they were when OP bought, and he keeps his increased payments. Then the amortization would be even less than 25 years on the same principal.


Lavaine170

>On the flip side, wouldnt ammoritzation come down if he renews when rates are lower again? It's cute how you assume rates are going to come down anytime soon.


Outtherejoe

I agree with your sentiment but this really isn’t “such basic math” I would venture to guess that 99% of the population wouldn’t have a clue where to begin solving this without a mortgage calculator. It’s actually a bit complex in reality but the concept should be simple


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Sudden-Team2415

Correct at 5 years they need to bring it back to 25 years which will cause a huge spike in payments (this also applies to every home owner victory lapping over taking a fixed mortgage in this thread). And they also need that loan amount to be at least 20% of the equity. Even if OP can afford the much higher payments at a 25 year amortization in 2025. If the loan amount is worth more than the house value then they'd need to come up with an extra $100k+ as well to bring the principal down to 80% LTV. If I were to wager, I'd say between now and when the 5 year renewal cliff hits in 2025 and 2026 the govt may introduce new policies or change some of the rules around mortgage renewals to provide support for the trillions of underwater mortgages. Like anyone who bought between 2017 and 2022 are grandfathered in to their mortgage at high LTV or +50 year amortization and banks are not allowed to deny their renewal if monthly payments are met.


greenfrog7

The advantage fixed payers have at renewal is that the remaining principal is exactly where they expected it would be from the outset.


Sudden-Team2415

Yeah but if the interest rate increased 3x to 4x during that time they still might not be able to afford the new mortgage upon renewal. Like let's say they were approved for a $600k mortgage at 2% fixed. And monthly payments of around $2500. In 5 years they're up for renewal and their principal is ~$520k. Exactly where they expected, but now the fixed rate is 5.5%. At 20 years amortization (since theyre 5 years in), their new mortgage payment on the smaller principal will be $3570 per month. So even with going fixed and paying down principal you're looking at $1k+ monthly payments upon a renewal. That's a lot for most families.


greenfrog7

Fair enough. You can gain a bit of relief ratcheting the amortization back to 25 on the re-fi, but it is a universal truth that higher rates harms those looking to borrow. The breadth and depth of the pain has yet to be seen - wage growth might make the extra monthly payment manageable, boat and RV sales might plummet but otherwise damage is contained, or prices could freefall under the weight of forced sales - tough to say with any certainty.


gonether

> Like anyone who bought between 2017 and 2022 are grandfathered in to their mortgage at high LTV or +50 year amortization and banks are not allowed to deny their renewal if monthly payments are met. You're thinking too rationally. In Canada, we tend to do: "we've tried nothing and we're all out of ideas". Just look at how they ignored how big this problem was ballooning.


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jasduhuhwwa

There are two definitions for that term. You just stated one of them, lol.


OneTugThug

You're conflating people who are actually knowledgable about this with he average person who follows and posts on this sub. OP has asked a question which comes up here on the daily. OP has 24 Karma. Cut people some slack. A lot of folks with low financial literacy are getting a tough lesson in personal finance right now...


Sudden-Team2415

Nothing wrong with OPs post. That is fine. It's good for people to come here looking for answers on this stuff. It's all the answers of "why would you take out a 40 year mortgage" "OP which bank let you do a 42 year amortization", "we only did a 25 year amortization, because thats what we were comfortable with, 40 years is risky" etc. Like when I posted and there were only a few answers most of the responses were struggling to understand the basic concept of a fixed payment w. variable rate. And this stuff has been the most popular topic in Canada for 6 months now. So I was surprised at the lack of understanding across the sub.


T98i

I am growing to be so distrusting of this sub now. It's a good awakening. When we bought our home last year, peak pandemic, we got a fixed rate of sub-1.5%. Reading the posts here, people were in disbelief that some folks went fixed at a similar (or even lower!) rate. Variable has always been historically lower, blah-blah. Even one of our own mortgage brokers said the same. I told my parents that we're gonna do variable because it's slightly lower than the fixed rate. They laughed at me being ridiculous, because I'm essentially betting a couple hundred bucks for thousands of dollars of risk. We took my parents advice. I learned people here can be sometimes just as clueless as I am (even those highly upvoted), and I 100% always need to do my own legwork and trust my gut. ...which I should have known to begin with. Anyway! Crazy times.


random604

Agreed, this sub likes to use theoretical statements to address actual real personal situations, in this case you "timed the market" which is an idea that this sub has great disdain for. Variable rates are definitely lower than fixed on average, and stock market returns are on average better than HELOC rates and last year this sub was full of advice to take a HELOC and invest in whatever preferred ETF, but now that advice has mostly gone away because they too are trying to time the market. Each decision needs to be looked at according to individual risk tolerance.


