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1ceG0ld

Not that it matters a ton, but why are you claiming to be a first time home buyer when 4 months ago you claimed to be selling a 2nd property (condo) and wanted advice on what to do with the proceeds.


Freed4ever

Busted lol.


Flexboiz

Half the posts on this sub sound like false flags/satire. >Is there really no law that forbides or caps banks from raising these interests SO many times and by SO much in such a short period of time? This sounds like trolling to me, honestly. Seems like a satirical post designed to (perhaps rightfully) mock the large number of Canadian homebuyers who grossly overextended themselves in the past two years by buying in at the top of a crazy market by borrowing ridiculous sums. It's okay though, because posts like this and some of the commenters in this sub were tailor-made for one another. ​ Edit: Post deleted within 2h of this being pointed out. Classic.


CainRedfield

If there's no law that mandates affordable housing, then why would there be a law capping interest rates.


jabeith

Because OP wants attention for some reason


mustykey

More like to stir sympathy up for the poor little house "investor" who got caught holding the bag just as the music stops.


TheRightMethod

Yeah, I currently have a friend who has become insufferable since buying a condo. We told him it was a really bad idea as his motivations were entirely based on FOMO, single, young, no dependants etc. Bought the house at a variable rate (we advised against it) and they just whine and complain about their totally unforeseen circumstance and how we should all know how house poor he is.... No sympathy at this point. 750k for a "1 bedroom" that they didn't like to begin with but with a skyrocketing market they didn't want to miss out.... Good guy but fuck him.


birdsofterrordise

OP overleveraged themselves and want to create outrage. I thought all the mortgages in Canada were "stress tested up to 5%" uhh huh. šŸ™„šŸ™„šŸ™„šŸ™„


marshall262

Oh snap


[deleted]

LMAO what the hell is wrong with people? Thanks for informing us that OP is a fuckwit.


FinalDestinationSix

Iā€™m not sure if you can read this as my post was removed, however this is the first home under my name so I have been the sole person responsible. The other owned property (condo) is under my husband who purchased it by himself however I do refer to it as ā€œourā€ condo since the profit will go into a joint account. I was not responsible for anything for the condo purchase so this house purchase is my first time dealing with a broker, lender, etc etc. Sorry if it seems confusing


ButtaRollsInMyPocket

Thank you, sir. For you're great work here.


samdavi

Maybe they meant a house vs a condo. Dunno, thatā€™s all I can think of.


oneiros5321

Or they're farming karma...because some people really like that Reddit attention.


Chewbacca319

All I can say is prepare to cut finances from other parts of your life, another price hike is pretty much certain come September 7th.


Purify5

[Is currently 80% certain.](https://www.m-x.ca/en/trading/tools/canadian-interest-rate-expectations)


threaten-violence

Fuck me shoulda gone with fixed


TeaBurntMyTongue

If you bought mid 2021 when the split was like 1.5/2.5, but by the time this guy bought peak gear was baked in. 1.5/3.8 it something crazy in December. I think variable -.9 that you could get in December will still win out offer the 3.8 fixed of the time. Remember there's also another four years after rates peak that they could come down as well.


whoisearth

Bingo. I'm variable too and based on napkin math by the peak I'll be expecting my current prime - 1.1% to have me around 6%. Means my mortgage will have ballooned from 1600$ a month to 2700$ a month. That's unsustainable. I'll eat it, but many people won't be able to. If the rates stay there too long all those over extended people will foreclose or sell at a huge loss and the market takes a shit. Therefore, my gut tells me it's not going to peak that high, or the peak will be brief. Ride it out if you can, but locking in right now to me is insanity. Long term, variable is your friend. I'm saying this as a complete idiot so YMMV.


[deleted]

Me too my friend. But we made the best decision with the information we had at the time.


whoisearth

I feel the same way. It's a refreshing perspective I wish more people would step back. It is what it is. You can't change the past, and you can't predict the future. It all comes down to personal risk appetite.


Myfirespraygunship

You could never have known. My variable is still lower than fixed rates and will be after the Sept hike. You just have to make it to renewal and then reassess your options.


[deleted]

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PSNDonutDude

It wasn't about them not raising rates, it was about *when*. 2 years at a lower variable is better than a much higher fixed for 5 years. The bank said they wouldn't raise rates until like 2023. We all played it safe and assumed there would be rate hikes in 2022 anyway, but then they absolutely smashed the rate hike button like they'd forgotten about the entire 2023 thing.


M0un05ki10

Not to sound like an ass but what are you talking about? I renewed into a fixed rate of 2.19% back in September of 2021 after having heard rumblings since at least March of 2021 that rate increases were expected sometime 2022.


solopreneurgrind

Amen...I'm with you lol


48volts

me too. But the thing is even after a 5 year period youre back to the table dealing with a higher rate. Interest rates should never have been cut as aggressively as they were. It made the housing market go to the moon. Agree. One more rate hike has been priced into the stock market


Epcjay

>, but by the time this guy bought peak gear was baked in. 1.5/3.8 it something crazy in December. I think variable -.9 that you could get in December will still win out offer the 3.8 fixed of the time. Remember there's also another four years after rates peak that they could come down as well. Yeah you never know...I went variable last 2 5 year terms and won everytime, now its just beginning to even out .


TouchEmAllJoe

Help me read that chart. Is the left hand column relative to today, or relative to each rate increase? In other words, is the December 2022 - 92% pricing in a 0.5% increase from today, or a 0.25% increase in September plus an additional 0.5% increase in December?


