vania-janet/multiturn-rag-retrieval-data huggingface dataset:
The new mortgage qualification rules were introduced to cool a hot Canadian housing real estate market. The rules are a pre-emptive measure intended to avoid a bubble (and later crash) in real estate. The government wants to make sure anybody buying a house can handle higher interest rates. Those rates, currently at record lows, are expected to go up later this year and into the future. The tighter mortgage rules include: Borrowers will need to qualify against a minimum standard 5-year fixed rate mortgage, even if they'll contract their mortgage at a lower or variable rate.  Previously, the 3-year fixed rate mortgage was used as the minimum qualification standard. The amount a homeowner can borrow in a refinanced mortgage drops to 90% of the home value, down from 95% of the home value.  A home is not meant to be an ATM machine. Anybody wanting to borrow to buy an investment property – i.e. a property that won't be their principal residence – will need a 20% downpayment instead of a 5% downpayment. The new rules go into effect April 19th, 2010.  However, according to the backgrounder (see below): Exceptions would be allowed after   April 19 where they are needed to   satisfy a binding purchase and sale,   financing, or refinancing agreement   entered into before April 19, 2010. Definitive information about the new rules can be found at the Department of Finance of Canada.  Specifically, refer to: Some additional news media sources:
"With regard to PMI. You propose to put down 5% less, i.e. 15% instead of 20%. This is $12,500.  How much is the PMI? You will pay interest on the $12,500 extra you are borrowing, but also stuck paying that PMI for a number of years. Say the PMI is $100/mo. That's like paying nearly 10% on top of the interest you are already paying.  If you get a firm quote on what the PMI will cost you, you can make an informed decision. Borrowing at a bit of a premium may make sense, but much about 7-8%, and I'd rather take the risk of needing to raise cash elsewhere. PMI is tough to get rid of until you are at 80% LTV.  Edit -Beautiful link from Chad below. Now for the real math - You borrow 85K (to keep math easy) which is 15% down on a $100K house. 1.1% of $85K is $935/yr. But, you see, you are subject to that because you couldn't raise that last $5000. And $935 is 18.7% of that $5000. The PMI is on the whole mortgage, not on that extra bit you owe. Permit me to say ""holy crap! 18.7% is higher than my worst credit card, and more than I'd pay to borrow nearly anywhere else.""  The percent is the same regardless of the mortgage, this is the math to borrow at an 85% LTV. And why I suggest things like using one's 401(k) as a bridge for such amounts. For the OP, the $12K delta.  (Note, the link shows an update to 1.2% which makes the real cost 20.4%) The numbers are not as crazy when borrowing 95% LTV. ""only"" about 7.9% on the extra needed. Crazy as it sounds, this is how the math works."
$100K of mortgage debt at 4%, 30 years will result in a $477/mo mortgage. It would take about $23K in income to have 25% of the monthly income cover the mortgage.  This means, that with no other large debts, a bank will lend you about 4X your income.  If, instead of 25%, we decided that having 20% of income go to the mortgage, the ratio drops to just over 3X.  In the end, it comes down to keshlam's advice regarding a budget. I think the question can't be answered as asked, given the fact that you offer no numbers. For the average person, credit card debt, student loans, and cars payments add up to enough to chip away at the amount the bank will lend you. Since (per one of the linked questions) the maximum debt service should be 36%, you start with that and subtract all current payments.  If this doesn't suffice, let us know what, exactly you're looking for .
