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Madelaine, 42, and Ben, 48, Victoria
Should this couple downsize their debt by moving to a smaller home? The family of five live in a dream house in a beautiful ocean-side neighbourhood, but the costs are high. She wants to move to smaller digs in suburbia. He doesn't think it's worth the hassle. Should they stay or should they go?
SHE SAYS: MOVE
We bought our current house five years ago, when we moved here from Saskatoon to be closer to our respective families. We were under pressure to buy quickly, and we wanted to get our kids into one of the better public school districts, so we picked this house - our neighbourhood is fairly upscale and a 10-minute walk from the ocean. The problem is that the maintenance costs between $10,000 and $20,000 a year. We've had to make a lot of improvements, like a new chimney and new floors. Our one major liability is our mortgage, and if we have to scale back our life, our home would be where we'd do it. It's a beautiful house, but what's the point if we have to work so hard to afford it that we never have time to really enjoy it? There's a great park nearby, but I go maybe once a month. Our kids just moved to a new French immersion program with a wider catchment area, so we have more choice on where we could live. If we downsized to a $400,000 house, Ben and I could work four days a week, we could travel more and we'd pay off our debt within five years.
HE SAYS: STAY
It was a tighter market when we first moved here, but this house has almost all the qualities we could ever want. We've invested a lot of money and sweat equity in it already. The houses Madelaine is looking at are at the bottom of the market in less desirable areas than the one we're in. They're mostly fixer-uppers, and I'm not keen on living in a half-finished house for months - we already did that when we bought our current house. I understand the appeal of being mortgage-free, but she says she also wants more time with the kids. How would we get that if we have to put so much work into the new house? Our oldest daughter only has a year and a half before she goes to university, and I'd like to maximize the time we have. Once all the kids leave home, our house will be too big, so why not downsize then? We live in a prime neighbourhood, and prices will probably go up significantly by that point.
Occupations: She's a university fundraiser, he's an environmental consultant
Kids: Three, ages 11, 13 and 16
Annual household income: $150,000 (two-thirds his, one-third hers)
Assets: $500,000 in savings in RRSPs, RESPs, TFSAs, pensions; current home worth about $650,000
Debts: Mortgage principal $317,000 at 3.65 per cent, 13-year amortization, $1,150 paid biweekly
THE ADVICE: KEEP WHAT YOU'VE GOT
Financial expert Kelley Keehn says:
I hear your frustration, Madelaine, but I can't see how a move now would make the most financial sense. You say the cost of maintenance is prompting your desire to move, but Ben thinks you'll likely have those same costs at the next home - if not more. Plus, keep in mind the full costs - dollar, emotional and physical - of moving.
It may be wiser to stay put until the kids have left, then opt for a new condo with no repairs required. (One note of caution: Ben cites increased property value as one benefit of not selling for a while. But unless you're moving to a less expensive city, that's sort of moot. If your home increases in value, so will the others in Victoria.)
But there are things you can do in pursuit of mortgage freedom sooner. Plan a family money night and discuss creative ways for bringing in more income or reducing expenses. Could your kids start a computing 101 course for seniors in the area? Perhaps you and Ben have some items you could sell online or start a side business together (thus making some of your home expenses tax deductible)? I'd also like you as a family to commit to tracking your spending for 30 days and reconvene at the end of the month to see where you could trim the spending fat. Then, use that savings to lower your mortgage principle with an annual lump sum or by increasing your monthly payments (check your mortgage agreement).
Mortgage freedom is a worthy goal, but I strongly agree with Ben that you should enjoy your current home while your kids are in their teen years rather than spend the next decade distracted by yet another fixer-upper.
Kelley Keehn is the host of W Network's Burn My Mortgage ( kelleykeehn.com).
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