make mortgage lump sum or save for next house.
make mortgage lump sum or save for next house.
So I’ve owned a condo for the past 3 yrs going on to my 4th. Typically I use my yrly prepayment privileges and make a 15k payment at the end of each yr on top of raising my biweekly mortgage payment by 10% for the up coming yr. Its worked great, the two work together to really help drive down the amortization yrs.
This past year I’ve moved out to rent a place with my gf and have also been renting out the condo I own (one in question). I’m hitting the year end I am starting to think about if this year end plan is still the best plan for the future. Specifically we are saving for a home together I’m wondering if it makes more financial sense to
1. continue to do the 15k lump sum, and 15% increase is biweekly payments and manage the house savings to the side.
2. just do the 15% increase and put the 15k to our house savings
3. do neither and really free up my financial flexibility and saving ability
I’m not sure if I can go wrong with either choice but really just want to make sure I’m smart about it.
This past year I’ve moved out to rent a place with my gf and have also been renting out the condo I own (one in question). I’m hitting the year end I am starting to think about if this year end plan is still the best plan for the future. Specifically we are saving for a home together I’m wondering if it makes more financial sense to
1. continue to do the 15k lump sum, and 15% increase is biweekly payments and manage the house savings to the side.
2. just do the 15% increase and put the 15k to our house savings
3. do neither and really free up my financial flexibility and saving ability
I’m not sure if I can go wrong with either choice but really just want to make sure I’m smart about it.
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Re: make mortgage lump sum or save for next house.
Welcome to FWF.
What is your plan for the condo if/when you purchase a house? Will you continue to rent it? I'm thinking along the lines of what will you be declaring your principle residence for tax purposes? If not the condo, then I'm pretty sure you'll be able to deduct mortgage interest payments from rental income for tax purposes. Does this change the questions you are asking yourself (and us)?
The general guiding principle around here is to eliminate debt as soon as practical as the return is known versus saving/investing the funds where the future return is unknown.
My $0.02
What is your plan for the condo if/when you purchase a house? Will you continue to rent it? I'm thinking along the lines of what will you be declaring your principle residence for tax purposes? If not the condo, then I'm pretty sure you'll be able to deduct mortgage interest payments from rental income for tax purposes. Does this change the questions you are asking yourself (and us)?
The general guiding principle around here is to eliminate debt as soon as practical as the return is known versus saving/investing the funds where the future return is unknown.
My $0.02
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Re: make mortgage lump sum or save for next house.
The OP is blending emotional and financial characteristics in each option. It all depends on priorities set by the OP and gf. Emotional or financial.
Re: make mortgage lump sum or save for next house.
You want to save for a big down payment for the house you are buying with you gf. A big down payment will avoid CMHC costs.
Re: make mortgage lump sum or save for next house.
thanks for the points so far. So to reply to some of the questions.
1. I want the purely financial sense decision. not the emotional hence why I figured i'd reach out here.
2 I plan to keep the condo long term as an income property....its in a great location that allows me to not have any real challenges finding tenants. Right now; given that i've raised my mortgage bi weekly each year, i'm in negative revenue territory when its comes to rental income minus cost of that property.
3. Inital down payment for the new house shouldn't be an issue when it comes down to will it make or break the need for CMHC; ie regardless I will be over the required threshold.
Sry for not be able to give hard tangibles; just looking for some general directions/ thoughts so I that I ensure its thought out; particularity from those with no vested emotion in play.
1. I want the purely financial sense decision. not the emotional hence why I figured i'd reach out here.
2 I plan to keep the condo long term as an income property....its in a great location that allows me to not have any real challenges finding tenants. Right now; given that i've raised my mortgage bi weekly each year, i'm in negative revenue territory when its comes to rental income minus cost of that property.
3. Inital down payment for the new house shouldn't be an issue when it comes down to will it make or break the need for CMHC; ie regardless I will be over the required threshold.
Sry for not be able to give hard tangibles; just looking for some general directions/ thoughts so I that I ensure its thought out; particularity from those with no vested emotion in play.
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Re: make mortgage lump sum or save for next house.
What are the financial characteristics of the rental condo?handyy83 wrote:1. I want the purely financial sense decision.
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Re: make mortgage lump sum or save for next house.
With this additional information, I'd be inclined towards redirecting future savings towards the down payment on a new house. My rationale is based on taxation, mortgage interest payments on the rental are tax deductible against the rental income while mortgage interest payments on the new house are not tax deductible. Therefore I'd be inclined to increase the down payment on the new house and therefore reduce the non-deductible interest payments.handyy83 wrote:2 I plan to keep the condo long term as an income property....its in a great location that allows me to not have any real challenges finding tenants. Right now; given that i've raised my mortgage bi weekly each year, i'm in negative revenue territory when its comes to rental income minus cost of that property.
At the end of the day, you know you own situation and the actual numbers involved, so you should run the various scenarios to determine which makes the most financial sense to you and your situaton.
finiki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
Re: make mortgage lump sum or save for next house.
The advice would be to evaluate what you can net by selling the condo versus what you will gain by renting it. While renting it might seem to be the easiest step right now, it is not founded in any financials that you have shared.handyy83 wrote:Right now; given that i've raised my mortgage bi weekly each year, i'm in negative revenue territory when its comes to rental income minus cost of that property...
For the fun of it...Keith
Re: make mortgage lump sum or save for next house.
Negative revenue or negative cash flow?handyy83 wrote:2 I plan to keep the condo long term as an income property....its in a great location that allows me to not have any real challenges finding tenants. Right now; given that i've raised my mortgage bi weekly each year, i'm in negative revenue territory when its comes to rental income minus cost of that property.
The capital repayment component of the mortgage is forced savings, not an expenditure.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
Re: make mortgage lump sum or save for next house.
On a rental property, Your return on equity will usually be better if you have a mortage because you are using leverage and deducting the interest as expenses. Having a fully paid rental is strategy for cashflow but your return on equity will probably be very crappy.
Plus, if you have the choice of owing money between your home or your rental, you want to clear your home first because the interest aren't deductible.
Plus, if you have the choice of owing money between your home or your rental, you want to clear your home first because the interest aren't deductible.
Re: make mortgage lump sum or save for next house.
Fixed that for you.Thanak should have wrote:On a profitable rental property, Your return on equity will usually be better if you have a mortage because you are using leverage and deducting the interest as expenses. .
Re: make mortgage lump sum or save for next house.
Doesn't sound like much of an "income property."handyy83 wrote:I plan to keep the condo long term as an income property.... i'm in negative revenue territory
What could that capital earn in the equities market if you were to liquidate the condo and invest the proceeds? And would it ever call you at 3:00 am about a plugged toilet?
Re: make mortgage lump sum or save for next house.
Sorry guys, once again Elvis has left the building.
The OP (handyy83) has last visited the forum two weeks ago.
The OP (handyy83) has last visited the forum two weeks ago.
finiki, the Canadian financial wiki
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
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Re: make mortgage lump sum or save for next house.
I know this thread is dead, but just as an aside, if a real estate investor is working at 3:00am (let alone getting calls about a plugged toilet at that hour), they're doing it wrong.kombat wrote:Doesn't sound like much of an "income property."handyy83 wrote:I plan to keep the condo long term as an income property.... i'm in negative revenue territory
What could that capital earn in the equities market if you were to liquidate the condo and invest the proceeds? And would it ever call you at 3:00 am about a plugged toilet?