You of course have a lower loan balance at the end, but you haven't saved any money overall, and if you're just refinancing at this point into a new loan, you're no better off (and very slightly worse off), even assuming the money will just sit in your bank account and do nothing. I think with daily compounding interest it will be around the same or slightly better, but it's not a significant amount. Now, there is a third option, perhaps: pay £24000 (so after penalty, £23,520) on the first month. This is that whole extra £1000 per month, all up front, where it makes the most difference for interest. This does help, some: you pay £3,172 in interest, around £450 less. Sounds good to me, right? Except, you might be able to make more than £450 with that £24,000. £450 is 1.875% of £24,000, meaning you just need to make a 2% return on your money to beat out this option (and in fact, that's not surprising, given the 2% interest rate!). Investing in the market, even conservatively, is likely, though not guaranteed, to be beneficial; over a 2 year period it's fairly risky, though if you can think over 5-10 years, it's very likely to be substantially better. Even a 4-5% return (well below long-term market averages) will be quite a bit better, and the market's down quite a bit right now - so it might be even better than that - though it's still a risk. You can make a term deposit (looks like ""Fixed rate bond"" is the term), even, and at least break even - right now it looks like 1.9% is common for a 2 year term deposit in the UK. In total - my recommendation would be against paying off the mortgage early, particularly in this 2% interest rate period. 2% is around inflation levels, meaning you're not really paying any real interest, from one point of view. Once the rates are higher (4%+) then it may be worth considering.
"I think the answer to this is just ""no.""  It's not commonly available to have the option to obtain a mortgage at a fixed amount and fixed rate, especially over a timeframe like the 5 yrs you mentioned in your question.  There would be several practical problems with such a thing, including but not limited to: As was noted in a comment to your question, it is common to be able to ""lock"" a rate over a period of days to weeks.  This isn't the same as what you asked though, because it's much shorter term and it's typically tied to having an offer accepted on a specific house."
There are several things that are missing from your estimate: The terms for the mortgage for a rental property will be different. You may be required to have a larger down payment. When approving you for the mortgage they will not count all the rental income as income, they will assume periodic vacancies. This difference may impact other credit you will be getting in the near future.
I suggest that you first decide on what %'s of the home value you each have a legal claim to. Then split the mortgage using the same %'s. Then, if someone feels their % is slightly higher, they are compensated because they 'own' a correspondingly higher share of the house. Use the same %'s for downpayments (which may mean that an 'adjustment' payment might be required to bring your initial cash outlay from 70/30 into the %'s that you agree to). Tenant income gets split the same way. Utilities are a bit more difficult - as heating depends more on square feet, but water and hydro depend more on how many people are there. You can try to be really precise about working out the %'s, or just keep it simple by using the same %'s as the mortgage.
Something else is going on here. Rates are high for a specific reason, possible due to the house being non-conforming (ie, trailer/pre fab housing?)  Higher downpayment won't help.  Go to LendingTree.com and have a ton of offers spammed at you. With 20% down + conforming you should be around 4.5%.
"It depends on the area, but right in Toronto there's not a whole lot of development, but like starter townhouses (3 storey, modern/executive look, around 2000sq ft) start around 750k. Older and run houses, depending on area can go from 600-1.4 million, but it's heavily dependent on area. In a ""good"" area, you'll see completely run down shacks going for 1.4 million. I'm not sure exactly who's buying these houses, but banks aren't giving as many loans now, so I assume people are going private for mortgages. There are incentives for first time home buyers where you don't need much of a down payment (it was around 10%, but I think it's gone up), however something called ""mortgage insurance"" is required, in the case of a default. Rent is sky high as well, and rentals are just as expensive as mortgages, however without the ""commitment"". Cheap rentals never come up, and there is sort of an internal issue with realtors who essentially hike up the prices, however things have cooled off as of late.  I always remember my parents saying that we good do down to the states and buy a house for less than 100k, especially after '08. Houses just seem to have more value in Canada, even in less sought after areas more north"
A lot depends on whether your mortgage payments are interest only or 'repayment' and what the remaining term is on each of the mortgages.  Either way I suspect that the best value for the money you put in will be had by making payments to the larger, newer mortgage.  This is because the quicker you reduce the capital owed the less interest you will pay over the whole term of the mortgage and you've already had the older mortgage for sometime (unless you remortgaged) so the benefit you can get from an arbitrary reduction in the capital is inevitably less than you will get from the same reduction in the capital of the newer mortgage.  Even if the two mortgages are the same age then the benefit of putting money into the one on the new house is greater due to the greater interest charged on it.
