Rising interest rates have dealt this B.C. couple a double whammy as they try to sell their home and buy a new one. Find out more.
They thought their present home would sell easily for $900,000 but have no bids on an asking price of $850,000, barely above the $790,000 mortgage they are carrying. They have also agreed to pay $1,050,000 for a new home, on which they have paid a $50,000 deposit. They need $275,000 to close on the new house and will have to cover $40,000 to sell their old house including $35,000 fees if they wish to get out of their existing mortgage.
“They have minimal net worth on their balance sheet, but they are not poor,” Moran explains. “There is a big difference.” The old home is not a financial disaster, he says. They paid $615,000, so they have had what amounts to free accommodation with a capital gain. However, rather than paying the mortgage down over time, they have used their equity as an ATM. It is catching up to them now.A rental suite in their new house can be valued at $250,000.
They might get a two-tier mortgage — one for their own home and one for the rental. That would keep their accounts clean for CRA reporting, Moran suggests.If it were not for the large mortgage balance caused by overspending, they could retire early. However, to make up for it, they have agreed to work to Molly’s age 65 when she will have an indexed pension of $35,000 per year. Ernst, starting the same year , will have a non-indexed pension of $26,703 per year.
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