# How big of a mortgage are you comfotable with?



## piano mom

*How big of a mortgage are you comfortable with?*

Just wondering how big of a mortgage are most people comfortable with.


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## Spudd

We bought a more expensive house before we were done paying for the first one. It's certainly not uncommon. For us, our first house was in the suburbs and the commute was killing me. We moved to be closer to my office, but unfortunately real estate prices are a lot higher in that area. Our "new" house is smaller and 50 years older than the "old" house, and cost more. Location location location!

It's the "I'll never pay off my mortgage" crowd that scares me. I can't imagine going into retirement with a mortgage.


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## Four Pillars

If you want to understand your in-laws thinking, you should probably ask them instead of us.

I'm not sure I follow the logic of having to pay off the mortgage before buying a bigger house. A lot of people buy starter homes or a house/condo on their own and end up buying something else as their situation changes.

Did you save up for your first house or did you take out a mortgage?


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## piano mom

My husband and I hate mortgages. We paid off our condo mortgage within 1 year, our first house mortgage ($138k) within 3 years and our last mortgage on our current home ($66k) was paid off within 1 year. And all these mortgages were paid off with only my husband working while I stayed home with the kids.

We have been wihout a mortgage for 6 years now and have been very happy with our still frugal lives.

I just cant wrap my head around people who get "really" comfortable with living with mortgages.


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## Four Pillars

piano mom said:


> We have been trying to influence our in-laws to do the same thing but to no avail.


Lead by example - that's all you can (and should) do.


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## piano mom

Actually we have been without a mortgage for 9 years!!!


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## Echo

Our mortgage was about 3x salary when we bought a new house in 2011 - so I guess that's how much we were comfortable with. We put just over 20% down and plan to pay it off in 10 years.


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## none

Unfortunately, the way you did things is not really possible now a days due to the massive price run up in housing. When people buy 1/3 million dollar houses on a 40K a year salary there is little hope that the mortgage will be paid off any time soon.


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## lonewolf

How come the mother owns a third of the house ? Is it a loan or are they in bussness togeather ? If its a loan the first goal should be to pay of the mother not buying a bigger house. If its a bussiness then I can see looking for a differnt house.

Social dependence most likely has your SIL head burried in the sand like the average person that have paying interest along with taxes as thier 2 biggest expenses throughout thier lifes. (based on united states). I take the easy path which is to not waist my time & energy to make money to pay interest. Instead I have interest making me money saving me time & energy of having to work for money.


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## piano mom

none said:


> Unfortunately, the way you did things is not really possible now a days due to the massive price run up in housing. When people buy 1/3 million dollar houses on a 40K a year salary there is little hope that the mortgage will be paid off any time soon.


I still think it is possible for them if they try hard enough.

My husband still takes the bus to work. Although we can easily pay for a new deck, we are thinking twice about spending the money if it can be invested and making more money so that my husband can retire earlier.

None, it is just the way people think. If they think they can't pay off the mortgage, then they just give up and instead spend the money elsewhere.


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## none

Hey, I'm the first to jump in line saying that people who can't afford houses should buy them but unfortunately that's not the case now adays.

Houses in Urban centers run fom 1/3 to a million and higher. Most people can't pay these off any time soon. You're living in the past.


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## summer

piano mom said:


> I still think it is possible for them IF THEY TRY. They don't need any more toyd, 2 cell phones, 2 cars, movie channels, take outs, brand name clothes, renovate bathroom, deck etc. Yes, they buy these things!
> 
> My husband still takes the *bus to work*. *Although we can easily pay for a new deck, we are thinking twice about spending the money if it can be invested and making more money so that my husband can retire earlier.*
> 
> None, it is just the way people think. If they think they can't pay off the mortgage, then they just give up and instead spend the money elsewhere.
> 
> Regarding his mother's share, they didn't have enough down payment so they borrowed money from his mother.


OK but not everyone thinks your way, which is fine too.
I would never take the bus to work, no matter what. I would rather work till 75 instead of doing that.
Plus, spouse and I would rather work extra so we can have a nice home with nice things (granted I only work 2 days a week).
Different strokes for different folks.


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## lonewolf

If they borrowed from his mother, the only leverage you most likely have is if someone in the family has money that will be left in an estate @ a future date. That person should let your SIL know no money will be left to her or her kids if the mother is not paid off.

People 

NEVER LOAN MONEY esp a large amount i.e., a home, if the bank will not lend out the money there is a reason for it. Do not be a wimp that can not say "NO".


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## marina628

none said:


> Hey, I'm the first to jump in line saying that people who can't afford houses should buy them but unfortunately that's not the case now adays.
> 
> Houses in Urban centers run fom 1/3 to a million and higher. Most people can't pay these off any time soon. You're living in the past.


How much equity do they have?That is the real question and it really is no big deal selling up in fact right now is probably the best time to do it as you could probably get a 10 year fixed rate for around 3% .If you have no debt and a decent savings account I don't think it matters if you owe $200,000 or $500,000 as long as you can afford your home and still have a decent amount of cash left over each month.


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## piano mom

summer said:


> OK but not everyone thinks your way, which is fine too.
> I would never take the bus to work, no matter what. I would rather work till 75 instead of doing that.
> Plus, spouse and I would rather work extra so we can have a nice home with nice things (granted I only work 2 days a week).
> Different strokes for different folks.


That's fine. But what happens if, God forbids, your husband could no longer work to pay the mortgage? Would you be ok for the house to be foreclosed? Where would you live then? How about your children? What happens if there is a need for a large sum of money i.e. Emergency. Have you thought of the future?