"I am going to respond to a very thin sliver of what's going on.  Skip ahead 4 years. When buying that house, is it better to have $48K in the bank but a $48K student loan, or to have neither?  That $48K may very well be what it would take to put you over the 20% down payment threshhold thus avoiding PMI. Banks let you have a certain amount of non-mortgage debt before impacting your ability to borrow. It's the difference between the 28% for the mortgage, insurance and property tax, and the total 38% debt service.  What I offer above is a bit counter-intuitive, and I only mention it as you said the house is a priority. I'm answering as if you asked ""how do I maximize my purchasing power if I wish to buy a house in the next few years?"""
Different bonds (and securitized mortgages are bonds) that have similar average lives tend to have similar yields (or at least trade at predictable yield spreads from one another). So, why does a 30 year mortgage not trade in lock-step with 30-year Treasuries? First a little introduction: Mortgages are pooled together into bundles and securitized by the Federal Agencies: Fannie Mae, Freddie Mac, and Ginnie Mae. Investors make assumptions about the prepayments expected for the mortgages in those pools. As explained below: those assumptions show that mortgages tend to have an average life similar to 10-year Treasury Notes.  100% PSA, a so-called average rate of prepayment, means that the prepayment increases linearly from 0% to 6% over the first 30 months of the mortgage. After the first 30 months, mortgages are assumed to prepay at 6% per year. This assumption comes from the fact that people are relatively unlikely to prepay their mortgage in the first 2 1/2 years of the mortgage's life. See the graph below.  The faster the repayments the shorter the average life of the mortgage. With 150% PSA a mortgage has an average life of nine years. On average your investment will be returned within 9 years. Some of it will be returned earlier, and some of it later. This return of interest and principal is shown in the graph below:  The typical investor in a mortgage receives 100% of this investment back within approximately 10 years, therefore mortgages trade in step with 10 year Treasury Notes. Average life is defined here: The length of time the principal of a debt issue is expected to be   outstanding. Average life is an average period before a debt is repaid   through amortization or sinking fund payments. To calculate the   average life, multiply the date of each payment (expressed as a   fraction of years or months) by the percentage of total principal that   has been paid by that date, summing the results and dividing by the   total issue size.
Its a huuuuuuuuuuuge topic, and to answer your question in full will require a book, with a small booklet of legal advice attached to it. I'm not going to write it here, but I'll give you some very specific points to start your research with: ARM/Baloon - big NO NO. Don't touch that. Get rid of those you have any way you can, and then never ever do it again. That's the kind of crap that got us into the housing bubble mess to begin with. Especially with the rates as low as now, the only future with ARM/Baloon is that you're going to pay more, way more, than your initial period payments. Rates - the rates now are very low. They were even lower 12-24 months ago, but are still extremely low. Make sure you get a fixed rate loan, in order to lock these rates in for the remainder of the loan. Any ARM loan will have higher rates in the future. So go with FIXED RATE. Period - fixed rate loans are given for periods up to 30 years. The shorter the period, the lower the rate. However, at the level they're now, you're practically getting money for free (the APR is comparable to the inflation) even for 30 yr/fixed loans. PMI - private mortgage insurance - since you don't have much equity, the lender is likely to require you paying PMI. This is a significant amount of money you pay until you have at least 20% equity. It changes from lender to lender, so shop around and compare. Government assistance - that's what the broker was referring to. There were programs allowing people refinance even under-water mortgages. Check what programs are still available in your area. Some banks will not refinance with less than 20% equity, but some government assistance programs may help you get a loan even if you don't have enough equity. Closing fees and points - that's the money out of your pocket. Shop around, these vary wildly. Generally, Credit Unions, being non-profits, are cheaper on this item specifically, while comparable to big banks on everything else.
