Author Topic: Crazy huge mortgage  (Read 2945 times)

Aselv

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Crazy huge mortgage
« on: January 09, 2019, 09:03:46 PM »
My husband and I built a huge house in 2005 and were going to live in it for a few years and then sell it at a profit, haha.  Then the housing crisis happened in 2008 and we couldn't sell it.  House prices in the lower price range went up since then but not in the higher end homes ($1,100,000).  Our mortgage is $870,000 so if we sold the house we wouldn't end up with much after realty fees, etc.  We are in our late 50's and don't have alot of time to save for retirement.  We just got out of debt and are now starting to save $30,000 per year.  Should we take our lumps and sell or do we wait and hopefully sell higher in the next few years?

We don't have any car loans, cc debt or other loans.
I drive a 2007 Rav 4 and work 4 minutes from home.
My husband is a service plumber and has a 5 year old van.

Here's some more details:

We make $100,000 after tax each year. 

We just finished digging ourselves out of debt from the housing melt down hence the large mortgage which consolidated losses from other properties.

We own a condo with $150,000 in equity with a $66,000 mortgage that will be paid off in 10 years.  It is rented for $1400 per month.

We have $30,000 in savings and will be able to save 30% of our take home pay going forward.

The big house has a suite in the basement that we rent out for $1200 per month.

The mortgage is $2,900 per month.

I just got rid of my shopify store (I'll use etsy instead) to save $41 cdn each month.  My phone plan is almost up so I'll be going from $90 per month to $40. 

We got rid of cable last year and I'm trying to figure out how to never eat out again.  Basically I'm cutting and slashing as much as possible.

It's just my husband and I in the home - we have 3 grown kids that have moved away.  We are both employed, I am a bookkeeper and make $40,000 per year and I also have an artisan business on etsy that makes about $20,000 after expenses but before tax.  My husband is a plumber and he makes around $65,000 before tax.  I think our actual income is close to $120,000 but we claim part of our mortgage, utilites, our cell phones, our car expenses, to get it down to $100,000.  If we were more careful it's possible we could save $35,000 to 40,000 per year. 

Is it possible to stay in the house and pay it off?  Should we even do that?  Should we keep the extra money separate?

Thanks for any advice.
« Last Edit: January 10, 2019, 08:17:04 AM by Aselv »

AliEli

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Re: Crazy huge mortgage
« Reply #1 on: January 09, 2019, 09:22:10 PM »
Do you have the option of renting out more rooms, or moving to a smaller and cheaper rental and renting the rest of the large house for enough to cover the mortgage? If you want to retire soon and don't have the cash you'll need to consider some drastic action.

Aselv

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Re: Crazy huge mortgage
« Reply #2 on: January 09, 2019, 09:29:13 PM »
We have more bedrooms we could rent but my husband doesn't like the idea of other people living with us - it's different when renters have their own locked out area.  I would be into it but he's a bit more private.  We could move to a rental although rentals around here are pricey - a small old house is around $2000 so it wouldn't save too much.  We have thought about moving into the basement suite and renting the larger area to help cover the mortgage.  And we have thought about moving into the condo as well but then miss out on that income.

cchrissyy

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Re: Crazy huge mortgage
« Reply #3 on: January 09, 2019, 09:48:17 PM »
if you moved into the basement and rented out the main house, how much would you get for it?

cchrissyy

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Re: Crazy huge mortgage
« Reply #4 on: January 09, 2019, 09:49:46 PM »
and, do you have any savings or retirement accounts? How much?
 Or are your only major assets this house and the condo?

Aselv

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Re: Crazy huge mortgage
« Reply #5 on: January 09, 2019, 09:50:04 PM »
I think we could probably rent it for around $2500.00.

Aselv

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Re: Crazy huge mortgage
« Reply #6 on: January 09, 2019, 09:52:29 PM »
We have $30,000 in savings, it is our emergency fund.  Going forward we will start putting savings into retirement funds but because we are getting older not wanting anything risky.  We have some of our emergency fund in a 2.75% redeemable guaranteed investment.

Villanelle

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Re: Crazy huge mortgage
« Reply #7 on: January 10, 2019, 12:24:59 AM »
I'd consider moving into the basement (when is the current lease up) and renting the main house, but you need to run the numbers to see if it truly makes sense and do some research to figure out if rentals like that are in-demand in your area.  And try to figure out whether people will be turned off by an nice, expensive house that has someone else living in a basement rental.

Also, if you truly want to retire ASAP, it seems like there is lots of room for improving income.  Are you both employed?  Can you start side hustles of some kind?  What is your pre-tax income?  Family size/situation?

reeshau

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Re: Crazy huge mortgage
« Reply #8 on: January 10, 2019, 02:54:05 AM »
Others have pointed out specific missing information, but I will make a more general statement:  you are asking a very big question, while giving very little detail.  It can be difficult to see what our assumptions are, or think ahead to what others' assumptions are.  That's why the first topic here is "How to Write a Case Study."  You should go back to your original post and beef it up with that general information.

Because you asked, yes I think selling the house *could* be the right decision.  Besides the mortgage, a house that is too big drives other costs, too:  property tax, insurance, heating/cooling, lawn maintenance, HOA, cleaning, etc.  You have made a good move to get a renter, but I assume the house is not set up with separate meters, etc., and so the rent includes utilities?

There are many sad stories of people who became "accidental landlords."  But, you also have another rental, so at least it's not your first attempt.

As another scenario to shuffle around the rentals:  would you be OK to move to the condo, and rent out the whole large house?  (whether in two pieces, or altogether)  You could market it for rent or for sale, again as a residence or as a rental (and rented) property.  To do the latter, though, you would have to show a good cash flow.