LeDudeDeMontreal

A lot of people on this sub are in the early stages of their adult lives and have known nothing but a perma-bull stock market and an ever increasing real estate market.


T98i

>stock market returns are on average better than HELOC rates Its tough. Precedence doesn't dictate future performance. There's definitely a lot of caution and straight-up depression these days, but you're 100% right. Individual risk tolerance is key.


Lokland881

It’s at least partially the government / CBs fault. Risk is a cross section of potential damage, potential gain, and chance of occurrence. If the CBs have made the chance of occurrence = near zero for a decade then there is no downside. This is how we found people gambling thousands (or tens of thousands) in interest payments per year with variables to save a few hundred/thousand. I’m pretty sure I just defined moral hazard and why it’s bad. Turns out it looks like a rug pull to those that lose at the end.


YoungZM

>When we bought our home last year, peak pandemic, we got a fixed rate of sub-1.5%. Reading the posts here, people were in disbelief that some folks went fixed at a similar (or even lower!) rate. Variable has always been historically lower, blah-blah. Even one of our own mortgage brokers said the same. That's because people are parroting commonly held advice without actually understanding it. People are so confident in taking advice blindly that they won't even look up the histogram that shows that variable rates are historically lower, only to also notice the unprecedented low rates we recently saw and came away from. It's the perfect convergence of the unpredictability of the market with those who are unwilling to acknowledge the limitations of the information that we do know. PFC is wonderful in a lot of regards for general awareness, some specific advice, etc. but we always need to keep in mind that whatever we find is almost always anonymous so the quality should *always* be in doubt (even identifiable professionals/experts can inappropriately generalize or have their insight taken out of context). I think most people are trying to help, they just don't always know how to or that their help actually was unhelpful (or why).


T98i

It might be because reddit creates a sense of community - especially in the smaller, less frequented subs. Heck, I find myself searching "Toronto sushi recommendation site:reddit.com" since I'd trust a reddit comment more than google reviews or a blogger. Because reddit appears to be more personal (like I'm literally talking to a complete stranger right now), the info presented *feels* more trustworthy. And that's dangerous. Thanks for the reminder.


YoungZM

That's fair and very true. It all depends on where we are and what we're looking for. When we naturally enjoy or agree with something we're also more likely to trust or praise it (even without merit) as it aligns with our needs/bias. There's a lot of good to reddit but there can also be a lot of chaff to sort through. I'm sure that I myself have added to that and will continue to in the future. More and more I'm just trying to reply with sourced information so that it's easier both to read more on, but also to verify.


TheDrunkPianist

I guess this circle isn’t going to jerk itself.


T98i

Feels good to be right for once. Feel free to join in.


greenfrog7

Even if we academically know that variable has (over relevant horizons to paying down a mortgage) outperformed fixed rates, as you've identified the trade off is not linear. If you cannot afford increased payments in the short term it is irrelevant that over 20 years you would have come out ahead.


T98i

>If you cannot afford increased payments in the short term it is irrelevant that over 20 years you would have come out ahead. I agree, but even the increased payment is dependent on individual risk, right? How much more increased payment should people allow for? $1000 a month? $5000? For some (if not most), $2000 bi-weekly increased mortgage payments is probably unprecedented. It's a tough situation.


sosapplejuice

I always suggest fixed to anyone buying. I dont care if variable is lower, when the stress of fixed is way lower(in my opinion) plus you know what you will be paying for the next time period.


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OneTugThug

I agree. The people that ridicule when questions like "invest or pay off mortgage" came up drowned out any voices of caution. But it had been over a decade of up markets, so that was all they'd known.


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ExternalVariation733

I’m told I could have had more money if I didn’t pay off my house so fast - should have invested they say Idiots


bureX

I was always shocked at how people easily borrowed against their home to invest in dividend stocks. Do some people not like having a roof over their head?


pmmedoggos

It's just a churning of the market. Investor's that grew up in the last 20 or so years never experienced anything other than a prolonged bull market.


Additional-Gas2031

We need to pump this guys post. Especially the first sentence.


