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Even if Marilyn goes as little as $25,000 over the $500,000 she’s been pre-approved for, she’d have to pay $51,250 upfront to purchase the home. Orgil then estimates she’d have to pay an additional $9,775 in taxes, fees and moving costs. That leaves little more than $6,200 in the bank.
After adding in an estimated $2,251 mortgage bill, $25 mortgage life insurance, $300 in utilities and $535 in property taxes, Orgil estimated that Marilyn could only save a maximum of $1,024 per month if the rest of her spending stays the same. Of that, $500 would go into a fund that she could tap in case the house needs repairs, leaving her with $524 for general savings.
If Marilyn’s hypothetical $525,000 home appreciates by 3.5 per cent each year for the next 25 years and her TFSA and RRSP each earn a yearly five per cent, she would have $1.6 million for retirement. Conversely, if she stayed in her current apartment and stuck to her July spending for the next 25 years, she’d have saved $1.5 million.
“There are many ways to get to the same finish line,” said Orgil.
And so the key is for Marilyn to stay at or below the $500,000 mark. The more she surpasses it, the less sense it makes for her to buy a home.
The best solution, Orgil said, is still to buy a house for $500,000 and below. In 25 years, Marilyn would have $1.8 million in assets and cash. It might look impossible to buy one for that price now, but Orgil is preaching patience. He suspects the market might cool off into the winter when mortgage deferrals expire, giving Marilyn her chance. Mind you, while Marilyn can calmly put away $700 per month in that scenario, buying a car as most do when they leave Toronto would basically leave her living paycheque-to-paycheque, he warns.
Hearing that made Marilyn uncomfortable. For someone who’s routinely saved $3,000 per month, even putting away only $700 makes her queasy.
At the end of our interview, she tells me she’s preparing to bid on one more house and if she fails again, she says she’s done until the winter. Less than a month later, I checked in on her and the number of houses she’s lost is now at seven and climbing. She’s relentless, I’ll give her that.
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