DLD Financial Illustrative Case Study
When does it make sense to purchase a primary residence? This case study shows two different financial snapshots – Lindsay (single) and Michael & Alexis (a young family) – to determine if they should purchase a primary residence.
Meet Michael and Alexis
Michael, 35 is a successful lawyer in town and his wife Alexis is a stay-at-home mom. Michael and Alexis have been married for 3 years and now two children – a newborn and a 2 year old.
They live on Michael’s income of $160,000 / year. At a recent meeting, Michael inquired about whether it makes sense for him to purchase a home in East Vancouver. He’s looking to spend about $900K to $1 million.
Financial Snapshot
Current net worth:
- Cash: $82,000
- Life Insurance Cash Surrender Value: $44,000
- TFSA: $63,000
- RRSP: $50,000
- RESP: $8600
- Total monthly savings: $3232/mth
Comprehensive financial planning with DLD
If Michael and Alexis decide not to purchase a home, all of their existing assets will be re-allocated towards retirement and will continue to pay $3000/mth in rent and retire at age 60 with $68,000 in after tax income in today’s dollars. Their net worth at age 60 would be $2,828,405.
If Michael and Alexis decide to purchase a $900,000 home, they would derive their down payment from cashing out their TFSA ($61,000), cash account ($82,000) and borrowing from their life insurance policy cash surrender value ($44,000).
- Monthly expenses: $3800 (maintenance and taxes)
- Mortgage: $713,000 (3.5% 5 year fixed rate) with a monthly payment of $3192.
Their monthly savings will be $2832/mth and will retire at age 60 with $51,000 in annual income. Their net worth at age 60 will be $3,166,726.
In this scenario, Michael and Alexis have decided to purchase a home.
Due to our commitment to client confidentiality, we couldn’t provide a real-life example. Each client is unique. This illustrative case study is based on typical financial situations we manage. Contact us to learn more about what your financial recommendations might be, or to hear what real DLD clients have to say, read our testimonials.