Sl1mP1992

It's all one sentence but agree


MSK84

Your first time to Reddit I see 🤣


xt11an

not all people has mortgage in this sub and most people joined here to learn. maybe i'm one of those dumb people because I opted to have fixed rate and didn't consider variable rate and all its complication.


Equal-Candidate2745

We don't know your situation, so we can't really provide any relevant advice. Some general options though: \- make more money \- reduce spending \- rent out spare room/basement We will all go through hard times, you buckle down and man up. There will be more rate hikes coming. I doubled my payments (bought in 2021) and watched my amortization go from 13 years to 22 over the past few months, so I feel you.


Deceptikhan42

Op could also sell the house they seemingly can't afford. Or just hold


JimmyDaro

OP post isn't really clear on if they can afford it. They raised their payment $700 and was asking what else they can do


CainRedfield

This is what a lot of people need to hear, but not what they want to hear. Lots of people bought an investment while only considering the best case scenarios. The unfortunate thing about making poor financial decisions, especially by taking out more leverage than you can afford, is that sometimes you just have to take your medicine and accept you got greedy and made a bad bet. It's unlucky sure because real estate only corrects every decade or so, but when it does correct it bankrupts people and ruins lives. If you can get out of a bad real estate bet without declaring bankruptcy, all things considered, you've done alright.


Geoffro94

So what's your advice on what people can afford? If the mortgage goes from 3% to 12% you should just assume that could happen and not buy? I'm curious at what rate do you assume the market can get too?


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Anarchaotic

"also feel dumb as most of my downpayment was in investments." I feel you on that. Prudent advise is to not risk a downpayment with a short term horizon in a volatile market - but the market was so bullish for so long that it seemed dumb not to. I also did this - ultimately I sold most of my portfolio equating to about a 2% loss. So if I had never invested a dime I'd actually have been better off. I'm going basically cash/GIC only for the next year


CainRedfield

This will seem like a cop out answer, but like with every other financial decision, it depends. But since you asked for my opinion, I'll give you a few different examples. If you have a **high risk** tolerance, for example maybe you're in your 20s with no kids an no dependents, maybe you're even comfortable with declaring bankruptcy in a worst case scenario, then look to the last mild housing slowdown as your worst case scenario. **Bank rate to around 2%**. If you have a **low to moderate risk tolerance**, maybe in your 30s with a spouse and children, then base your worst case scenario on a repeat of the last major bear market event/crash. The obvious one would The GFC around 08. **Bank rate to around 4.5%.** If you are **very financially conservative**, maybe in your 40s+ or are younger but want to buy a home to live in for at minimum the next 30-40 and the most important thing to you is being able to keep this asset long term and you don't care about what the market does in the short term. Then base your worst case scenario between the dot com bubble and the mid 90s. **Bank rate between 6-8%.** In my personal opinion, no one should have been purchasing real estate in the last couple years without budgeting for a worst case scenario like 08 and a bank rate of 4-5%. Especially considering the uncharted territory of the global pandemic, supply chain issues, and it being common knowledge that demand is vastly outpacing supply in nearly every industry. Add to that the blatant mania in the market with the crazy bidding wars, FOMO, and 100% leverage purchasing that was all over in the media, not preparing for a worst case scenario is unfortunately just high stakes leveraged gambling. Obviously hindsight is 20/20, but you also definitely had to be putting on some thick blinders to decide to max yourself out and not budget in the possibility of a hawkish BOC and a bear market.


PantsOnHead88

While I got in and locked into fixed 5-year at 2%, I set my upper limit at what would still be doable at 10% without any lifestyle changes. Dont know what my hard cap would be, but I figure the country would be in complete crisis if it climbs much beyond that any time soon. As restrictive as it might sound, I really think the stress test rate should have been higher than 2% over current because as is currently being made blatantly clear, that 2% buffer can be blown through inside a few months. I’m no banker or finance guru, but a couple more points seems a forgone conclusion at this point. Wouldn’t be terribly surprised to see 8% inside the next couple years before rates are back on the decline. Regarding 3-12% jump, that does seem more than anyone should expect. Where exactly the line gets drawn, I don’t know. The current rates though should have been in everyone’s budget even if not specifically expected a year ago.


CainRedfield

The futures market has priced in a 100% chance that rates go up another 50-75 basis points by the end of 2022. With it being far more likely we see 100 or even 125 than it is we see 25 or 0. Although you were "restrictive", your priorities were to not invite unneeded financial stress and to not lower your standard of living. You definitely made the right choice in being disciplined.


kittywrastler

Tiff Macklem and friends definitely encouraged the risk. I fault our institutions.


