Saturday, August 10, 2013

Weekly Roundup - August 10, 2013

This week has been exciting and frustrating and stressful all at the same time.  Purchasing a house is such a huge financial decision and there's just so many aspects that go into the purchase.  I can't wait for this process to be over.  We're currently still in the option period, although that ends Sunday at midnight, and I'm really hoping that every goes well.  The inspection came back really clean except for the roof and we're having some roofers out to inspect it today and we also have the appraisal going through.  There's no damage to the actual structure of the roof but the inspector was saying the shingles needed to be replaced but the homeowner's are saying no.  So who knows what will happen.  As soon as the final price is agreed upon, a huge burden will be lifted because then there's no more negotiating and no more issues.  Just answering stupid questions from the loan writer about where this money came from and where that money came from.

Another big decision that's been weighing on me is whether we should go with a 15 year or a 30 year mortgage.  Our minimum monthly payment with the 15 year is higher but the total interest paid is much less.  I know the 15 year is probably the best route, but part of me wants to do the 30 year in case for any reason I lose my job things will just be tight but not unbearably so.  I know I can use my dividend income to help lighten the load in that situation but it's still something that is bothering me.  Plus that's an extra $400 that the portfolio would need to churn out every month, so an extra $135k invested at 3.5%.  Getting through this process and back to saving and investing is going to be such a relief.

Thanks to everyone that stopped by and mentioned Passive-Income-Pursuit this past week.  I truly appreciate it.

What does early retirement look like? by Dividend Mantra

Successful investing is all about controlling your mind by Get Financially Integrated

Top 5 Dividend Investing Rules by The Dividend Guy

The pressure of having to work for a living can be sickening by Young, Cheap Living

Stock thoughts: Healthcare REITs by Dividend Growth Machine

Home value update - How to use comps by Planting Our Pennies

Dividend Investing - Science vs Intuition by Dividend Growth Investor

The Key to Taking a Guilt-Free Expensive Vacation by Financial Samurai

I hope you have a great weekend.  I'm luckily going to be heading back home early next week and will get to be off for around a week.


  1. Do the 30 and make extra payments.

    1. I second this motion. Plus, take a firm stance on the roof. Get the sellers to fix it or no deal. A bad roof can lead to all kinds of problems.

    2. I emailed the mortgage broker about switching to the 30 but haven't heard back yet. I think that's the best route to go because it gives more cushion in case something happens. The roofer that we had came with with a $9.5k estimate, they got one that said $7.5k. I don't really understand why the roof is such an issue from their side. Their realtor keeps suggesting that they might just stay there if they have to fix the roof. Why? You still need to get the roof fixed. Plus if our deal falls through and they decide to sell again, they'll either have to disclose that, which will drop the price, or they'll have to get the roof replaced so they'll still be about the same amount from this transaction unless they can sell for higher than what we agreed on. They countered with less than half of their estimate which is pretty insulting to me. We countered back so hopefully we hear something today. Our option period ends tonight at midnight.

      Thanks for stopping by!

  2. The roof would be a major issue for me....when I see new roof in 20** it automatically has me looking at any house a different way. A roof can be the beginning of so many very very expensive issues....foundations is another no no. Everything else is cosmetic imo and you can easily do most of it yourself and negotiate accordingly. If they don't want the roof repaired, take off the cost of the job and some extra for contingency, management and living in a house tht is having it's roof torn off...or a rental whilst it is down. It is all value adding, if they don't want to do it the fine.

