Options for Home Downpayment? - Page 4 - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

fundmark19 · 03-10-2010, 10:16 AM

It's not fraud if you have renters in place by the time mortgage funds! Also if you are locked in for 5 years that gives you 5 years at a good interest rate and you can start sorting everything else out over that period if rates go crazy high.

If history repeats its self and things do spike. They level off over a 5 yr period. So by locking in at a crazy low rate you can afford now if something crazy does happen it should leveled off to a more respectable amount at the end of your term. I could easily afford 10 percent rates. 20 on the other hand I would need to have a couple roomates. But still do able in a worst case scenerio

speede5 · 03-10-2010, 11:24 AM

Quote:

Originally Posted by fundmark19

It's not fraud if you have renters in place by the time mortgage funds! Also if you are locked in for 5 years that gives you 5 years at a good interest rate and you can start sorting everything else out over that period if rates go crazy high.

If history repeats its self and things do spike. They level off over a 5 yr period. So by locking in at a crazy low rate you can afford now if something crazy does happen it should leveled off to a more respectable amount at the end of your term. I could easily afford 10 percent rates. 20 on the other hand I would need to have a couple roomates. But still do able in a worst case scenerio

Very interesting perspective. Even at a crazy low of 3.89 over 5, which is what I just did, in 5 years you will not have enough paid off to negate a huge spike in interest. Plus it's unknown if that spike will devalue property to the point where you are underwater.

If your going to try and snow the bank, put your house up for sale, and buy the other. Once you have the other mortgage take your first house off the market. You'll still need a downpayment, but that downpayment is protecting the bank and the buyer.

Another option is to partner with someone (mom and dad) in the new property. They provide the downpayment, or co-sign, you make the payments.

cmyden · 03-10-2010, 12:12 PM

Quote:

Originally Posted by MJK

Well I can tell you in my case it's very simple. I have been very busy paying of other things in my life so I do not have a huge stash of cash in my account. We found a home we like and we know we can afford but we do not have $30,000 lying around becuase we didn't expect that the min. to buy now is 10%.

Call it bubble mentality if you want but without knowing my situation fully you really are not in a position to judge.

Sorry, believe me I wasn't judging you personally, just the mentality that North America as a whole adopted regarding real estate between 2001 and now.

amorak · 03-10-2010, 12:23 PM

April 1 will be the beginning of the end of the real estate bubble, you mark my words. No judgment on the OP, but there are so many people who just scratched out the 5% to get a new home back during the glory days. They used credit card cheque transfers, etc...

With a 20% down payment requirement, I am willing to bet 25% of the market will disappear instantly - That is, 1/4 of the people actively looking at buying a $600,000 home will no longer be able to afford it.

This is going to have a profound, lasting and very necessary impact on the housing market.

I am a free-market proponent, but the Canadian (global? North American?) real estate market has shown me that many of my adult peers cannot properly plan their finances, so I hardily approve of a gov't mandated 20% unborrowed DP.

A little pain coming to the market soon, for sure, but man alive is it better than letting things get further out of hand.

pylon · 03-10-2010, 12:48 PM

Not that it is entirely 'legal' and it may be too late to do now since the bank knows the terms... but you can, and I have seen it done in the past.... get the seller to front you 30k and you buy the house for 30k more. I have never personally done this, but know someone that has, it is do-able. You just have to make sure the money is filtered through a relative so the down payment looks like a gift, not from the seller. It is risky, and if you are caught, your bank won't like you.

speede5 · 03-10-2010, 12:48 PM

Quote:

Originally Posted by amorak

With a 20% down payment requirement, I am willing to bet 25% of the market will disappear instantly - That is, 1/4 of the people actively looking at buying a $600,000 home will no longer be able to afford it.

Just out of curiosity, where are you getting that 20% down is mandatory? 20% is only applicable to rental property. You will still be able to get a 95% loan to value on a residence. This is going to have a negligible effect, people will always find a loophole, subprime lenders will find a way to bend.

Jonrox · 03-10-2010, 12:50 PM

Quote:

Originally Posted by amorak

April 1 will be the beginning of the end of the real estate bubble, you mark my words. No judgment on the OP, but there are so many people who just scratched out the 5% to get a new home back during the glory days. They used credit card cheque transfers, etc...