Two years ago, I wrote an article titled Student Loans and Your First Mortgage in response to this exact question posed by a fellow blogger.  The bottom line is that the loan payment doesn't lower your borrowing power as it fits in the slice between 28% (total housing cost) and 38% (total monthly debt burden) when applying for a loan.  But, the $20K is 20% down on $100K worth of house. With median home prices in the US in the mid-high $100Ks, you're halfway there.  In the end, it's not about finance, it's a question of how badly you want to buy a house. If I got along with the parents, I'd stay as long as I was welcome, and save every dollar I could. Save for retirement, save for as large a downpayment as you can, and after you buy the house, pay the student loan aggressively. I moved out the week after I graduated.
Should I use the profit to pay down student loans or just roll it into my next house in order to have a lower mortgage amount? Calculate the amount of interest in each scenario, where the two scenarios are: Use extra cash to pay down student loans, take out a full mortgage. Use extra cash to make a big down payment on the next house, keep paying down student loans at normal rate. In both scenarios the student loan rate will  stay the same. However in the second scenario you may get a lower interest rate from making a larger down payment. So then calculate the total interest resulting from each scenario: student loan rateXremaining student loan balance=student loan interest  new mortgage rateXnew mortgage balance=mortgage interest scenario 1 interest = student loan interest+mortgage interest student loan rateXstudent loan balance = student loan interest  new mortgage rate with large down paymentXnew mortgage balance after large down payment = mortgage interest scenario 2 interest = student loan interest+mortgage interest Whichever scenario's interest is lower will save money.
You didn't answer my questions above, but the biggest factor if the two interest rates are similar is what it will cost you for mortgage insurance if you do not include a 20% down-payment on your next house purchase. I would take the extra money from the proceeds of the other sale to get to a 15-year loan on your next house, then put all of your extra money into paying down the student loans ahead of the 7 year schedule.
Unless I'm missing something, this doesn't make sense at all.  Why take out money at 3.25% (the Heloc) to reduce the balance on a 3% loan (the refi)?  It would be better to move as much from the Heloc to the refi as possible to get the best rate.  If this results in a lower monthly payment, keep paying the higher payment and you'll be better off.
"I'll start by focussing on the numbers. I highly recommend you get comfortable with spreadsheets to do these calculations on your own. I assume a $200K loan, the mortgage for a $250K house. Scale this up or down as appropriate. For the rate, I used the current US average for the 30 and 15 year fixed loans. You can see 2 things. First, even with that lower rate to go 15 years, the payment required is 51% higher than with the 30. I'll get back to that. Second, to pay the 30 at 15 years, you'd need an extra $73. Because now you are paying at a 15 year pace, but with a 30 year rate. This is $876/yr to keep that flexibility. These are the numbers. There are 2 camps in viewing the longer term debt. There are those who view debt as evil, the $900/mo payment would keep them up at night until it's gone, and they would prefer to have zero debt regardless of the lifestyle choices they'd need to make or the alternative uses of that money. To them, it's not your house as long as you have a mortgage. (But they're ok with the local tax assessor having a statutory lien and his hand out every quarter.) The flip side are those who will say this is the cheapest money you'll ever see, and you should have as large a mortgage as you can, for as long as you can. Treat the interest like rent, and invest your money. My own view is more in the middle. Look at your situation. I'd prioritize In my opinion, it makes little sense to focus on the mortgage unless and until the first 5 items above are in place. The extra $459 to go to 15? If it's not stealing from those other items or making your cash flow tight, go for it. Keep one subtle point in mind, risk is like matter and energy, it's not created or destroyed but just moved around. Those who offer the cliche ""debt creates risk"" are correct, but the risk is not yours, it's the lender's.
Let's start from the premise that the mortgage is something you will have anyway because you need it to live (as opposed to say getting a bigger mortgage initially in the expectation of paying it down faster than scheduled). In that case I think paying down a mortgage certainly is an investment; one with a well-defined interest rate and maturity that depends on the precise terms of the mortgage. For example I have a (UK) mortgage that's fixed for the next two years at about 5%, and allows overpayments of £500 per month, which can be withdrawn at any time. So I treat those overpayments as equivalent to savings with quite a nice interest rate, especially since mortgage interest isn't tax deductible and so I actually get the full benefit of that interest rate.