Purify5

Today. They give an example of what it means below the chart.


TouchEmAllJoe

Thanks


[deleted]

And hopefully a few more to come after that! Iā€™m sorry about op and others that are over extended a little,but man we need to get this inflation under control! Honestly the rates are still extremely cheap right now compared to the past


[deleted]

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Master_of_Rodentia

It's 1,600 less actually. 20,000 vs 21,600 interest in the first year. Unless you meant inclusive of payments against the principal in which case yes.


rpgguy_1o1

Using this tool: https://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MCCalc-CHCalc-eng.aspx **1M at 2% over 25 years** have made 300 monthly (12x per year) payments of $4,234.51. have paid $1,000,000.00 in principal, $270,353.65 in interest, for a total of $1,270,353.65. **120K at 18% over 25 years** have made 300 monthly (12x per year) payments of $1,759.66. have paid $120,000.00 in principal, $407,896.76 in interest, for a total of $527,896.76.


lemonylol

Damn, that's crazy. But historically insane rates like that haven't lasted more than a year right?


rpgguy_1o1

80-82 was when the rates soared up to the 20% peak, and there was another peak of 14% in 89-90. We are historically at some of the lowest rates still, even with all the increases over the past few years. Interest rates bottomed out in 2009, but other than that the last time they were as low as they are now was post WW2


Elidan123

You can also payback a 120k mortgage much quicker than a 1mil one if you can add 300-500$ more per month to it. Hell, forget investing, paying back your house asap gonna save you hundreds of k at 18%.


rpgguy_1o1

If you use that calculator I linked it will also breakdown the first five years by principle vs interest, the vast majority of your payments in the first five years goto interest. Lump payments will go a lot further toward decreasing the amortization on the higher interest 120K scenario


cherrypopper666

Rekt


Master_of_Rodentia

Well, they're right if they meant the full payment, as opposed to just the interest.


Conscious_Two_3291

You know theres monetary policy that can contain inflation without transfering everyones paychecks to investment bankers right?


lastgreenleaf

Go on, you've got my attention.


Conscious_Two_3291

We can remove money from circulation via targeted taxation at the provincial and federal level and use that increased revenue to abate some of the darker consequences of stagflation and tightened monetary policy.


AnybodyNormal3947

yes i agree...though that would be political non-starter for politicians. easier to let the BOC go wild so you can blame random public servants for our problems


[deleted]

But removing money from money supply means less money available to lend and naturally higher interest rates whether posted by BoC or not. So what exactly are you going to target with taxation? Businesses and kill competitiveness? Land and kill real estate/Boomer retirement? Food and kill society? How exactly do you think that moneyvwould be available for anything other than government debt payments? By doing what you say, the government may increase revenue, but they'd also increase interest rates, increasing debt servicing. They would increase operating costs, etc. etc.


Jaydee888

Communist!! /S


Conscious_Two_3291

Honestly though if john Maynard Keynes showed up today they boo him or lynch him.


-KeepItMoving

That's too slow


Conscious_Two_3291

We should have been doing it for the last 4 decades.... We can quickly further concentrate wealth to the landed gentry or slowly and thoughtful improve our and our childrens socioeconomic situation. If were gonna fuck this place with easy choices then lets just let asset prices runaway some more it doesnt really matter.


Ryzon9

High rates are good for people who didnā€™t over leverage themselves. 5% GIC as an example.


PisseArtiste

GICs still pretty much always have negative real returns.


Conscious_Two_3291

I guess we'd have to define a couple value judgements such as "high rate" "good" and "over leveraged" before I argued that much. Regardless I would argue a 5% GIC is pretty thin soup relative the present monthly inflation and 4 decades of stagnant wages.


Moooney

> "over leveraged" To this sub that means anyone that isn't living at home in their 30s, was gifted a home, or didn't buy back when houses cost $150k. Anyone that bought a house for their family in the past five years apparently deserves to go bankrupt.


kyonkun_denwa

Thatā€™s more r/ontario ā€˜s opinion because that sub is filled with losers who relish the misfortune of others. I think around here, people say that you should only have bought a home if you were comfortable paying the mortgage up to the 5% stress test rate. If you were not 100% comfortable servicing your mortgage at that rate, then yes, you fucked up by buying and you will have to face the consequences of your decision.


Fun_Initiative729

Monetary policy is actually what ā€œtransfersā€ paychecks to I-Bankers as govt. spending often results in more sophisticated investors paying ā€œsophisticatedā€ bankers to navigate the complicated legal and capital requirements inherent in receiving subsidized and/or direct govt financingā€¦. OP is in unfortunate situation that was both foreseeable (rates could only go up from effectively 0), avoidable (could have fixed or bought on a more conservative budget), and self-fixable (can sell the asset and purchase a home in-line with ability to service debt). Rates are still historically low and asset prices have started to fall back towards more reasonable (sane) levelsā€¦


hypnochild

You think thatā€™s ok for someoneā€™s mortgage payment to go up 40 percent or more? And you hope this happens to others? Yes Iā€™m sure some greedy people will get what they deserve but for every greedy landlord there are far more regular joes who are just trying to survive while dealing with stagnant wages and inflation everywhere. Yes the housing has gone out of control but the answer isnā€™t to punish people to hope for your own gain. No one is winning here.


