Looks like we’re at the end of the line
Posted on | April 5, 2009 |
We bought our land at 60 Three Brooks Drive almost a year ago now. In that time, we’ve been through everything from designing a ‘dream’ house, to downsizing this ideal, to pricing this out, to looking at kit houses. At long last, we found a house that we felt we might be able to afford from Lindal Cedar Homes. It had the feeling we were looking for, with passive solar features and the space we need for a family of five.
We spoke with the bank last week, and got a call back on Friday. It’s not pretty.
Some background: currently, we pay about $1,400 a month for a mortgage (including property taxes) on our current house. Our oil budget for heating costs us $250-300/month. We were hoping to basically break even between the new mortgage and the savings on heating costs. We’re also stuck in a relationship with Scotiabank, the mafia of Canadian banks. We can break our current mortgage and get another with them, but we can’t go elsewhere without paying a substantial penalty.
So, here’s our two options:
- $1,952/month + property taxes plus supplementary heating costs. Before-heating costs would likely be close to $2,200 or more. This is based on us getting approval for the mortgage now, moving ahead with the new house and putting ours up for sale as we get closer to the completion date of the new house. We’d then have the ‘privilege’ of putting the proceeds of sale of our old house down on the mortgage. This would lower the principal by whatever we had available, but would not affect our monthly costs.
- Sell our house now, arrange the new mortgage using the proceeds of sale as a (substantial) down payment, book the build of the new house, find an apartment for our family for the 4-6 months the build would take, and then move in. We figured that if we had $60,000 to put down, this would give us a pre-tax total of $1,679/month. The total with taxes would be about $1,930.
Obviously neither of these options is really going to work for us. Add to this that with option 2 we’d also be paying rent for at least four months, and have to put most of our stuff in storage. Given that we have a large dog and three small kids and my business to run, this would not be the easiest of options.
We knew that the house itself was going to cost more than where we currently are. However, we were not prepared to pay $500+ more per month for it. Although we truly believe in passive solar as a heating framework, we know that we’ll need something to back it up. Friend of ours who just built a house with a heatpump are currently being surprised by their $600-800 electric bills (bi-monthly, I think). This was our first choice as a secondary heat source. I can only imagine if we went with the $2,200 option and then had winter heat costs of $400/month.
We’ve talked this over exhaustively and I’m pretty sure we’re at the end of the line. I know that if we really wanted to do this, we could pursue option 2. However, the whole wheat Mini Wheat side of me says that this is a foolish idea.
I think we’re going to stay here. Much has changed since we decided to buy the lot. We have new neighbours who are both awesome and our age. We’ve made some changes to our current house that make it much more livable. All of our landscaping is done. High oil heating costs (at least for the moment) have subsided.
We can make some more changes that will reduce our environmental footprint here and make our house more enjoyable to live in. We could make radical changes to the interior of our house if we really wanted to, and still come out ahead on costs.
Watch for an upcoming post on the sale of our lot and what we’ve learned/spent throughout this process.
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12 Responses to “Looks like we’re at the end of the line”
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April 5th, 2009 @ 4:39 pm
That’s too bad Jeff, sorry things didn’t work out for you at this point in time. Are you selling the lot in Three Brooks, or hanging on to it and hope to build in the future?
April 5th, 2009 @ 4:53 pm
I think we’ll put it on the market and see what happens. It’s not killing us to have it, but if we can get what we want for it, we’ll put it up for sale.
April 5th, 2009 @ 8:37 pm
Jeff, I would recommend keeping the land if you like it there. You never know what could change over the next few years.
Also, can’t you get a bridging loan for building the new house? Draw out when required. Once it’s built you can get a mortgae with any bank and once you sell the old house the commitment with scotiabank is over with.
April 5th, 2009 @ 8:53 pm
Hey Julian,
The only options they’re making available are the ones above. In all honesty, we’ve decided that this is a learning experience and have decided that we really do like our present house. It’s unfortunate that it took this kind of money to learn that, but such it is.
I could keep the property, but I really don’t want the added debt right now. I’d prefer to shed the land and re-evaluate once our mortgage is up. Also, it’s not costing me enough that I need to sell, so we can afford to hold onto it until we get what we want for it.
April 6th, 2009 @ 6:22 am
a good read Jeff. you ever heard the Mojo Nixon song ‘i hate banks’?
if the land is unique in some way, put up a website for it, it would make an interesting marketing campaign.
