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 Post subject: New grad with a mortgage to burn (175k)
PostPosted: Mon Jul 04, 2011 10:24 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Hello to all, have been reading GRS for the last 4 years and finally have decided to take advantage of the forums to get some reflection on my financial well being I suppose.

Myself and my girlfriend of 4 years moved to Calgary last July after our month long trip around Europe as a grad present to ourselves. We both graduated debt free from St.FX and with money in the bank; she did so because of being a crazy brainiac on scholarships while I cruised by doing co-op / internships at IT firms during my summers.

We found ourselves in Calgary because she wanted to get her Ph.D which is now 1 year out of 5 complete at UofC and I followed because I can get IT work in just about any major city.

After 11 months of renting we finally pulled the trigger this past May as we had the 20% down-payment ready for a condo. Of the 220k purchase price we now are left with a mortgage of 174k at 2.2% variable (hoping the US economy doesn't recover anytime soon). Our default mortgage payment is $388 rapid biweekly, but we pay $450 and I top up every second payment with an additional $500 towards the principal.

In terms of our finances I have to say we get by quite comfortably, as her scholarships pull in 40.5k tax free of which only 6k goes towards yearly tuition and I make around 45k after taxes and maxing out retirement contributions.

In terms of money sitting in the bank I have a 4-6~ month emergency fund sitting at 6k (making 1.5%) and 5k in my chequeing and 1.5k sitting in savings (making 1.5%) for our east coast trip next week.
I have no idea what she has but seeing as we split all the expenses I have an idea that shes doing quite ok.

For retirement I have work spitting in 9% to a DC plan and i put in 6% for a total of 15% of my salary and then I put the remaining 3% into an RRSP to max out my 18% annual contribution. I think the total of those 2 accounts is just about 14k now, probably 11 in the DC and 3 in the RRSP.

In terms of other savings I've put 250 into my emergency fund every month and 250 into savings. The emergency fund contributions will now stop as I've hit my goal mark and my job is quite secure.

In terms of better utilizing my money do you guys think I should keep prepaying the mortgage at such a low percent? Come next year I can refill my TFSA ( was emptied for down-payment) up to 24k because of withdraws and earned contribution room, this will be on the stock market once I get it funded again.

What is the best use of my excess money monthly, If i stopped my prepayments and savings what would you do with the extra $1000 each month?

Thanks and hope to remember to update this frequently enough.

Cheers,
Chriscabob


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Mon Jul 04, 2011 6:45 pm 

Joined: Tue Mar 11, 2008 12:19 pm
Posts: 1683
Location: Ottawa, Canada
chriscabob wrote:
After 11 months of renting we finally pulled the trigger this past May as we had the 20% down-payment ready for a condo. Of the 220k purchase price we now are left with a mortgage of 174k at 2.2% variable


I would lock that down to a 5-year fixed immediately. Mark Carney has made it widely known that he's itching to raise interest rates, and was already hoping to start this summer. He's begrudgingly waiting, but it's inevitable, and just around the corner. You can lock that down at 3.69% fixed today, and I would strongly recomend you do so.

chriscabob wrote:
In terms of money sitting in the bank I have a 4-6~ month emergency fund sitting at 6k


I'm confused - how would $6k last you 6 months? Your minimum monthly mortgage payment alone is ($388 * 26 / 12) = $841. That only leaves you $159/month for everything else. What are your total monthly expenses?

chriscabob wrote:
I have no idea what she has but seeing as we split all the expenses I have an idea that shes doing quite ok.


This is none of my business, but if you've been together for 4 years, I'd suggest it might be time to share your financial information with each other, just to make sure there are no surprises for anyone. If you've bought a house together, you should know how much other debt/savings she has.

chriscabob wrote:
For retirement I have work spitting in 9% to a DC plan and i put in 6% for a total of 15% of my salary and then I put the remaining 3% into an RRSP to max out my 18% annual contribution. I think the total of those 2 accounts is just about 14k now, probably 11 in the DC and 3 in the RRSP.