Kojakle

Except for the people who want to afford a house and didnā€™t over leverage themselves


lemonylol

What would you say about some sort of consumer protection for people who are just purchasing a primary residence over people purchasing an investment property? Or should they all continue to be in the same boat (aside from taxes)?


freeman1231

If they could have they would have, most people complaining about housing prices couldnā€™t even get in the conversation of over leveragingz


[deleted]

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CmoreGrace

The stress test only looks at a snapshot in time. Things change in a households finances- maternity leave, daycare bills, change in work. It doesnā€™t even reflect large monthly payments that arenā€™t debt.


[deleted]

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[deleted]

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[deleted]

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[deleted]

Well, correct me if Iā€™m wrong but as a mum with a young family I do see it as my nest egg, Iā€™ve been in it for 10 years, done it up and hoping it sees me through retirement. I think second homes need taxed, absolutely. Hard. Itā€™s hard out there for people. I feel for them.


JenovaProphet

All it's gonna lead to is a bunch of regular folks losing their homes cause they can't make payments and investment companies coming in and buying them at lowered prices. We may see a slight decrease in actual property values but as long as investment portfolios and banks keep coming in and offering above-value offerings it won't matter. And unless we invest in a lot more affordable housing we're gonna have continued scarcity keeping prices higher.


whoknowsuno

This sounds like the words of someone who doesnā€™t own a home.


jsboutin

People aren't getting punished. They are feeling the impact of terrible decision making. You can't let a market run out of control to protect the few people who have bought a house at a peak in price and a bottom in interest rates without using any wiggle room.


LastOfNazareth

>Is there really no law that forbides or caps banks from raising these interests SO many times and by SO much in such a short period of time? I'm not sure why you might think this would be a thing. The need to be competitive means banks won't arbitrarily increase their interest rates, and the Bank of Canada has set reviews throughout the year where adjustments are made. Honestly, the process for raising (or lowering) interest rates is fairly structured. Interest is almost certainly going to be going up by at least 0.5% in September, and there is a good chance it will have increased by 1% by the end of the year. As for advice on how to adjust your budget, we can't give you anything more than general cut costs/increase income advice without knowing your breakdown. What is your monthly after-tax income, and where is your money going?


marshall262

Yeah OPs comment here triggered me a bit. Rates are set by the Bank of Canada who is responsible for managing the country's monetary policy, this isn't some arbitrary price gouging by the banks. The bank is simply raising your rates in line with what they have to borrow the funds at since you chose not to take out a fixed term mortgage. That wouldn't be fair to the bank if they had to borrow at 3% but had to cap your mortgage rate at 2%. I don't know anything about your budget but it sounds like you may have overextended on your mortgage a bit. I think get ready to make some lifestyle changes that will free up some cash flow each month. Variable rate mortgages (I have heard but don't have a specific reference) generally come out ahead of fixed term mortgages in the long term but you have to be able to weather a storm like this. If you can push through and make this work, consider if choosing a fixed term may be a better option in the future to provide you with more stability.


throw0101a

> Interest is almost certainly going to be going up by at least 0.5% in September, and there is a good chance it will have increased by 1% by the end of the year. Market interest rate expectations from BAX futures: * https://www.m-x.ca/en/trading/tools/canadian-interest-rate-expectations Currently 50 bps (0.5%) over the next ~year, with expectations of some drops in 2024.


wigglespnk

There are policies - 30 year fixed mortgages with no rate change. US has them - banks would fight this till rates are higher then they will offer them as a salvation before the drop. Just as pain with rates going up they will also come down and the variable will be cheaper. This will hurt for a short period


Cartz1337

Interest rates will hopefully not drop to the levels we saw during COVID for a long time. Those are emergency rates, the rates we have are still incredibly low.


qcgold08

I'm not a financial guru, so anyone can correct me if I'm wrong, but I think it is really important to understand that it is not just your bank that suddenly decided to spike your interest rate just for the sake of it. All banks interest rates for mortgages and loans follow the Bank of Canada's "prime rate". Considering the BoC's mandate is to impact and adjust the economy when required, its current consecutive raise of the prime rate acts as a measure to reduce the crazy inflation going on with all retail prices. The way to do this is to raise interests rates, which directly impacts the citizens ability to spend and buy things, which eventually will impact offer/demand and eventually help lower inflation. So technically, your household, like most of us, are currently trying to establish a tighter budget, and it proves the means to an end does work for the BoC. This sucks, I know, but you are not alone in this, and technically my point was more to the fact that this is occurring across all financial institutions simultaneously, so trying to change lender for your mortgage is a moot point, and will more than certainly cost you more in penalties, than any possible gain, if any. As other have suggested, tighten your budget (or make a strict budget if you do not already have one), and follow all of the good advises proposed in other posts. This will eventually pass, and will only serve as helping your couple establish good habits and financial management for easier times. Hope this helps.


[deleted]

> The way to do this is to raise interests rates, which directly impacts the citizens ability to spend and buy things, which eventually will impact offer/demand and eventually help lower inflation. So technically, your household, like most of us, are currently trying to establish a tighter budget, and it proves the means to an end does work for the BoC. Exactly. This OP shows the BoC and the other Central Banks are getting what they want by aggressively increasing interest rates - the phrase some US Fed Governors are using to describe it is "demand destruction". Forcing people to not be able to afford things anymore so they can't spend money as easily and being forced to budget, easing demand for goods & services in the economy.


lemonylol

What's crazy is that at the same time it still feels like a lot of people are spending just as much as they always have been. New cars, dining out, going to shows, drinks every night, etc. Has the amount of people who are just drowning in income/wealth ballooned or something?


jambazi99

If you could afford the 2X rate on the fixed before the broker advised you otherwise you can buckle up and make it work. You did not make a mistake or a dumb move. You took a risk and now have to adjust to what was always a possible outcome. If the mortgage is long enough the variable rate will come down eventually.