April 6th, 2009 @ 8:27 am
That must be really disappointing. I was interested to read your comment about your friend’s electricity bill after installing a heat pump. We got a bunch of quotes for heat pumps and even looked into geothermal, but I was continually amazed at how little information these guys were able to give me in terms of subsequent electricity use and oil savings. There really was no way to make an educated decision on the whole thing. There must be some kind of formula out there based on your house size, eco-audit rating, etc., for working out how much you might save. So, for now, we’re sticking with our oil furnace and our woodstove - though Craig really, really wants to get one of those pop can solar panels!
April 6th, 2009 @ 10:48 pm
Hi Jeff, sorry to read about your issues with Scotiabank, they like most banks are difficult to deal with. I am not sure what the penalty would be, but I am guessing it is based on Interest Rate Differential (IRD) and would be between 8-12K. The reason for this is over the last 4 months the fixed rates have dropped down to historic lows, meaning the spread between your current rate and Scotia’s current market rate is larger than normal, making IRD penalties very painful.
Note that rates will not stay this low for long, as the economy recovers rates will rise and rise fast. This will reduce the amount of your penalty to as low as 3 months penalty interest or apx. $2500-3500. Plus the longer you are in your current term the lower your penalty will be.
I would hold on to my lot for 3-6 months and see what happens to the banks rates, if they go up it will significantly reduce your penalty. I would at the same time get a pre-approval at another bank or via a broker and get a rate hold for 120 days, which you can get them to keep resubmitting every month or so to give you some more time and options.
April 11th, 2009 @ 9:13 am
Hey Jeff,
This past year I’ve been thinking of you and your project throughout every step of our own recent building experience. I’m so impressed! by researching the building process in depth, and trusting your gut instincts you maybe saving yourself a lot of grey hairs. Believe me, often I have thought if we just improved our older home we would saved a lot of money and head aches. With very young children, and self employment, the challenges have been almost too much….and many times disheartening. After our own experience I’ve come to the conclusion that building can’t be ALL about the money and making eco friendly choices for the future. New constructions are expensive, wasteful and not eco friendly no matter how hard you try. A new house is a huge foot print. Also we’ve learned that the infloor slab/off peak system while it maybe a good economic choice due too paying less per kilowatt, overall the consumption is more than a heat pump. A heat pump uses less kilowatts and you will have better control in our fluxuating nova scotian climate. If you choose not to build! be happy! Your choice to reuse and recycle your older home is a much more eco friendly, and pocket friendly choice in itself.
We love our new house and it has been quite a life experience but mostly I’m glad we built because we are happy in our hearts with our new community and our life style change. At the end of the day a house is just a house…it’s the memories made inside that are important.
cheers Lisa
April 11th, 2009 @ 10:53 am
Lisa, thank you so much for your comment. You eloquently and perfectly encapsulated our feelings about this.
April 25th, 2009 @ 3:32 pm
Hi Jeff,
Enjoyed your talk at AIM.
Well I have read every word of your experience. Why? We are doing the same thing. I could not believe it was you when I started reading this blog. I found it by accident. We have a lot we bought last September and have been trying to find a small footprint modern house that was different, solar etc. I have already paid a designer about $2000 to look at lot and design the space we need etc. But it did not feel right. So we have been sitting on it trying to find something we really want. I was searching the internet and I am on the e-mail list for Lindal and as a result noticed the Turkel homes. So in trying to find out more about them your blog popped up. I am reading through it saying to my wife heh ! this couple is just like us and can you believe they are having the same experiences. So I start reading every word as I want to know more and then suddenly I see your name in one of the comments and I realize who it is. Wow!
Small world.
Anyway I would love to have a talk with you. Our budget is the same and I even know Cam. I really enjoyed the blog and it really helps us realize the hard work may have not even begun.
I really like the Lindal Turkel homes as well.
Thanks for sharing your experience.
Jeff
April 25th, 2009 @ 4:47 pm
Whoa, Jeff. Strange coincidence indeed. Want to have coffee this week or next? I have some info that may help you, and I’d love to hear about your project.
Even though we’re likely not going to proceed, I’m still extremely interested in the project and where this could go.
April 27th, 2009 @ 9:43 am
Hello! We are former residents of Three Brooks. We built the Eurohab at 15 Three Brooks Dr. We moved to BC and have returned and purchased a place in Bedford. Now we are interested in building again in Three Brooks so - if you decide to sell your lot, please contact us to walk it with you. Best regards, Reg Hardy. 27 April 2009.