Posts Tagged property taxes
Your Mortgage will Never be Paid; How much Mortgage Interest are you Paying?
Posted by Top Home Loans in General Banking, Mortgage Advice, Mortgage News on June 26, 2010
Believe it or not, you could be paying up to 368% the price of the property you purchased. This means that you are paying almost 4 times the purchase price for your house.
Paying off mortgage interest is one of the biggest expenses of your life. Even though the rates on a mortgage can appear to be quite low, the amount of interest that you pay over the course of your mortgage is quite substantial. Even if you have the best mortgage rate, you still could be paying several times more interest than principle against your mortgage.
For example, let’s say you buy a car, and instead of paying it over the usual five years, you decide to pay it over 35 years. In this case, you would end up paying $27,481 in interest on a $20,000 vehicle. That means that you would have to pay more than double to purchase the car. A car that retails for $20,000, you would be paying $47,481. That is almost 150% higher than the cars actual cost. With cars and other material goods, this is absurd; however, in home ownership, the market allows for these absurd prices.
Let’s look at an average $400,000 property in Toronto.
Here are the details of your mortgage:
- Purchase Price: $400,000
- Down Payment: $20,000 (5% down payment)
- CMHC Fees: $11,970
- Land Transfer Taxes: $8,200
- Closing Costs: $8,000
Mortgage Terms:
- Total Mortgage Amount: $392,000
- Amortization: 35 Years
- Payments: $2,216/month
- Interest paid per month: $1,936
- Principle paid per month: $280
Interest and Expense Details:
- Interest Paid after 35 years: $538,631
- Total Payments: $930,631
- Total Payments including initial expenses: $966,631
- Total Payments including initial expenses and property taxes: $1,176,631
The property costs almost 300% the initial purchase price, and this is not even taking into account mortgage refinances. The average home owner will refinance their property once every three to four years to pay off debt and renovations. When a home owner does this, they usually add on a few years to their amortization.
Let’s assume that the average home owner refinances 5 times over the course of their mortgage term. Each time they refinance, they add on an additional 3 years to their mortgage term. This means that they will be adding on approximately another 15 years to their mortgage term.
With refinancing, the home owner can expect to pay as much as $833,321 over the course of their mortgage term, and as much as $1,225,321 in total payments. This means that the home owner as much as $1,471,321 for a $400,000 property.
Do you want to pay 368% the listing price of the property you are looking to purchase?
Save your Mortgage from the Bank. Simply Mortgages can Help!
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Mortgage Payments that are 44% of your Income are Way Too High!
Posted by Top Home Loans in Mortgage Advice, Mortgage News on May 3, 2010
Let’s say that the average household has an average household income of 55,000. After tax, this turns into $3437.50/month, with a tax rate of 25%.
This means that, with no debt, the highest mortgage payments these borrowers could have would be approximately $2000/month.
Then let’s assume the family owns a car, has 2 children, and they need food and entertainment.
First the house would have property taxes, home insurance, utilities, and upkeep.
The property tax would be approximately $350/month, the insurance would be around $70/month, and the upkeep would be around $70/month.
With the house fees, we are already up to $2500/month.
Now we just have a little over $900 for the rest of the household expenses. The car alone will knock out a big portion of this. The car will take approximately $500 for a cheap car with insurance, gas, and the car payment.
After buying food, their isn’t any money left. Most people aren’t happy just living pay cheque to pay cheque, they have to enjoy life as well. They may even want to save some money for retirement as well. Unfortunately, being offered a loan at 44% total debt service ratio, this doesn’t happen.
People work to pay the bank. A total debt service ratio should be in the mid-thirties.
The thing is that if they decrease the total debt service ratio, it will hurt really bad in the short-run, but in the long-run, it will create more affordable housing, and a higher standard of living for everyone.
What do you think of the total debt service ratio? Should it be higher or lower?
Save your Mortgage from the Bank. Simply Mortgages can Help!
Mortgage Bits: House Upkeep; What does it really cost to own a home?
Posted by Top Home Loans in Mortgage Advice, Property Management on December 13, 2009
when purchasing a property, most buyer’s number one question is: how much are the mortgage payments? Buyer’s usually think that if they can afford the mortgage payments, then they must be able to afford the property.
Unfortunately, this is the furthest thing from the truth. Upkeep, especially on condos, can be as expensive, if not more expensive, than the property itself. For example, let’s take a look at the average property in Toronto.
In Toronto, the average property value is approximately $450,000. This property would produce the following upkeep fees if it is a free hold unit.
? Property taxes: 350/month
? Heating: 75/month
? Electricity: 100/month
? Cable and Internet: 120/month
? Phone Service: 60/month
? Repairs and Upgrades: 200/month
Total upkeep per month: $905
If you look at a condo, then you would also need to factor in condo fees and parking rental fees. These fees alone can be as much as an additional $1000 per month.
Keep in mind that as your property increases in value, so does your upkeep. All the upkeep items are aligned with values, so you should expect to pay more as your value goes up.
Unfortunately, just because you have the money to buy a property doesn’t mean that you should if you can’t afford the upkeep. Make sure that you calculate the upkeep as well as the mortgage payments before you decide to purchase a property.