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Old 10-22-2017, 11:13 AM   #3181
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Originally Posted by OMG!WTF! View Post
I read in the article a household income of $100K can qualify for $700K mortgage. Wow.

Is a family completely house poor at that point? How do they afford cars, kids, utilities, repairs, vacations, etc.

Pretty obvious debt is the solution. I can start to see how this is getting dangerous here in Canada. People at that income should not be spending that on a mortgage period. Just a totally dangerous situation.
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Old 10-22-2017, 12:17 PM   #3182
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Originally Posted by OldDutch View Post
I read in the article a household income of $100K can qualify for $700K mortgage. Wow.

Is a family completely house poor at that point? How do they afford cars, kids, utilities, repairs, vacations, etc.

Pretty obvious debt is the solution. I can start to see how this is getting dangerous here in Canada. People at that income should not be spending that on a mortgage period. Just a totally dangerous situation.
Even with a $450k mortgage, I wonder how families aren't house poor with a gross household income of $100k.
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Old 10-22-2017, 12:27 PM   #3183
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Government should absolutely not be involved in the free market.
Like the implementation of the CHMC in the first place? The government helped fuel this mess - now they're trying to tidy it up a bit.
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Old 10-22-2017, 01:43 PM   #3184
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Originally Posted by OldDutch View Post
I read in the article a household income of $100K can qualify for $700K mortgage. Wow.

Is a family completely house poor at that point? How do they afford cars, kids, utilities, repairs, vacations, etc.

Pretty obvious debt is the solution. I can start to see how this is getting dangerous here in Canada. People at that income should not be spending that on a mortgage period. Just a totally dangerous situation.
I would like to know what insane bank is approving that. I couldn't get anywhere close to that with RBC, which is perfectly reasonable.
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Old 10-22-2017, 03:02 PM   #3185
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Originally Posted by OldDutch View Post
I read in the article a household income of $100K can qualify for $700K mortgage. Wow.

Is a family completely house poor at that point? How do they afford cars, kids, utilities, repairs, vacations, etc.

Pretty obvious debt is the solution. I can start to see how this is getting dangerous here in Canada. People at that income should not be spending that on a mortgage period. Just a totally dangerous situation.
It's been a while since I've done a bank mortgage but I suspect that the real answer is no, most people do not qualify in that scenario. Like if you have perfect credit and no other debt you would qualify for that. So if you have car payments, other utility costs, kids/vacation debt, then there is no way you would qualify for that amount.

I think the debt we're creating as a country comes largely after qualifying for a mortgage. We're creating secondary financing debt...HELOC's, second mortgages, refinancing without reassessing the house.
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Old 10-22-2017, 07:32 PM   #3186
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Just did some calculations for a 700k mortgage based on 100k income. Most banks/lenders (almost all) would approve that if >20% down, as otherwise the high ratio (<20%) stress test would make the payment too high to qualify.

Edit: (assuming there is little to no debt outside of mortgage)
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Old 10-22-2017, 08:43 PM   #3187
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Haha ok. Or I'm just someone who bought within my means and not trying to maximize my mortgage.
The thing is Weitz, its not just about you, who are you going to sell your house to when the time comes to cash in your chips?

Lets say you were frugal and even paid for your house already. next month you get transferred to Toronto and have to sell your house, this policy may have just cost you 10-20% of your tax free sale.
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Old 10-22-2017, 08:45 PM   #3188
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Haha ok. Or I'm just someone who bought within my means and not trying to maximize my mortgage.
The real estate wheel tends to come around on things like this. Its not just about you, who are you going to sell your house to when the time comes to cash in your chips?

Lets say you were frugal and even paid for your house already. Next month you get transferred to Toronto and have to sell your house, this policy may have just cost you 10-20% of your tax free sale profits. Of course, you could rent it out, but in this case everyone is in the same boat, so rents suffer as well....

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Old 10-22-2017, 10:56 PM   #3189
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I just don't see the appeal with dropping 200k+ cash and then taking on a 700k+ mortgage to pay for 30ish years, six figure salary or not. House prices are now making the purchase of a home a bad option for me.
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Old 10-22-2017, 11:24 PM   #3190
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I just don't see the appeal with dropping 200k+ cash and then taking on a 700k+ mortgage to pay for 30ish years, six figure salary or not. House prices are now making the purchase of a home a bad option for me.
What would you pay in rent during that same period of time ?

How many times would you have to move because of increased rent, owner selling the house etc ?

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Old 10-22-2017, 11:49 PM   #3191
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What would you pay in rent during that same period of time ?

How many times would you have to move because of increased rent, owner selling the house etc ?
Renting a home with a value of 900k would be pretty damn expensive...and yeah once you have a family you don't want someone telling you "hey pal, pack your #### and get out"
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Old 10-23-2017, 12:30 AM   #3192
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I just don't see the appeal with dropping 200k+ cash and then taking on a 700k+ mortgage to pay for 30ish years, six figure salary or not. House prices are now making the purchase of a home a bad option for me.
Just a hypothetical question: What is that home you're buying for $900,000 now is worth $3,000,000 after those 30 years?
Would you still have no interest in purchasing a home?
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Old 10-23-2017, 12:39 AM   #3193
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Even with a $450k mortgage, I wonder how families aren't house poor with a gross household income of $100k.
Pretty much my circumstance that time I moved into my current house.

I think we were sitting close to $105 / $110 K income at the time. Our initial mortgage was was $445K, and we had two kids in full time daycare, we did not have a penny to spare until we started making a little bit more and one of the kids got out of full time daycare.