I'm assuming the DC plan through works is also a qualified RRSP? If it's not, then of course it doesn't count towards your 18% annual contribution limit. I would also advise you to look into the expenses associated with whatever mutual funds your DC money is invested in, because company-sponsored plans typically have outrageously high expenses. They're notoriously terrible, particularly in Canada. As for the remaining 3% you're investing outside of your employer DC plan, where do you have that stashed? What is it invested in?

chriscabob wrote:
In terms of better utilizing my money do you guys think I should keep prepaying the mortgage at such a low percent?


Yes, I would. I would refinance it to a fixed rate, and pay extra on it.

chriscabob wrote:
Come next year I can refill my TFSA ( was emptied for down-payment) up to 24k because of withdraws and earned contribution room, this will be on the stock market once I get it funded again.


Given that you just used your TFSA money for a house down payment (a relatively short-term savings goal), what is your next plan for your TFSA? What are you saving up for next? The reason I ask is because if it's for another relatively short-term goal (like the house down payment), I would advise you to be very careful about investing it in volatile securities like stocks or mutual funds, and would instead stick to lower-risk things.

chriscabob wrote:
If i stopped my prepayments and savings what would you do with the extra $1000 each month?


If I wasn't going to throw it at the mortgage, and I had no other debt, and I was already maxxing out my RRSP and TFSA room, I'd spend it. Have fun with it. Save it up and take a trip.

Welcome to the forums, I hope to hear more about you in the future. You sound like you're on the right track!


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Wed Jul 06, 2011 8:39 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
kombat wrote:
I would lock that down to a 5-year fixed immediately. Mark Carney has made it widely known that he's itching to raise interest rates, and was already hoping to start this summer. He's begrudgingly waiting, but it's inevitable, and just around the corner. You can lock that down at 3.69% fixed today, and I would strongly recomend you do so.

Thanks for the advice, we've been weighing in on this idea for awhile seeing as rates couldn't possibly go any lower, but its tempting to hold on to the variable till years end.
kombat wrote:
I'm confused - how would $6k last you 6 months? Your minimum monthly mortgage payment alone is ($388 * 26 / 12) = $841. That only leaves you $159/month for everything else. What are your total monthly expenses?

Sorry should have specified that it's more of an emergency fund that covers my own butt for 6 months, as we split expenses down the middle it hovers around 1k each monthly. Jointly you could call this a 3 month EM, but seeing as her scholarship is guaranteed for the next 3 years I don't worry about her end.
kombat wrote:
This is none of my business, but if you've been together for 4 years, I'd suggest it might be time to share your financial information with each other, just to make sure there are no surprises for anyone. If you've bought a house together, you should know how much other debt/savings she has.

I don't know specifics I just have a general idea of what goes in and out. She has no debt, pays off her credit card in full each month. So I guess I just don't seem to be too concerned here to pay much attention.
kombat wrote:
I'm assuming the DC plan through works is also a qualified RRSP? If it's not, then of course it doesn't count towards your 18% annual contribution limit. I would also advise you to look into the expenses associated with whatever mutual funds your DC money is invested in, because company-sponsored plans typically have outrageously high expenses. They're notoriously terrible, particularly in Canada. As for the remaining 3% you're investing outside of your employer DC plan, where do you have that stashed? What is it invested in?

Yes the DC plan contributions count toward my overall 18% and the fees are actually quite competitive. I'm in two plans (for both my RRSP and DC) that both end in 2040 and are quite neat because they have a guaranteed value at maturity if you stay in the plan until then (google: Sunlife milestone plans) and basically adjusts how its invested as I get closer to retirement. IE. more stocks and international for now and then it slowly progresses to bonds / money funds. The fee is only 0.95% for the fund, which has been about ~$160 to date (1 year). My return since joining in July of last year is 7.5.
kombat wrote:
Yes, I would. I would refinance it to a fixed rate, and pay extra on it.