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## none

piano mom said:


> That's fine. But what happens if, God forbids, your husband could no longer work to pay the mortgage? Would you be ok for the house to be foreclosed? Where would you live then? How about your children? What happens if there is a need for a large sum of money i.e. Emergency. Have you thought of the future?


Piano mom: Careful you're bordering on the condescending and insulting.

Keep in min that your husband bought a house at the peak of affordability - those conditions do not exist now. I'm a huge housing realist (some call bear) so I understand your horror that your SIL wants to buy a larger house in todays inflated environment. Is your SIL a stupid **** for wanting to buy another house while still suckling on her in-laws proverbial financial teet? Absolutely - I think we've all agreed on that.

You're version of frugality is different from others - you sound like a one of the self entitled baby boomers that got a ton of fantastic breaks but are horrified that others be offered even a pitance of a similar level of support.


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## piano mom

none said:


> Piano mom: Careful you're bordering on the condescending and insulting.
> 
> Keep in min that your husband bought a house at the peak of affordability - those conditions do not exist now. I'm a huge housing realist (some call bear) so I understand your horror that your SIL wants to buy a larger house in todays inflated environment. Is your SIL a stupid **** for wanting to buy another house while still suckling on her in-laws proverbial financial teet? Absolutely - I think we've all agreed on that.
> 
> You're version of frugality is different from others - you sound like a one of the self entitled baby boomers that got a ton of fantastic breaks but are horrified that others be offered even a pitance of a similar level of support.


I apologize if I sound condescending or insulting. 

First off, we are not baby boomers. We are 44 and 43. My husband and I did not get hand outs of any kind - simply hard work and perseverance plus frugality. I am only trying to understand how anyone can be so carefree when it comes to mortgages.

Again, I do not mean to bring anyone down. Just don't understand people's thinking. That's all.


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## marina628

I can speak first hand here on worst case happening in life.I worked full time as did my husband and we had a mortgage and small child when I was in a car accident that left me permanently disabled and in a wheelchair.I do not think there is any amount of planning you can do for an event like this to be honest.I was a passenger and there were 3 insurance companies fighting about who was at fault.My work paid me short term disability for 6 months then they cut me off ,then then took me 25 months before I received another dime .My husband had to lose alot of time from work as I could not care for myself let alone my daughter.I have to say thank god we had a house to borrow again and we had family able to help us to keep up this fight.I went in the hole $78,000 to fight for my rights ,you guys will be shocked to learn that my first offer was $24,000 to settle with my husband's insurance company. This is how no fault worked , I was married didn't have a drivers license myself and due to no fault and being a passenger I had to sue my own husband's insurance.
Life is too short to worry about what other people are doing ,these are the things that cause family issues when you butt in .Does the mother in law live in the house?Is she getting paid interest on the loan?Maybe they are going to sell and buy another house and give her back her money who knows.Cell phones and cable are not really excessive things today nor are two cars.It really depends on where you live ,physical abilities to take public transit etc.My daughter lives in the city,we bought her a car and she would not take it ,the street car and bus runs 24/7 and it would cost her more to drive and park than take the bus to school.It is not a once size fits all world out there and hard for any of us to judge the decisions others are making.


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## dubmac

"Noting that the current debt-to-income ratio sits at more than 160 per cent, the consulting firm called the trend to higher debt levels “unsustainable” for consumers."
http://www.cbc.ca/news/business/story/2013/04/30/business-debt-levels.html

We live in a small place, close to work, not much space for all the "toys" that I see referred to in posts upthread. My approach is to avoid debt of any kind - due in part to my scottish roots I suppose. I'd rather sell my place in a few years, move to a larger home (with room for a nice garden, maybe on a lake somewhere) but all this is after the kids are through school, and hopefully after all the car-driving involved in raising kids

I really wonder home many out there can sustain a debt to income ratio of 160%. I would be losing sleep!


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## marina628

Many of these people may be business owners who take average salary while their business is banking a significant amount of assets each year.My husband and I fall in this category.


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## blin10

I'm same way, I will work more to have toys I want then settle for garbage and be extremely cheap... obviously there is still a limit to how many toys you can have as well...



summer said:


> OK but not everyone thinks your way, which is fine too.
> I would never take the bus to work, no matter what. I would rather work till 75 instead of doing that.
> Plus, spouse and I would rather work extra so we can have a nice home with nice things (granted I only work 2 days a week).
> Different strokes for different folks.


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## Mookie

lonewolf said:


> I take the easy path which is to not waist my time & energy to make money to pay interest. Instead I have interest making me money saving me time & energy of having to work for money.


I totally agree. Why have interest working against you, when you can have it working for you? All those people that over-extended themselves with humongous mortgages will never get interest (or dividends:chuncky on their side, which is essential if they ever hope to retire comfortably.


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## Homerhomer

piano mom said:


> Again, I do not mean to bring anyone down. Just don't understand people's thinking. That's all.


That is your problem not theirs ;-)

If you are happy with your decisions and life style then great, you did well, now mind your own business ;-)


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## piano mom

Homerhomer said:


> That is your problem not theirs ;-)
> 
> If you are happy with your decisions and life style then great, you did well, now mind your own business ;-)


You're right. I really should.


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## marina628

I would hope anyone with a mortgage also has investments of some sort as well.But we all started out young and broke ,at least I did and it is not a bad thing to buy a house to live in and take 20 years to pay for it.What concerns me is when the 50 year old people are buying homes and needing 30-40 years to pay them off.


