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elwoodblues
Elwood Blues
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join:2006-08-30
Somewhere in
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reply to Gone

Re: [Serious] Banking on your home resale price to retire?

said by Gone:

It was those kind of mortgages that caused the housing collapse in the US. In Canada, ours has different causes, and the feds are trying to nip it in the bud before it pops like it did in the US.

Except they were the ones who created it in the first place with Zero down and 40yr mortgages. Now realizing the mistake they made,they wrap themselves in being "fiscal managers" and are reversing those mistakes.
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No, I didn't. Honest... I ran out of gas. I... I had a flat tire. I didn't have enough money for cab fare. My tux didn't come back from the cleaners. An old friend came in from out of town. Someone stole my car. There was an earthquake.......


Gone
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join:2011-01-24
Fort Erie, ON
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40 year mortgages in of themselves aren't a problem. Hell, they have 100 year mortgages over in Europe with the intention that you and your kids will pay the mortgage for your descendants to have a paid-off property to keep in the family.

The problem is when people sign on to 40 year mortgages that they can barely afford to pay, then the interest goes up a few points and they find themselves in over their head. That's the problem. By lowering it back down to 25 years, it creates a buffer zone that prevents people from overextending themselves and makes an interest rate jump less detrimental on household finances. The cooling effect has already started.


elwoodblues
Elwood Blues
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Yes and no, the problem was that these rules got introduced, the banks are happy to write the mortgages, since they're backed by CHMC. Do they care if you're underwater when rates go up? Nope.

They're overextending themselves because (unlike now) there were no rules in place. Now you need to qualify for a 25yr mortgage , even if your term is 30.

The 100yr mortgages are mostly in Japan, to make housing more affordable after the 90's meltdown.
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No, I didn't. Honest... I ran out of gas. I... I had a flat tire. I didn't have enough money for cab fare. My tux didn't come back from the cleaners. An old friend came in from out of town. Someone stole my car. There was an earthquake.......


Gone
Premium
join:2011-01-24
Fort Erie, ON
kudos:4
said by elwoodblues:

Yes and no, the problem was that these rules got introduced, the banks are happy to write the mortgages, since they're backed by CHMC. Do they care if you're underwater when rates go up? Nope.

Relatively speaking, the Canadian banks were far more conservative with how they lent money than the American ones. I'm not even sure if it's logical to try and draw a comparison between the two.

said by elwoodblues:

The 100yr mortgages are mostly in Japan, to make housing more affordable after the 90's meltdown.

Actually, the article where I read about those mortgages was in specific reference to Europe - Austria, Liechtenstein, Switzerland, Germany, etc. Japan wouldn't surprise me one bit, though.

booj

join:2011-02-07
Richmond, ON
said by Gone:

said by elwoodblues:

Yes and no, the problem was that these rules got introduced, the banks are happy to write the mortgages, since they're backed by CHMC. Do they care if you're underwater when rates go up? Nope.

Relatively speaking, the Canadian banks were far more conservative with how they lent money than the American ones. I'm not even sure if it's logical to try and draw a comparison between the two.

I think the comparison is apt. Post-2006 Canadian banks were basically in the 'sup-prime' business. They would assign credit to anyone with a pulse because CHMC would back anything, including 110%+ financing for a home. You could buy a house with no proof of income, and get 10+% of the worth back as a home line of credit. You would then use part of this 10% to pay the CMHC premium in order to get the responsibility of the loan off the bank's books and onto the government's. Canadian banks were very happy with this arrangement.

To get all politicky, it was Flaherty who made this is change as his first order of business upon becoming finance minister. Harper was complicit too, suspending Garth Turner from caucus for being critical of Flaherty's plan.

Now that CMHC insurance rules are strict again, the Canadian housing bubble is ready to burst. The American one busted very very hard, the Canadian one will be no cup of tea.


elwoodblues
Elwood Blues
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said by booj:

The American one busted very very hard, the Canadian one will be no cup of tea.

Again for those that are overextended and will find themselves underwater if the housing prices drop.

The amount of Condo building in Toronto is insane, I went for a bike ride on Saturday for a few hours and it's like every little lot has a Condo/Townhouse going up. I find that single family homes are in being in the outer burbs (Eastern Scarborough out by Rouge Hill for example).

Downtown is just waiting to burst, it's coming, they're buying up properties like its going out of style.
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No, I didn't. Honest... I ran out of gas. I... I had a flat tire. I didn't have enough money for cab fare. My tux didn't come back from the cleaners. An old friend came in from out of town. Someone stole my car. There was an earthquake.......