What is confusing about this is that we don't know where you are looking to end up.  You can get out of this mess, yes, and you have stated you didn't intend to stay in the house.  But given where you are, where are you going?  There may be options more optimal to move you in your long-term direction, too.

Aselv

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Re: Crazy huge mortgage
« Reply #9 on: January 10, 2019, 08:15:17 AM »
I'd consider moving into the basement (when is the current lease up) and renting the main house, but you need to run the numbers to see if it truly makes sense and do some research to figure out if rentals like that are in-demand in your area.  And try to figure out whether people will be turned off by an nice, expensive house that has someone else living in a basement rental.

Also, if you truly want to retire ASAP, it seems like there is lots of room for improving income.  Are you both employed?  Can you start side hustles of some kind?  What is your pre-tax income?  Family size/situation?

It's just my husband and I in the home - we have 3 grown kids that have moved away.  We are both employed, I am a bookkeeper and make $40,000 per year and I also have an artisan business on etsy that makes about $20,000 after expenses but before tax.  My husband is a plumber and he makes around $65,000 before tax.  I think our actual income is close to $120,000 but we have claim part of our mortgage, utilites, our cell phones, our car expenses, to get it down to $100,000.  If we were more careful it's possible we could save $35,000 to 40,000 per year. 

Is it possible to stay in the house and pay it off?  Should we even do that?

P.S. I'm adding this extra info to my initial post

Aselv

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Re: Crazy huge mortgage
« Reply #10 on: January 10, 2019, 08:25:57 AM »
Others have pointed out specific missing information, but I will make a more general statement:  you are asking a very big question, while giving very little detail.  It can be difficult to see what our assumptions are, or think ahead to what others' assumptions are.  That's why the first topic here is "How to Write a Case Study."  You should go back to your original post and beef it up with that general information.

Because you asked, yes I think selling the house *could* be the right decision.  Besides the mortgage, a house that is too big drives other costs, too:  property tax, insurance, heating/cooling, lawn maintenance, HOA, cleaning, etc.  You have made a good move to get a renter, but I assume the house is not set up with separate meters, etc., and so the rent includes utilities?

There are many sad stories of people who became "accidental landlords."  But, you also have another rental, so at least it's not your first attempt.

As another scenario to shuffle around the rentals:  would you be OK to move to the condo, and rent out the whole large house?  (whether in two pieces, or altogether)  You could market it for rent or for sale, again as a residence or as a rental (and rented) property.  To do the latter, though, you would have to show a good cash flow.

What is confusing about this is that we don't know where you are looking to end up.  You can get out of this mess, yes, and you have stated you didn't intend to stay in the house.  But given where you are, where are you going?  There may be options more optimal to move you in your long-term direction, too.

Thank you for your response, I have added more info into my initial post.  I think that we would like to live in a house with room for our kids when they come to visit (the condo is a 2 bedroom) and space for a vegetable garden.  A starter house like this would be a minimum of $400,000 and that's where the problem lies if we sell the house and end up with $100,000. We would have the down payment but would be looking at 25 years?

Where we live, Pension in Canada for the 2 of us would be $2500 per month but that doesn't kick in in total until 10 years from now.  If we pay off the condo we would be able to clear $1000 per month in rent plus I would continue to do my artisan business. 

SunnyDays

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Re: Crazy huge mortgage
« Reply #11 on: January 10, 2019, 02:04:13 PM »
You ask if it's possible to pay off the house, with a mortgage of 870,000.  Even without interest, it would take you 25 years at your current payment rate to pay it off.  You're in your 50's.  So, that's probably a "no."  Where do you really WANT to live, money aside?  If it's your current house, are you willing to put that amount of money into it?  A better plan might be to sell now, put any profit into your condo mortgage and live there until you are ready to retire and then see what the situation is.  You would lose the 2 rental incomes, but your housing expenses would likely go way down.  Crunch the numbers and see what it would cost you to live in the condo vs the house.  Your kids can stay in a hotel or with other relatives if feasible when they visit.  It's not worth keeping a too-big house just for that reason.

BoonDogle

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Re: Crazy huge mortgage
« Reply #12 on: January 10, 2019, 02:36:55 PM »
You are probably paying 25K or more annually in interest costs on that mortgage.  Also, as was mentioned, other housing related costs are much higher with a larger house - utilities, taxes, insurance.  Based on what you have said, it appears to me that selling the home and living in the condo is the most reasonable approach.  Getting your financial situation under control has to be a priority over deciding where your kids will stay when they come to visit.

seattlecyclone

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Re: Crazy huge mortgage
« Reply #13 on: January 10, 2019, 04:50:35 PM »
I would be inclined to downsize. You may not get anything back when you sell the house. So be it. Waiting for it to increase in value may look tempting, but there's no guarantee that will happen anytime soon. What's certain is that you remain on the hook for the big mortgage and all the other costs that go along with owning a big house.

Aselv

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Re: Crazy huge mortgage
« Reply #14 on: January 10, 2019, 08:08:26 PM »
You ask if it's possible to pay off the house, with a mortgage of 870,000.  Even without interest, it would take you 25 years at your current payment rate to pay it off.  You're in your 50's.  So, that's probably a "no."  Where do you really WANT to live, money aside?  If it's your current house, are you willing to put that amount of money into it?  A better plan might be to sell now, put any profit into your condo mortgage and live there until you are ready to retire and then see what the situation is.  You would lose the 2 rental incomes, but your housing expenses would likely go way down.  Crunch the numbers and see what it would cost you to live in the condo vs the house.  Your kids can stay in a hotel or with other relatives if feasible when they visit.  It's not worth keeping a too-big house just for that reason.
I think you are right, the writing is on the walls - whether we break even or not because it's really just throwing good money after bad. 

