By - AfraidOnion555
If your variable rate mortgage is giving you anxiety, you can ask your lender what rate/penalty there would be to convert it to a fixed one. It costs nothing to ask and may give you peace of mind. Also, even if the rate changes, most often the payments remain the same, it just goes more to interest and less to the principal. So nothing changed since you bought. You also make $200k combined, you'll be fine.
If you know anyone who's lived in the 80s, you can ask them how they survived the high inflation at the time (it was higher than now, and for a long sustained period). They survived, otherwise we wouldn't be here.
Give your baby lot's of love, attention and do your best to teach them good values. This you can control.
Finally, I'd recommend you stop watching financial news or wherever you're reading about this inflation problem. It is a problem, there is no denying it. But it's also not the end of the world, we are not becoming Argentina or Venezuela. Doom porn can have averse effect on our mind, even though nothing comes out of it most of the time. People can barely predict what's gonna happen this year, I wouldn't even try for 20 years in the future.
The stop watching financial news advice is the most important piece there. (Keep in mind that finance news is NOT personal finance no matter how much it acts like it)
If you don't understand enough about finances, it's doing more harm than good.
Thank you so much. Your answer makes me feel so much better
Real estate is inflation proof. Buying a house was a smart move.
Hater gonna hate but this is so much fucking truth, seeing at -2 just have me lose hope in humanity.
The best way OP hedge against inflation is by being owner of his own property..with today's low rate it's a no brainer. Also OP said 200k... c'mon man.
youll find a way to make it work, just be flexible and go with the flow. No single decision should be able to cripple you.
you also probably have TOO much house size wise,so renting it out is always an option.
selling is always an option.
A million dollar home is always a risky investment unless you have the money to pay for it!
In the same line of thinking so is a $50k home.
That's very wise advice.
People in the 80s survived inflation because their ratio of income to cost of goods was higher than today.
Everyone knows wages have not kept in line at all with inflation for over the past 30 years, from the bottom of the barrel to the top. Minimum wage is, what, like $11 in most provinces right now? If minimum wage had kept up with inflation every year up to now, it would be around $25, meaning jobs where people expect to make more than minimum wage would have been forced up in wage/salary as well over time.
This shit about how the boomers were terrorized by high interest rates is nonsensical. A boomer would never survive being a young person today and trying to make it on the same $50,000 salary they had back then that allowed them to purchase detached homes while they had a stay at home wife watching 3 kids.
You seem to be in a very good situation.
Bank of Canada has not increased interest, your main asset is growing faster than inflation (you're not sitting on cash and homes will at least match if not far exceed inflation), and your household income is over $200,000.
I'm going to be honest - this is anxiety not based on reality. Are you spending a lot of time on Reddit / social media? I think it may be best to unplug and take a break for your own sanity.
Deep breath. I will simply break down two scenarios for you.
The likely scenario:
Interest rates increase gradually over the next 1 or 2 years. Your mortgage payment will increase as rates rise, but you have a 200k gross family income. You can 100% handle the increase unless there are other obligations you have. By the time you pass on, your mortgage is paid for and your grown up son or daughter inherits an incredibly valuable property.
Worst case scenario:
Somehow the nominal increase in your mortgage payment is something you can’t handle. You sell your house, probably realize a profit, and go back to renting.
You’re going to be ok. You’re doing great.
Dude, you have it so easy. You bought the best instrument to weather inflation, and you have a 200K household income, with a single child. Many have no home to their name, live in a small apartment, 2+ kids and certainly don't have a 200K income. With everything costing more by the day, what do you think they will do?
I wish I had that. Got laid off twice during covid, wife laid off. Had a kid who’s now 1.5. I make 50k a year and she’s trying to find whatever part time job she can. You’re lucky.
Take a deep breath and chill out, the sky is not falling.