OnGuardFor3

>Keep it the way it is and when renewal comes and re-mortgage for 30 years with new amount since I’m barley paying any Pricilla? Get rid of Pricilla. Problem solved.


verifiablepoppy

Depending on which FI your mortgage is with, those extra payments you're making may not be reflected in that amortization. When you make extra payments, the FI has no way of knowing if you will continue to do so for the remainder of the term or if you will use them to skip payments etc. The extra payments will reflect in the amortization only at renewal.


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rmcintyrm

This was my first thought too and a key point. The way it was explained to me is that virtually all of your mortgage info (with the exception of changes to trigger rate and principle amount) is based on the minimums required. If the mortgage holder were to do nothing but pay the minimum and no payment increases or lump sums are factored in. Worth a call to your FI for anyone unsure if what their monthly statements are actually showing.


1slinkydink1

Yup depends on if they’re just making $700 biweekly lumpsum payments or of they’ve actually increased their regular payments. The latter should be reflected in the amortization.


Pushing59

I am retired now but lived through the high interest rates in the early nineties. It will be tough but you will find a way. Frugal skills we learned then have been carried over the years allowing us to have a comfortable retirement even though we only earned median wages.


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RoyalCities

It was the 90s tho. Even with high interest their mortgage was maybe 200k for a 5 bedroom home.


vacon04

Yeah I mean high interest rate but you could do a big downpayment and bring the monthly payments down. With the super high current prices people are putting the minimum downpayment and end up with some monster monthly payments.


zeromussc

Human psychology is such that many many people get used to a particular amount of available money in their budget. So regardless of what the rates were, amount for the home etc, the people who struggle with cash flow today would be the same people who struggle with cash flow before. The other person is effectively saying that people will have to find a way to manage their monthly dollars in a difficult situation. Ultimately that's the point of what they were saying. They were simply saying rates went up and it made budgets tight and a lot of folks had to figure it out. Not making a 1:1 comparison.


Pushing59

I am the one who posted about our struggles in the 90s. We knew people who had good jobs and did ok. Unfortunately, we both lost our jobs twice in the first 4 years of buying.


CainRedfield

Not going to say the 90s were easy by any means, but financially, especially in terms of home ownership, the 90s were objectively much easier than the 2020s where bubble areas easily have home value multiples at 20x+ median incomes.


Embarrassed_Weird600

What is the average amount of a mortgage in Canada currently? Anyone know?


PantsOnHead88

Counting all homeowners (with and without mortgages), exclusively those with existing mortgages, or recent first time homebuyers? I imagine those numbers are drastically different.


syndicated_inc

Yeah but their salary was 1/5 of today’s


SleazyGreasyCola

I mean, my father was making 60k as a graphic designer in the 90s. I doubt he would be making 300k today if he was still working lol


sarahc_72

I was making $72,000 a year as a graphic designer 1996-2000!! Definitely wouldn’t be five times that today… Now I’m a stay at home mom with a different business so I don’t really know but maybe double at most


JiveTalkerFunkyWalkr

Did you own your own company? That’s a really high wage in 2000 if you were on agency side anyway. Actually even today most graphic designers I know aren’t making 72k. Art directors do though.


sarahc_72

Also to add I purchased my first condo in 1996 for $119,000 with $6000 down


RoyalCities

College and University wasnt basically a requirement to get any decent paying job and tuition was 10X cheaper than today. No matter how you slice it the 90s was a vastly different time and better suited to get financially stable.


PantsOnHead88

Household in 1990 was roughly $58k and today it’s just over $100k. That’s just over a 70% increase in income. House prices are up roughly 300% in the same period. This is not really a comparable situation.


Pushing59

Thanks for your kind words. I sometimes respond to posts about grocery costs that we feed 3 adults for less than $50 per person per week including hygiene and cleaning products. I occasionally get comments that imply we eat garbage. The vehemence is astonishing.


PantsOnHead88

That’s entirely doable. I managed in a budget of $25 per week exclusively veg/bulk meats (mostly chicken, pork, white fish) til 2018. It would no longer be doable at that price, and even at $50 you wouldn’t have many extras, but far from impossible.