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## Maybe Later

We are considering moving in the near future to a similar sized home with an additional bedroom that would be closer to schools and work. When I ask this question of myself, despite what I think might be an 'optimal' financial strategy, it would honestly depend on the specific house and the preceived value to us as a family. It's a pretty wide range that probably varies more than a year's take home pay. At the same time, we would probably not lengthen the amortizatiion time and hope to have everything paid off long before the kids are out of school. However, because of the amount of equity in our current home, even with taking on more debt, our monthly cash flow including mortgage interest and property tax would still be less than or equal to renting a comparable house.

Part of my reasoning is that it isn't 100% about it being an investment. Part of that variance, that I'm obviously willing to pay for, is lifestyle (or more correctly, perceived lifestyle). That said, I also don't count on appreciation of my personal residence for retirement (I don't even try to predict it at all - it is essentially zero in any back of the envelope calculations) and I know that I'll sink a ton of $$ into it that won't be recoverable. It is more of a consumption good that provides me shelter. Plus, I enjoy most, if not all, of the tasks associated with being a homeowner.


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## Hawkdog

Well you likely in the minority in your thinking (not on this website though!!!). I have sold 4 houses and just transferred over the mortgage each time.

I am sure 12 years ago interest rates were a little higher, today at 2-3% I would think twice about putting all my free cash on my mortgage when I can put in a bank stock at 4%. 

I can see your concern regarding your inlaws, but I believe your concern is more money sense/spending habits than just having a mortgage, maybe have them watch the TV show till debt do us part.

They have generational mortgages in Europe.



piano mom said:


> My husband and I hate mortgages. We paid off our condo mortgage within 1 year, our first house mortgage ($138k) within 3 years and our last mortgage on our current home ($66k) was paid off within 1 year. And all these mortgages were paid off with only my husband working while I stayed home with the kids.
> 
> We have been trying to influence our in-laws to do the same thing but to no avail. They thought we were foolish to not live life today. We have been wihout a mortgage for 6 years now and have been very happy with our still frugal lives.
> 
> 
> 
> I just cant wrap my head around people who get "really" comfortable with living with mortgages.


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## Hawkdog

Forgot to mention I held a mortgage on a rental house for 7 years at the same time, so obviously my comfort level is a little higher.


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## HaroldCrump

Family & friends sometimes have bizarre money management ideas.
For the sake of sanity, we choose to leave such matters alone, and keep our thoughts to ourselves.
Unsolicited advice is seldom appreciated.


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## MoneyGal

100-year mortgages were introduced in Japan in 1995.


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## marina628

Hawkdog said:


> Forgot to mention I held a mortgage on a rental house for 7 years at the same time, so obviously my comfort level is a little higher.


I have 3 rental mortgages plus my own , I am sleeping like baby but we put down 35% on these homes and I believe we have an average of 60% equity on them now.


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## marina628

My friends just bought a home in Germany that cost them about 1 million USD , the house is three levels with master bedroom and bathroom in basement ,level two has kitchen /dining with living room and a office and top level has 2 bedrooms and two bathrooms.Super small house but they got a locked in rate 1.9% for 10 year amortization.They will be 62 when the mortgage is paid assuming it all goes well and they have to pay $3500 a month to get this paid off in 15 years..They own a house of similar value in South Africa but can't sell it ,just dropped it by $90,000 last month .That probably would exceed my comfort level !


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## sags

Oddly enough, a lot of people may be in the best financial position of their lives to pay a mortgage.....after they retire.

Kids grown up and gone...........car insurance cheaper.........less food..........less hydro........less everything.

I would rather enjoy life and make mortgage payments............than scrimp and save and end up without a mortgage payment, if it only means putting more money into a bank account to be distributed upon my demise.

Most of the older people that I know personally..........have more money than they know what to do with anyways.


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## Ihatetaxes

sags said:


> Oddly enough, a lot of people may be in the best financial position of their lives to pay a mortgage.....after they retire.
> 
> Kids grown up and gone...........car insurance cheaper.........less food..........less hydro........less everything.
> 
> I would rather enjoy life and make mortgage payments............than scrimp and save and end up without a mortgage payment, if it only means putting more money into a bank account to be distributed upon my demise.
> 
> Most of the older people that I know personally..........have more money than they know what to do with anyways.


Very interesting POV sags. I've never looked at it like that and there is some good logic there. If a retired couple has great pension income and want to enjoy life in a nicer home or buy a vacation property with a mortgage, why not?


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## Echo

dubmac said:


> I really wonder home many out there can sustain a debt to income ratio of 160%. I would be losing sleep!


Some homeowners are leveraged 10:1 (1,000%) and you'd lose sleep over 160% debt to income ratio? You wouldn't be comfortable with an $80,000 mortgage if you made $50,000 a year?


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## none

Echo said:


> Some homeowners are leveraged 10:1 (1,000%) and you'd lose sleep over 160% debt to income ratio? You wouldn't be comfortable with an $80,000 mortgage if you made $50,000 a year?


"A debt-to-income ratio (often abbreviated DTI) is the percentage of a consumer's monthly gross income that goes toward paying debts. (Speaking precisely, DTIs often cover more than just debts; they can include certain taxes, fees, and insurance premiums as well. Nevertheless, the term is a set phrase that serves as a convenient, well-understood shorthand.) There are two main kinds of DTI, as discussed below.
http://en.wikipedia.org/wiki/Debt-to-income_ratio


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## MoneyGal

read down, down, down in your link to find the common Canadian version of the DTI, which is not what you posted.