Aselv

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Re: Crazy huge mortgage
« Reply #15 on: January 10, 2019, 08:10:54 PM »
You are probably paying 25K or more annually in interest costs on that mortgage.  Also, as was mentioned, other housing related costs are much higher with a larger house - utilities, taxes, insurance.  Based on what you have said, it appears to me that selling the home and living in the condo is the most reasonable approach.  Getting your financial situation under control has to be a priority over deciding where your kids will stay when they come to visit.

Actually the payments are 100% interest so in the 13 years we have been in it we have only paid down $8,000 which is really embarassing.  And yes there are a lot of other expenses with a big house.

Aselv

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Re: Crazy huge mortgage
« Reply #16 on: January 10, 2019, 08:16:52 PM »
I would be inclined to downsize. You may not get anything back when you sell the house. So be it. Waiting for it to increase in value may look tempting, but there's no guarantee that will happen anytime soon. What's certain is that you remain on the hook for the big mortgage and all the other costs that go along with owning a big house.

Ok, thank you - I think I needed to hear this but I was afraid to go there.  In the end it will be the best thing to do.  We have mountains of storage areas in the house to go through because none of it will fit in the condo but it's going to feel good.


Tuskalusa

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Re: Crazy huge mortgage
« Reply #17 on: January 10, 2019, 08:23:41 PM »
I totally agree with selling the house and moving to the condo. Eliminating all that financial stress would be life changing. I would think that paying the mortgage on the big house each month is a constant reminder of the financial crisis. Time to put it behind you and find some peace. ✌️

Aselv

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Re: Crazy huge mortgage
« Reply #18 on: January 10, 2019, 08:44:30 PM »
I totally agree with selling the house and moving to the condo. Eliminating all that financial stress would be life changing. I would think that paying the mortgage on the big house each month is a constant reminder of the financial crisis. Time to put it behind you and find some peace. ✌️
[/quote

I have to admit that I had a little cry today after your responses when I realized that selling was the way to go.  There's emotion wrapped up in this because it's been grueling up to this point - working so hard to make ends meet.  Selling means failure in a sense.  We've been confused but really had no one to talk to about it because it's embarrassing to say the least. 

I think it's going to be liberating at the same time so all is not lost.  The timing is really interesting as well - if we had sold earlier we may have continued to make mistakes but coming to a place of frugal living in the past year I'm very motivated to never let anything like this happen again.

iluvzbeach

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Re: Crazy huge mortgage
« Reply #19 on: January 10, 2019, 09:04:02 PM »
Without a doubt, sell the big house and move into the condo. You can use some of the house proceeds to pay off the condo (if you want) and still have leftover money to invest. You should absolutely not view it as a failure, itís a huge success! You hung in through the challenges and will have a paid for condo and excess money available. Sounds like youíve turned your life around and are headed in the right direction!

Aselv

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Re: Crazy huge mortgage
« Reply #20 on: January 10, 2019, 09:22:34 PM »
Without a doubt, sell the big house and move into the condo. You can use some of the house proceeds to pay off the condo (if you want) and still have leftover money to invest. You should absolutely not view it as a failure, itís a huge success! You hung in through the challenges and will have a paid for condo and excess money available. Sounds like youíve turned your life around and are headed in the right direction!

Thank you for this new perspective - I will get there!  For now we have a bit of work to do to get the house ready - maybe we'll even have a bit of extra money from all the furniture, wine making equipment, drum sets and other things that won't fit into the condo haha.

Tuskalusa

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Re: Crazy huge mortgage
« Reply #21 on: January 10, 2019, 09:53:22 PM »
I think you are doing an amazing job working through this. Selling is absolutely not a failure.  If anything, itís a victory. Youíre still going to retire eventually, and youíre taking a step towards a lower-stress, manageable life!  Think of all the fun youíll have with your newfound financial flexibility!  It takes a strong and smart person to get where you are today. Well done. :)

And if you want to get a reminder of how bad it got in that crazy crisis, watch ďThe Queen of VersaillesĒ on Netflix. And then congratulate yourself on not getting so far in debt that you couldnít get yourself out!  Rock on. Youíve got this! 

Villanelle

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Re: Crazy huge mortgage
« Reply #22 on: January 10, 2019, 10:40:45 PM »
Others have pointed out specific missing information, but I will make a more general statement:  you are asking a very big question, while giving very little detail.  It can be difficult to see what our assumptions are, or think ahead to what others' assumptions are.  That's why the first topic here is "How to Write a Case Study."  You should go back to your original post and beef it up with that general information.

Because you asked, yes I think selling the house *could* be the right decision.  Besides the mortgage, a house that is too big drives other costs, too:  property tax, insurance, heating/cooling, lawn maintenance, HOA, cleaning, etc.  You have made a good move to get a renter, but I assume the house is not set up with separate meters, etc., and so the rent includes utilities?

There are many sad stories of people who became "accidental landlords."  But, you also have another rental, so at least it's not your first attempt.

As another scenario to shuffle around the rentals:  would you be OK to move to the condo, and rent out the whole large house?  (whether in two pieces, or altogether)  You could market it for rent or for sale, again as a residence or as a rental (and rented) property.  To do the latter, though, you would have to show a good cash flow.

What is confusing about this is that we don't know where you are looking to end up.  You can get out of this mess, yes, and you have stated you didn't intend to stay in the house.  But given where you are, where are you going?  There may be options more optimal to move you in your long-term direction, too.