Pushing59

I have extras! We eat meat or fish every day. I tried to up my spending to $65 to deal with inflation and now my freezers are jammed.


g323cs

Yet I see friends of mine doing multiple vacations in this "climate". One of them took out a huge HELOC to purchase an overpriced investment property This family I know - every Canadian holiday is a cottage trip/Airbnb. Minimum per trip is about $700-1000, and that is just short ones. They have week long ones which I know are about $2k minimum Either Im just getting poor or theyre drowning in debt. Maybe Im just too strict on budgeting/saving but Im floored how much trips one can afford in 2022. I sure hope my sacrifices now do pay off. I never forget to have fun but not to the tune of 3,4,5x vacations yearly And before anyone says "none of your business" - I dont want to see any of these families hurting. They still have small children who still needs daycare, post secondary schooling, etc.


Pushing59

We did the trips but on the cheap. Camping on crown land etc. When my grandkids were little we had more money for destinations. We once stopped on a trip and had a picnic lunch. They are in university now. When I asked about the strongest memories of trips, they remember the picnic, including details of the table cloth. Museums, zoo's, water parks. Nothing. Snowshoeing yes. Collecting pinecones yes. Staying at a hotel. Nope. Painting pictures in the back yard. Yes. Your friends don't need money to make memories, but you do need money to retire and send kids to school. An opinion I read here is that you should look after your retirement first. You can fund schooling on the fly since you will have higher earnings.


Valuable-Play-2262

Buckle up and find a way to earn more money


ScagWhistle

Instead of quite quitting, try loudly demanding a promotion.


GinaFrom_VA

I like this


BWS_001

Part of this issue is the mortgage brokers pushing variable rates and really not explaining the downside. The upside is great save money more expensive house. The mortgage broker gets a bigger commission. The downside the predicted rise in interest rates happened and people are scrambling trying to find more cash to pay a mortgage.


jimjams5263

This is my exact scenario. It’s literally terrible. Our mortgage has gone up $2000 more a month


Nikkolotto

I may be incorrect but I think that new amortization is based on the assumption the rate will this high for the entire life of your mortgage. The amortization should adjust down when the rates eventually come down. Maybe an expert can weigh in here to confirm. Great job on making additional payments.


yourgirl696969

I really don’t think rates will be going down anytime soon. It would be healthy for rates to be where they are now. We’ve gotten way too comfortable with such low rates since 2008


MassMindRape

Can't really make predictions like this. 2 years ago everyone on this subreddit was saying it was stupid to do a fixed mortgage because they'll never increase rates.


AngielandNB

Agreed. I predict they will continue to rise for at least another 2 years.


1king650

Sale your house and move to Costa Rica


QuestionVisible

That's the plan here. Unfortunately I still need another 10 years to retire.


1king650

I have 14 to go and my wife will want to stay,who has the biggest [problem?You](https://problem.You) have it made baby...enjoy your life


DudeFromYUL

“I don’t think in terms of monetary policy”- The guy in charge


rockinoutwith2

“Our message to Canadians is that interest rates are very low and they're going to be there for a long time” -The *other* guy The Guy put in charge.


titanking4

Besides the "normal" stuff like attempting to cut back on expenses, there isn't much else. Drive less, go out less etc. Know that variable rate almost always results in less interest paid over the amortization of the mortgage even it results in temporary painful periods.


OblivionGuard13

Sell the house


mrbnlkld

OP may not be able to if the value of the house has fallen below the mortgage amount.


[deleted]

Can’t wait for the RE perma bulls come and write a huge paragraph on why he shouldn’t ever sell.


CainRedfield

Honestly this. If you made an investment without considering if you could weather a worst case scenario, then you were a little greedy, and got a bit unlucky.


Dense-Gift4782

Just tossed 20k lunch p and increased payments by 900 another to bring it from 55yr to 25 yr


medium2slow

I would Lock in fixed, take it on the chin and protect yourself from any future increases. Toss as much on the fixed mortgage as you can to pay down the principle


Dbonker

Mine has gone up 1000 bucks a month since I refinanced last October. We had at 1.8% for about 2 months and then it started going up. We built our house in 2013 had a fix rate up until we switched providers last year and tried out variable lol. Well be okay but it sucks have less money now.


Background_Panda_187

Just pay the higher rate at 25yr amortized - the stress said you could afford it....


Classic_Ad_9475

Well a lot of folks will have to get into the rental market if rates keep going up. People in detached houses might find it worthwhile to finish their basements legally and rent it out to offset rising cost/ weather the storm.