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## none

MoneyGal said:


> read down, down, down in your link to find the common Canadian version of the DTI, which is not what you posted.


Whoops! My bad, I didn't scroll all the way down. Nice catch.


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## Echo

Not to mention mortgage debt is super cheap right now with 5 year rates under 3% and 10 year rates under 4%. Debt to income ratio is not a good metric on an individual household level. 

http://www.boomerandecho.com/why-our-debt-to-income-ratio-is-misleading/


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## summer

I could work full time if need be.
Also, I never said I had a large mortgage. I put about 70% down on my house. 
Of cours I think of the future. But I won't live like a pauper now because of these irrational fears.


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## summer

blin10 said:


> I'm same way, I will work more to have toys I want then settle for garbage and be extremely cheap... obviously there is still a limit to how many toys you can have as well...


Yes, and to me certain things are basic, like having two cars. Unless of course you like right downtown Toronto. If I can't afford two cars, then I need to work more.


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## Jon_Snow

I live about 25 minutes from downtown Vancouver. My monthly mortgage payment is $270. I am comfortable with this.


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## arashbro

Piano Mom, you seem to be trying to figure out why you're SIL doesn't have the same values as you. As others here have mentioned, live and let live. Your SIL and BIL are grown ups, paying their own bills and making their own way. Just because they are doing it differently than you, doesn't mean it's wrong. It just means it's wrong for you. That's the beauty of being free and having free will. We each get to do what we think is best for us individually and on behalf of our family. If they were to ask how you've achieved your version of amazing results, you could tell them or give them advice. If they owe you money, you'd be entitled to an opinion but if they're paying their own freight, you get to share you're angst for them here on this forum but not with them directly. FWIW, a few years ago, someone very wise gave me some valuable advice on the subject of family relations: When dealing with in-laws, try to be like vanilla pudding: bland, sweet and inoffensive!


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## NotMe

To me I don't think it's necessary to clear off your old mortgage before getting a bigger house. But to buy a house and need your in-laws to make it happen, now that's a bigger red flag than anything. God I couldn't imagine accepting $10 from my father in law, let alone $100,000!


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## Dmoney

Uh oh... about a 600% debt-to-income ratio going by the Canadian definition.
I still only pay ~40% of my net income to pay all housing related expenses (mortgage, taxes, utilities, generous allowance for maintenance etc.)
This also ignores the "rent" my girlfriend contributes which would knock me down below 30% of net income.
If I include the equity pay down, I'm now at less than 15% of NET income to service debt of 600% my net income.

With rates where they are, I'm not too concerned, and in no hurry to pay off my mortgage. I don't see rates rising for at least two years, and even then, it will be a gradual crawl.
Currently, my average monthly income from investments can cover about 50% of gross housing costs, this with a portfolio less than 1/3 the size of my mortgage.

Crazy environment we're in right now


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## none

Dmoney said:


> Uh oh... about a 600% debt-to-income ratio going by the Canadian definition.
> I still only pay ~40% of my net income to pay all housing related expenses (mortgage, taxes, utilities, generous allowance for maintenance etc.)
> This also ignores the "rent" my girlfriend contributes which would knock me down below 30% of net income.
> If I include the equity pay down, I'm now at less than 15% of NET income to service debt of 600% my net income.
> 
> With rates where they are, I'm not too concerned, and in no hurry to pay off my mortgage. I don't see rates rising for at least two years, and even then, it will be a gradual crawl.
> Currently, my average monthly income from investments can cover about 50% of gross housing costs, this with a portfolio less than 1/3 the size of my mortgage.
> 
> Crazy environment we're in right now


You're assuming that mortgage rates are directly related to prime (as they are now). new mortgage rules may change that by forcing the banks to take on more of the risk themselves rather than offload it on the tax payer. This would be a decent move by our current incompetent government (to clean up their housing mess). We need to get stimulus funds out of real estate and into the economy.


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## Dmoney

none said:


> You're assuming that mortgage rates are directly related to prime (as they are now). new mortgage rules may change that by forcing the banks to take on more of the risk themselves rather than offload it on the tax payer. This would be a decent move by our current incompetent government (to clean up their housing mess). We need to get stimulus funds out of real estate and into the economy.


Unfortunately, the banks have enough clout that nothing is going to change any time soon. Anything that reduces the size of mortgages is very unlikely to pass. Add to that that government wants to keep the housing market rising slowly, rather than stagnant or crashing, and I'm not too concerned about rapid interest rate increases any time soon. 
Too many levels of government rely on overpriced housing to let the housing market reach any sort of natural equilibrium. Between taxpayer backed financing and artificially low interest rates, the bubble could continue for quite some time.


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## none

Dmoney said:


> Unfortunately, the banks have enough clout that nothing is going to change any time soon. Anything that reduces the size of mortgages is very unlikely to pass. Add to that that government wants to keep the housing market rising slowly, rather than stagnant or crashing, and I'm not too concerned about rapid interest rate increases any time soon.
> Too many levels of government rely on overpriced housing to let the housing market reach any sort of natural equilibrium. Between taxpayer backed financing and artificially low interest rates, the bubble could continue for quite some time.


Nobody wants a housing crash but I think it's largely unavoidable - whether the government wants it or not. People see the writing on the wall and once the true cost of home ownership is realized people will avoid buying houses. It's happened everywhere else and Canada is no different. Hoser aren't special.


