Quote:
Originally Posted by Table 5
And what happens when that 5 years is up and that interest rate has gone up 1.5-2 points? Chances are the buyer who only scrapped together 5% is going to be struggling hard. Not everybody is doing it as a savy investment...most people just want a home to live in.
I'm not saying you shouldn't buy a home...I'm just saying you should buy a home you can afford, and afford with some cushion. If you have 40k down, get the 400k starter home, not the 800k dream house.
I just went through a laughably hard mortgage approval process (forget down payment, try being self-employed AND having all your credit history be in another country), so I know unreasonable the process can be. But having said that, I'm glad Canada is not going down the "no credit no problem" route that happened in the US.
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It will never get to that disaster zone it did in the US in Canada. Banks are still very picky about who they approve here. I have banks turn down normally decent people because of late cell phone bills here.
The number one rule in lending, always borrow as much as you can, if you can borrow at less of a rate than you could reasonably expect a return. In the off chance, things go all 1981 again and the bottom completely falls out, you will still have your 50-60k or whatever parked somewhere, or at least a portion there of it left if you really desperately need it.
I would rather have that and an upside down mortgage. Than little or no equity, and nothing to fall back on. You can still continue to pay your upside down mortgage for a few years until things rebound, which they always eventually do.