Rates.ca Resources & News

Nicer Wedding or Bigger Down Payment…Which Would You Choose?

bride saving.jpg

Some people spend years dreaming of their wedding day. They plan big, lavish marital events that they hope they’ll never forget.

But alas, time fades all memories and what many remember most is the wedding bill.

That one-time expense can often exceed a down payment on a new home.

In fact, this week we stumbled across an extreme case of a 34-year-old Toronto teacher, Simone, who wants to save $80,000 (split with her fiancé) for their upcoming wedding and year-long honeymoon.

This Toronto Star article covered it and explored ways the couple can sock away the cash required to realize that dream. One such sacrifice was to cut back on their home purchase plans. That would leave them in their two-bedroom condo “for the foreseeable future.”

We’re probably not the only ones who wondered…what if their priorities were different? What if they chose to spend, say, just $10,000 on a wedding and honeymoon, and invest $70,000 extra towards a down payment on a home?

Moving Up the Property Ladder

According to the article, Simone already has $25,000 saved up for the wedding. But let’s fast-forward and assume they’ve reached that total savings goal of $80,000. Per our new and improved plan, $10,000 will be allocated towards the wedding and the remaining $70,000 to their down payment.

The couple currently lives in a two-bedroom condo in Toronto’s Junction area and has a $1,600 mortgage payment.

Let’s say they’ve found a cute four-bedroom townhouse in Downsview, like this one, for $639,000.

For argument’s sake, assume they currently own a half-million-dollar condo like this one and sell for enough to put down $150,000 on their next property.

Now, let’s compare this to their present plans (blow their wad on a fancy wedding) versus a modest wedding and a much bigger down payment. To the numbers…

Full wedding, lower down payment Cheaper wedding, higher down payment
Mortgage details 5-year fixed rate of 2.50%, 25-yr amortization 5-year fixed rate of 2.50%, 25-yr amortization
Purchase price $639,000 $639,000
Down payment $150,000 $150,000 + $70,000 = $220,000
Mortgage $489,000 $419,000
Monthly mortgage payment $2,191 $1,877
Total interest cost over 5-year term $56,313 $48,252
Total interest cost over life of the mortgage $168,166 $144,094

The Result

No revelations here. Plowing more towards a down payment makes you richer. Maybe not emotionally (although that’s debatable), but certainly monetarily.

Now, some may decide those wedding memories and cranberry vodka hangovers are worth the long-term costs. But others will find the savings of a modest wedding more compelling. Those being:

  • Monthly mortgage payment savings of: $314
  • 5-year interest cost savings of: $8,061
  • Mortgage lifetime interest cost savings of: $24,072
  • A mortgage balance after 10 years that is: $47,071 less
Wedding jar - 300x200.jpg

You can run your own numbers with any old mortgage calculator. Note: We don’t consider the possibility that a bigger down payment would potentially let you buy a more valuable home—one that could appreciate more.

The outcome: Putting $70,000 to work in real estate—instead of a one-night party and extended honeymoon—would immediately increase one’s net worth by the same amount, and generate an additional 34% nominal lump-sum return via interest savings alone (not considering opportunity costs of investing that money elsewhere).

If your creed is YOLO ("you only live once"), perhaps this strategy is a bit too staid. For everyone else, there’s either middle ground worth considering or a clear economic case to be made for wedding frugality.