In 2010 we bought a house and we took a 35 year mortgage. In the personal finance books I've been reading, they all seem to recommend a 10 maybe 15 year mortgage but that was not feasible for us.
We didn't buy an expensive home, we bought an older home in an niceish neighbourhood. It's a safe neighbourhood where our houses aren't cookie cutters and we actually have a back yard. We bought a home to renovate, but that had good bones and we could live in it without doing any work if we had to.
We took a 35 year mortgage, which, after our down payment of $30 000, made our mortgage payments $1235/month. That was pushing what we could afford at the time. Shortly after we bought the house, the Bank of Canada reduced the maximum mortgage length to 30 years.
Last week I heard on the radio that now in Canada you can't get a mortgage over 25 years. I am so happy we bought when we did. We live in a big, expensive city and while a 35 year mortgage is a very long term, we can increase the payments and put money down in lump sums when we can afford to. In the meantime, we are putting our money into our own asset (well at least some of it, tons is going to the bank as interest).
I was one of the first of my friends to buy my house and I really wonder how people are going to be able to afford to buy a house with the shorter terms. Our "starter" house was $315 000 and we bought during the recession when housing prices had dropped.
I am so thankful we bought when we did, even if it means paying extra interest. We have already increased our payments as our paychecks increase and have already shaved years off our of mortgage.
I don't think longer mortgage terms are a bad thing. It makes the payments affordable for those who are just starting out, and give you the ability to increase the payments as you go. Having affordable housing, with an affordable mortgage payment is very important!
Tuesday 3 July 2012
Sunday 1 July 2012
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