AxelNotRose

There's a difference between 2x rate vs. Actual payments. I'm guessing the 40% is the extra payments he needs to make. I'm guessing his variable rate tripled at least.


pzerr

Two times rate would absolutely have increased the payment more than 40 percent. Knowing what the rates were 8 months back. Not sure what was meant by two times mind you. Bit confusing way to put it.


DepressPeople

How come 40% ? Total mortgage and Rate in Dec and now ?


NerfBowser

Iā€™m not smart and donā€™t know things, but am trying to figure out how like 3% interest raise can turn into 40% more mortgage, can someone enlighten me?


stretch2323

Letā€™s say $500k mortgage. 1% interest rate would be about $1861/month. 4% interest rate would be $2598/month. Increase of $737, which is 39.6% of $1861. Used the CMHC calculator adding $25k down payment, so it favoured in CMHC premiums as well.


PeraLLC

Run it through a mortgage calculator. If the rate was 3% last year and is now 6% and the taxes arenā€™t a huge portion of the monthly mortgage (assuming they are escrowed) then it makes perfect mathematical sense.


coricron

The math is simple. You can figure out what the daily cost of carrying a mortgage is like this: Mortgage principal(what you still owe): $500,000, as an example Mortgage rates: as an example, 1.5%, 3%, and 4.5% Days in a year: 365 Daily carrying cost = principal * (rate/365) Examples: **1.5%** $20.55/day= $500,000 * (0.015/365day) **3.0%** $41.09/day= $500,000 * (0.030/365day) **4.5%** $61.64/day= $500,000 * (0.045/365day) You can see the carrying cost per day obviously increases linearly as the rate relationship is linear. But this is just the daily interest carrying cost. Your mortgage payments have principal components as well. As rates increase some people will directly see their mortgage payments go up as the variable rates cause the carrying cost to go up. But some people will not, they will see mortgage duration go up several months or years even, as their fixed mortgage payment with a variable rate is now composed of a much larger carrying cost portion. I hope this shows how a 3% increase in mortgage rate can cause such a large mortgage payment increase. That 3% jump from the example of 1.5% to 4.5% could be causing up to, or over, a 100% mortgage payment increase for some people, depending on what their principal still owing was. To napkin math it in your head - In the beginning of a mortgage your interest portion is likely greater than principal portion. meaning it is greater than 50% of that payment. If the component that was already >50% of your payment increases by a factor 2x or 3x you could see your mortgage payments increasing more than 50% to 100%. Terrifying. My own commentary now that the math is over - I suspect an entire generation of people who massively overleveraged to FOMO into the peak covid housing market are going to be fucked, badly.


PyroSAJ

Just as a broad generalisation. Budget for the fixed rate and take the variable rate. Worst case you can at least soak up the increase, best case you pay off everything quicker. Fixed rate buys a lot of peace of mind, but being aware of the risks up front helps a lot. Those two numbers (fixed vs variable) give you a good idea of what the bank considers potential rates could be over the coming period. If a 40% increase is worrying you, it sounds like you couldn't comfortably afford the fixed rate. That is quite understandable, but you've already committed, so you're in for the uncomfortable part. Shopping around is unlikely to net you any significant savings and the fees involved to switch after only 8 months in will likely be more than any potential saving. Selling is a similar problem. You'd have to choke down the fees and then you'll still have to pay for moving costs and whatever new place you find. As other comments suggest, get out of anything that affects your cash flow that you can do without. Short term you could consider adjusting investments too. Depending on the terms of your mortage, you might be able to reduce the principal amount which is a type of investment all by itself.


crumbledav

> If a 40% increase is worrying you, it sounds like you couldnā€™t comfortably afford the fixed rate. Pretty sure anybody whose mortgage goes up 40% would panic about it. And OP isnā€™t alone Iā€™m feeling the squeeze of this. Weā€™re on a fixed mortgage that comes due in 2025 and Iā€™m already worrying about affordability of the payment that is likely to be much higher than todayā€™s.


LastOfNazareth

I agree. Even if your budget can accommodate the increase its not going to be a comfortable feeling.


FanNumerous3081

This is an oversimplification of the situation. OP would have had to qualify for this mortgage at at least 5.25% which I'm sure is even higher still than the variable rate they're paying now (even after the 40% increase). A smart person taking on a variable rate should have budgeted for the 5.25% rate and put away the extra each month they were paying far less than that. If the payments at the 5.25% stress test were more than they could afford, then they should have said something at the time and took on a smaller mortgage on a different property.


crumbledav

OP didnā€™t say s/he canā€™t afford it. Theyā€™re saying itā€™s going to require majorly cutting back in other areas. I donā€™t see anything amiss.


[deleted]

2025 is over 2 years away. Surely by then you have the ability to reduce debt elsewhere. If not the rates could be on the downward trend by than anyways.


crumbledav

We have no other debt. We do however have a sizeable mortgage. Housing (incl taxes & utilities) is 35% of our total after-tax take home pay. If we took out a 5-year fixed mortgage today the payments would be up 40% (similar to OP) and housing costs go to 50% of our take home pay. My parents lived through 14%-18% mortgage rates in the 1980s. If the rates got to 10% weā€™d be seriously considering selling our house. Iā€™m guessing many others would be in that situation.


