Quote:
Originally Posted by tvp2003
^^ Mortgage? This is CP... I thought most people just buy houses in cash?!?
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Close. Since a mortgage isn't debt, if you take the purchase price and subtract the amount of debt on the place, it's like you've paid for the entire place in cash.
To add to the discussion, in 2008 I bought a townhome with a purchase price : household income ratio of 2.89. We had a LTV of 74%.
We recently bought a lot/house to demo with a price:income ratio of 3.89 with a LTV of 80%. We will be building a house on the lot which will raise our price:income ratio to 6.25, but we are paying for most of the build with cash. Once the build is complete we'll likely have a LTV of 65% (value being the total cost, with no bump for unrealized gain if the value of our house has risen). At this point we can either refinance the house in order to pull out some equity and make it an 80% LTV again, or just pay it down. We'll decide that around January 2016. My numbers might be a little skewed as the place is in Vancouver West (not West Vancouver).