March 15, 2016

Swearing like a trucker: A 1st world problem

MARCH 15, 2016

Today’s blog is not one that I am fond of, mainly because my husband and I are the lead characters, and because the ending was NOT what we wanted, though ultimately our choice. I reminded myself that The Cardinal’s Nest is not a platform for fairytales, I don’t write to be popular, or to claim I have all of the answers. I write to learn, evolve and hopefully help a few people (all 85 of my faithful readers) along the way, myself included. So here’s the story of my 1st world problem.

I am 42.
My husband is 50.
We have a 21-year mortgage on which we have 13.5 years left to pay it off.
At that time I will be 55ish, and my husband will be 64ish.

(Knock on wood, fingers crossed, throw salt over your shoulder,
live on a street named after salt.)

Our home value has almost doubled in 7 years by virtue of its detached existence in Toronto.


Well, we do. And depending on your age, and how close you are to retirement as you read this, you might care too.

We want to be able to retire. No, we want to be able to retire comfortably, without worry, so we continue to put everything we can into our home (instead of clothes or gadgets) because, so far, it has been the most reliable and lucrative saving vehicle we have ridden thus far. When an investment property opportunity popped up, we faced it head on.

It was a rental bachelor suite that we (ironically) renovated for a client who is now planning to sell. I asked them to give me a week or two to put an offer together and broker my own deal. They were gracious and on board with our offer if we could make the numbers work. No bidding war. Just a straight up sale. Sweet, right?

The plan was simple:

•get a separate home equity loan for the down payment
•have the renter pay off the new mortgage
•pretend that there won’t be any obstacles in our way
•laugh all the way home to count our retirement money, jiggity jigg!

The NOT so simple parts of the plan:

•for a rental purchase, you need to use your NET income to qualify 

•since we are self-employed we have low NET incomes, mine, in particular, was obstacle #1.

•we already HAVE a property/mortgage

•we needed a minimum 20% down payment for a rental property...possibly 25% depending on the lender

•we needed more cash than that because of the approximate $4000 in closing costs , $6000 refinance penalty at the current lender, 1-2% B lender fees ($2000-$4000) for the new mortgage (because we only *almost* qualified for a B lender with our self-employed GROSS income.

•our current property (however) needs a new roof and driveway and, when I say need, I mean NEED, so the refi was getting bigger and bigger by the second.

•we would have to pay a CMHC insurance premium on the additional funds (around $3000.00) because our original mortgage was insured and a full refi (instead of a line of credit) was the only scenario that brought us in line.


•we were limited by B lenders who might not fund a condo that was shy of 500sq.ft. This is hard enough in A lending because the Toronto market is becoming overwhelmed with mini condos, let alone open space bachelor pads without a separate bedroom. I did it for a client, but our financial scenario was making it difficult for us.

•and then (!!!) we would be left with a NEW30-yearr mortgage, larger than the original one on our first property, that we wouldn’t have paid off until ages 72 and 80.

•after all that, our ratios were still not entirely in line to qualify fully

•due to the higher interest rate of the B lender (4.25%), we would have to charge rent higher than market value which would make it harder to find/keep a tenant.

•our own monthly expenses would increase outside of our comfort zone due to the new, LARGER mortgage on our first property and no room for the unexpected.

•also, if we ever needed to live off of the equity in our current home in a reverse mortgage, a large portion would be eaten up by this new refinanced scenario.

We had all of this equity, but in the end, the numbers said, this is not going to happen today. Our retirement vehicle #2 would have to stay in the showroom for a little bit longer. 


•I’m frustrated that I was not prepared enough for this perfect opportunity.

•I’m frustrated that I have not saved enough for another down payment.

•I’m frustrated that I haven’t (yet) invested in a new retirement vehicle.

•I’m supposed to be f*$king rocking this property thing!!!!!!

But the risks, the list of penalties and costs, our ages, our fluctuating incomes, TWO 30 year amortisations on TWO properties, however, outweighed the gains in this moment.

In other words:

We would not sleep at night with this financial framework swirling around us.

I wanted it to work, and the fact that I was able to convince my husband to keep the conversation going longer than a day was what I thought was the sign from the universe that this was going to happen!



What WOULD have made it work? 

•A CASH down payment.


•Higher NET income (for me)

•Both, either/or.

If we had had that CASH down payment, or if my NET income was higher, we would have narrowly qualified in a way that would create a more manageable scenario. We would not have had to refinance the same way, we would not have incurred fees, we *might* not have had to go to the B side with higher rates, our renter would have paid off everything at market value, AND our current property vehicle would not have been jeopardised. 

Ironically, the money we put into our current house is also why we have so much equity in the first place. There’s a little bit of chicken & egg scenario going on here.

The NEW plan?

•Don’t give up
•DO keep swearing like a trucker about this for a little bit longer

My goal is to write a happier ending in about 3 years, but until then, I encourage my readers to continue to seek out financial success stories and keep ME posted on how YOU plan to get ahead. 

Thanks for reading and sharing!

note: all opinions expressed on this blog are
solely my own and do not express the opinions or
views of Mortgage Brokers City.