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## andrewf

lol @ government keeping house prices from correcting. Why do you think they've been tightening lending standards?


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## Eclectic12

sags said:


> Oddly enough, a lot of people may be in the best financial position of their lives to pay a mortgage.....after they retire.
> 
> Kids grown up and gone...........car insurance cheaper.........less food..........less hydro........less everything.


And less income unless they are continuing to work somewhere.




sags said:


> I would rather enjoy life and make mortgage payments............than scrimp and save and end up without a mortgage payment, if it only means putting more money into a bank account to be distributed upon my demise.


You know yourself and your priorities best. Whereas for me, the mortgage being paid off means more traveling than if I was still paying the mortgage. To each their own ...

Of course the OP sounds like they have scrimped but when I look at what some co-workers are spending (ex. Starbucks twice or more a day at $5 plus taxes for a cheap visit), scrimping isn't always necessary.




sags said:


> Most of the older people that I know personally..........have more money than they know what to do with anyways.


Which raises the question in my mind of how many of them have a db pension and how many in the future will have a similar retirement income? 
There's lots of comments on CMF that db pensions are not sustainable and how little is being saved for retirement so unless one has planned for their own retirement - YMMV dramatically.


Cheers


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## Berubeland

The way I look at it is...the less housing cost you have to pay the better off you are. I'm prepared to live in a crappy house in a not fantastic area to achieve this goal. Even though I make decent money, I'm not at all into upgrading my house, my car and "stuff". I'd rather have the money. 

In fact this abnormal level of house proudness and emphasis on how great housing is and how much you need it and how much bigger your house is next to the other guys house is a sign of the ridiculous housing mania that has gripped this nation

Your house is in a constant state of entropy. The longer you have it the older it gets and the more it breaks down and the more it costs to maintain.


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## NotMe

Berubeland said:


> The way I look at it is...the less housing cost you have to pay the better off you are. I'm prepared to live in a crappy house in a not fantastic area to achieve this goal.


Hmm well while I get the sentiment, especially as a father I'd rather not live in a crappy house in a not so fantastic neighbourhood. I'm equally opposed to living in a rosedale in a house I can't afford either. So for me that meant compromise - a nice but not super house in a good but not bloor west village neighbourhood. That was my choice, others make different ones.


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## none

Berubeland said:


> In fact this abnormal level of house proudness and emphasis on how great housing is and how much you need it and how much bigger your house is next to the other guys house is a sign of the ridiculous housing mania that has gripped this nation


Hey, you sounds like an adult!

Ironically, our society for some reason equates buying a house as an essential act in the pathway to becoming an adult. I would argue that buying things heavily weighed on the emotional need side is actually a halmark of immaturity.

Good for you.


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## Toronto.gal

NotMe said:


> especially as a father I'd rather not live in a crappy house in a not so fantastic neighbourhood......That was my choice, others make different ones.


I'm with you!

'Abnormal/immature' for being a homeowner??? :rolleyes2:

Sure, home ownership is not for everyone, but it is for many.


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## HaroldCrump

none said:


> heavily weighed on the emotional need side is actually a halmark of immaturity.


The vast majority of our lifetime expenses are based on emotional needs.
A lot of our food and clothing is emotional (social stature, show-off, etc.).
Technically we can survive by eating rice and vegetable soup.
We can get by with 2 shirts and 2 trousers for years.

Look around your house - over 90% of the things are "emotional".

Even saving, investing, retirement, are emotional.
We can all work till 67 and retire exclusively on govt. pensions.
Hardly anyone starves or freezes to death in the G8 countries.


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## Toronto.gal

HaroldCrump said:


> Look around your house - over 90% of the things are "emotional".


If my memory serves me right, I think that someone upthread has an Audi parked in his garage. Hmmm, I wonder why not drive a less expensive car?  No, I do not wonder at all, as mentioned upthread, people make different choices; it's their business, that simple!


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## none

Toronto.gal said:


> If my memory serves me right, I think that someone upthread has an Audi parked in his garage. Hmmm, I wonder why not drive a less expensive car?  No, I do not wonder at all, as mentioned upthread, people make different choices; it's their business, that simple!


Eeeps, looks like I'm getting a creeper.. 

I got a fantastic deal on the audi (US blue book trade-IN price) and it's really the safety features I was interested in. I have a son and I spare no expense on his safety.

Anyway, there's a huge difference between buying a reasonably prices car (that I could currently sell for how much I paid for it 3 years ago) with cash compared to buying a 750K house in an obviously overinflated inflated market on leverage. I bought this car (which was my first) when I was 37 and had rented cars since I was 25. Why? Because I don't have a fuzzy emotional need to own such an object and when I needed one I would simply rent. Consequently, I saved probably $25K plus compared to if I had bought a car at 25. You guys really need to realize it's not all about you, I was complimenting Berubeland BTW.


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## HaroldCrump

none said:


> I have a son and I spare no expense on his safety.


Some people might say the same for choosing to buy a home in a safe[r] neighborhood.



> compared to buying a 750K house in an obviously overinflated inflated market on leverage.


The market for used cars in also over-inflated.
Using leverage is common for buying cars, too.
Never heard of car loans?
Right now, there is a thread going on about a 96 month car loan.
Some of us plan to pay off our mortgages in a similar time frame.



> had rented cars since I was 25. Why? Because I don't have a fuzzy emotional need to own such an object and when I needed one I would simply rent.


Are you seriously saying that renting cars is cheaper than buying?


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## none

HaroldCrump said:


> Are you seriously saying that renting cars is cheaper than buying?


