Quote:
Originally Posted by hulkrogan
40 years isn't really the problem. It's the zero down. 35 years are still allowed, and the difference in monthly payment between a 35 and 40 year mortgage is less than $100 unless you are buying something really extravegant. 40 years does allow you to qualify for something with a higher price tag though, which introduces more risk. Zero down is just foolish. If prices drop even a bit within the first few years of your mortgage and you need to sell, hello negative equity situation, hello USA.
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I don't think it really relates to the US situation, yes a zero down mortgage does put the owner in a negative position for the first few years of the mortgage, but that would only impact people who have to sell, and that situation happens anyway even with 5% down mortgages if the market goes down a bit..
The US situation was with sub-prime mortgages, ones where the borrowers were sub-prime. Canada has very little of this (something like 3% compared to 25% in the US).
I do see the point though, zero down, 40 years, all those things do increase the risk and increase the interest paid so increases the total cost of the home to the buyer so has a bigger impact on their productivity etc.