Thank you for your response, I have added more info into my initial post.  I think that we would like to live in a house with room for our kids when they come to visit (the condo is a 2 bedroom) and space for a vegetable garden.  A starter house like this would be a minimum of $400,000 and that's where the problem lies if we sell the house and end up with $100,000. We would have the down payment but would be looking at 25 years?

Where we live, Pension in Canada for the 2 of us would be $2500 per month but that doesn't kick in in total until 10 years from now.  If we pay off the condo we would be able to clear $1000 per month in rent plus I would continue to do my artisan business.

A two bedroom house does have room for three visiting children.  Frankly, you simply can't afford the things you want, so you need to start examining those wants.  Do you want to have an individual bedroom for each child for the few weeks a year they visit?  Or do you want two of them to share a bed (or twin beds) and one to sleep on a fold out sofa or air mattress, and actually retire someday?

Your non-negotiables need to be negotiated.  All of them.  You can keep a handful of them, but the rest have to go.  It is going to be a process and will be uncomfortable at times, but you will be much better off for it. 

Evasion

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Re: Crazy huge mortgage
« Reply #23 on: January 10, 2019, 10:49:15 PM »
You are 4mn drive from work ?
Just walk or bike if you can.
That will save you heaps

Dicey

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Re: Crazy huge mortgage
« Reply #24 on: January 11, 2019, 01:30:42 AM »
Not so fast...

There's not enough info to provide a definitive answer yet.

Some people just see a big number and shout, "Sell!"

What is the payment on the condo?

What is the economy like where the house is? How are the schools?

reeshau

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Re: Crazy huge mortgage
« Reply #25 on: January 11, 2019, 03:19:08 AM »
You are probably paying 25K or more annually in interest costs on that mortgage.  Also, as was mentioned, other housing related costs are much higher with a larger house - utilities, taxes, insurance.  Based on what you have said, it appears to me that selling the home and living in the condo is the most reasonable approach.  Getting your financial situation under control has to be a priority over deciding where your kids will stay when they come to visit.

Actually the payments are 100% interest so in the 13 years we have been in it we have only paid down $8,000 which is really embarassing.  And yes there are a lot of other expenses with a big house.

Red alert!  This is a very important detail.  When does your interest-only period end?  That becomes a hard deadline, because your payments will go *up*.  It also means, as you say, you will never get ahead on the big house, without somehow redoubling your efforts.  Good money after bad, indeed.

In terms of visitor space, you are in a condo.  Are any of the other condos listed on AirBnB?  Or other houses nearby?  It doesn't have to be a hotel--they can be quite close, but still with their own space.

Aselv

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Re: Crazy huge mortgage
« Reply #26 on: January 11, 2019, 07:53:33 AM »
I think you are doing an amazing job working through this. Selling is absolutely not a failure.  If anything, itís a victory. Youíre still going to retire eventually, and youíre taking a step towards a lower-stress, manageable life!  Think of all the fun youíll have with your newfound financial flexibility!  It takes a strong and smart person to get where you are today. Well done. :)

And if you want to get a reminder of how bad it got in that crazy crisis, watch ďThe Queen of VersaillesĒ on Netflix. And then congratulate yourself on not getting so far in debt that you couldnít get yourself out!  Rock on. Youíve got this!

Thank you!  That's very encouraging :-)  We certainly have worked hard and it could be worse.

Aselv

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Re: Crazy huge mortgage
« Reply #27 on: January 11, 2019, 07:56:03 AM »
You are 4mn drive from work ?
Just walk or bike if you can.
That will save you heaps

That's the plan as soon as the days are longer - I don't feel safe walking in the dark right now through the industrial area.

Aselv

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Re: Crazy huge mortgage
« Reply #28 on: January 11, 2019, 08:05:36 AM »
Not so fast...

There's not enough info to provide a definitive answer yet.

Some people just see a big number and shout, "Sell!"

What is the payment on the condo?

What is the economy like where the house is? How are the schools?

The payment on the condo is $635 per month with about $150 going towards interest.  The economy here is starting to slow down.  The Canadian government has implemented some difficult mortgage rules so it's stopping people from qualifying - which is a good measure to protect investors but bad for those of us that would like to sell.  The schools are great - it's a small community and a great place to raise children.  Not sure if that helps. 
I have thought that  maybe if we work hard our future could be brighter.

Aselv

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Re: Crazy huge mortgage
« Reply #29 on: January 11, 2019, 08:11:09 AM »
You are probably paying 25K or more annually in interest costs on that mortgage.  Also, as was mentioned, other housing related costs are much higher with a larger house - utilities, taxes, insurance.  Based on what you have said, it appears to me that selling the home and living in the condo is the most reasonable approach.  Getting your financial situation under control has to be a priority over deciding where your kids will stay when they come to visit.

Actually the payments are 100% interest so in the 13 years we have been in it we have only paid down $8,000 which is really embarassing.  And yes there are a lot of other expenses with a big house.

Red alert!  This is a very important detail.  When does your interest-only period end?  That becomes a hard deadline, because your payments will go *up*.  It also means, as you say, you will never get ahead on the big house, without somehow redoubling your efforts.  Good money after bad, indeed.

In terms of visitor space, you are in a condo.  Are any of the other condos listed on AirBnB?  Or other houses nearby?  It doesn't have to be a hotel--they can be quite close, but still with their own space.

There is no deadline.  It just keeps going as far as I know - we have had it for 13 years now.  Condos in our building do not allow short term rentals.  We could put a fold up bed in the bedroom and a sofa bed in the living room which wouldn't be all bad.  I have family in town so we could farm them out as well.