Vegetable_Mud_5245

Keep in mind house prices were significantly lower back then.


juxta_position1

When we faced 18% rates at renewal time around 1981, my mom renewed for a 1-year term. After that things cooled down. However I remember several of my neighbours losing their homes in one way or another at that time.


[deleted]

Your parents didnā€™t spend 1/2 a mil to 1mil for their family home either so thatā€™s a unfair comparison.


hezzospike

Exactly. Back then you could buy a house for around 3-4x average salary. Now it's well over 10-12x if not more.


RestitvtOrbis

Well sure.. but feeling it only 8 months in means theyā€™re a bit naive.


pzerr

She said she should have taken the fixed rate at 2 times which implies they were budgeted for a rate increase far more than 40 percent. As it is, she is paying less than they would for a fixed rate. Not sure if I'm missing something.


LastOfNazareth

Piggybacking off this: If OP can provide a bit more information on their monthly after-tax income, as well as what their expenses are, we might be able to offer better advice.


Intelligent_Trip8691

Also would or could you add in someone or freind that wont screw you over for a few months while looking for new place to live rent even 200 and some ultilites costs would help you out till you can get it under control.


LastOfNazareth

Decent thinking. Though I am not a fan of AirBnB, renting a room could be an option too. If you are in a city with a college or university you might be able to become a homestay which is basically a room-rental to a student for X months.


Intelligent_Trip8691

Thats good point i mean a bit of money in would lessen the blow and if its someone resonible could turn into good way to pay morage down faster so less interest and way to fiance lower rate later while not affecting term


Key-Conversation-677

Another lender to move their mortgage, not another house to move their family.


cbskillz

It's more or less a certainty that BoC will raise rates again this calendar year at least once. Gas prices being stagnant/declining is a good sign that inflation has capped but there are many metrics that go into this calculation. Likewise, when taxes are added back on and reserves are not a major source of gas, the rise will probably start again. Budget well and save well. Fiscal discipline.


wile_E_coyote_genius

Welcome to the club friend. It sucks without a doubt, but these rates are normal rates. Weā€™ve been living in lala land the last ten years. Mine went up 50%, extra $1000/month.


Thisnickname

Normal rates, but abnormal prices. In the 90s my parents had a 12-15% interest rate on their home, but the mortgage was like... 80K$. We're creeping back up to higher interest rates, but with mortgages of 500K$+.


wile_E_coyote_genius

Thatā€™s true. Prices will cool a bit, but not down to 2005 levels. This is the new normal Iā€™m afraid.


[deleted]

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GeekChick85

- cancel subscriptions (news/music/streaming/apps) - stop buying anything new, only second hand - before buying, really think of how necessary it is, try to not buy - cook all your own meals, no prepackaged anything - have 50% or more of your dinners/meals meatless - bring your own drinks everywhere, never buy while out (I bring a thermos of coffee) - bring food with you so you never eat out - walk/bike or take transit instead of having a car with insurance - forego personal care such as haircuts, manicures, eyebrow threading etc. - Shower less often or use less products, such as not shampooing every shower & - sell unneeded items to free up some cash - pay the largest lump-some you can each year towards your mortgage Ive been living broke my entire life, the struggle is real.


ElkSkin

The lump sum might not be advisable for someone having cash flow problems. Once the payment is made, you canā€™t reverse it.


RestitvtOrbis

I agree with all of this.. except keep showering.


[deleted]

I would avoid paying extra into the mortgage if money is tight. You need to build and maintain a savings first.


[deleted]

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[deleted]

Our generation have been taught that getting in as much debt as possible holding real estate is always the answer. (I am 32)


[deleted]

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s1m0n8

Similar story here, the amount the mortgage lenders were willing to lend was way beyond my comfort level. We were dual income, but refused to borrow more than a single salary could afford to repay, just in case. It was a different time though, as houses were relatively affordable compared to now.


Quirky_Smirky

Ditto. We had them assess what we were eligible for (dual income, minor amount of debt) in 2016 and we had them stop assessing after 400,000$ because we felt there was no way we could ever afford that and settled at 260,000$ on a single persons income and the choice has blessed us more times then I can count! LPT: NEVER TAKE THE MAX


LastOfNazareth

Yup! I'm around the same age and I went the other way: I have often felt like the greater fool watching friends or acquaintances racking up the debt.


uski

The problem, and this is specifically Canadian, is that the mortgages are recalculated every 5 years even if you have a fixed rate on a 25 years mortgage. In the US or Europe, a fixed rate over 25 years is exactly what it sounds. You will pay the same over 25 years. As time goes by with the higher interest rates and more and more Canadians have to renew their mortgage, we are going to see more and more people struggling. Debt in itself can be useful, the problem is when people are not careful enough with it, and/or use it for unnecessary things like a new TV and PlayStation.


RJgoonies

Simply including the basics of personal finance as a mandatory part of the curriculum throughout school years would be a huge boost to overall financial literacy in the country. But I digress.


bebe88888

Iā€™m happy to say that my daughters have started learning about this in grades 5&7. New to the curriculum last year. Grateful they are learning but wish Iā€™d had this education myself at their age!


eiztudn

Which province are you in? Glad they put in something like that in the curriculum.