    Also...home loan...I would be taking the shorter package dependent on the interest rate comparison, you gotta think of your payment window, how quickly do you want to be mortgage free?? Leave some fat in there but nothing silly. In know in the states mortgages are different though as they are low rate and interest in tax deductible. Here in Aus we struggle to get a good rate beyond a five year fixed and even then it is hard work (5.5%+ right now at historic lows). It is also a pain in the ass to get the lender to move the mortgage if you want to move house. Takes a lot more research. It is good to put your payments at a level that is comfortable for you and your wife and not just for today. It can be good to be able to dial back payments for a few months if needed, rather than using expensive forms of credit, so this all forms part of the decision I guess. In Aus you have an offset account system, it enables you to have 'savings account' that earns no interest but is offset against the total mortgage which in turn reduces your monthly interest bill (you also pay no tax on the income either which means for me at 5.5% /0.45 (my marginal tax rate) the returns are stupidly good. I would ask have an emergency fund right? why double down on security? Your liquid investments will be there to back up as needed. FI is different for different people...personally I want a house owned outright and to me that is the first step in FI, that means the shortest possible mortgage. I have gone down the leveraged investment step in property first and it just feels like an anchor right now. I want my wife and I to grab a house, have it paid off in full and then chase investments (potentially leveraged). Anyways just some thoughts on approach.


    1. KM,

      Everything else from the inspection was pretty minor stuff that I'll be able to take care of myself, so the roof is the only problem. Although it can potentially be a big problem or lead to other big issues. The inspector and our roofer said that they couldn't tell of any damage to the actual roof structure, just the shingles needing to be replaced. But it's a different story once you get the old ones off and can really get a look at the roof.

      The interest rates would be about a $0.6-0.7% spread between the 15 year and 30 year. My main thing is more the cash flow in case one of us, namely me, loses their job. She's a teacher so it's much more stable, but I work in the oil/gas industry which is notorious for going through boom/bust cycles. While yes technically the 15 year is the best deal out of the two options, I think the peace of mind is worth paying more through the 30 year. Plus the way I'm thinking of going is to pay as if it's the 15 year loan or invest the difference between the payments and then once I feel comfortable later on, aggressively pay off the mortgage completely. Just my thoughts.

      I hadn't really thought about the emergency fund, it just kind of sits there in my savings account if need be but other than that I just don't even notice it's there. I'm curious to see how we should handle the emergency fund now because it's going to be much larger due to the higher monthly expenses and there being so many other things to take care of with the house. I'm leaning towards a full year's emergency fund again. Man, I really like renting and only spending $1,400 or so per month including all of the other expenses. House expenses alone will now be around $1,400-1,500 just for my share since I'll be footing the bill for most of the increases.

      Thanks for stopping by! And definitely something to think about.

    2. Pursuit,

      I hope everything works out with the house. Sounds like you and your wife really like this one. Hopefully, the sellers are reasonable and realize they need to concede on the roof expenses.

      On the mortgage term, I'd go with the 30-year. That leaves you a built-in buffer in case things go wrong. Life can turn in an instant. Make the extra payments and pay it off as soon as possible, but have the option to step back on payments if necessary. I like flexibility and liquidity, personally.

      Thanks for the mention. Much appreciated!

      Sounds like this stress will be behind you soon enough. :)

      Best wishes!

    3. That's a big increase in costs PIP. Are you moving to a much nicer place? Where we are leaving right now it would actually be cheaper to own than rent. Prices have come back but short termers are still keeping the rental prices high. On the sales front investors are flocking to new property which is bottoming out the price on established homes which would be the market we are in. Just the $60k deposit needed and we will leap in.

      We look at our expenses differently and it is complete team effort, funny though because our circumstances are very similar. I work in industrial chemicals/manufacturing as a planner/process improvement specialist but as a contractor on hourly rates (very turbulent just like you) and my wife is an health education officer so much more stable. Our emergency fund is a big fat zero. Everything spare is set aside for investments/debt reduction currently. However....there is a big caveat on this, I figure we both won't lose our jobs at once. Both my wife and I make enough individually to cover all basic and general discretionary expenses. We have a credit card to put anything more than a either weeks wages on and have 40-50 days to clear if anything major went on there. In terms of disposable income we can clear $15,000 in that time so my emergency will always remain a retrospective one if any. Once we buy a house I will dump everything into an offset for a guaranteed 9%+ tax free return on my income until the loan is cleared. It will be interesting to see how the next year goes for us.