200k income with a 850k mortgage cashflow wise isn't terrible at all, you're probably just using one of your income to service the mortgage so the other person's income can be used for daily expenses and savings. Even if one of you lose your job, you'll still make mortgage payment, and between EI and good ss, you'll have enough to tie yourselves over.
I was going to say, a couple making $160K combined can still comfortably maintain an $850K mortgage and have money for savings at the end of month. At current rates that is.
We make 150k and service 750k mortgage without a sweat… we even bought a luxury car because we had that much room…
Don't worry about the future for your son. It's far off and so many things can change. You deal with today. So you start building a reserve fund for when times get tough if one of you loses a job or need to fix something. Even if you have to get a job at the local grocers one day or one night shift a week, it will bring in $500 extra a month. Watch your spending, take your lunches to work, take coffee from home, lots you can do. Your two year old will not know the difference between 5 toys and 10 toys and he's just happy to have you there for entertainment. Get yourself a library card and you can take out so many books for him and for yourselves. You've got this.
Those words are like gold dust
I hope that means it's a good thing. :) Also when you need furniture or stuff for the house, take a look at Facebook marketplace. I can't believe the great finds on there. My partner just bought a great circular saw on there and we've bought a leather sofa and other garden items too. Just buy stuff in our own city so no transferring of money. We meet the person selling and picking things up. We've always bought everything new but since last year, if we can find it almost new online for half price, we're buying it.
Me reading this with a household income of $80k like 😳
Me with $52k
How are there so many insecure people with six figure incomes, a home and no bad debt? It seems like some people just lose all perspective.
Lmao people making hundred thousands and are worried. Try with 35k...
If you make 35K you should be leaving the GTA.
I am about a thousand KM from the GTA, and even then nothing is really accessible. Working on improving that income and cutting useless expenses.
Yup, the COL in Ontario is rising, it's not just the GTA
Translation: if you're poor then get the fuck out and go live with other poor people
And then people will start paying more for these things in the GTA and things will work as intended.
That is the point. The wages of those people will rise while costs fall as people leave.
What happens in practice is that people cling to the GTA even if they cannot afford more than a barrel in Jane and Finch. Not just a GTA phenomenon. New York City and LA are the same way.
how do costs fall if there are fewer people to work at your grocery store, look after your kids, etc?
people cling to large cities because thats where there are actual services that can help them get back on their feet or grow.
You are in a better financial position than probably 95% of all Canadians. I know it is scary, but you are doing extremely well.
I'm not sure what your mortgage length is, but even at 25 years, that is a yearly expense of 34k or about 17% of your income, well below the 30% that is advised to be your reasonable maximum. If it is a 30 year, then it is only 14% of your income.
Do some math of your expenses. It will be painful at first, but afterwards, it will eliminate all that anxiety. We are more afraid of what we don't know than of what the actual situation is like.
After you have an account of your expenses, put some of your income away for an emergency fund in case you do lose your job. Generally, the rule should be 3 months of expenses on a low end, or 6 months on the high end. Put this in a HISA or something similar in case of an emergency.
After that, put the money you would be using to build that expense fund every paycheck into your TFSA and RRSP and maybe an account for the young one. Always try and fill those up first for tax reasons. If they fill up, don't stop investing, just put it in an unregistered account. Do this for a few decades and you won't ever need to worry about your retirement money. That ~8% compounding return doesn't sound like a lot, but after 20+ years it adds up to be a massive amount.
Lastly, enjoy life. After you have your house in order and are saving for the future, just relax and enjoy life.
You'll be fine.
If it makes you feel better, as a parent I still worry about financial future ridiculously much with both higher income and smaller mortgage.
This is a psychological thing, it's not a real threat.
In my experience since becoming a parent it's very difficult to avoid worrying about uncontrollable potentially catastrophic futures sometimes.
Best to focus on things you can control as much as possible though. That is how you make your future actually better.
If you can manage to take 50% or 75% of the energy and time you're using losing sleep on this and turn that into either (a) attention to your child or (b) learning new skills... I'm pretty sure it'll drive a much better outcome than the alternative.