Laura33

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Re: Crazy huge mortgage
« Reply #30 on: January 11, 2019, 11:23:09 AM »
I think you are at the last stage of a significant readjustment of your expectations, and I think you posted here because you are finally ready to take that last step -- you know what the right answer is, you just need to hear it from someone else.  Right?  15 years ago, like a lot of other people, you had great dreams of a big life.  And then that went down the toilet, and you've been hanging on and clawing back.  You have made a number of changes, cutting back expenses, taking on renters, etc., but you have still been clinging to the idea of the big family home where everyone gathers.  Because it is a wonderful vision, and you worked hard to achieve that! 

But for right now, you need to be realistic and face the numbers head-on.  You haven't provided all of the numbers, so we can't give too much detail here.  But you need to look at what that big house is actually costing you every month -- including how much more you'd need to pay to actually own it in the future.  What is the mortgage, what would the principle be on a regular mortgage, what are the utilities, what are the property taxes, what is the upkeep, what is the insurance, etc. etc. etc.  Consider the good things, too -- subtract out the rent you receive and the tax benefits you get.  The net is what you are paying, every month, for the privilege of maintaining the dream of the big family home.*  Is it worth it?  How many more years would you need to work to achieve that dream?  And is it worth it to have that big family home, if you are so busy working you don't actually get to enjoy time with that family? 

I know this is hard.  I am around your age, which means I am old enough to have seen several dreams crushed, and to have had to mourn those losses and find a way to move on.  But what I can tell you is that life is always changing, and nothing is forever.  Because I was able to cut the ties to those old dreams and move on to whatever the next big unknown phase, I was able to find new dreams and a life I love and now wouldn't give up for anything.  It looks very different than I thought it would 20+ years ago, but it is no less satisfying. 

So embrace the unknown.  Make the best financial decision for you, right now, even when it hurts.  And do so trusting that you will have the power to shape a good, satisfying future.  You have a great financial situation without the house!  You make plenty of money to do very well by yourself -- and you have a pension coming later as a backstop!  Believe you can do this, take your power back, and start putting your considerable resources into building that new, different future instead of continuing to try to sustain an unsustainable past. 


*You are telling yourself that you are hanging on as an "investment" -- that the market will come back and you will make that huge profit you dreamed of.  This is called "speculation," not investing -- and if you are as risk-averse as you say you are, well, speculating is about as risky as you can get.  Again, look at how much that house is costing you every month, and multiply by 12 -- and then multiply by the 14 years you've been waiting.  That's how much you've paid to keep that dream of a big sale alive.  How's that worked out so far?  There is no reason to believe the housing market is going to dramatically turn around in the near future, especially if as you say the local economy is slowing.  Or to look at it another way:  if you didn't currently own the house but had the cash to buy it for the amount of equity you currently have in it, is that how you'd choose to invest?  If you wouldn't buy it again now as a good investment, it's not a good investment, and it's time to cut your losses. 

Dogastrophe

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Re: Crazy huge mortgage
« Reply #31 on: January 11, 2019, 12:28:31 PM »
There is no deadline.  It just keeps going as far as I know - we have had it for 13 years now.  Condos in our building do not allow short term rentals.  We could put a fold up bed in the bedroom and a sofa bed in the living room which wouldn't be all bad.  I have family in town so we could farm them out as well.

We sold our 3-bdm house and moved into a 2-bdm condo which made the guest bedroom disappear (second bedroom is my music room).  A 3-bdm unit in the same area was going to add $30+K to the purchase - we were determined not to over buy for having guests 7 or 10 nights per year.  Rented cot, air mattress on floor, or couch are only options at our place.  :)

patchyfacialhair

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Re: Crazy huge mortgage
« Reply #32 on: January 11, 2019, 01:56:08 PM »
Your kids will appreciate having financially solvent parents more than a place to stay 1-2 weeks per year.

It sounds like you're hearing the feedback and I hope you can make peace with what will be a tough but beneficial decision.

Aselv

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Re: Crazy huge mortgage
« Reply #33 on: January 11, 2019, 07:58:21 PM »
I think you are at the last stage of a significant readjustment of your expectations, and I think you posted here because you are finally ready to take that last step -- you know what the right answer is, you just need to hear it from someone else.  Right?  15 years ago, like a lot of other people, you had great dreams of a big life.  And then that went down the toilet, and you've been hanging on and clawing back.  You have made a number of changes, cutting back expenses, taking on renters, etc., but you have still been clinging to the idea of the big family home where everyone gathers.  Because it is a wonderful vision, and you worked hard to achieve that! 

But for right now, you need to be realistic and face the numbers head-on.  You haven't provided all of the numbers, so we can't give too much detail here.  But you need to look at what that big house is actually costing you every month -- including how much more you'd need to pay to actually own it in the future.  What is the mortgage, what would the principle be on a regular mortgage, what are the utilities, what are the property taxes, what is the upkeep, what is the insurance, etc. etc. etc.  Consider the good things, too -- subtract out the rent you receive and the tax benefits you get.  The net is what you are paying, every month, for the privilege of maintaining the dream of the big family home.*  Is it worth it?  How many more years would you need to work to achieve that dream?  And is it worth it to have that big family home, if you are so busy working you don't actually get to enjoy time with that family? 

I know this is hard.  I am around your age, which means I am old enough to have seen several dreams crushed, and to have had to mourn those losses and find a way to move on.  But what I can tell you is that life is always changing, and nothing is forever.  Because I was able to cut the ties to those old dreams and move on to whatever the next big unknown phase, I was able to find new dreams and a life I love and now wouldn't give up for anything.  It looks very different than I thought it would 20+ years ago, but it is no less satisfying. 

