Quote:
Originally Posted by GreenLantern
I've also seen examples where people are buying a house with a basement suite and the broker works the rent of the suite into their income.. before the house is even built or the suite is even rented... not sure how that works.
I've also seen people who are buddy buddy with their broker in houses I can't even understand how they afford.
I guess if you just keep leveraging your equity you can keep upgrading/renovating houses... but I mean eventually you have to pay that lump sum off, or work for the rest of your life.
We've played it very safe during this covid situation, watched a lot of people make big moves, build their dream home on record low interest rates.. all I know is if winter is coming we will be in good shape to weather the storm..
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What's also fun is that those numbers often show gross income rather than net. I held onto my property because I'd be taking a huge bath on a townhouse and they just asked how much rent and mortgage were left on the property... no questions about expenses of the future "rental property". That spiked my income for qualification $24K straight up at $2K a month. Real cash flow wise, I was CF negative after expenses on those rents for mortgage, insurance, property tax etc.
That being said, I'm financially prudent and I always intentionally lump sum to pull my amortization down from the initial 25 years to below 15 within the first 3 years (best time to do it to avoid huge interest accumulation and then just follow the schedule afterwards), so I'll beat those stress tests a dozen times over.
But for some people I know where they have like 2-4 properties because their parents forced them and their parents have like 3-6 all at around 20 years amortization each... they super amplify their problems and often could pass stress tests without too many issues because expenses aren't factored in.
Different markets are also different. Prior to the recession, my wife and I probably made just around $150K combined and I think we could afford a $850-950K mortgage at max. I had friends in Vancouver and Toronto saying they were qualifying for $1.2-1.4 mil and could double to triple that easily if their parents co-signed and the down payment was high enough. I don't know for certain, but I can't help but think Toronto and Vancouver were allowing higher mortgages for the same income as Calgary for a while (and to be fair, those properties have increased far more than the 20-30% difference since then even with recent drops).