Ok thanks, don't need to refinance though I can lock in anytime to the best fixed rate (as long as I keep my term > 5 years, including whats already been done). I will continue to pay it down either way.
kombat wrote:
Given that you just used your TFSA money for a house down payment (a relatively short-term savings goal), what is your next plan for your TFSA? What are you saving up for next? The reason I ask is because if it's for another relatively short-term goal (like the house down payment), I would advise you to be very careful about investing it in volatile securities like stocks or mutual funds, and would instead stick to lower-risk things.

To be honest I have no idea... I've always wanted either a BWM 335i or a Subaru WRX STI. But those are more of a dream car as I don't think I could bring myself to spend so much on a point A to point B car. We currently have a 06 honda civic fully paid for and that seems to do what it needs just fine.
kombat wrote:
If I wasn't going to throw it at the mortgage, and I had no other debt, and I was already maxxing out my RRSP and TFSA room, I'd spend it. Have fun with it. Save it up and take a trip.

Thanks for all the advice.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Tue Sep 06, 2011 11:02 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
It's been two months since I last posted so i figured its time for an update.

The mortgage now sits at $172,089.77. I've changed my prepayments to now be 300 every payment which is rapid biweekly vs how I was doing 500 every second payment, cut back on eating out an extra day per week at work.

The girlfriend got one of her scholarships from NSERC bumped up to a more prestegious one a CGS D3? It bascially means she gets 12k more from NSERC and 2k more from another scholarship top-up that is based off the nserc one...

So since we already have a budget inplace that seems to be working well for the last 3 months in the new condo, we've decided that once she gets the lumpsum at the end of the month that half will go towards the mortgage as a principal payment and the rest will go to her family's investor which handles her TFSA and investments for her. So it will be like money we never had.

Still waiting on moving to a fixed rate as per Kombat's suggestion earlier, seems our mortgage broker can get us a 3.10% 5 year fixed which is great but the variable discounts seem to have gotten worse.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Mon Jan 30, 2012 4:00 pm 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
So it's been awhile since an update, I figured since I still visit the site daily I owe it to myself.

Our mortgage now sits at 163,406 with a now regular payment of 1050 of which only ~140 now goes to interest and an additional 5000 set to hit this friday, using up some extras funds sitting around as our mortgage year is coming to an end in may and the prepayment privialges don't carry forward for each year. The girlfriend will also be throwing down some cash before the end of the mortgage year, an unknown amount until we figure out her rrsp status.

The low mortgage balance is due to changing up the prepayment once again, so from the default mortgage payment of 348 bi-weekly we upped the payment to 450 biweekly and then also make double mortgage payments along with a prepayment of 150 biweekly to amount to the new total of 1050 that we have been doing since early October I believe.

My dream is to have this payed off before the 5 year term expires in may 2016, should be manageable as long as my job situation doesnt change in the next 4 years.

No doubt about it in my mind now to hold onto our awesome variable discount, due to recent announcements by the US and Canadian governments.

In other news, I've also slowly put funds to a savings account (7k and growing) to purchase an engagement ring and travel back to Europe with my girlfriend so hopefully this will be an eventful summer in both mortgage and life.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Tue Mar 06, 2012 2:08 pm 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Mortgage is now sitting at $155,658.72, first national thinks it will take another 15 years and 9 months. We're still planning on getting it done by May 26th 2016 ( the end of the 5 year term). Have another 5k prepayment ( coming from the GF this time around) scheduled in the upcoming 6-7 mortgage payments to use up the priviliges before they roll over. Plan to end the morgage year with 145k left to tackle.

Trip to Europe is no longer in the books because we switched things up completely and just booked a 16 day tour in Ecuador to see the amazon. Bought this on the capital one aspire world travel card that I just recieved last week, which using the $350 first purchase bonus and the points I earned paying for the trip has earned me a $450 credit towards the trip. :) Man are they quick crediting your points and credits as the credit has already hit my online account statement. I plan to buy an engagement ring just before the trip and take a fake/ super cheap ~$100 one with me to propose with keeping the real diamond ring safe at home.