So embrace the unknown.  Make the best financial decision for you, right now, even when it hurts.  And do so trusting that you will have the power to shape a good, satisfying future.  You have a great financial situation without the house!  You make plenty of money to do very well by yourself -- and you have a pension coming later as a backstop!  Believe you can do this, take your power back, and start putting your considerable resources into building that new, different future instead of continuing to try to sustain an unsustainable past. 


*You are telling yourself that you are hanging on as an "investment" -- that the market will come back and you will make that huge profit you dreamed of.  This is called "speculation," not investing -- and if you are as risk-averse as you say you are, well, speculating is about as risky as you can get.  Again, look at how much that house is costing you every month, and multiply by 12 -- and then multiply by the 14 years you've been waiting.  That's how much you've paid to keep that dream of a big sale alive.  How's that worked out so far?  There is no reason to believe the housing market is going to dramatically turn around in the near future, especially if as you say the local economy is slowing.  Or to look at it another way:  if you didn't currently own the house but had the cash to buy it for the amount of equity you currently have in it, is that how you'd choose to invest?  If you wouldn't buy it again now as a good investment, it's not a good investment, and it's time to cut your losses.

All good points but still not an easy thing to go through.  I am in the process of grieving right now - I don't care about having a big fancy house, it's the idea of selling without getting much out of it.  It is so final.  And what about listing it and showing it and cleaning it and dropping the price until it sells - all can be very grueling.  But at the same time I'm ready to move on, it's exhausting having to work as much as we do and not have much to show for it.  Basically feels like damned if we do and damned if we don't. 
We wouldn't invest in this now so it is time to sell and do what it takes to break free.

Finances_With_Purpose

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Re: Crazy huge mortgage
« Reply #34 on: January 11, 2019, 10:03:49 PM »
I think you are at the last stage of a significant readjustment of your expectations, and I think you posted here because you are finally ready to take that last step -- you know what the right answer is, you just need to hear it from someone else.  Right?  15 years ago, like a lot of other people, you had great dreams of a big life.  And then that went down the toilet, and you've been hanging on and clawing back.  You have made a number of changes, cutting back expenses, taking on renters, etc., but you have still been clinging to the idea of the big family home where everyone gathers.  Because it is a wonderful vision, and you worked hard to achieve that! 

But for right now, you need to be realistic and face the numbers head-on.  You haven't provided all of the numbers, so we can't give too much detail here.  But you need to look at what that big house is actually costing you every month -- including how much more you'd need to pay to actually own it in the future.  What is the mortgage, what would the principle be on a regular mortgage, what are the utilities, what are the property taxes, what is the upkeep, what is the insurance, etc. etc. etc.  Consider the good things, too -- subtract out the rent you receive and the tax benefits you get.  The net is what you are paying, every month, for the privilege of maintaining the dream of the big family home.*  Is it worth it?  How many more years would you need to work to achieve that dream?  And is it worth it to have that big family home, if you are so busy working you don't actually get to enjoy time with that family? 

I know this is hard.  I am around your age, which means I am old enough to have seen several dreams crushed, and to have had to mourn those losses and find a way to move on.  But what I can tell you is that life is always changing, and nothing is forever.  Because I was able to cut the ties to those old dreams and move on to whatever the next big unknown phase, I was able to find new dreams and a life I love and now wouldn't give up for anything.  It looks very different than I thought it would 20+ years ago, but it is no less satisfying. 

So embrace the unknown.  Make the best financial decision for you, right now, even when it hurts.  And do so trusting that you will have the power to shape a good, satisfying future.  You have a great financial situation without the house!  You make plenty of money to do very well by yourself -- and you have a pension coming later as a backstop!  Believe you can do this, take your power back, and start putting your considerable resources into building that new, different future instead of continuing to try to sustain an unsustainable past. 


*You are telling yourself that you are hanging on as an "investment" -- that the market will come back and you will make that huge profit you dreamed of.  This is called "speculation," not investing -- and if you are as risk-averse as you say you are, well, speculating is about as risky as you can get.  Again, look at how much that house is costing you every month, and multiply by 12 -- and then multiply by the 14 years you've been waiting.  That's how much you've paid to keep that dream of a big sale alive.  How's that worked out so far?  There is no reason to believe the housing market is going to dramatically turn around in the near future, especially if as you say the local economy is slowing.  Or to look at it another way:  if you didn't currently own the house but had the cash to buy it for the amount of equity you currently have in it, is that how you'd choose to invest?  If you wouldn't buy it again now as a good investment, it's not a good investment, and it's time to cut your losses.

All good points but still not an easy thing to go through.  I am in the process of grieving right now - I don't care about having a big fancy house, it's the idea of selling without getting much out of it.  It is so final.  And what about listing it and showing it and cleaning it and dropping the price until it sells - all can be very grueling.  But at the same time I'm ready to move on, it's exhausting having to work as much as we do and not have much to show for it.  Basically feels like damned if we do and damned if we don't. 
We wouldn't invest in this now so it is time to sell and do what it takes to break free.

I was about to post simply to second the always-wise @Laura33 , but then I saw your response, too, and it sounds like you know what you need to do.