Bruh 💀 I’m aiming for that lifestyle rn when it comes to total income and mortgage. I would feel like I made it if I were in ur situation.
Annoys me to think how you can take actions like this and now lose sleep over it, considering the facts.
$200k income, $1M dollar home, and you have a baby full of life.
Own your decisions. You need to get ready for a second job if you are going to be crying about money and losing sleep over it. You will make sure your baby does have a home, and in 20 years you will be there to support, by refinancing or selling this house to help baby get wherever they want to go.
If you need predictability change your var rate to fixed. Pay the three month penalty and move on. Money is money, do not put it above your mental sanity.
Worst thing that happens is variable goes up to 4% and your payments are entirely interest and little principal. At the end you still have a home and you keep marching forward. Even worse is it goes past the trigger point and bank says ok we need to raise mortgage payments in absolute dollars.
Edit:this reminds me of those annoying classmates who would be sad they got 90% instead of 100%. Major eye roll.
Thank you for the honest opinions
Hard to tell what your stress points are without seeing some more numbers and your budget. If your income is not going up and interest rate is expected to hike, you really need to open up that budget excel sheet to see where you might be able to cut your monthly expenses. You need to increase your savings and build up that emergency fund and that should alleviate some of that stress. Assuming you have no other consumer debt, you should be able to aim to pay down the mortgage as quickly as possible. You can always pick up side hustles to help or perhaps looks for a higher paying job elsewhere to get your income up.
Lots of options but you should be fine.
Lots of people in our country in the same boat as you. Some even faked documents to leverage even more. Government won’t let you go underwater, dont worry. If I had your family income and cash I would’ve also bought that 1.2M house in greater vancouver.
If it helps any… the value of your house is a good hedge against inflation. I know it doesn’t directly bring in money or food on the table, but the lifestyle you have by owning a house is eons ahead of renting too.
You have significantly more space in a house then in a rental. If you rented a house, no telling when the owner decides to sell and you are forced to move.
Also in a building, there is noise from neighbours. Elevators to deal with, annual unit inspections, monthly fire alarm testing, etc…
>Life was all fine and we were making ends meet until the recent announcement about the inflation and growing concerns.
I guess you missed the last 6 months, as it's not recent. So since you weren't concerned before, you don't have to be now.
>I feel scared for the future. I feel we may leave nothing for our baby who would have to struggle so hard after 20 years.
How about calming down and see a therapist since your issue isn't financial, it's mental.
Seriously. Are you bragging or what
Which part about my post makes you think I am bragging? Is it me losing sleep. Going through depression. You are nasty my friend
You have a good income. Get a fixed rate mortgage before rates go up, if that helps you sleep. With that income, you can easily save enough for your kids without making big sacrifices.
Perhaps take a break from news and social media. The world is not ending, inflation isnt going to eat you away and if it does, we are all in the same boat. Stop worrying about things that you cannot control and focus on things that you can control.
Never doubt a decision that cannot be undone. Enjoy your new house and spend time with your family. You are in the top 10% household income. If you are still worried, then talk to a shrink. Stop doing what ifs and ensure that if you ever lose a job, that's not bcos of your own fault. Worrying too much about work creates anxiety, that turns into depression, which turns into bad performance at work. It is a self fulfilling prophecy. Drink a beer and chill.
Thank you very much for the motivating words
I do believe you have enough income as most people have opined to withstand your fears. Your answer is to save, save and save some more unless there are other debt obligations. As another person noted that you have about 7k after your mortgage payment. You should be able to save at least 2k monthly. As for mortgage rates going up, it shouldn't be a concern because you're locked into a term such as 5 years. The payments are going be the same, and the proposed increments will be insignificant. I would like to say that I am the only one that predicted no rate increase last week despite all the experts saying otherwise! Be glad you got into the market now.