Absolutely. We'd rent a car for $35 to have it from Friday until monday from Enterprise. Because I had a RBC platinum card collision was covered and liability was included in the price.

Renting a car every weekend for a year cost me about $1500. That is FAR cheaper than any car you can reasonably buy with insurance.


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## MoneyGal

No, he or she is saying he or she is free from impure, immature, emotional impulses, not like the rest of us idiots. each:


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## none

MoneyGal said:


> No, he or she is saying he or she is free from impure, immature, emotional impulses, not like the rest of us idiots. each:


I would appreciate it if you wouldn't misrepresent my posts - i never said such a thing.


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## MoneyGal

none said:


> I would argue that buying things heavily weighed on the emotional need side is actually a halmark of immaturity.


Sorry, what you said was that people who buy houses [="things heavily weighed on the emotional need side"] display the hallmarks of immaturity.


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## Ihatetaxes

none said:


> I would appreciate it if you wouldn't misrepresent my posts - i never said such a thing.


Yeah you pretty much did, and do, every time the subject of real estate comes up. We get it, you are a brilliant renter and we are dolts for owning homes and other real estate. 

You are entitled to your own opinion of course but its getting tiring to read it in so many threads.


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## none

MoneyGal said:


> Sorry, what you said was that people who buy houses [="things heavily weighed on the emotional need side"] display the hallmarks of immaturity.


I don't see how this is controversial. This is the foundation of what impulse buying is - satisfying an emotional need without due regard to the financial consequences is the halmark of financial immaturity. I don't understand why this is obviously upsetting you.


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## marina628

MoneyGal said:


> Sorry, what you said was that people who buy houses [="things heavily weighed on the emotional need side"] display the hallmarks of immaturity.


I am very very Immature then :distress:


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## none

Ihatetaxes said:


> Yeah you pretty much did, and do, every time the subject of real estate comes up. We get it, you are a brilliant renter and we are dolts for owning homes and other real estate.


Nope - currently owning is quite different from currently buying. I've made that clear on numerous occasions. I would never suggest someone sell their house and start renting to avoid the coming housing correction. Putting off buying for a couple of years though when renting is frequently cheaper than buying at today rates regardless of a correction, however, is a completely different matter.


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## MoneyGal

You are right! I don't know why I'm getting so upset. I can't imagine what is compelling me to post over and over with my point of view on a single issue about which I am so obviously right, with my insight into every financial situation of every poster who has ever posted on this board ever. Your insight into my emotional well-being and state is also very compelling and accurate.


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## none

MoneyGal said:


> You are right! I don't know why I'm getting so upset. I can't imagine what is compelling me to post over and over with my point of view on a single issue about which I am so obviously right, with my insight into every financial situation of every poster who has ever posted on this board ever. Your insight into my emotional well-being and state is also very compelling and accurate.


No.. I obviously have very few insights into your emotional well being. You are a difficult person to understand... passive aggressiveness and prone to exaggerating and all...


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## Sampson

Internet boards are funny. We can all make broad sweeping generalizations about personal finances, but how applicable are they in every scenario.

What if a family buys a 1/2 million dollar home, young family, early 30's. Say they put down 20%, $100,000 equity. Are they stretched too far? 

Most people would say yeah, that's what happens in our overly expensive Canadian housing market. Now let me fill in some details. Young professional couple earns $175,000 gross, 10-15% bonuses annually (we are in Calgary after all), and they have been experience 5%+ income growth per year, early on in their careers after all.

Still too much house?

Wait for more. They have been working in Cowtown as young professionals for 10 years, and have managed to save another $200,000 into their RRSPs, and other accounts.

Still too expensive? This might not be an average scenario, but clearly these individuals are not buying too much house (IMHO).

So if this example isn't used as an archetype, then how can all home owners (even ones that are buying right now) be swept into a single category?


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## Toronto.gal

none said:


> *currently owning* is quite different from currently buying.


I chose to interpret your posts that way thus far, until I read the following, which had been in response to Karen simply saying [as a general comment], that having paid off her mortgage 30 years ago had made her very happy:

*'That's a funny way to weight it. You still in a sense rent the house by paying property taxes and upkeep - it's just been reduced. I don't really see the big deal as I try to think of this things as flows rather than absolutes.'
*

You really don't miss an opportunity to be negative on this topic regardless whether the time is now or 30 years ago. 

Relax a little and try to enjoy the forum!


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## none

Toronto.gal said:


> Relax a little and try to enjoy the forum!


Well there is the pot calling the kettle black.

Was I was attempting to impart is that one should focus on rates rather than absolutes.

For example, if you have a 500K house which you can pay off to avoid a 2.79% mortgage rate compared to using some of the equity to max out your RRSPs & TFSA and tax favoured investments and reasonable make 5% I would think the latter would be a better financial decision. 

You never truly own your house anyway - you always owe taxes and the government can take it away if it gets in the way of development anyway.


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## Homerhomer

none said:


> I got a fantastic deal on the audi (US blue book trade-IN price) and it's really the safety features I was interested in. I have a son and I spare no expense on his safety.
> 
> .


Audi to keep a kid safe ;-) .


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## none

Homerhomer said:


> Audi to keep a kid safe ;-) .


I would like you to know that the A3 consistently scores 90%+ for safety rating. The fact that it has a top speed of 250 km/h is just convenient


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## Maybe Later

Two points: First, anyone who has made this decision has already rationalized it to themselves, regardless of whether it is a financially "optimal" solution or not. Doesn't matter if it is a mortgage or an Audi. From the outside, the rationalization or solution may not seem optimal, but that it because the outsider lacks the same value system for context.