As a sidenote, this isn't you, it's human nature: we really, *really* don't like to accept losses.  Especially when lots of money is involved.  It's called the sunk-cost fallacy and it constantly causes people to make very bad financial decisions.  And I'm thinking of one (a small one, thankfully) that I made for that very reason even as I type this.  Humans really hurt when we "cut our losses" which is why we hold on far too long.  It's much better to eat/recognize the loss - yes, there's pain - but there's only more pain in the future if you hold on in most cases (which is why it's called a fallacy). 

six-car-habit

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Re: Crazy huge mortgage
« Reply #35 on: January 12, 2019, 02:22:16 AM »
 Am surprised you were able to get a mortgage for nearly 880K , on your income, even as an interest only loan.  This thought assumes you didn't have the basement suite rental income available yet, at the time you applied. Does your mortgage payment include real estate taxes as well ?

  Not sure about Canada, but I was under the impression if a family were to claim part of the mortgage , say for the square footage of the bookeeping office as a percentage of total sq feet in the home, as depreciation / business "rent" expense [?] ,-- that when it came time to sell the house, there would be a tax hit in that filing year- to account for the -what I'll call the "depreciation" cumulatively taken over the years.

  We have a similar situation , in that we could have attempted to write an expense against earnings each year for the home office " rent " .  In the end it just seemed like it wouldn't be worth it to go thru the hassle to have to reconcile the taxes if/ when we sold the house.  Quite possibly we are leaving "money on the table" each year by not doing this though, and you were smart to do this ?

ShoulderThingThatGoesUp

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Re: Crazy huge mortgage
« Reply #36 on: January 12, 2019, 07:09:27 AM »
You have an 870,000 interest-only mortgage. Itís a boat anchor on your neck. Start calling realtors today.

better late

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Re: Crazy huge mortgage
« Reply #37 on: January 12, 2019, 12:02:52 PM »
Of the $870,000 that you rolled into the interest-only mortgage, was any of it from consumer debt? Or a HELOC that had been used to pay off a consumer debt? Anything like that?

Aselv

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Re: Crazy huge mortgage
« Reply #38 on: January 12, 2019, 01:04:58 PM »
Am surprised you were able to get a mortgage for nearly 880K , on your income, even as an interest only loan.  This thought assumes you didn't have the basement suite rental income available yet, at the time you applied. Does your mortgage payment include real estate taxes as well ?

  Not sure about Canada, but I was under the impression if a family were to claim part of the mortgage , say for the square footage of the bookeeping office as a percentage of total sq feet in the home, as depreciation / business "rent" expense [?] ,-- that when it came time to sell the house, there would be a tax hit in that filing year- to account for the -what I'll call the "depreciation" cumulatively taken over the years.

  We have a similar situation , in that we could have attempted to write an expense against earnings each year for the home office " rent " .  In the end it just seemed like it wouldn't be worth it to go thru the hassle to have to reconcile the taxes if/ when we sold the house.  Quite possibly we are leaving "money on the table" each year by not doing this though, and you were smart to do this ?

We got the mortgage at a time when they were handing them out as if they were candy (based on the house value).  We have claimed parts of our houses prior to this one and it didn't impact our taxes at that time and accountant has not mentioned anything to us. 

Aselv

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Re: Crazy huge mortgage
« Reply #39 on: January 12, 2019, 01:08:30 PM »
You have an 870,000 interest-only mortgage. Itís a boat anchor on your neck. Start calling realtors today.

We will have to do some renos before it's ready - hoping to keep it less than $15,000.  Since it's a high end home we have to revamp the kitchen since it has some cabinets that are peeling (faulty kitchen varnish I think) and also the quartz counters.  The fence is a bit wonky in one spot and needs a fresh coat of stain.  Other than that it looks good.

Aselv

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Re: Crazy huge mortgage
« Reply #40 on: January 12, 2019, 01:10:26 PM »
Of the $870,000 that you rolled into the interest-only mortgage, was any of it from consumer debt? Or a HELOC that had been used to pay off a consumer debt? Anything like that?

It was a while ago so I don't recall exactly but we have lost money on other properties that we sold at a loss and also had to carry those mortgages for some time prior to selling - it was an accumulation of bad decisions.

Evasion

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Re: Crazy huge mortgage
« Reply #41 on: January 12, 2019, 11:12:46 PM »
You are 4mn drive from work ?
Just walk or bike if you can.
That will save you heaps

That's the plan as soon as the days are longer - I don't feel safe walking in the dark right now through the industrial area.

Fair enough. Personally I feel much safer riding a bike because it's very unlikely someone would stop you without your consent, and it just feels safer, so you might want to try that or just stick with active transport in sprinf/summer

SwordGuy

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Re: Crazy huge mortgage
« Reply #42 on: January 13, 2019, 12:13:47 AM »
My husband and I built a huge house in 2005 and were going to live in it for a few years and then sell it at a profit, haha.  Then the housing crisis happened in 2008 and we couldn't sell it.  House prices in the lower price range went up since then but not in the higher end homes ($1,100,000).  Our mortgage is $870,000 so if we sold the house we wouldn't end up with much after realty fees, etc.  We are in our late 50's and don't have alot of time to save for retirement.  We just got out of debt and are now starting to save $30,000 per year.  Should we take our lumps and sell or do we wait and hopefully sell higher in the next few years?

Jeesh, that's one hell of a mortgage monkey on your back.   If you sold at break-even and rented or bought a small, inexpensive place for your needs, how much more could you save per year?  Don't forget to include savings in insurance, pmi and property tax.



We just finished digging ourselves out of debt from the housing melt down hence the large mortgage which consolidated losses from other properties.
So, you haven't actually dug yourself out of debt, you just moved it around into your mortgage?   If so, stop fooling yourself,  you've got an $870,000 hair on fire mortgage emergency.

We own a condo with $150,000 in equity with a $66,000 mortgage that will be paid off in 10 years.  It is rented for $1400 per month.