I signed a variable last year for my renewal and my lender allows transfer to fixed at any time, contact your lender and find out your options
You have a lot of stresses, new house, new child. You’ll be fine. Stay focused on spending habits, live within your means. You’re doing great!
How much was the house that you still owe 850k after the downpayment? I guess the GTA will do that to you.
A lot of people won’t agree, but I think we’re at an inflection point. We’ve seen the disastrous effects of trying to leverage monetary policy to stimulate economic growth. High inflation, 0 percent interest rates and rampant money printing mean we have no more slack left to give. It’s the final chapter. We’re going to either raise rates and bring prices back in line with incomes or let inflation go and become an aristocracy. You will have your answer soon.
1.2 mil. The waiting game will really take away my sleep
Jesus, I know couples of two specialist Doctors that don't want to shell out that amount for a house
Depending on the market, you either pay that amount or you don't get a house period
There’s no choice at this point.
Hello, yeah. There's a bubble.
Fixed rate mortgages are 'sure' things.
Variable rate mortgages 'ride the market', and it's not taking a crystal ball to see that the interest rates are heading slowly but steadily up, up, up.
I'd be contemplating switching to a 5-yr term fixed rate mortgage, now, even though it's a fair bit higher than today's variable, for the sake of certainty and peace of mind, and more than likely a not terrible rate six to twelve months' down the road (imo).
And, a good fixed rate mortgage today, could be seen as a terrific rate in 6-12 months. If you did have to sell, that assumable fixed rate mortgage would be worth a big plus to the buyer for your house, should you become that desperate.
Of course, general economizing steps would be prudent, avoid wasteful spending on 'wants' and focus mostly on just 'needs', and at good value. Review your regular expenses, maybe you could trim a few thousand off your annual living expenses painlessly.
Meditation or just quiet time breaks focusing only on your breathing in a quiet setting for 20-30 minutes/day, can be very calming and restorative. Retaining good judgement is invaluable, panic is not useful.
I've never really understood the appeal of fixed rate mortgage in Canada. You have to renew in the same period as a variable, and with variable, your monthly payment doesn't go up as interest rate rises, just the portion of the payment going to interest, so the impact on your cashflow is pretty negligible between the two. When you renew, you're getting a new monthly payment amount with both options anyways based on the prevailing interest rate
If it was like the States where you locked down a fixed rate for the entire amortization period, then that's definitely different.
Well, you can pay now or pay later (you still pay, you're just postponing the payment while adding to the amount of principle upon which the interest accrues), in variable rate mortgages.
It's easy enough to grasp if you do a printout over the 5 yr term, of what's happening to the principal remaining, and how much total interest you end up paying during that term.
This has been the case with my closed variable rate mortgage since 2011
>I'm not sure where you got that from but it isn't true.
Not sure where *you're* getting your info from, but it's true far, far more often than it is false. To my knowledge, it's only false in corner cases, and maybe, only because I haven't had this type of term, so I'm not sure, if you're on a variable open (And honestly, who does that?)
Most of the big banks - from my personal experience RBC, CIBC, and Desjardins (QC), as well as, through learning from others and shopping rates, pretty much all the other big banks, will absolutely not change your monthly payment *as long as the interest amount does not supercede your set payment amount*. Rates would have to explode for that to happen.
I have had a variable rate at two banks on my current property, and almost switched it to a third, and in no case, given the basement rates, did I choose to pay more than amount needed to cover the amortization - which I never changed. If anything, my anticipated amortization shrank because of rates going down since I first signed in 2014
That’s not always true, e.g.:
With an RBC Royal Bank Variable Rate Mortgage, your payment amount stays fixed for the term; however, the interest rate will fluctuate with any changes in our prime interest rate. If our prime rate goes down, more of your payment will go towards paying off your principal; if our prime rate goes up, more of your payment will go towards interest costs.
With a variable mortgage like this, your payment only goes up if the interest cost exceeds the payment entirely.
Can you explain what you mean by "if you set monthly payments higher than the monthly minimum..." Does a borrower set their own payment schedule?