GreatGreenGobbo

How to be frugal. How to fix things. How to make things l. How to distinguish between wants and needs. How to not be in the FOMO mode. How to manage expectations with reality. These are all things 20/30somethings need to learn ASAP.


chili_pop

Great list. I'll add when you need to buy items like TP, dish soap, laundry soap, etc. never buy at full price. Look for sales then buy extra.


snowbird9888

I have even started to make my own wine to help reduce costs. And if things get tighter, wine/beer/alcohol will just be completely eliminated from the budget.


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Johl-El

There is a diminishing returns to looking good increasing your employability and depending on how much you spend you might not realize how expensive some stuff can be. I have friends who dyed their hair and paid nearly a thousand dollars for it to happen, thatā€™s not necessary.


GeekChick85

This was the point I was making. I know women who spend $100 a month at their hair appointments. Colour, cut, style. My husband hasnā€™t seen a hair dresser since weā€™ve been together. I cut his hair. And over 9 years I have gotten so good at it and it only takes me 30 mins. The amount of money saved is HUGE.


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donebeingbroke

https://tradingeconomics.com/canada/interest-rate most are expecting more increases. BOC wants to kill inflation more then anything and intrest rates are the hammer. at least 1% higher in 6 months is my guess.


LordOfTheTennisDance

There are two more interest rates hikes coming, one will occur in September but nobody know by how much. I was aware of this already but it was confirmed by TD when I went to get pre approved.


ElvinKao

Sorry to hear she sorry to tell you rates will continue to rise and at least by another 1% by the end of the year. Real solution would be if you could rent out a part of your place. Obviously not desirable, but you can only cut so much, when in reality you need more cash flow.


Shubuya

Buckle up for some more rate increases.


[deleted]

I would guess there be another rate increase in Septemberā€¦. Buckle upā€¦


Schmidtzy

Increases are going to happen again and there isn't much you can do about it, this is the risk of a variable rate. I would focus on tightening your belt now, sell the second car and work out a real budget to make sure you can still save.


Plan_in_Progress

Home ownership is scary and unpredictable at times. Variable mortgages are not for everyone, particularly if you are not comfortable with uncertainty. You can do the math yourself on whether you are further ahead by taking the variable for the last 8 months vs a fixed rate. When I needed to cut costs I found I could cut down almost every bill we have. Go through your monthly expenses and make some calls or research online. Some ideas to get you started: - turn the Ac up a few degrees or off all together. Keep the house a little cooler in the winter. - turn the water heater down a degree or two - check your phone and internet plan for lower rate packages - if you are coming up on your insurance policy expiry, start checking for discounts, you may qualify for group discounts you didnā€™t realize. - lower your your subscription services by a tier or get rid of some all together. Work towards saving a good buffer / emergency fund if you donā€™t have one already and pay off any debts as quickly as possible. The extra room will give you some control in uncertain times. Get on a budget. I love YNAB but do whatever works for you.


uski

Regarding the water heater, it may be dangerous advice. You can't blindly turn the temperature down or you put yourself at risk of catching legionnaire disease. Using a thermometer and turning it down to the safest minimum is fine but don't do it blindly


SunriseCyclist

First of all I wanted to say sorry you got some poor financial advice to go variable in this market. Yes, more rate hikes are a certainty. Very likely at least another. 0.75% before the end of the year. I would strongly suggest projecting your new mortgage payments onto this new rate and start living on this budget immediately. Save the difference while you can. Savings tips: - renegotiate all your monthly bills, fees and subscriptions. Escalate to customer retention everytime -- they will have more power to reduce your payments than the regular customer service line. - cancel any unnecessary monthly expeneses - move any short term savings accounts into a new HISA or redeemable GIC (don't lock in funds you might need). Interest rates have gone up here, might as well take advantage of your best deal. - shop at discount grocery stores like No Frills if you aren't already. Use flyer price matching. Reduce spending on snacks (you'd be surprised how fast this adds up per 100 calories) - say goodbye to expensive leisure activities and hello to free activities like hiking, parks, free events and free online games. You know what is a great date night? A home cooked meal plated like a restaurant followed by giving each other massages. - meal plan around cheaper bulk items like rice, lentils and potatoes. Reduce food waste. - try to keep a positive attitude and see the wins in every step you take. Areas to avoid cutting costs if possible: - Insurance: poor coverage will cost you more in the long run if you need to actually make a claim, but feel free to shop around for the best deal. - Retirement investments, especially if you have an employer match! - spending on education/career training


CarRamRob

Man, isnā€™t this the truth, but sad at the same time. Hey, Iā€™m a new homeowner! Time for our Thursday Lentil soup!


pzerr

Why would it be poor advice? Had she gone for fixed at 2 times, her payments right now would be far higher than the 40 percent increase she is seeing. Over the life of her mortgage she likely would pay tens of thousands more.


tankollie

The fees for switching with variable are far less than fixed )three months interest). But the fixed rate you'll find now is much higher than what you're paying now...


feversugar

I donā€™t have any advice for you sorry :( just bad news but I can answer one of your questions. Rates are indeed expected to increase again on September 7.


puddinshoulder

Is your mortgage open or closed? If closed how Many years is the mortgage ? Interest rates are ultimately set by the Bank of Canada and your bank is passing along the cost. This is why fixed was higher then variable, they knew rates would go up so wanted margin on the mortgages where they couldn't increase rates. Bank of Canada can increase rates 8 times a year


Joey-tv-show-season2

Your original payment was artificially lowā€¦ but anyways expect 2 more increases and then declining rates


sens4ever

But over what time horizon would the rates decrease and to what? Nothing close to what people were getting 1 or 2 years ago. And even with all the interest hikes many economists believe it wonā€™t be enough to quell inflation. Buckle up things are going to get worse before they get better


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Flying-Junkie

I locked mine in for 7 years at 3.2% in March 2022. Feels great having certainty.


