“My spouse and I earn about $225K/annually. We live and work in Richmond, our house would sell for about $1.2M (it’s a nice, newer house with a good-sized yard). We are early 40s. We are paying on a $450K mortgage locked in till 2017 at a low interest rate. We contribute to our own RRSPs, but are also relying on husband’s awesome pension plan (we know he is lucky). Most of his income goes towards the mortgage and other “big” expenses (his new leased car, the insurances on house and car, and property tax). I pay for most everything else – clothing, food, household bills, personal cell phone, kid’s activities (hockey is NOT cheap!). Our second car is 7 years old and completely paid for. The only way we can afford our house is because it’s our third residence since 1997, and we’ve made good money on each sale. We do not get any money from our parents or any other family members. But, we do have grandparents who do our after-school childcare, which allows us both to hold full-time jobs without having to pay for daycare (we support them financially in other ways but we don’t actually pay for their babysitting). I shop at big-name grocery stores like Save-On and Safeway and rarely at Costco (mostly because I can’t stand shopping at Costco….). We have a pet who costs me $40/month in pet insurance, and even more in prescription dog food (sensitive stomach). We rarely travel for work, so we have to pay for our flights for when we flight for our vacation. We fly across the country every 2 years for vacation and that costs us about $7,000-$8,000 for two weeks (accomodation, flights, and car rental). Alternate years, we only spend $3,000 on vacation. We keep our credit debt (outside our mortage and leased vehicle) under $5,000 and use a line of credit instead of credit cards. Overall, I think we live modestly and we’ve never gone to Disneyland or Hawaii, much to the chagrin of our children. I guess that’s how we afford to live in the Lower Mainland.”
– Anon at thethirtiesgrind.com 29 May 2012 9:04am
House value $1.2M – Mortgage $450K = Home equity $750K
50% price drop scenario:
House value $600K – Mortgage $450K = Home equity $150K
Leverage works both ways, and even those with apparently robust low-ratio mortgage set-ups are vulnerable when a bubble pops. These guys would lose 80% of their equity with a 50% collapse.
With each move up, this couple’s market exposure has increased. Many who accumulated paper equity through the bubble will give it all back in the coming collapse.