"I've never heard of rent quoted per week. Are you in the US?  In general, after the down payment, one would hope to take the rent, and be able to pay the mortgage, tax, insurance, and then have enough left each year to at least have a bit of emergency money for repairs. If one can start by actually pocketing more than this each year, that's ideal, but to start with a rental, and only make money ""after taxes"" is cutting it too close in my opinion. The 19 to 1 ""P/E"" appears too high, when I followed such things I recall 12 or under being the target. Of course rates were higher, and that number rises with very low rates.  In your example, a $320K mortgage at 4% is $1527/mo. $400/wk does not cut it."
"There are times that the simplest explanation (or analysis) is best.  You show that, for a time, the PMI is $1812/yr. And it's the cost you will incur by sending $15,000 to the student loan instead of using it as a downpayment. 1812/15000 is 12%. The loan is already costing you 4% (I know, 3.899, a rounding error), so in effect, that $15,000 is costing 16%. I doubt the student loan is even double digits.  Use the $15,000 toward the downpayment. Take the $1812 plus the $859 per year saved on the mortgage payment, and throw the $2671 towards the student loan. This is the simple solution. (Note: $15000 at 4% for 30 years is a payment of $71.61 or $859/yr.) Part of the PMI issue is that PMI gets removed when you hit 80% due to natural amortization. i.e. the timeframe due to normal payments. If you make extra payments, and hit 80% a year after you close, that's nice, but the bank will drag its feet, and the appraisal (at your cost) may come back low. Then what?  Last, without the S/L interest rate and term, I can't calculate the numbers the way your example showed, but don't mix up term and cash flow with actual cost. Say I owed my mom $50000, at zero interest, and $500/mo payment. Sending $50K would ""free up"" that $500/mo, but there are better uses for that money, such as high interest debt. You propose to create 16% debt in your scenario."
It's worthwhile to try and find a better minimum down-payment.  When I bought my home, I got an FHA loan, which drastically reduced the minimum down-payment required (I think the minimum is 3% under FHA).  Be aware that any down-payment percentage under 20% means that you'll have to pay for private mortgage insurance (PMI) as part of your monthly mortgage.  Here's a good definition of it. Part of the challenge you're experiencing may be that banks are only now exercising the due diligence with borrowers for mortgages that they should have been all along.  I hope you're successful in finding the right payment.  Getting a mortgage to reduce your spending on housing relative to rent is a wise move.  In addition to fixing your monthly costs at a consistent level (unlike rent, which can rise for reasons you don't control), the mortgage interest deduction makes for a rather helpful tax benefit.
Every extra dollar of down payment is that much less that you're paying in interest. You want to keep an emergency fund so I wouldn't put every spare dime I had into a down payment if I could avoid it, but you want the biggest down payment you can manage. (Well, one can debate whether its better to use spare cash to invest in the stock market or some other investment rather than paying down the mortgage. Whole different question.) ""I dont think its a good idea to make any principal payments as I would probably loose them when I would want to sell the house and pay off the mortgage"" I'm not sure what you're thinking there. Any extra principle payments that you make, you'll get back when you sell the house. I mean, suppose you buy a house for $100,000, over the time you own it you pay $30,000 in principle (between regular payments and any extra payments), and then you sell it for $120,000. So out of that $120,000 you'll have to pay off the $70,000 balance remaining on the loan, leaving $50,000 to pay other expenses and whatever is left goes in your pocket. Scenario 2, you buy the house for $100,000, pay $40,000 in principle, and sell for $120,000. So now you subtract $60,000 from the $120,000 leaving $60,000. You put in an extra $10,000, but you get it back when you sell. Whether you make or lose money on the house, whatever extra principle you put in, you'll get back at sale time in terms of less money that will have to go to pay the remaining principle on the mortgage."