With a 20% down payment requirement, I am willing to bet 25% of the market will disappear instantly - That is, 1/4 of the people actively looking at buying a $600,000 home will no longer be able to afford it.

This is going to have a profound, lasting and very necessary impact on the housing market.

I am a free-market proponent, but the Canadian (global? North American?) real estate market has shown me that many of my adult peers cannot properly plan their finances, so I hardily approve of a gov't mandated 20% unborrowed DP.

A little pain coming to the market soon, for sure, but man alive is it better than letting things get further out of hand.

To be clear though, the 20% DP requirement is only on 2nd homes (i.e. investment properties). For primary residences, the old DP rules still apply with few (if any) changes. So I'd be surprised if the impact was all that much.

speede5 · 03-10-2010, 12:52 PM

Quote:

Originally Posted by pylon

Not that it is entirely 'legal' and it may be too late to do now since the bank knows the terms... but you can, and I have seen it done in the past.... get the seller to front you 30k and you buy the house for 30k more. I have never personally done this, but know someone that has, it is do-able. You just have to make sure the money is filtered through a relative so the down payment looks like a gift, not from the seller. It is risky, and if you are caught, your bank won't like you.

It works best on a private sale. I... I mean someone I know bought a house from a friend, who just never cashed the downpayment. The sales contract had purchase price, - downpayment, and the rest was financed. Only works with someone you trust though.

amorak · 03-10-2010, 01:10 PM

Sorry, I meant on rental homes / 2nd homes. I didn't mean the entire market. I was speaking with respect to the bubbled due to many people buying income-generating properties, be they rentals or flips. They have been one of the main drivers for this bubble, in my humble opinion.

Jonrox · 03-10-2010, 01:13 PM

Quote:

Originally Posted by amorak

Sorry, I meant on rental homes / 2nd homes. I didn't mean the entire market. I was speaking with respect to the bubbled due to many people buying income-generating properties, be they rentals or flips. They have been one of the main drivers for this bubble, in my humble opinion.

I agree with you on this. The new requirement will pretty much restrict these activities to serious, financially stable investors.

Pastiche · 03-10-2010, 01:21 PM

What's wrong with renting? Nothing actually, so long as the save the cost savings from renting and buying and invest it.

chemgear · 03-10-2010, 01:29 PM

Quote:

Originally Posted by amorak

April 1 will be the beginning of the end of the real estate bubble, you mark my words.

Well, I assume there will be a rush up to April 19 when the new rules kick in. It might last 60-90 days afterwards depending upon whether banks can/want to hold rates or regs.

Mind you, the consensus is that rates are going up July 20 when the Bank of Canada meets after their "political" promise to hold rates to June 30. I would suggest that would squeeze people more than the April timing if anything.

I am guessing prices hang in or increase a bit while people/first time home buyers panic to get in on the good interest rates. After July, I can't see how increasing interest rates and restricted regulations are going to do anything but put downward pressure on it. I'm no expert though, could totally be wrong.

Jonrox · 03-10-2010, 01:39 PM

So who wants to buy a house in Okotoks? I'll give you a great deal since my agent will only charge me to do some paperwork if I find the buyer.

troutman · 03-10-2010, 02:22 PM

Quote:

Originally Posted by pylon

Not that it is entirely 'legal' and it may be too late to do now since the bank knows the terms... but you can, and I have seen it done in the past.... get the seller to front you 30k and you buy the house for 30k more. I have never personally done this, but know someone that has, it is do-able. You just have to make sure the money is filtered through a relative so the down payment looks like a gift, not from the seller. It is risky, and if you are caught, your bank won't like you.

Sounds like mortgage fraud.

amorak · 03-10-2010, 03:15 PM

Quote:

Originally Posted by pylon

Not that it is entirely 'legal' and it may be too late to do now since the bank knows the terms... but you can, and I have seen it done in the past.... get the seller to front you 30k and you buy the house for 30k more. I have never personally done this, but know someone that has, it is do-able. You just have to make sure the money is filtered through a relative so the down payment looks like a gift, not from the seller. It is risky, and if you are caught, your bank won't like you.

