Canada tops, Harper shines?
- Thread starter JLM
- Start date
Even then, though, if one's mortgage payment is less than the rental of your living space, what's the biggie? Eventually you may own what you've basically been renting cheaper. Renting gets you a spot to live only with nothing at the end.
No doubt about it. In the end, the owner of a rental property is passing off the mortgage obligation to the renter.
The only risk that I was responding to was that as the owner that has your name on the mortgage, there is a risk associated with that. When you rent, if your personal situation turns bad, you can walk away from the rental on (relatively) short notice... That's much more difficult to do as the owner.
The only risk that I was responding to was that as the owner that has your name on the mortgage, there is a risk associated with that. When you rent, if your personal situation turns bad, you can walk away from the rental on (relatively) short notice... That's much more difficult to do as the owner.
Quite so. Unfortunately most people don’t realize that, they are attracted by lower monthly payment.
Most people have a monthly budget of say 1000 $ or 1200 $ for the mortgage. Then they ask the question, what is the biggest, best house I can afford in that money? They obviously can buy a bigger, better house if they take out 40 year mortgage, rather than 30 year mortgage. Most don’t see the possible pitfalls, and there are many.
Shortsightedness is a very human vice. And it is up to the government to see to it that unscrupulous operators don’t make money by exploiting it.
Indeed, that is what happened with sub prime lending. They had very low, teaser rates for the first year or two. The rate progressively went on increasing. But people saw that they could afford the mortgage payments for the year or two, and that was the end of it.
The same problem exists with a 40 year mortgage with zero down payment.
If the retail store sold you the big screen TV and expensive furniture when you happen to be a pauper, when you don't have a penny to your name, then the retail store is as culpable as you are.
I think if you check on a 40 yr morg - rate about 5 % -6 % - fixed rate - 5 yr term - making minimum payments - at about the 30 year mark is when you start paying off the principal.
How many of those types of mortgages were entered into by youngsters? I've seen plenty of annecdotes on the news while this crisis was in full boil mode, where the mortgaged house belonged to older folks, some with older children, some with adult children.
The responsibility can't be on one group alone, obviously. Speaking seriously, some people just aren't that bright, and they probably won't understand the deal they are signing. Just the same, a child can't sign a legal document. They don't have the wherewithal to understand what they're signing for the most part.
Let's not forget that financials were marketing these. There needs to be a responsibility on the part of the lender to make the information available in good faith. At the same time there has to be good faith on the part of the mortgage seeker.
When you consider that both groups will not always act in the best interests, it seems like leaving the strength of the market up to these actors is probably a bad idea. Smart people can craft smart regulations. We have some good regulations in Canada, but we shouldn't fool ourselves. We've also been lucky. Just look at Vancouver. What is smart about that situation? Seventy per cent (nearly) of disposable household income on housing? That's not sustainable. The Bank of Canada has already signaled that interests rates will be rising, soon.
I think there are multiple levels of responsibility here. I really think that whatever you sign, you are accountable for, but at the same time, I don't think it helps any of us to just allow the weaker to be preyed upon.
Just as important as the mortgage terms is what you buy with it- where the bulk of the cost is mortgaged your best is to buy the most modest house, actually the worst house in the best neighbourhood. There is always a demand for them. That way you can consider it an investment rather than just an incumberance.
Not sure but I think that 40 year mortgages went out last year - Rules were changed I believe.
The rules in Canada changed in the last six weeks back or so. Twenty percent down payment, minimum for rental properties. Buyers have to qualify for the five year fixed rate, even if opting for the variable rate. We were considering buying the duplex we live in, until the minimum down payment went to 20%. Can't swing that. Our rent on our side of the duplex (2BR, 3Br on the other) is still more than the mortgage payment would be, but there's no way I can get enough for a 20% down payment. I think the maximum amortization is still 35 years.
No. We had just decided that buying might be something we should look at. We hadn't even gone to see the bankers yet. When the rules changed, and I heard it on the radio, it was kind of disheartening. I mean I might not have even qualified yet. I'm convocating from University on Friday, I have a full time job, and I support my fiance, who is in the process of applying to veterinary school.
So I might not have even qualified anyways, the only way I figured I would is because of the rental income on top of my salary. The 20% puts it out of reach now.
Then take the time and wait - markets change - save and wait - having the cash when the makets go down is then the perfect oportunity to buy - people always get in over their head -
Having time is a good thing - appreciate the wealth in that.Time I have! Money...not so much
Are you saying that for the first 30 years you pay no principal at all? I find that astounding.