Canada tops, Harper shines?

[AnnaG]

There are people for whom the 0/40 mortgage makes sense.

On the other hand, my mother in law just bought a condo on a line of credit, and has no intention of paying off the balance, only the interest. Should we blame the bank for allowing her to do this?

We had the idea of getting a 30 yr when we bought this place, with the intention of paying as much off the capital as we could whenever we could. We didn't though. We got a 15 yr and paid it off in under 10. We had to pay a penalty for early mortgage retirement, but it was still cheaper than waiting the full 15 years.
Anyway, I see nothing wrong with 0/40s as long as you use it wisely. Pay it off as soon as you can.

 

[JLM]

There is also a little discussed change in mortgages that the banks wanted to implement back in the nineties, which the Liberals did not allow. Once the Conservatives gained power, they allowed the change - which introduced the so called 0/40 mortgages (40 year amortization, with 0 down). This change was introduced to make the banks more "competitive" with their US counterparts. Of course, in the US this lead to the sub-prime loan meltdown. The conservatives did make a big deal about the fact that they cancelled the ability of the banks here to give to 0/40 loans as thier way to protect our banking system, as it was causing a mini-sub-prime problem here too (which the government bailed out as well). Of course, they fail to mention that it was their stupidity that permitted them to exist in the first place. Sheer incompentance in my opinion - but at least they recognized they fubared that one (even if it was after the damage was caused).

We have to remember that the 0/40 is only bad for the borrower (depending I guess on how he looks at it) but terrific for the lender.

 

[TenPenny]

I figure that 0/40 mortgages are no worse than leasing cars, and lots of people lease cars. I don't see anyone blaming the banks and lending companies for suckering people into renting a car for 3 years.

 

[JLM]

One can hardly put all of the blame on the banks, and none on the homebuyers. At some point, people have to take some responsibility for their own decisions.

You're absolutely 100% correct there. When one borrows money to finance the biggest purchase of his/her life they should spend sufficient time to research it thoroughly, in fact you should be just as knowledgable as the people lending the money or you're gonna get burnt.

 

[Socrates the Greek]

"Canada tops, Harper shines,"

not come election day Harper will not shine, and Canada tops because of past Liberal doing not Con doing. The record speaks for it self, the record is free of self serving propaganda. How can one prove the record wrong?

 

[JLM]

There are people for whom the 0/40 mortgage makes sense.

On the other hand, my mother in law just bought a condo on a line of credit, and has no intention of paying off the balance, only the interest. Should we blame the bank for allowing her to do this?

Absolutely not- that is a win/win situation- you're mother - in - law has a condo for life and the bank eventually owns a condo. (As long as her payments are less than they would be to rent)

 

[AnnaG]

I figure that 0/40 mortgages are no worse than leasing cars, and lots of people lease cars. I don't see anyone blaming the banks and lending companies for suckering people into renting a car for 3 years.

Right. It's simply a tool one can use if one likes. How one uses it is up to them.

 

[AnnaG]

"Canada tops, Harper shines,"

not come election day Harper will not shine, and Canada tops because of past Liberal doing not Con doing. The record speaks for it self, the record is free of self serving propaganda. How can one prove the record wrong?

Ugh! Them bad, we good. :roll:

 

[Socrates the Greek]

Ugh! Them bad, we good. :roll:

psssssssssssssssssssssssst

 

[AnnaG]

psssssssssssssssssssssssst

You're balloon spring a leak again?

 

[Slim Chance]

The banks that agreed to give out loans to people that can't afford them get bailed out by the government. That seems to be a little in-congrurent to me. If the bank gave out bad loans, they should have eaten the loss - not have it bailed out by the taxpayer.

Government got into the game via legislation that sought to provide "artificial" access to homes for those people that traditionally would not qualify for a mortgage... If the government wants to call the tune, then they had better be prepared to pay the piper.

The catch-22 on this whole deal is that if the banks were not compelled to provide these high risk mortgages, the hue and cry would be that the greedy banks were denying home ownership to the low income demographic.

 

[Slim Chance]

There are people for whom the 0/40 mortgage makes sense.