The car bug is biting me pretty hard with a new bmw dealership put in down the road from my work, not that I'd buy new. I think I'd get a 2-3 year old one of kijiji after an inspection and carfax of course. Although then again, just last week the renovation bug was biting me and making me want to put granite to the kitchen and bathroom and replace the appliances with stainless steel.... so hard to decide what to do with excess $. ( keep in mind my pension/rrsp is maxed out and I contribute 5k annually to my tfsa, so in no way am I negleting savings).

From an unexpected expense point of view the back right tire in the studded winter tires currently on the car keeps slowly leaking, about 5psi every two weeks. I keep using Co-op gas stations to fill it back up as the air is free there minus the 20$ i spent on a pressure reader. Hope the leak doesnt progress otherwise that means awhole new set of 4 winter tires, was hoping they'd last this last winter before having to buy replacements... so close.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Thu Aug 09, 2012 10:44 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Our mortgage is taking a nice beating which is exactly as I've hoped for. Balance is currently sitting at $140,928.04 :) Over 34k gone in 14 months, keeping in mind that i didn't start off with the heavy payment schedule ongoing now.

Got engaged on our 2 week trip in Ecuador, havent merged finances yet still have kept accounts seperate and settle bills at month end. Wedding is almost all planned out for 2014 in Newfoundland.

Good news is that the leaky back tire I got fed up just before changing over the winter tires and paid to have them look in depth at it. Turned out to be a faulty valve stem that would leak out until the psi was around 25 then it would seal back up... go figure.

Hoping to get a promotion at work in the coming months, just past 2 years a month ago and have tackled some projects so hoping my boss is paying attention.

Emergency fund still sits at 6k I move the interest out and treat ourselves to ice cream lol. My savings is over 18k, so a new to us car (USED) looks to be in the books as we've had our car appraised for a trade in (6-7k surprisingly) towards a small car (think civic, sentra, impreza). So after tradein and the fiance's contribution I expect to spend 5k and end up with a 2011/12 with maybe 15000 km on it. This may happen this winter or next summer.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Thu Nov 22, 2012 10:30 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Mortgage now sits at $133,009.42, were going to throw our annual 10k prepayment at it in March. We have now saved enough cash (25k) to purchase a CUV, which will happen in April or May. We are looking toward the Tuscon or Mazda Cx-5 as they have nice appeal to us while not being gas hogs. The CX-5 does particularly well in regards to gas and thats what I've been leaning towards.

Have gotten a few salary raises that I haven't mentioned and those have helped accelerate saving for the 1 year old cuv planned purchase and our big trip to hopefully thailand next year. Not to mention the profit sharing bonus at work was just capped out at 10% for this year so thats an awesome bonus to count on to receive on top of any regular bonus in April.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Tue Apr 09, 2013 12:33 pm 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Mortgage is now at $114,134 with 4 biweekly payments left in our second year of having the mortgage. Payments are 400 biweekly currently, plus our doubling and prepayments to bring it to 1100. We are continuing on our track to have the mortgage gone in the original 5 year term. With 36.3k left to pay each year in our remaining 3 years.

On the car front we did buy a 2014 GS AWD Mazda CX-5, about 3 weeks ago. Gets amazing fuel economy for an SUV, just finished our first 1000km's and its averaging 9.0l/100km. We did 10k down and got 6.5k trade in value for the car, we decided to finance the remaining 17k over 3 years at 0.99%.

Have our first vacation of the year finally coming up in May, a week and a half much needed getaway to Orlando. Mostly for the beach and sun, but also for the Universal theme park and some shopping. :) Also just upgraded the living room tv to a samsung 55" smart tv with 3d and all those other fancy features most will never use, but I will. Gotta love kijiji, buy a new tv and somehow sell your old for the same price. (I hunt for bargains all the time).