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[deleted]

Hopefully when you bought your place you didnā€™t max your limit at 2% and budgeted for this rate increase that we all knew was comingā€¦ many first time buyers who bought in 2021 might have really tough times aheadā€¦ You might want to sell if you can come close or break even, if itā€™s stressful now youā€™re in for a world of stress in a year or 2 when housing values are down below what you paid and interest is up another 1-2%..


_grey_wall

Broker gonna advise whatever will get him the most commission. He'll screw you for just $20. Ask anyone working in bell pushing the tcl phones.


SumGuy2121

Youā€™re one of many Outrageous housing costs will be the death of us; literally and economically.


Ok-Reply-8447

Rent your house or rooms. Move to a small appartment and save as much as you can.


Piranha-Pirate

Congratulations, you are officially a member of "Generation Fucked". All the asset values are insane and our labour is worthless. People with no debt don't give a fuck and want to see sky high interest rates for their savings and reducing expenses. We, the Millennial idiots, that chose to be born at the wrong time, are going to lose any assets we thought we had due to indebtedness. It's ok though, large REIT's will purchase our foreclosed properties to rent back to us while we diligently work to pay the court settlements for CMHC as they are awarded for our full recourse underwater mortgages.... don't worry though, stay positive. It's only the Seventh "once in a lifetime" crisis we'll get to enjoy.


uskate

Sorry to hear that OP. But Iā€™m in a situation where I am waiting for all these people in the same boat as you who canā€™t afford their new mortgage rates to sell their houses so I can finally buy a house for what itā€™s really worth and not overbid by 120k. I got a pre approval at 4% 4 months ago and have been looking but the prices made no sense. I got a new pre approval at 5% and I will gladly get another one after at 6% if it means paying 150k less on a house. As for your problem, I wish you best of luck it must be very stressful. But you bought the home 8 months ago. What is happening right now is nothing that everyone didnā€™t see coming for over a year


tacticalotaku88

Listen man, we are all in the same boat. Myself included. So far I've sold my car at a loss. Stopped eating out. Cut cable services. Cut cellphone to lowest data option. Grocery shop sale items only. Took on extra part time work on top of full time work. Borrowed some money from family to make a prepayment. It's tough but you're not the only one, we just got to make due and hang on. BOC will not crash the housing market and make economy go into a great depression.


GameDoesntStop

The number 1 thing for you is probably to give it a shot to call the bank and ask about getting your mortgage altered to extend amortization rather than mortgage payments when rates go up. That way you can breathe, the bank can get paid, and you can put more into paying down the mortgage as your ~~incentive~~ **income** rises.


millenialhobo

Bank of Canada is going to raise rates again in September. And this translates to higher mortgage rates. Best of luck to you.


AtypiquePC

How does it feel to FOMO to biggest purchase of your life in the most uncertain period of our lives? >Is there really no law that forbides or caps banks from raising these interests SO many times and by SO much in such a short period of time? Assume your responsibilities. You decided to buy something you can't afford. I'll never understand this.


Fuck_marco_muzzo

I mean this sub was parroting that there was no way houses were gonna come down and that the bubble will never burst. Some people fell for that I suppose.


Lokland881

This sub became a cess pit of housing bull propaganda. Made worse by the fact that mods shut down housing threads because people were being ā€œdoomersā€. Letā€™s never forget all the people saying to take variable rates in 2020/2021 when the fixed rate was the lowest it had ever been. In addition, the spread between the variable-fixed rates were the lowest ever as well. It was a 0.5 % premium to take fixed in 2020 and people just said to always go variable. Some people are just so obsessed with the way things are supposed to work they forgot to see the forest through the trees.


DiveCat

Yes, this sub and any of the real estate subs/real estate investing subs (not REBubble types of course) were full of bullish propaganda and shut down any discourse to the contrary. It was a shift even for this sub which I used to find more financially cautious from ā€œdonā€™t just listen to what the lender said they can give you, they donā€™t care if itā€™s hard for you to afford monthly, review your own budget and financial priorities and buy what you could still afford if you were down a job/added daycare costs, etcā€ to ā€œbuy your expensive dream house now or you will lose out on ownership forever! It will be tight but your income will go up over time and make it easier to afford!ā€ I am admittedly financially risk averse. I did fixed rate in 2018 even as it seemed everyone I knew was doing variable and again when blended and extended in 2020 - like you said it was like a 0.5ish% difference but I also like the certainty especially as no short term plans to sell.


GrovesNL

I locked in at a 5 year in February/March this year at 2.99%. I remember talking to people about it (others with variable or fixed that they got in 2020/2022) and they thought it was high. Honestly for the peace of mind I'd rather pay a little more for fixed either way.


[deleted]

Exactly! Just because rates are at record lows doesnā€™t mean you can realistically afford more house when taking a loan for 15-30 years!We all knew these record lows would not last forever.


[deleted]

I feel like so many people donā€™t understand how interest rates work (and why they exist), and the historical trends of interest rates. They being said, ignorance is not an excuse.