Second, Rob Carrick linked to the following yesterday It provides an interesting point of view: 

"The biggest consumer purchase most of us will ever make is a house. It’s also the biggest investment. The house itself is the consumer purchase; the land underneath is the investment. Your house depreciates in the same way that your car does, but more slowly. Eventually, a house reaches the end of its economic life. But the land it sits on is as functional as ever."

http://www.fundlibrary.com/features/columns/page.asp?id=14431

I hadn't thought of it that way. There are caveats of course, some of which are mentioned in the blog post, but he raises some interesting points.


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## Toronto.gal

none said:


> Well there is the pot calling the kettle black.


Hmmm, I'm certainly not passive aggressive, just the latter, LOL [nor is MoneyGal btw], but sure I enjoy the forum [minus a few people], why else would I be here?

I have a mixed strategy with most things, ie: I'm optimist/realistic.

*HH:* Sure it's about safety, and nothing whatsoever to do with any emotional attachment to the # 1 luxury car in India, and zooming past the Beemer. :biggrin:


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## Homerhomer

Toronto.gal said:


> *HH:* Sure it's about safety, and nothing whatsoever to do with any emotional attachment to the # 1 luxury car in India, and zooming past the Beemer. :biggrin:


I then draw the conclusion that me driving a dodge and having my son in it is deemed highly reckless and irresponsible parenting ;-)

I now have to watch for the Family Services knocking down my door ;-)


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## Hawkdog

HaroldCrump said:


> Family & friends sometimes have bizarre money management ideas.
> For the sake of sanity, we choose to leave such matters alone, and keep our thoughts to ourselves.
> Unsolicited advice is seldom appreciated.


I'll drink to that.


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## Berubeland

Family services is coming for me too. I live in a crappy neighborhood and I drive a 1999 Toyota. 

Did I mention that with what I avoid paying on a mortgage or cars I might be able to pay for any private school in this city... if I wanted to. Certainly we don't save money on activities around here. TaeKwondo, dance, swimming and piano are some of the stuff we can afford for my son even after the 60K pay cut I took last September.


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## Eclectic12

none said:


> ... You never truly own your house anyway - you always owe taxes and the government can take it away if it gets in the way of development anyway.


I suppose ... though if the possibility of losing one's shelter is a significant factor - I'm not sure what is the solution. I've had my lease canceled as the owner wanted to move back in and stop renting.


Cheers


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## Homerhomer

Berubeland said:


> I live in a crappy neighborhood .


And I just wish more and more members here would view other poeples choices as simply different and not stupid solely based on the fact that they are different (the comment is obviously not directed at Berubeland, just to clear it up;-)
I moved out from a crappy neighbourhood and my housing costs increased, I don't give a fly about what car I drive as cars don't mean anything to me, and I am very comfortable with my mortgage even though it's about 200% of my annual income.
Choices ;-)


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## MoneyGal

Homerhomer said:


> And I just wish more and more members here would view other poeples choices as simply different and not stupid solely based on the fact that they are different (the comment is obviously not directed at Berubeland, just to clear it up;-)
> I moved out from a crappy neighbourhood and my housing costs increased, I don't give a fly about what car I drive as cars don't mean anything to me, and I am very comfortable with my mortgage even though it's about 200% of my annual income.
> Choices ;-)


So much this!


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## Toronto.gal

How mature/respectful/simple would that be, eh?!


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## Four Pillars

Agreed Homer. Most of the forum members are very reasonable, however there are always the occasional jerks/trolls who have to repeatedly insist that they are the smartest ones in the room, when it is pretty clear that they don't even belong in the room.


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## piano mom

Did I start this war or did my thread get hijacked? 

As you guys can see here, it would have been very difficult to ask my original question to my in-laws - it being a very sensitive matter.

I thought I would just air out my thinking in this forum. It wasn't meant to be insulting/ disrespectful to any one here. Afterall, that's what a forum is all about, isn't it? People talking and asking questions?

Anyways, I've leanred that there are things that are very personal and should be left undiscussed. Everyone has their own priority and that's ok. So, let's all stop criticising each other for their decisions. Just accept that ducks quack and cows moo


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## Four Pillars

piano mom said:


> Did I start this war or did my thread get hijacked?


Hijacked - nothing to do with you.


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## 1.5M

Sampson said:


> Internet boards are funny. We can all make broad sweeping generalizations about personal finances, but how applicable are they in every scenario.
> 
> What if a family buys a 1/2 million dollar home, young family, early 30's. Say they put down 20%, $100,000 equity. Are they stretched too far?
> 
> Most people would say yeah, that's what happens in our overly expensive Canadian housing market. Now let me fill in some details. Young professional couple earns $175,000 gross, 10-15% bonuses annually (we are in Calgary after all), and they have been experience 5%+ income growth per year, early on in their careers after all.
> 
> Still too much house?
> 
> Wait for more. They have been working in Cowtown as young professionals for 10 years, and have managed to save another $200,000 into their RRSPs, and other accounts.
> 
> Still too expensive? This might not be an average scenario, but clearly these individuals are not buying too much house (IMHO).
> 
> So if this example isn't used as an archetype, then how can all home owners (even ones that are buying right now) be swept into a single category?


Yes, I think it's too expensive if they don't need it. They should focus first on becoming financially independent. They are not making that much to afford a $400k mortgage and their savings are way too low if they make $175k/year.


