Without any doubt, the best current forum for Vancouver RE market discussion is vancouvercondo.info, hosted by ‘the pope’. Readers of VREAA know that we owe many of the anecdotes archived here to posters at VCI. In a recent article, ‘Say Goodbye To Free Money’, the pope asked a series of questions aim to assess how people were preparing for future tighter lending. Here’s one response from a relatively well prepared owner. -vreaa
“How are you preparing for higher rates?
We have a 30yr amortization period on our mortgage (which is $500K), but do monthly payments as if it was a 25yr. We also have a savings account we call our “higher interest rates in 2014″ fund. We save about $1500/month into that.
If you hold a mortgage are you locking in or are you counting on the low rates of today continuing for a lot longer?
Locked in. 4.05% until end of term in March 2014. Probably should have opted for the variable rate and locked in when rates started going up and benefit from a year or two of low variable rate. Live and learn.
If you’ve got cash, where are you sticking it?
Extra top-up mortgage payments (about $250/month), savings account (about $1500/month), and investing in index funds (only $200/month). Losing out on investment returns now, but it’s worth it for us. The trade-off is in 2014 when mortgage is due, we have security of having about $450K left on our mortgage, with $90K sitting in cash which we can use to reduce mortgage to deal with higher interest rates.
Do you hold equities in markets that will be negatively affected by higher rates?