question about buying/building a second home

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animal-inside

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We have plans to build a house in the next 2-3 years.

Right now, I'm debating paying down our current mortgage OR putting any extra money into the down payment of a our build.

Is there any advatnage to doing one over the other?


With our current economy and possible inflation in the future, I'm thinking paying down any loan faster isn't good right now if inflatation happens. But if/when inflation happens, having a big savings account will be worth significantly less than when you put that money into the savings account.
 
Well, usually you have a limit on how much extra you can put down on your mortgage. I beilive mine is 10% of the mortgage per year.
So that may or may not be a limiting factor.
The next thing would be, what is the interest rate on your current mortgage vs the rate you will be getting for the new house.
The insurances on the mortgage as well, if you put more than 20% down we avoid that government insurance in Ontario.

Basically, pay off the higher mortgage as much as you can.
That would be my advice.
 
With mortgage rates so low and doubtful they will rise for a long time I would sock more money away for the new house. I would also keep my eye out for great deals and pre buy some materials and store them (if that's an option of course)
 
flexappeal said:
With mortgage rates so low and doubtful they will rise for a long time I would sock more money away for the new house. I would also keep my eye out for great deals and pre buy some materials and store them (if that's an option of course)
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GReat idea, but no place to store things..

It actually was my plan to build the shop/garage with our cash right now.. That way in 2-3 years time, we don't need borrow as much to build. But sadly around here a empty lot with a garage will get destroyed or squatted in very quickly. but if I was able to do it, it would easily be the best thing to do with extra cash. Same as stock piling building materials.


My current mortage is up in about 8 months. Our rate is 2.5% right now. Guessing in 8 monhts the rates will be lower and than with our renewed mortage, the mortgage on the house build will be pretty much near equal.


I believe we are allowed 15% addtional money on our mortage without penatly. I wish I would have put the additonal 15% down for the last 3 or 4 years. We'd be laughing.
 
animal-inside said:
GReat idea, but no place to store things..

It actually was my plan to build the shop/garage with our cash right now.. That way in 2-3 years time, we don't need borrow as much to build. But sadly around here a empty lot with a garage will get destroyed or squatted in very quickly. but if I was able to do it, it would easily be the best thing to do with extra cash. Same as stock piling building materials.


My current mortage is up in about 8 months. Our rate is 2.5% right now. Guessing in 8 monhts the rates will be lower and than with our renewed mortage, the mortgage on the house build will be pretty much near equal.


I believe we are allowed 15% addtional money on our mortage without penatly. I wish I would have put the additonal 15% down for the last 3 or 4 years. We'd be laughing.
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You should be able to get a sub 2 mortgage very easily right now. We just got a 1.45 fixed 5 year.

Are you going to keep the first house and rent it ?

If you have a lot of equity refinance and pull the cash out and build now. If there is a lot of inflation then it will get much more expensive to build later.
 
The Old Guy said:
You should be able to get a sub 2 mortgage very easily right now. We just got a 1.45 fixed 5 year.

Are you going to keep the first house and rent it ?

If you have a lot of equity refinance and pull the cash out and build now. If there is a lot of inflation then it will get much more expensive to build later.
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Selling first house. That's the kicker right now.. We could build right now, but I don't want to carry 2 mortgages and pay for day care. We have to wait until my kid is out of day care.


I kniw building right now seems to make the most sense, but with a 1000$ a month day care fee and very uncertain releaste market in my area its just not worth the risk.

I don't live in a city.. small town in the middle of no where that's dependant on oil field economy.

If I sell now, I loose..

If oil ever makes even the smallest little run and I sell during the run, I win big..

Rolling the dice that the Turd will get the boot and oil will pick up.
 
The Old Guy said:
Get your money in now. Buy the land to build if you can afford it.

Most financial people are saying real estate or other tangibles.
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I agree here. I would throw the cash into getting the other house built or partially. At that point I would mortgage the partially built house or your current house to complete the build.
 
animal-inside said:
Selling first house. That's the kicker right now.. We could build right now, but I don't want to carry 2 mortgages and pay for day care. We have to wait until my kid is out of day care.


I kniw building right now seems to make the most sense, but with a 1000$ a month day care fee and very uncertain releaste market in my area its just not worth the risk.

I don't live in a city.. small town in the middle of no where that's dependant on oil field economy.

If I sell now, I loose..

If oil ever makes even the smallest little run and I sell during the run, I win big..

Rolling the dice that the Turd will get the boot and oil will pick up.
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You don’t need to carry two mortgages. Borrow against the equity in your existing home. Mortgage rates are so low it’s almost like free money. You can refinance up to 80% of the current value of your home.
 
Not sure if it could be applied here but I’ve done a couple flips in the past and did an interest only on the second mortgage which wasn’t much.
 
We own multiple homes. Although we have enough saved to pay off both mortgages right now, it doesn't make sense with bank rates. We've had sub 2% mortgage rates for the last 10 years on our places. Instead of paying off the mortgage we invest the money and make back an average of a little over 9% returns per year. So it just makes sense to keep our money invested and making us more money while the mortgage rates are so low.
 
I'll have to talk to the bank about the things suggested here.

When I last looking into builder mortgage I was told a bank will not finance a build unless its from day one. They todl me this is because the bank requires inspections at various points of the build. they inspect the build at specific steps to enure it's being done to code in the event they need to reposes the build so they can sell it to get their money back. This is what I was told. Different banks have different inspection points and I have been told by many people the bank said they would inspect at several pointa but not once actually did.

To me, that would rule out any option building without starting the mortgage on the house right away. I was willing to build the shop seperately because its a compeltely separate detached building from the house.

Refiancing my current house to have one mortage probably won't work either due to the difference in the two values. OUr current house is going to be worth siginficantly less than the new house, don't think 80% refinance would cover it even with cash on our end.

There is also laws about how long you have to finish your build once you break ground. Any mortgage through the bank I was told you have exactly 1 year from start to finish or you get large penalities.

I think building permits are good for a few years though.

I'll have to go into the bank and see what the options are. I was toold the other day that banks are quite leary of giving new mortgages right now due to economy. Could be interesting.
 
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