CMHC Announces an Announcement **Edit: CMHC increases insurance premiums

[FlamesAddiction]

Originally Posted by GP_Matt

If you want to see why CMHC is a joke try to take out a mortgage with 19% down.
The fee to insure that last percent is one percent.

Yeah, I noticed that too.


I just bought a house with 10% down. I could have put more down, but unless you get to at least 15% (but 20% being the real benchmark), it didn't seem to be worth it. I was going to do 13%, but there wasn't much of a point.

[GP_Matt]

I was really close to 20% on our house and got a bit worried that I would miss the mark by $1000 and end up paying $5000 to insure it.

[Table 5]

Originally Posted by pylon

I disagree.

With mortgages at all time lows, and 5 year fixed rates of 2.99% all over the place, why not borrow every nickel you can, and invest instead.

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.

[pylon]

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.

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.

[corporatejay]

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.

That's not what you said. You said don't put down 5%, you are likely in over your head.

Just a quick calculation but a $315,000 mortgage (so let's say a a $330,000 starter home) at 3.5% costs $1,582.69 a month, which is basically as much as rent or less. Why wouldn't you buy this if that's what makes sense for you? Why save up another 15k to buy the same house when interests rates are so low?

I mean taking out a 25 year mortgage with 5% down when you're 40 doesn't make sense, but the above scenario seems to work?

[Table 5]

Originally Posted by pylon

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 can understand that strategy, but personally I'm pretty allergic to carrying debt and want to pay down my house/car etc as fast as possible. I'm not a smart investor who will use that money more wisely. Im not going to make savy trades and get in at the right time...I'm just too way too busy working to do any of that (the one time I did try, I was wasting way too much of my day making terribad trades). I'm going to buy things like cars and photo equipment and go on vacations!

[Table 5]

Originally Posted by corporatejay

That's not what you said. You said don't put down 5%, you are likely in over your head.

Not really sure how that's any different? All I'm suggesting is to buy within your means.

Just a quick calculation but a $315,000 mortgage (so let's say a a $330,000 starter home) at 3.5% costs $1,582.69 a month, which is basically as much as rent or less. Why wouldn't you buy this if that's what makes sense for you? Why save up another 15k to buy the same house when interests rates are so low?

Add on another 500 bucks for condo fees + home insurance etc, and you're easily over $2100/month. It might be enough to push some people into a precarious situation.

I generally agree with you though, a lot of times it makes financial sense for people to buy than rent, especially on the condo/apartment side of things. We did that ourselves 2 years ago. I'm just not convinced that having a ton of 700k houses bought on 5% is a good thing for the long-term if things ever go south.

[corporatejay]

Originally Posted by Table 5

Not really sure how that's any different? All I'm suggesting is to buy within your means.



Add on another 500 bucks for condo fees + home insurance etc, and you're easily over $2100/month. It might be enough to push some people into a precarious situation.

I generally agree with you though, a lot of times it makes financial sense for people to buy than rent, especially on the condo/apartment side of things. We did that ourselves 2 years ago. I'm just not convinced that having a ton of 700k houses bought on 5% is a good thing for the long-term if things ever go south.

I think we both agree that you should buy within your means, and quite honestly, I think the whole CMHC thing should be available for basically your first home and that's it. It helps people get started out, but after that you should have to put down far more than 5%. We bought our first condo (prior to the boom) with 5% down, I think our mortgage was 800 bucks, so it made a lot of sense for us to do that especially since we are both professionals and knew that our salaries would increase and even if they didn't, it was something we could afford.

[Nehkara]

I am looking to buy my first place in the next few years (a condo). I will be buying the least expensive place I can that is still reasonable (decently built, decent management, etc).

Doing it on my own though... I may have to just put 5% down because you have mortgage + all of the related real estate fees... and then I have to buy all of my furniture and stuff that goes IN the condo.

I know a lot of people here are very well off, but you need to understand that not everyone bathes in money every morning.

I feel like I'm being responsible as I'm completely paying off all of my debts before I buy (my parents are awesome and are letting me stay with them in the interim)... and I plan on buying the least expensive place I can get away with so that I'm not "house poor".

But I might only be able to put down 5% or so because there are a lot of associated costs with buying your first place and I'll be doing it alone.

[FlamesAddiction]

Originally Posted by Table 5

Not really sure how that's any different? All I'm suggesting is to buy within your means.



Add on another 500 bucks for condo fees + home insurance etc, and you're easily over $2100/month. It might be enough to push some people into a precarious situation.

I generally agree with you though, a lot of times it makes financial sense for people to buy than rent, especially on the condo/apartment side of things. We did that ourselves 2 years ago. I'm just not convinced that having a ton of 700k houses bought on 5% is a good thing for the long-term if things ever go south.

Fuel prices are another thing to consider. Maybe not a huge thing in Calgary, but in cities like Toronto where people often commute 50km/100km round trip to work everyday, you end up paying $300 to $400 a month more in gasoline. They might have to buy a cheaper house further from where they work because of down payment issues, but the additional expenses don't make it significantly cheaper per month (not to mention the 2 hours wasted per day in traffic for a lot of people).

There are so many little things that can screw people in these situations.

[GP_Matt]

Originally Posted by Nehkara

Doing it on my own though... I may have to just put 5% down because you have mortgage + all of the related real estate fees... and then I have to buy all of my furniture and stuff that goes IN the condo.