Finally got a nice 12k bonus this year (sadly before taxes) and a 4k bump to make my salary 72k now. My fiance just finished an interview for a CBC radio AIHS internship that would put her PHD work (and scholarships) on hold for 4 months, so she can get some exposure to the communication world of science, it comes with a stipend determined at time of hire. Hopefully its something comparable to her current income, but I'm highly doubtful of that.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Wed Apr 10, 2013 11:17 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
I'm surprised the canadian gubimint allows one to "make" money off of scholarships. In the US, each school publishes a total cost of attendance. Any scholarship money above that amount is taxed as income. I suspect not being "married" gives her some preferential treatment as well.

_________________
Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Fri Jun 14, 2013 1:47 pm 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Bichon Frise wrote:
I'm surprised the canadian gubimint allows one to "make" money off of scholarships. In the US, each school publishes a total cost of attendance. Any scholarship money above that amount is taxed as income. I suspect not being "married" gives her some preferential treatment as well.


Well in Canada any scholarship that goes toward a Master's or PhD is considered exempt from taxes. The not being married has no impact on her, but as we are common law I get to claim a 10k tax break for supporting her as she has no taxable income. Quite the odd system they have set up.

My fiance did end up getting the AIHS/CBC science internship. Two weeks in and they already have her running around doing preliminary interviews and researching story ideas for the radio.

Mortgage update: $109,106.13, three years less two weeks left until its paid off. Coincidentally if we accelerate our payments as I plan to, it will land in the same week as our CX-5 3 year loan will be paid off. Finally we had a big celebration last week with friends and family as we had passed the 50% pay off of the value of the condo (bought at 220k hit 110k left on the mortgage) of course we didn't explain why we had a party, only those on the internet get to know.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Fri Jun 14, 2013 3:10 pm 
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chriscabob wrote:
of course we didn't explain why we had a party, only those on the internet get to know.


So that's what it was all about! I thought you just had extra beer to get rid of!


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Thu Jul 11, 2013 7:08 am 

Joined: Mon Apr 25, 2011 7:37 am
Posts: 446
Sounds like you are doing great! Yeah the way Canada handles scholarships is different from the US. When I had a graduate fellowship, they didn't take out for social security (so those years show me as not working) but all other taxes needed to be paid.

When I got married to my husband, since he made so little at that time before we were married he didn't need to pay federal taxes, but regardless of filing seperately or jointly he lost that advantaged status so we pay more (not less in taxes) after being married. The main benefit being married was he could sign up to my health insurance.


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 Post subject: Re: New grad with a mortgage to burn (175k)
PostPosted: Tue Oct 15, 2013 1:51 pm 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
partgypsy1 wrote:
Sounds like you are doing great! Yeah the way Canada handles scholarships is different from the US. When I had a graduate fellowship, they didn't take out for social security (so those years show me as not working) but all other taxes needed to be paid.

When I got married to my husband, since he made so little at that time before we were married he didn't need to pay federal taxes, but regardless of filing seperately or jointly he lost that advantaged status so we pay more (not less in taxes) after being married. The main benefit being married was he could sign up to my health insurance.


I assume social security is the same as the CPP (Canadian pension plan) in which case my fiance is not paying into that either currently so its also counted as years not working. Same thing with her Employment insurance, that is not being paid into either and thus no unemployment benefits. For your health insurance point, we didn't need to be married for her to sign onto mine. Just sign a common-law document at work, oddly enough just my signature not hers... go figure.

Mortgage balance is now 94,989.59, the fiance has a 5k prepayment coming up at the end of January at which point the balance will be a very exciting ~82K.

On the condo note we finally upgraded all the appliances to nice stainless steel kitchenaid and home depot is coming to do the granite in the kitchen and bathroom on the 30th just before halloween when we have some family over.

On a completely unrelated note: Flames vs Toronto on Oct 30th going to be a blast of a game. It's a yearly treat as Toronto only comes once a year. Go Toronto!!!


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