On the other hand, my mother in law just bought a condo on a line of credit, and has no intention of paying off the balance, only the interest. Should we blame the bank for allowing her to do this?

The 0/40 arrangement makes perfect sense for anyone that is having difficulty qualifying for a traditional term-length mortgage.

The benefit lies in their capacity to access credit; and with a little forethought and discipline, that individual can develop a good track record and possible renegotiate the terms upon renewal or pay the loan off earlier like Anna/Les did.

 

[SirJosephPorter]

Mergers can be a good thing and can even provide stability if well regulated.

personally, I don't necessarily fear monopoly per se, but rather the power that comes with it. With proper regulation, we could make even a natural monopoly harmless while exploiting its increased efficiency.

I used to be all for mergers (that is why I thought that Martin erred when he did not allow mergers to go ahead), but I am having second thoughts after what happened in USA. If a bank or a corporation becomes too big, the country may become bankrupt if it fails. There can be such a thing as too big to fail. I don't think we want anything like that in Canada.

 

[AnnaG]

I used to be all for mergers (that is why I thought that Martin erred when he did not allow mergers to go ahead), but I am having second thoughts after what happened in USA. If a bank or a corporation becomes too big, the country may become bankrupt if it fails. There can be such a thing as too big to fail. I don't think we want anything like that in Canada.

You mean you used to be all for merging banks and trust companies until the dreaded evil Cons decided they liked the idea, don't you? lol

 

[SirJosephPorter]

There are people for whom the 0/40 mortgage makes sense.

On the other hand, my mother in law just bought a condo on a line of credit, and has no intention of paying off the balance, only the interest. Should we blame the bank for allowing her to do this?

So she bought the condo for zero down payment? Well, if she defaults, the bank would be as much to blame as she.

 

[SirJosephPorter]

I figure that 0/40 mortgages are no worse than leasing cars, and lots of people lease cars. I don't see anyone blaming the banks and lending companies for suckering people into renting a car for 3 years.

Leasing a car is totally different from buying a house. For one thing, car is much cheaper than the house, the possibility that the buyer may default on car payment is remote, much more so that defaulting on the house. Indeed, he may be able to borrow against the house to make the car payments.

Also, car leases are typically for three years. The possibility that the customer’s financial situation may change drastically in three years is much lower than the probability that it may change drastically in 40 years. Anything can happen in 40 years. I don’t see anybody leasing the car for 40 years.

40 year mortgages are good only for the lender. Lender collects plenty of interest and even after 5 or 10 years the borrower has paid back very little capital. Seeing that many of them may sell the house in 5 or 10 years, the lender gets most of his money back, plus a substantial amount of interest. The borrowers are suckered into the 40 years mortgage simply by the lower monthly payment. But the advantages are all to the lender.

In Japan they used to have 100 year mortgages. I don’t know if they still have them. These products are all designed to maximize the return to the lender.

 

[JLM]

I'll bet my bottom dollar that any document you sign for the bank says somewhere that whatever happens (probably in fine print and obscure language) it ISN'T the bank's fault.

 

[JLM]

I think the best policy when getting a mortage is getting it with the lowest obligatory monthly payment with the option of making the highest extra payments.

 

[SirJosephPorter]

The 0/40 arrangement makes perfect sense for anyone that is having difficulty qualifying for a traditional term-length mortgage.

The benefit lies in their capacity to access credit; and with a little forethought and discipline, that individual can develop a good track record and possible renegotiate the terms upon renewal or pay the loan off earlier like Anna/Les did.

Only a few smart ones will do that. I expect most of them will get into trouble at some point. It is a very risky product, similar to sub prime lending (though not as speculative) and was rightly snuffed out.

 

[Slim Chance]

Only a few smart ones will do that. I expect most of them will get into trouble at some point. It is a very risky product, similar to sub prime lending (though not as speculative) and was rightly snuffed out.

Regardless, for those that have discipline and a semblance of a plan, the 0/40 would be a powerful tool.... In the end, regardless of your income, if you elect to put down the minimum and extend the terms out as far as possible, you are paying way more than necessary and risk default in the event of an unforseen circumstance.