I don't think there are any real estate fees for the buyer in Alberta so that should help you out. You need a lawyer but they don't charge that much and are sometimes included if it is a new build. (You pay for it either way but if it is part of the purchase price then it counts towards your down payment)

As for furniture try not to forget the golden rule that spending begets spending. Meaning that if you put a nice couch in your house then your table will look ratty so you will want a new table which of course needs a nice place setting to go on top of it. All of a sudden the bedroom furniture is uncomfortable and ugly so it needs to go.
If you can find a way to just buy a cheap couch you will save thousands.

[Canehdianman]

Originally Posted by Table 5

I agree with his bold statement. If all you can scrap together is 5%, chances are you're not in a position to make the biggest purchase of your life. Part of showing you're financially sound is saving up for that down payment. It's not easy, and it takes time, but I don't think 10% is unreasonable.

Thanks Dad.

I disagree with the bold statement (and blanket statements in general).

I bought my house with 5% down. Our mortgage is less than 2x our household income. Are you suggesting my wife and I are over our heads or not financially sound?

[Hugh Jahrmes]

Originally Posted by GP_Matt

As for furniture try not to forget the golden rule that spending begets spending. Meaning that if you put a nice couch in your house then your table will look ratty so you will want a new table which of course needs a nice place setting to go on top of it. All of a sudden the bedroom furniture is uncomfortable and ugly so it needs to go.
If you can find a way to just buy a cheap couch you will save thousands.

This , this , this.

I put 33k (10%) down on my home two years ago and kept 7k for furnishings.

Burned through that ASAP and the total now is easily at 11-12k as we slowly replace things that now look out of place / don't fit in anymore. Truth is, almost everything we've been replacing looked great in my apartment before and probably didn't need upgrades. It all started with wanting new couches though haha

[WinnipegFan]

Q I have to disagree with you. The less you put down the more the mortgage calculates into the cumulative interest, which is the majority of what you are paying for the first few years of that mortgage. I highly doubt you will get a return on the small percentages of money in comparison to the cost of borrowing it. My advice to all my friends and family is to suffer through and save up 35% down and do a secure line of credit. Then your interest is calculated monthly, you aren't front loading your interest and you are paying off your principal far faster.

[Travis Munroe]

Banks are much tighter right now than I have experienced in several years. Insurers are also extremely tight. Ive had 2 deals rejected by CMHC for little to no legitimate reason.
I also agree with Pylons previous statement.
Rewind the clock several years - if you are a single guy/girl and more focused on a financially secure future than getting married:
Buy property based on value and not falling in love with 5% down. Live for a year and you are real close to having 20% equity in payments and appreciation. Move on and buy another based on the same criteria. You only need 5% again. Ffwd to today and you could have a few properties in your portfolio before the age of 30. Not a bad start to retirement.
Of course you could have saved up for 20% on the first property but the extra time it took to develop that 20% would set most people behind the ball.

[Travis Munroe]

As for the announcement, I am assuming it will be on the premiums as to entice people into coming up with 20% but not forcing them to do so.

[Travis Munroe]

Originally Posted by WinnipegFan

Q I have to disagree with you. The less you put down the more the mortgage calculates into the cumulative interest, which is the majority of what you are paying for the first few years of that mortgage. I highly doubt you will get a return on the small percentages of money in comparison to the cost of borrowing it. My advice to all my friends and family is to suffer through and save up 35% down and do a secure line of credit. Then your interest is calculated monthly, you aren't front loading your interest and you are paying off your principal far faster.

No harm in getting in sooner with 5% and putting extra money when had on the mortgage.

Of course, everyone has different views on risk/reward. There is no clear cut answer at the start...its all how you invest the extra money you save and the answer is had at the end!

I think it would be different if a mortgage was considered debt (yes lets get it out of the way now)

[albertGQ]

Originally Posted by Realtor 1

Banks are much tighter right now than I have experienced in several years. Insurers are also extremely tight. Ive had 2 deals rejected by CMHC for little to no legitimate reason.

Can you elaborate on this? I'd love to know the reason why CMHC declined those two deals.

Thanks in advance!

[fundmark19]

Originally Posted by Realtor 1

Buy property based on value and not falling in love with 5% down. Live for a year and you are real close to having 20% equity in payments and appreciation. Move on and buy another based on the same criteria. You only need 5% again. Ffwd to today and you could have a few properties in your portfolio before the age of 30. Not a bad start to retirement.
Of course you could have saved up for 20% on the first property but the extra time it took to develop that 20% would set most people behind the ball.

I wouldn't have my 3 properties if it wasn't for this trick!

[Travis Munroe]

Condos - they had concerns with a downtown condo that had great financials and the building had plans to update much of the building. Insurers were concerned about potential future special assessments and also didnt like that windows and doors were the owners responsibility. My condo document review specialist has her office in the building...I think she has a pretty good grip on whats going on. One insurer was willing to lend however I felt it was best for the client to walk for re sale purposes.
The other was a building which had a SA a couple years ago to repair the parking garage. All repairs are done and fully paid for and the board is now trying to go after those who initially made the mistake. CMHC hears the word lawsuit and they get paranoid despite the fact it was not against the board.
It can be frustrating when you have proof that there is no concern and they don't bother reviewing the situation until enough people have brought it to their attention.