- We want to buy a house.
- We've done all the pro's and con's of home ownership.
- We have 1/2 a down payment and some highish loan payments
Would it be wiser to pay down the loans and go with a cash back mortgage at 5.29% interest, or wiser to keep saving for the full down payment while still carrying the highish loans? FYI: the biggest loan is a $30k truck loan at 9.9%
I'm in Canada, and our government has changed the laws a bit and we're not allowed to do zero down mortgages. I know this is a good thing, but unfortunately it puts us in a tight spot. We must have 5% down and cannot borrow it from anywhere.
Family is allowed to "give" money but that's never gunna happen for us.
Banks are allowed to "give" money, but that comes by way of additional fees that suck the lifeblood out of us... basically they give you your 5% down but make up for it in an additional 2% interest for a fixed 5 year term. Currently mortgage rates are roughly 3.25% and a "cash back mortgage" is 5.29%.
Now on to our situation.
We currently have $7k liquid cash in the bank, and the size of home we need (in our area) will cost $340k. That sets us up for a down payment of roughly $17,000.
I also carry a $565/month truck payement ($30k @ 9.9% interest) and a couple of visa's with a total balance of about $600 (no big deal there). There is a new bank willing to take my truck loan at 5.9% interest, lowering my payment to $425/month if I tack on an additional $3500 as a new down payment.
Would I be smarter lowering my overall debt ratio by kicking in the $4100 to pay down the two visa's and get the truck loan smaller, then go after a "cash back mortgage", or am I smarter keeping the cash in the back, stashing away as much as I can, and carrying the higher payments and interest?
This is such a hard decision for me, and I'm having a hard time finding a sound solution one way or the other.
One thing I'm thinking about is that there is no savings account that's going to give me 4% guaranteed, which is what I'll get if I move the truck loan. However, my savings will take a big hit and set us that much further back from our goal (If we don't go the cash back route).
I'm not here to defend my decision to buy a house vs continuing to rent, I have my reasons. I'm more just interested in the dollars and cents of it all.
Final Results: if anyone cares
We ended up needing to move out of our rental (landlord wanted to bump us to $2000/mo) into a town home with rent at $1600/mo. This was the tipping point, and we needed to buy something asap. We ended up paying off one of our vehicles using my tax return ($7000), coming up with 10% down and buying a $320,000 home at 2.89%. Leaving us with a monthly mortgage of $1440. With property tax in, we're paying $1620 / month (utilities are the same everywhere we've lived), so for an additional $20/month we're paying on a mortgage instead of rent.