I love it when people start advice with sentences like this

"Hey Joe, my wife is pissing me off, what should I do?!"

"Not that it is entirely 'legal', but I know a guy who can do her in"

Winsor_Pilates · 03-10-2010, 05:31 PM

Quote:

Originally Posted by amorak

Sorry, I meant on rental homes / 2nd homes. I didn't mean the entire market. I was speaking with respect to the bubbled due to many people buying income-generating properties, be they rentals or flips. They have been one of the main drivers for this bubble, in my humble opinion.

I would say it's more to prevent a bubble, than to bring the "end" of the bubble.
It's a good thing, will keep investment properties under control and also bring in stronger qualification requirements primary buyers as well.
Welcome changes IMO, and should actually strengthen the Real Estate market, not destroy it.
Most investors are putting over 20% down now anyway.

Winsor_Pilates · 03-10-2010, 05:45 PM

Quote:

Originally Posted by cmyden

I really don't want to derail this thread with my thoughts on the Canadian housing market, but I just shake my head when I read statements such as 'I don't have the money, but I can afford a second home'.

It's the classic bubble mentality that's been around as long as there has been markets. The notion that an asset class is affordable only because it has a perceived never-ending increase in value and not based on fundamentals.

I agree with you on the statement, but don't agree that we're in a bubble. I think the new regulations will help prevent that as well.

cmyden · 03-10-2010, 06:00 PM

Quote:

Originally Posted by Winsor_Pilates

I agree with you on the statement, but don't agree that we're in a bubble. I think the new regulations will help prevent that as well.

Yeah, it seems people are either in the bubble camp or the non-bubble camp.

Reasons why I think we're in a bubble....

1) The price to rent ratio for a SFH in Calgary is currently around 250-275X. The long term average is 200.

2) Historically, home prices increase at about 1.5% above inflation in Calgary. In 2010, we should be at about 300k for an average home. Right now we're at 2020 house prices.

3) Everyone and their dog has been talking non-stop about where real estate prices are headed for the past 5 years. This might be the most telling of all.

One day when this has finally run its course, Calgary will be back at a 200X p/r ratio, as the just fine second-tier city in the middle of the Canadian prairies that it is.

People will no longer want to talk about real estate, or why they tied up and leveraged all of their money into a single asset class. Just like nobody wants to talk about Nortel or their dot-com portfolio of '99.

Granite counter tops, hardwood floors and stainless steel appliances will mark that ridiculous time period where everyone seemed to be manic about real estate.

Winsor_Pilates · 03-10-2010, 08:04 PM

I was referring to Canada at large, not just Calgary. I would actually agree that prices in Calgary are higher than they should be and it's largely due to Calgarians buying into their own hype and creating a hysteria around Real Estate. But if jobs come back to Calgary and everyone starts moving there again, those ratios could improve quickly as rents go up.

I work in the Vancouver market and it's a different beast for many reasons. I think one of Calgary's issues is that the RE market looks at Vancouver too much, when there's too much difference for comparison.

I don't share your view of the future and comparison to Nortel, but we could argue that forever, it's pointless. I think it's far more likely a lot of people can make a lot of money investing and selling RE at the right times, and those who rent forever waiting for the bubble usually just miss out.
Like any investment the key is to invest wisely, don't spread yourself too thin and time things well. The new restrictions on mortgages will help more people do this.

pylon · 03-10-2010, 11:42 PM

Quote:

Originally Posted by amorak

I love it when people start advice with sentences like this

"Hey Joe, my wife is pissing me off, what should I do?!"

"Not that it is entirely 'legal', but I know a guy who can do her in"

It is definitely not something I would personally do, or I would condone. The guy I know who did it, did on the advice of an independant mortgage broker, and had little or no other options, and a family on the way. So I wouldn't say it was advice... just a scenario. As far as the legality of it, I am not well versed on Mortgage lending but I would assume it is not legal as Troutman suggests.

Have you considered finding an assumable? That is what I did 5 years back when I was strapped for the necessary down payment, as I didn't qualify for CMHC at the time. Or are you stuck on this one property?