What's your annual profit after setting aside funds for future repairs and vacancy?   It's not clear to me whether this is a money making, money losing, or break-even cash flow rental.  Are you expecting a lot of price appreciation?

For comparison, I've got 3 houses that I paid a total of ~$150,000 for, owned free and clear, worth $220,000+ in total, and I rent them for a total of $2415.

Quote
We have $30,000 in savings and will be able to save 30% of our take home pay going forward.
Excellent!


Unique User

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Re: Crazy huge mortgage
« Reply #43 on: January 13, 2019, 08:00:54 AM »
You have an 870,000 interest-only mortgage. Itís a boat anchor on your neck. Start calling realtors today.

We will have to do some renos before it's ready - hoping to keep it less than $15,000.  Since it's a high end home we have to revamp the kitchen since it has some cabinets that are peeling (faulty kitchen varnish I think) and also the quartz counters.  The fence is a bit wonky in one spot and needs a fresh coat of stain.  Other than that it looks good.

I second calling realtors asap.  A good realtor will be able to tell you what you need to do to sell, give you a range of prices, how long you should expect the house to be on the market, etc.  Some of the things you think you need to do may end up as unnecessary. 

Aselv

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Re: Crazy huge mortgage
« Reply #44 on: January 13, 2019, 10:57:54 AM »
You have an 870,000 interest-only mortgage. Itís a boat anchor on your neck. Start calling realtors today.

We will have to do some renos before it's ready - hoping to keep it less than $15,000.  Since it's a high end home we have to revamp the kitchen since it has some cabinets that are peeling (faulty kitchen varnish I think) and also the quartz counters.  The fence is a bit wonky in one spot and needs a fresh coat of stain.  Other than that it looks good.

I second calling realtors asap.  A good realtor will be able to tell you what you need to do to sell, give you a range of prices, how long you should expect the house to be on the market, etc.  Some of the things you think you need to do may end up as unnecessary.

We called in a couple of realtors about 6 months ago to see what they thought and get their feedback.  They basically told us what we knew - the kitchen was the main thing.

Aselv

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Re: Crazy huge mortgage
« Reply #45 on: January 13, 2019, 11:00:38 AM »
My husband and I built a huge house in 2005 and were going to live in it for a few years and then sell it at a profit, haha.  Then the housing crisis happened in 2008 and we couldn't sell it.  House prices in the lower price range went up since then but not in the higher end homes ($1,100,000).  Our mortgage is $870,000 so if we sold the house we wouldn't end up with much after realty fees, etc.  We are in our late 50's and don't have alot of time to save for retirement.  We just got out of debt and are now starting to save $30,000 per year.  Should we take our lumps and sell or do we wait and hopefully sell higher in the next few years?

Jeesh, that's one hell of a mortgage monkey on your back.   If you sold at break-even and rented or bought a small, inexpensive place for your needs, how much more could you save per year?  Don't forget to include savings in insurance, pmi and property tax.






We just finished digging ourselves out of debt from the housing melt down hence the large mortgage which consolidated losses from other properties.
So, you haven't actually dug yourself out of debt, you just moved it around into your mortgage?   If so, stop fooling yourself,  you've got an $870,000 hair on fire mortgage emergency. 



We own a condo with $150,000 in equity with a $66,000 mortgage that will be paid off in 10 years.  It is rented for $1400 per month.

What's your annual profit after setting aside funds for future repairs and vacancy?   It's not clear to me whether this is a money making, money losing, or break-even cash flow rental.  Are you expecting a lot of price appreciation?

For comparison, I've got 3 houses that I paid a total of ~$150,000 for, owned free and clear, worth $220,000+ in total, and I rent them for a total of $2415.



Quote
We have $30,000 in savings and will be able to save 30% of our take home pay going forward.
Excellent!



There are so many variables that we haven't calculated them yet - if we break-even we won't have a down payment so we would move into the condo.  Our monthly expenses there would be approximately $24,000 per year so with our 2 incomes (no rental income) we would probably be able to save about $55,000 per year. 

No we actually sold properties some number of years ago and were left with about $30,000 in LOC so that took us about 5 years to pay off because our income was lower at the time.  Plus we paid off my husband's $25,000 payment on his work vehicle and paid off $8,000 of the big mortgage.  Also we weren't living the MMM way so we were still taking holidays etc.  It's just recently that I've gotten on the bandwagon and I'm running around like my hair is on fire! 

This one is money making, We paid $159,000 and the mortgage is currently around $66,000 after owning it for 13 years.  The mortgage is mostly principal now after all these years so most of the payment is taxed as income.  When it is paid off down the road we estimate that of the $1400 approximately $400 will go to taxes, insurance and strata.  My husband is a handyman and can do most of the repairs and upkeep if need be.  It was brand new when we bought it, so far just small repairs.

Thank you!

Aselv

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Re: Crazy huge mortgage
« Reply #46 on: January 13, 2019, 11:03:07 AM »
You are 4mn drive from work ?
Just walk or bike if you can.
That will save you heaps

That's the plan as soon as the days are longer - I don't feel safe walking in the dark right now through the industrial area.

Fair enough. Personally I feel much safer riding a bike because it's very unlikely someone would stop you without your consent, and it just feels safer, so you might want to try that or just stick with active transport in sprinf/summer

Oh Yeah and did I tell you that it's straight up hill!  I will walk it because I would end up walking the bike up anyways, haha!

ATR

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Re: Crazy huge mortgage
« Reply #47 on: January 14, 2019, 08:28:33 AM »
I won't bore you with repeating the advice you have already received. Looking forward to seeing your progress!