I'm Dreaming

Because the last couple days have been a little stressful, I really wanted to do something light and fluffy. Something fun and semi-useless. I say semi-useless instead of useless, because this exercise can give you real insight into where your priorities actually lie. Sometimes that's just as useful as money. So, inspired by Money Rabbit's What I Would Do With $100,000, and Krystal at Give Me Back My Five Bucks' What I Would Do If I Won $1,000,000: 4 Years Later, here is what I would do if I had $100,000:
Credit Card - $4,300 ($95,700 left)

So long sucker. Like a bad ex-boyfriend, I won't miss you when you're gone.

LOC - $11,000 ($84,700 left)

This is like the annoying kid brother to the aforementioned bad ex-boyfriend. Less directly spiteful, but I'll be happy to not have to deal with it again either.

Car - $9000 ($75,700 left)

I still plan to sell my silvery little lemon, but in the mean time I'd rather not have the monthly payments or inflated insurance on it either. Hello extra $450 a month...

Mortgage - $48,000 ($27,700 left)

My mortgage, while it is fixed, has multiple pre-payment options including one allowing me to put up to 20% of the total mortgage down on the balance every year. That chunk right there takes my mortgage out of the oh please don't let the rates get too high category into the *breathe* category. Ah the things you learn when you're young and dumb.

New Homebuyer's Repayment - $15,000 ($12,700 left)

Because when I put money into RRSPs, I want my tax money back dammit.

Emergency Fund - $5,300 ($7,400 left)

I'd plunk the money for my goal of $4000 in there, along with a little extra just for good measure. That puts my combined cash savings and investments between $9,000 and $10,000. I'd feel pretty good about that for the time being, as that gives me several months living expenses should I need it. Or a new furnace in January. You never know.

Renovations - $5,000 ($2,400 left)

I need to finish the flooring on my staircase, and the tile in the kitchen. After that, I should have enough money left to put up the other half of the fence in my back yard.

Pantry Restock - $400 ($2,000 left)

Assorted dried/canned odds and ends, as well as 1/2 a lamb from a farming friend of mine up north. Some containers to hold dried goods in an orderly fashion would be nice too.

Grandfather's Birthday Present - $250 ($1,750 left)

Because he deserves it. I don't know yet what the exact gift would be, but I can assure you it likely includes a large Tim Horton's gift card.

Grandmother's Birthday - $750 ($1,000 left)

It's my grandmother's 80th birthday this year, and the family is all getting together in BC to celebrate. That means flights and accommodation, along with a gift for my grandmother.

Wardrobe Restock - $995 ($5)

Right now the thing I'm most in need of are a pair of gum boots (rain boots, wellies, whatever you call them). The snow is melting around my place, and the water on the sidewalks gets quite deep in some places. Other than that, some good quality work clothes to kick a couple items off my list would be great.

Starbucks Chai Latte - $5 (I'm Out!)

Because, you know, I want one.

;)


*Missed a couple several others - Oops*
Paying Myself
Finance Say What
Debt Free Kid
Fabulously Frugirl
Little Miss Money Bags
Figuring Money Out
Hi That's My Bike

The Acid Test

I've been wondering what would happen to my mortgage if my interest rate was to jump when I have to refinance with a new interest rate in 4 years. I locked my rate in for 5 years, unfortunately I don't keep if for the life of my mortgage (though that would be awesome!) The mortgage calculations are slightly different in the different countries, so I'd recommend finding a local calculator rather than using this link if you're outside of Canada.

http://www.cmhc-schl.gc.ca/en/co/buho/buho_005.cfm

I found a calculator claiming to be Canadian that talked about PMI and based it's tax rate on Massachusetts. Do I think it's calculations are accurate? Not likely. If you don't know interest rates from insurance, I'd suggest really wandering around the CMHC website. Do this before you even go into a bank! A mortgage is the largest loan most of us will take out in our lives, make sure you know what the bankers (or even better, mortgage brokers) are talking about before you sign anything! Even better, check out this site:

http://www.yourfirsthomecanada.ca/

Their website is under reconstruction, so it doesn't look that great, but it is chock full of resources for people looking to buy their first (or second, or third) home.

Anyway, back to what I started rambling on about. My mortgage was ~$242,000 when I started a year ago. I pay on an accelerated biweekly schedule, so instead of making 12 months worth of payments I make 13 months worth per year (1/2 month payment every 2 weeks = 26 1/2 month payments = 13 months worth of payments)

Not counting taxes, my mortgage is ~$533 every 2 weeks on the accelerated schedule. This averages out to ~$1154 a month, and the lifetime interest cost of the mortgage is ~ $169,546. On a regular monthly payment schedule I'd pay ~$1065, and the lifetime interest cost of the mortgage would be ~$205,433. It's a small extra payment every month for a decent savings in interest.

But like I mentioned before, my interest rate will (most likely) be increasing when I renew my mortgage in 4 years. How is this going to affect my ability to pay for the house?

At the end of the first 5 years, at the rate I'm going, my balance will be ~$228,000. Not considerably less than what it is now, thanks to the wonder of interest payments (so much better when it's working for me, not against me).

Interest Rate: 5%    Monthly Payment: $1217    Interest Cost: $210,053
Interest Rate: 6%    Monthly Payment: $1356    Interest Cost: $260,231
Interest Rate: 7%    Monthly Payment: $1502    Interest Cost: $312,582

If the interest rate goes up a percentage, my monthly payment would only go up ~$63 from my biweekly accelerated monthly payment, not too bad. If it goes up 2 percentage points, the monthly payment increases ~$202 a month. Huh... If it goes up 3 percentage points, the monthly payment increases ~$348 a month. Ouch.

But what if I pay off the insurance costs? Then I'd only have ~$220,000 left owing on the mortgage. That should help, eh?

Interest Rate: 5%    Monthly Payment: $1174    Interest Cost: $202,683

Interest Rate: 6%    Monthly Payment: $1309    Interest Cost: $251,100

Interest Rate: 7%    Monthly Payment: $1449    Interest Cost: $301,614

That didn't really seem to help much. The monthly payment at 5% is close to what I'm currently paying on the accelerated biweekly rate, but the other two still kinda hurt. Lets say I really focus my efforts and chip away at this sucker after I dig myself out of the other debts. What would I be looking at if I can get it down to ~$200,000?

Interest Rate: 5%    Monthly Payment: $1067    Interest Cost: $184,257

Interest Rate: 6%    Monthly Payment: $1190    Interest Cost: $228,273

Interest Rate: 7%    Monthly Payment: $1317    Interest Cost: $274,194

That's looking a little more reasonable. What this tells me is that once I've finished taking care of the other debts, I need to really focus on chipping my mortgage down. That way once the economy stabilizes, and mortgage rates go up again, I'll be able to continue paying for it comfortably without needing a huge salary hike. I'm glad I looked at this now rather than 3 and a half years from now; time is still on my side.


Home Buying For Dummies, 4th Edition
100 Questions Every First-Time Home Buyer Should Ask: With Answers from Top Brokers from Around the Country
The First-Time Homeowner's Handbook: A Complete Guide and Workbook for the First-Time Home Buyer (Book & CD-ROM)