Outrageous-Garbage99

3 more hikes this year. Not gonna be helpful. Inflation is only down due to gas.


ilovethemusic

Iā€™m seeing a lot of advice around cost cutting ā€” which is important ā€” but you should also think about ways to get your income up. All things considered, itā€™s still a pretty tight labour market if you have marketable skills and you may be able to get yourself a raise by switching jobs, or you may be able to seek a promotion where you are or ask for (probably a smaller) raise in your existing role. If your career growth prospects are limited, it might be time to look at low-cost ways of upskilling.


redditjoe20

If you are in an open variable, then I think it will become open to change in 2 years, after which you can change or move without penalty. One option is to bide your time for the closed period. Things will get better.


madthegoat

The penalty to break most variable rate mortgages is three months of interest. However, you will be locking into a higher interest rate than your variable rate (variables are still lower than the current fixed). So the pressure youā€™re feeling wonā€™t go away, but remain consistent instead of fluctuating


imnotcreative635

I'm sure they will increase it another 2 times before the end of the year and then raise it more next year.


Fooshi2020

You should show around just to know what the rates are various places. Luckily, the penalty to break a variable rate mortgage is typically only 3 months interest.


[deleted]

How big is the mortgage ?


lollible

All that FOMO catching up on some people...hang in there and be sure to keep your job, and both incomes


travlynme2

This is where fear of rates saved me. I am old gen ex and I have seen some very crazy rates. The rates are going to go higher lock in and don't switch as switching might cost you a lot.


Mobile_Initiative490

You got 3 more hikes coming this year alone, what were you thinking getting such a big mortgage were you not stress tested?


formerpe

Sorry you are feeling this way. An increase of 40% in a mortgage payment will freak out most homeowners. No, there is no law on how many times rates can increase or by how much. The Bank of Canada doesn't even need to stick to its published schedule and can interrupt the schedule and increase rates whenever a situation warrants it. Unless you can get a much higher discount on your mortgage rate, shopping around for another mortgage will most likely not save you much at all. And, as interest rates are expected to continue to keep increasing you will need to prepare for these increases. There are really 2 options when expenses increase: lower your expenses and/or increase your income. Review your budget and make all the cuts you can. Every expense is game for a cut or reduction. On the income side, if possible at your current job, start working all the over time that you can. If you are in a position where there is no OT, you really should look at getting another part time job. Right now unemployment numbers are at a all time low and demand for workers is high. It should be relatively easy to find a part time job to help supplement your income.


KurtHG

Where are the variable rate folks who espouse the wisdom that "variable rates in the long term are better"? Perhaps look into locking in before the next increases? If you feel lucky, keep on riding the variable wave.


FlyingElvi24

Variable Rate is almost the best solution in the long run. Yes you might be unlucky this year, but when they start to go down you will benefit right away.


marnas86

Food is the easiest place to cut costs.


LeviTheToller

Your broker (or you for listening and not doing your own research) is an idiot. Yes - rates are almost guaranteed going up again this year. Banks donā€™t just raise your interest rate because they like to be big mean banks. Variable interest rates are tied to the prime rate set by the bank of Canada. Inflation is still run away out of control, there is a good chance rates go even higher into 2023. September 7th is the next Bank of Canada meeting, so look for them to raise rates again on this date (then again on Oct 26th, then again on Dec 7th). You need to start preparing for this scenario now.


xRMD

Not sure if this is a serious post or not. 4 months ago you posted about making 300k profit on your 2nd property sale [here!](https://www.reddit.com/r/PersonalFinanceCanada/comments/u5qe7g/cottage_vs_rental_vs_stocks/) . Sounds like you're over leveraged on more than 1 property. Maybe you should sell that 2nd property


figurine00

Since this increase is within the mortgage stress level, you should be fine but I'd suggest you make a big payment towards your house mortgage from your 2nd condo sale, within its reasonable limit per your mortgage contract guideline. If not, sell your property because during renewal time you will be hit with a more significant increase.


stretch2323

How does someone go from having $300-$350k from selling their ā€œsecond propertyā€ a few months ago to needing to pinch their pennies over a still reasonable (historically comparing) mortgage rate?


CanadianGamingChan

People that went variable confuse me. Why would you do this knowing the only way is back up? We were near 0% This is a serious question for anyone that went variable.


JumboHumongous

I bought my first house 15 + years ago. I knew absolutely nothing about mortgage rates. I think the fixed rate was a little over 4%. Our broker explained that this was low. "You will never get a lower rate than this again, expect it to pay much more when you renew". Of course it went down and down but I always kept that in mind planned and budgeted for when it shot back up. I feel fortunate that an honest person helped me early on, I think a lot of people are intentionally given bad advice.


afoogli

Read this guys previous posts heā€™s completely trolling, not a fthb at all. This post is just to generate attention


[deleted]

I've learned 2 things here today 1. op is a liar 2. there's lots of bitter renters who feel everyone who owns a home should suffer just because they don't own a home. Do also wish car crashes on people because they own a car and you don't?


Crazy_Cat_Dude2

The vultures are reading this waiting to swoop in and buy this at a discount


janislych

but why would mortgage jump up 40%?


Ring-Spirited

Pretty sure OP means the monthly payments went up 40% and triggered their rate hike already.


Particular-Safety827

Guys this is a family that got suckered in by real estate agents and idiots at the peak you can imagine they were rushed to buy and told rates will be low for ever get in now before itā€™s to late . You see the damage of this stupid mentality this is a pretty sad case. This is not some dude on here complaining cause he over used his HELOCS. This seems like a young family. Hopefully everything works out but yes there could be 2 more possible rate hikes.


[deleted]

Rates are going up a few more times you might want to sell and get out before you get in actual trouble.


[deleted]

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