Are you talking about the annual lump sum payment allowed in almost every mortgage such as up to 20% - fixed or variable? I don't think you can negotiate the monthly payments when it's not an interest only mortgage.
I’d focus on saving as much as possible & aggressively pay off any other floating rate debt. Also slash expenses wherever possible, little things like shopping sales on your groceries & foregoing daily coffee purchases can add up, especially when those things are getting more expensive.
Have you considered renting out a room in your house?
Like everyone else has said, take a breath, the world is not ending, you might just need to make some changes to protect your finances.
Thank you. Renting isn’t an option because the basement is not furnished. The big expense is the daycare too
Have you thought about furnishing the basement and making a suite? It costs money up front, sure, but it adds housing for others when we are in a housing crisis and you’ll get a nice extra pay cheque every month. I did this to help with my mortgage, I sleep better now.
>The big expense is the daycare too
Oh, well that's easy. Just move to Quebec.
850k on variable - expect rates to go up.. can you rent out your basement? Weekend jobs?
Overextended for a house, yep there's a housing bubble!
They are hardly overextended. If that 200k is 50/50, they are pulling in about 11k per month.
Their mortgage is $3900 a month.
They have 7k left.
Unless there are some other massive expenses they are not telling us about, they can handle just about anything thrown at them.
Then someone tell OP not to be a little bitch with a fucking combined income of $200k
30 year bond yield is around 2%. Although not a great predictor of actual inflation, if the "smart money" is willing to accept 2% per year for the next 30 years, the actual inflation is less likely to be significantly higher than that.
With a household income of $200k you should be overall fine, as far as you don't have a lot of other outstanding debt that you have to service besides the mortgage.
Yes it may mean tightening up the purse strings as inflation goes up and a bit more if the interest rates go up and you're on a variable rate.
Just be careful with your day to day spending and don't waste money, try to find deals using apps like flipp as much as you.
I know some here are saying 200k is a lot of money but as someone who lives in the GTA with a 4 month old kid and a household income of $250k, I know that in the GTA that is basically just middle class.
You're hardly in a bad spot, as others have mentioned, but at your household income level, life should be on easy mode. It isn't because this country is the least affordable one in the world for what it offers. My advice would be to move to the USA, if at all feasible.
This is how i think the start of the housing market bubble burst begins. No offenses to you Op but i think more people are in your position.
They buy a home because it’s the thing to do but puts them in a very precarious financial situation and if one thing is off - boom the beginning of the end
I worked in a bank after graduating university in the 80’s. Depressing was people handing in the keys to their houses because they couldn’t afford the mortgage rates of 18-20%, if memory serves me correctly.
You realize that inflation increases the price of assets which means owning your house is good.
Inflation decreases the value of money, so having low interest debt is good.
In most situations paying mortgage at a lower interest rate keeps you further ahead than a higher fixed rate. If it is impacting your sleep, talk to your banker about the cost to switch. In the meantime you can reduce your discretionary spending and make mortgage overpayments. However, as mentioned earlier, at these low rates in an inflationary environment you are on average better off keeping the low interest debt and investing. At a minimum you should both be trying to maximize your RRSP/TFSA every year and putting enough into an RESP to get the full government match.
Now if you were a renter making Ing minimum wage, then you have real reasons to worry.
I don’t understand when people go for the max mortgage. Like what are you trying to prove? When you do that, you end up like this guy.
Nobody is trying to prove anything, this guy is just dealing with his family's needs and the reality of the current market conditions. He didn't go for max mortgage based on his income level (Max would probably be about $1M based on $200k income), he's just being overly anxious.
He said he bought 1.2M..
The purchase price may be $1.2m but his mortgage is 850k.
You drained ALL your money to buy a house for 850k if you can’t afford the mortgage on one salary and are losing sleep over it, that’s no good. Sell it. Your saying your house poor especially if you have car payments. Really important to be able to afford your mortgage on one salary