I’m Losing $100,000 on an Investment Property

[Music] brought to you by the every dooll app start budgeting for free today my spouse and I back in July of 2021 we purchased an investment property and we put a $100,000 deposit down and that was when the covid interest rates had gone right down and in Canada they're right back up I don't know how it is in the States but we're looking at we're looking at our closing date coming up in two months and we don't know if we afford this was the financing already approved no so we did sit down with our bank and essentially I think if we sold our current home we would be able to um get the mortgage but my predicament is is that even if we do get approved for a mortgage we're looking at a $5,000 plus mortgage per month and we've been looking at different Avenues potentially renting but in that area um the likelihood of someone renting over 3500 is very slim and so we would still be having money coming out of our pocket and now the reason we're thinking about doing a mutual release at this point is because we put that 100,000 down but we did really well with our our first home uh through covid we bought it really low and then when we sold we had actually got a lot of equity and paid off that line of credit that we used to put the deposit down on that home um and I just don't know if it's worth it to jeopardize and try and push this mortgage through also my my spouse is military so he's currently posted to where we are and I don't even know how uh the moving predicament would work so have you guys been building for that long yeah the Builder was very delayed um through covid they stopped a lot of the building and it's it's been ongoing for a long time okay was it a was it a custom build or was it one that was within a development and you pick a floor plan cing it was in a development okay what does the contract say because you signed the purchase agreement have you talked to the Builder about what it would look like to back out um so we did ask them about a mutual release um essentially if we did back out we would be forfeiting our $100,000 deposit yeah so that would be sort of the the stupid tax I guess on that how much would the full mortgage be if you did if you did go forward I'm just curious how much the house is um we originally purchas for about 1.1 and with $100,000 it would be about a million dollar mortgage okay so you going to put nothing down um well if we we were looking at the option of renting um if we sold our current house we have enough equity that we could probably get the mortgage down to about 700,000 why wouldn't you sell your current house my my husband's military and he's posted here so it would be so many loopholes and jumps like he might not even be able to move so we might have to why were you getting this new house um because we didn't realize that he would be posted out at that time we were posted to that base and so this was back in 21 this is about three years later now so and also too we thought with the interest rates honestly we weren't thinking ahead with the interest rates at that point it was affordable right right uh Haley how are you guys financially overall do you have savings do you guys have debt um our debt is paid like we don't really have any debt um we have some equity in our home um my husband's like military serving right now he makes about 80k a year um I've retired from the military I got injured um I'm getting an income replacement benefit of about 50k a year um so total income is about 130,000 okay do you guys have money saved um other than whatever we have in equity no okay trying to figure out how big this this one $100,000 I don't see a world where you guys could have afforded a million doll home regardless of what interest rates were doing I think you guys weren't thinking through this and got a little star eyed at what a new build would be and life happened I I agree and you cannot keep both there's no world where you keep both of these properties absolutely so if you're going to make this move and not lose your 100,000 you need to sell the property save up as much as you can until this build is done and minimize the mortgage as much as possible and you might not even be able to stay in it that long because it sounds like it's unsustainable you guys barely make $5,000 a month yeah it's it's not sustainable yeah I don't think you guys can do it I don't think you can I don't think you what's your mortgage now uh my mortgage well they just increased it because we had a variable rate it's about 3,000 it it was you're barely covering the mortgage now what's take home pay I'm sorry what's your take-home pay every month um between you and your husband gosh um I don't even know like my husband does the finances so my guess it's about $6,000 and half of it is taken up by your mortgage yeah yeah n it would probably be around there and and I'm more on the side of mutually releasing it doesn't immed immediately affect us um with regards to leaving 100,000 it's it sucks um but I just wanted I guess your advice and kind of clarification on that before I move ahead I mean it is a lot of money and it is a big deal yeah I mean almost I would I would I don't think you have an option I think you have to release it and lose 100K yeah I mean I think that's a better option than going into a million dollar house that you guys can't afford the mortgage that the mortgage payment is basically what you're bringing in every month I mean that's you'd foreclose on it within months yeah that's not ideal I know and and and we have children I don't want to jeopardize that his parents his parents have offered because they have multiple properties offered to sell one of their properties but at the same time we don't want to um we don't want to be indebted to them that's right no no no key I would keep this clean I think this is a decision was the $100,000 was it cash Haley or did you guys take out a loan for that so we did it originally on our first residence that we had purchased it was our first home and we had purchased it for about 500,000 and then when we sold we sold for nine but we had taken out a home equity line of credit but that is paid off there there's no debt owing towards that okay so the $100,000 it's just it'll just be gone it's not debt that you have to repay no so my my husband just told me he he said our income is 8907 per month okay that's better yes for your $3,000 mortgage so that's uh that's net so that's a third of your take home pay which is a lot but it's not you know going to crush you financially so I would just stay put where you are and mutually release this lose the 100K and learn from it yeah it's it's a tough Learning lesson but I definitely need you to hear that so I appre sh your help absolutely sorry you're going through it that's not a fun thing to deal with and for anyone watching out there who's military or they move around a lot this is why we tell people it's okay to rent it's okay to stay put don't feel like you have to go get a house because people are telling you you got to get a house you got to get a house and obviously there Situation's different but it's one of the risks you take for sure with new builds with mortgages of you don't know where you're going to end up and what life is going to be like and and that's one reason you know our house purchasing formula Ramsay's pretty conservative ative and people they don't like it very often but this is one of the reasons why too is like we just know life happens and if so much of your income is being taken up by your mortgage or what you think life will be like when you're doing a build that's two three four years long like I mean you you just have to be realistic about it and so um and also too I think when you have information and you have facts you're able to make wiser decisions and so that's one thing too and this isn't to you know harp on Haley by any means but you know she was like I'm not sure my husband takes care of the finances which is happens a lot too in families but if you're married you guys you're you together need to be making these decisions meaning both of you need to know the facts both of you because you both bring a perspective to the table right Haley could have if she you know maybe going information you know she could have said something that maybe would have directed a different decision I mean I don't know but that's why it's important that that's the beautiful thing about being married is that you have two people in these big decision-making processes but you both have to have the facts and understand what's going on and and sometimes you make a decision and you pay the stupid tax was which is what we say but we'd rather do that honestly than go into a million-dollar home that the mortgage is eating up close to 75% of their income so I'm glad you guys called Haley good luck and again I'm so sorry so sorry this is the situation create your free every dooll budget today the simplest 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