D1scoStu91

I just want to know who Pricilla is and why she is barely getting paid?


Green-Outside9301

Wait for rates to go down and the length will go down.


ipeefreeli

I was in a similar boat as you. My amortization went up to 44 years before I caved and went fixed for mine. Even with me increasing my payments as much as RBC allowed (10%) and throwing an extra $150 every payment, my amortization was still over 30 years. Ended up caving and going fixed at 5.44% (I was at 4.65%, right under my trigger rate), my payments are about $300 more but at least I'm back within my scheduled amortization. At this point, I'll take the peace of mind, cut back on costs, and throw my yearly bonus at my mortgage, and hope I'll be in a decent position come renewal time.


TipNo6062

Same answer every time. Weekly accelerated payments. Weekly! Make a lump sum payment annually if you can afford it. It will save you thousands in interest. When rates go back down, keep an eye on the penalty to break the mortgage. It might be worth it to renegotiate or switch banks to get a better rate.


PeaceFilledMama

My attitude toward mortgages is perhaps a little unusual but here you go. Is this the house you're going to live in until you die at a ripe old age? It's hard to keep perspective in these crazy times but hear me out. It is likely that you'll move in 10 or 20 years; it is likely that in that time that the market will recover and you'll at least break even, and may even make some money on the sale. When you sell in 10-20 years, will it matter whether it was amortized over 30 or 42 years?? No. It won't matter because you sold your house, paid off the mortgage with the sale, and are moving forward. However, in that time you have killed yourself to pay down the mortgage by an additional $700 per month while at the same time not investing any money for your future ie. kids post-secondary, retirement, etc. So in 20 years, what will you have to show for all your hard work? A house that has a variable value (it will fluctuate due to demand) that at 9 years may have been $100k over your purchase price but at year 12 maybe dropped $200k due to factors that you can't control like desirability of your neighborhood, market fluctuations, etc. AND no savings. I would suggest instead that you maybe pay $200 extra per month to the mortgage (if you feel the need to), and put the other $500 per month into an investment like a money market fund or short term GICs (which renew in 90 days at whatever rate is currently being offered ... which is going up currently). The insanity of the housing market happened because of many different factors but one that people don't know about is how anxiety affects decision making. When anxiety is high (like during a pandemic) higher brain function is affected, which leads to panic and a spiral of poor decisions. The psychology of lack was spurred on by media, sharklike real estate agents driving prices higher to make more commission, banks, and the fear people had about not getting on the home ownership wagon. Now that many people own hugely over-inflated homes, the panic continues because everyone is mortgaged to their eyeballs as we slide further into recession. Take a step back. Take some deep breaths. Look at your overall life and be realistic about where you'll be in 5, 10, 20 years. And realize that a mortgage is just a really long term rental agreement between you and the bank, where you MIGHT make money along the way.


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Budget_Builder_979

oh wow thats more than my monthly morgage payment itself :O


Shintox

Sell the house.


Emer1929

It’s like the BOC had this planned out all along, reduce rates too stupid lows and raise them at record speeds. All this could have been avoided. Kids running that show.


Kev22994

Could have been avoided if people listened when they said that these rates won’t last forever and you need to plan for large hikes in the future.


AggregateLift

Except BoC head Tiff Mackenzie literally said that “rates are very low and they’re going to be there for a long time” less than 2 years before he started hiking rates up


Lokland881

I remember, at the time, getting downvoted for saying that that specific statement was irresponsible for the head of the BoC to make.


steampunk22

Oh you mean like when the BoC came out and said rates would be low through 2023? The messaging has been all over the place.


banditski

Dude, no one in the world saw this inflation coming. We all knew 0.5% bank rate wasn't sustainable long term but no one saw 10% inflation requiring huge and quick bank rate increases. If a nuclear war breaks out or an asteroid smashes into the Earth, don't expect the economy to continue business as usual.


BurlingtonRider

No one saw inflation coming? Uh that's the first thing everyone knew when the money printers started.


swinginonastar

If “everyone knew” then we wouldn’t even be having this conversation. Nobody predicted the massive inflation and extremely quick rate hikes. To say otherwise is folly.


squirrel9000

It was expected, but not to this extent - we're well past the original spending now (the amount introduced added maybe 15% to the economy = we would be well past the worst of that by now) and into a more structural problem. I think the amount of latent demand for everything as we adapted to the pandemic surprised just about everyone. 1.5 years ago nobody was really sure where we were going at all.


steampunk22

That’s what I’m saying, they shouldn’t have signalled anything long term because obviously they don’t have a handle on that. They should have only forecasted in the interim and not made any statements about “a year from now” etc. A lot of folks got burned by that guidance.


macsb

Actually everyone except those responsible for managing it saw this inflation coming.


macsb

Except he literally said they weren’t going to raise them for a long time.