IMO your debt should not go a penny over 5x income, it's just impossible to service at that point, and if they ever want interest rates to go up it will have to get even tighter than that.
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Old 10-23-2017, 12:42 AM   #3194
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Just a hypothetical question: What is that home you're buying for $900,000 now is worth $3,000,000 after those 30 years?
Would you still have no interest in purchasing a home?
I wouldn't. I have no control whatsoever over the real estate market. But I have a great deal of control over other investments. So for me, it's far easier to create 3 million in a controlled investment than not. If I had no idea what to do with the money though I would probably take my chances on a house.
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Old 10-23-2017, 10:35 AM   #3195
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The thing is Weitz, its not just about you, who are you going to sell your house to when the time comes to cash in your chips?

Lets say you were frugal and even paid for your house already. next month you get transferred to Toronto and have to sell your house, this policy may have just cost you 10-20% of your tax free sale.
You have to crack some eggs to make an omelette. I'm a homeowner and I welcome these changes. I feel we've been in a low-interest rate environment for too long and credit is too readily available. They really should have implemented these tests a few years ago as rates were on their way down to the bottom. Might have mitigated some of the problems in the GTA (not sure about Vancouver).

Also, your house is only worth what you sell it for, so I don't really agree with the concept of losing 10-20% off a theoretical max price.
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Old 10-23-2017, 10:51 AM   #3196
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Originally Posted by Flamenspiel View Post
The real estate wheel tends to come around on things like this. Its not just about you, who are you going to sell your house to when the time comes to cash in your chips?

Lets say you were frugal and even paid for your house already. Next month you get transferred to Toronto and have to sell your house, this policy may have just cost you 10-20% of your tax free sale profits. Of course, you could rent it out, but in this case everyone is in the same boat, so rents suffer as well....
I don't really understand what you are saying here? Rates should be kept artificially low so prices continue to rise? Because I may need to sell down the road and I should make money on my investment?
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Old 10-23-2017, 01:10 PM   #3197
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Renting a home with a value of 900k would be pretty damn expensive...and yeah once you have a family you don't want someone telling you "hey pal, pack your #### and get out"
To add to this, rent always goes up over time as well. You might be breaking even renting now, but in 10 years, your rent is likely to have increased by 50% but your mortgage payment may actually have decreased.
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Old 10-23-2017, 01:32 PM   #3198
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To add to this, rent always goes up over time as well. You might be breaking even renting now, but in 10 years, your rent is likely to have increased by 50% but your mortgage payment may actually have decreased.
You can look at owning a house like owning a condo...your condo fee also goes up over time. Your taxes increase, your roof costs more in 10 years than it will now. Rent doesn't always increase either. But if you want to go by the average rent increases, maybe 3-5% a year. The comparison with inflationary costs of housing might be pretty similar. And as interest rates increases, and they certainly will be, your "rent" will cost more as well.
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Old 10-23-2017, 01:32 PM   #3199
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Pretty much my circumstance that time I moved into my current house.

I think we were sitting close to $105 / $110 K income at the time. Our initial mortgage was was $445K, and we had two kids in full time daycare, we did not have a penny to spare until we started making a little bit more and one of the kids got out of full time daycare.

IMO your debt should not go a penny over 5x income, it's just impossible to service at that point, and if they ever want interest rates to go up it will have to get even tighter than that.
I agree, but I'd argue that in our crazy low interest rate era, people shouldn't be going above 3.5x gross household income.

A few interest rate points and that mortgage payment at 3.5x will become a noose.

Assuming you make 100k a year, your mortgage payment on a 350k mortgage at 2.5% for 25 years would be $1,568 a month.

If we change the interest rate to 8% (an average rate over the past 30 years or so), and your 350k mortgage now costs you $2,671 a month. An increase of 70%.

So it'll cost you 32k for your mortgage... Out of your take-home income of approximately 76k. (or 42.1%, just above Total Debt Service Ratio that banks will use to calculate what you should be able to borrow).

Everything is shaping up for a colossal crash in real estate. Problem is that no one will know when it will come. My bet is when the baby boomers start downsizing. If that gets combined with a rise in interest rates, house prices will crater.
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Old 10-23-2017, 02:03 PM   #3200
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I don't really understand what you are saying here? Rates should be kept artificially low so prices continue to rise? Because I may need to sell down the road and I should make money on my investment?
Haha, no I am not saying that. First of all, why do you say rates were "artificially" low? From a monetary policy perspective, rates reflect the price of money and since the lower rates did not result in any inflationary pressure its an indication that they were appropriate. In fact in US dollars, real estate prices were relatively stable over the last few years. As a particular example in Toronto, the 30% increase in real estate pricing was almost exactly in parallel to the Canadian dollar depreciation.

The danger is that all these methods of tightening up access to financing at the same time could result in an over correction. For example, if you were active in the US real estate market in 2010-2011 you could have seen the banks had gotten so tight with loans that even people who could afford it were sidelined from entering the market. They had over corrected resulting in a deeper valley in the market.

In the case of Canada, the foreign buyer restrictions, the increase in the interest rates, and the buyer qualifications changes all at the same time might just be too much. So really without even approaching a US style crash(yet) the government has gone much further in Canada because the US government never considered the foreign buyer tax that they implemented here.

Certainly, being frugal and patient allows the ability to position yourself(a strategy i pursue myself) to take advantage of these valleys by buying low and the that can certainly be applauded, but characterizing it as a great policy that may drive some our neighbours into bankruptcies is not appropriate(which seemed to be the tone of your original post).

Yes, long winded reply, I think I will leave it at that.

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