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## My Own Advisor

Mortgage remains over $200k. I hate it. Hopefully it will be killed in 9 years. I am not comfortable with any more debt.


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## newfoundlander

1.5M said:


> Yes, I think it's too expensive if they don't need it. They should focus first on becoming financially independent. They are not making that much to afford a $400k mortgage and their savings are way too low if they make $175k/year.


Wow, that may be a bit harsh and quick on judgement based on the info provided.

They're young professionals who have worked for 10yrs and saved a nest egg of $300K in that time. Assuming they haven't been making $175k on avg over that time, but rather worked their way up to that point, from say $100k starting, then I would say they've done a pretty good job of socking something away. Assuming they maintain their savings rate then they could be mortgage free in, what, 15 years, if they focused and remained as fiscally responsible as they have been to this point? Maybe 25 if they keep their other retirement savings plans going strong. Nothing wrong with that as far as I can tell.

I find the whole "it's too expensive if they don't need it" and "they're not making enough to cover a mortgage of that size" views can be dangerous as it brings the subjective "need vs want" classification into it. Do I need all the things I have bought or spent money on (including my residence)? Absolutely not. Do I think that since I work hard to earn my money, I am entitled to a few things that make my life easier or more enjoyable (including my residence)? Absolutely. It's the "more enjoyable" one that sometimes raises red flags for the more fiscally risk-averse among us (including me, by the way).

A couple more relevant points...
Did they lock in historical low rates for the next 10-15yrs? Are they in trouble if rates increase? (Not if they locked in)
Is the rent they could get for their place more than the running costs and debt service costs? (because this is one of the alternatives to selling out and cristalysing losses at the low end of the market)

There is no absolute optimal level of risk-averseness which we can apply to the general public. People have different levels of comfort with carrying debt and different priorities. I usually consider the maximising of (net) equity to be more important than minimising of debt, and as such, I have no problem carrying mortgages which are cash neutral or better - even if I *gasp* may never pay them off without selling the property. People have different ideas of fiscal responsibility - sometimes taking the least risky option can also be irresponsible. We all have opinions, but they are not always transferable/applicable to the general public.

_I realise I'm new here, and that I'm reviving an older thread here, but this topic became very relevant for me over the past few weeks - for reasons that may not be so obvious from my post._


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## Sampson

The famous idiot thread...risk tolerance is a very personal matter and making judgements on others lifestyle is obviously precarious.

Welcome to the Board and post more details if you feel comfortable.

Few people in Canada go 'broke', and if you have a plan or how you will handle and manage your debt, then you are already ahead of the game. Managing spending is critical but if you sock away enough to achieve your goals, then naysayers be damned.


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## birdman

When I am "asked" for opinions on financial issues I normally respond to the effect "it all depends on how you want to live your life" and "choices" you make on your journey. 
Do you wish to retire at 45, 55, 65 or later? What is important to you such as major purchases, work, both parents working, housing, etc.? I can't tell you what to do but there are implications for each decision you make. I have a friend who spends and borrows like there is no tomorrow and somehow survives and he has no plans on retiring and doesn't worry about it as long as they get by living the lifestyle they want. In other words, just do what youwant but be aware of the long term impact of that decision.


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## sprocket1200

if it takes you more than 10 years to pay off the mortgage, there are sirious financial issues within the household....!



piano mom said:


> We just saw our SIL this weekend. She said she needs a bigger house to accommodate her growing family - mostly for the children toys and playing area.
> 
> I asked her if she's done paying off her mortgage on her current home and she looked at me shocked and called me "sick". Her husband and her don't own their house. His mother owns a third of it.
> 
> Here's what bothers me. How can someone be so comfortable getting a bigger mortgage when they can't pay off a smaller one? We've always paid off our mortgage on a smaller condo/ house before contemplating buying a bigger one. Am I alone in this thinking???
> 
> My other BIL said to me that he will never be able to pay off his mortgage (over 500k). He is 40 years old now. How is he ever going to retire??
> 
> Maybe I'm a worry wart but I just don't understand my in-laws thinking. Can anyone please explain to me!


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## My Own Advisor

Depends...unless you are building a retirement portfolio at the same time. If you are making no investments, not trying to max out your TFSA and contribute to your RRSP every year, then yes, likely the house should be paid off within 10-15 years.


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## HaroldCrump

sprocket1200 said:


> if it takes you more than 10 years to pay off the mortgage, there are sirious financial issues within the household....!


That rule would rule out the vast majority of Canadian home owners that have more than 10 year amortizations.
Thank Jimbo and Carney for pumping up the housing market to this level.
Anyhow, this sounds like a rather sweeping generalization - there can be many reasons why a mortgage is not paid off in 10 years.


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## My Own Advisor

Agreed Harold...re: many reasons why a mortgage is not paid off in 10 years. Life happens to many of us.


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## Sampson

HaroldCrump said:


> Anyhow, this sounds like a rather sweeping generalization - there can be many reasons why a mortgage is not paid off in 10 years.


Agreed. Opportunity cost of focusing solely on debt repayment could be 'astronomical' as evidenced by the past 5+ years. 10+yrs if you are heavily weighted in Canadian equities.


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## NotMe

Sampson said:


> Agreed. Opportunity cost of focusing solely on debt repayment could be 'astronomical' as evidenced by the past 5+ years. 10+yrs if you are heavily weighted in Canadian equities.


Yeah like "Billy, Joanie and Shawn" - daycare costs in the city are very very high.


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