Emer1929

Of course, but BOC should of never dropped rates during covid. We should of never seen sun 2% fixed rates.


br0ckh4mpton

Idk if it was planned but it’s sooo crazy that hundreds of thousands of Canadians over paid for houses that are suddenly worth 20% less than they paid and are now paying interest only mortgages for the next 2-5 years unless they can pay an extra 1-2k a month. I am so glad I didn’t let my fomo force me to buy something in the past year and a half because I would be so screwed right now


cdnninja77

You have no clue. This is not record speeds. This sub: “I wish house prices would drop. BOC raises rates and prices drop. Not like that! “


cuntsnapperr

Wait.


GinaFrom_VA

The government is also paying the new interest rates on their own debt. I think the next 12-18 months are going to be very hard but if you can buckle down and hold out you will be fine with variable again. I’m also in a difficult spot but have decided to try weather the storm and wait


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GinaFrom_VA

Thanks for calling this pretentious, whiney fucking tool out. People are understandably worried and asking for advice. Most people had to stretch to buy a home because prices were so crazy. Rent is also high so people did what they thought was the right thing at the time.


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XxOmegaSupremexX

Thats why I tell people to take all these Reddit comments with a grain of salt. Don’t make ANY personal or financial decisions based on the emotions you have after reading these comments. Speak to experts first.


kittywrastler

Step 0. Bank of Canada turns housing into speculative ponzi scheme and encourages borrowing.


zeromussc

Ok i hate this talking point. Real talk: Anyone who follows the bank of Canada's statements to make decisions about their borrowing and variable vs fixed decisions would very very likely have a much better understanding of interest rates, trigger rates, variable risk, and broader understanding of just how historically low 0.25 overnight was. The bank didn't even say it would be 0.25 forever, just for a while longer through covid. IDK who the overleveraged individuals out there are who somehow read bank of Canada releases and see one statement by tiff macklem to mean their variable rate would never move so it's ok to borrow at max stretch. That's ridiculous.


swinginonastar

So who was a higher authority for future guidance on rate hike than the BOC and FEDs?


RAT-LIFE

Yup the PFC special. Best part is the advice ends up being pretty bad anyways cause most of the people in here giving advice are in no financial position to be.


Unlikely_Estate_65

Here is the lesson: when purchasing a home on variable interest rate, ask question, "what was the interest rate in the past? Why is it so low now? " Canadian interest rates started going up in the 70s all the way to 20% and in until 2005, it was 8%. So why is is so low now 2%! Well because a certain govt wants to make housing "affordable" - will it remain the same? Maybe your mortgage broker thinks so(he gets commission on transaction), maybe banks think so(they get the house if you default), maybe the PM thinks so (he already got elected on the affordable housing platform though, whh does he care what happens afterward) Have you done your research before signing on to a 25 freaking years of commitment , if so you'd have seen the risks. Buyers beware! World is not a kind place to fools, I've learnt that that hard way.


go_irish_1986

Wtf 😅


CainRedfield

You getting downvoted here is like someone getting downvoted for answering "maybe you're underreporting your calories" when someone asks "I'm only eating 900 calories a day when my maintenance is 1,800 calories, but I'm still gaining weight, what should I do?" You're telling people what they need to hear, not what they want to hear. Too many people bought real estate only considering the best possible scenario of 10% appreciation every year with a virtually 0% bank rate. Not enough people asked themselves, would I still be happy with this home and could I weather the storm if houses corrected off these incredibly inflated all time highs and interest rates were raised from these insane all time lows? During a period where it was common knowledge that the demand for nearly all goods heavily outweighed the supply of goods, which is an obvious leading indicator for inflation. Sure hindsight is 20/20, but if you get burned for being greedy, that's still on you.


Unlikely_Estate_65

Thanks, and don't mind the downvotes, saying "I empathize/sympathize" ain't gonna help OP understand what mistake he made. But it makes the person saying those words feel much better about themselves though, guess thats what matters nowadays, ain't no room for tough love.