http://money.cnn.com/2006/05/10/news/economy/economy_mortgage/index.htm?cnn=yes
Lenders have begun offering a half-century home loan as incentive in face of record-high home prices, rising interest rates, report says.
Long long ago, in a village called Rampur, there used to live a farmer named Sukhiya. He wanted to buy a tractor so that he could plough his farm faster. So Sukhiya took $50 loan from Mukhiya/Sahukar.
Sukhiya sincerely paid $10 per month to Mukhiya/Sahukar.
Today, Sukhiya's son continue paying $10 per month to Mukhiya/Sahukar's son 
Hope this 50 yrs mortgage doesn't hurt any consumer.
In the bay area normal 3 bedroom house's median price is 700K. A nice house (which most of the desi's own or dream to own) costs 1.5M. Also note these 700K houses are old houses and almost all desis pay 100K in the remodeling.
Suppose you put a downpayment of 100K, mortgage payments with traditional 20 year loan would be about 4K per month. How can one afford this?
So they started these 50 year mortgage. One more attractive loan type is interest only loan for the 10 years!
And belive me people still keep buying houses. They dream that the realestate is appreciating at the rate of 20% a year and they will just pay 5-6% in the interest so they will gain one day a lot! A property values 700K will be 840K next year 920K a year after and 1100K a year after and 1324 a year after (2010!)
Might be true, but who will buy the house? The way the lenders have to come-up with innovative ideas to attract the buys itself says that the current market is not real. There is something wrong. Well let us assume there will be many Sukhiya's go for this 50 year mortgage. What after that? a 100 year loan? And Sukhiya's grand-son will pay the installments to Sahukar's grand-son?
It's a bubble.
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A Proud Indian Canadian
Quote:
Originally posted by Garvo Gujarati
In the bay area normal 3 bedroom house's median price is 700K. A nice house (which most of the desi's own or dream to own) costs 1.5M. Also note these 700K houses are old houses and almost all desis pay 100K in the remodeling.
Suppose you put a downpayment of 100K, mortgage payments with traditional 20 year loan would be about 4K per month. How can one afford this?
So they started these 50 year mortgage. One more attractive loan type is interest only loan for the 10 years!
And belive me people still keep buying houses. They dream that the realestate is appreciating at the rate of 20% a year and they will just pay 5-6% in the interest so they will gain one day a lot! A property values 700K will be 840K next year 920K a year after and 1100K a year after and 1324 a year after (2010!)
Might be true, but who will buy the house? The way the lenders have to come-up with innovative ideas to attract the buys itself says that the current market is not real. There is something wrong. Well let us assume there will be many Sukhiya's go for this 50 year mortgage. What after that? a 100 year loan? And Sukhiya's grand-son will pay the installments to Sahukar's grand-son?
It's a bubble.
Bang on GG and l5a....however, I would like some comments from Amit Kalia and other realators on this "BUBBLE" issue.....it's crazy the way home prices are going up.....it's virtually immpossible for a lot of middle class families to buy home.....when we ask this to a real estate agent, he/she will say historically house prices have never gone down.....WRONG.....they have gone down in mid and late 80s....I may be wrong this time...but I would really request more comments, especially from realators...
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Let's help each other to grow & prosper in Canada
Location: God's own country
Posted on: 11-05-06 17:58:42
hello!
I am not a realtor but my view is this .
It is always good to get a mortgage since if you donot own a house you need to rent it. It is not that you stay free if you donot own a house. The building bubble / boom will boost up or reduce your profits but you will never lose money.
Interest rates are supposed to remain low for 3-5 years and it might take 5-10 years for it to go out of hand. You will be given sufficient warnings when the housing bubble will burst (atleast 6 months to 12 months notcie- this time) and you can take it on from there. Even if there is building bubble bursting, it maynot affect anyone in Canada. Only when interest rates go upto 18% +, will there be any problem.
Just my view. Not a view set in stone or generalised.
TK
Sisenote : Only people who do business of buying and selling may get into a problem in a housing bubble. Not people who are buying their home and living in it.
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I am a Gents and not a Ladies.
Location: God's own country
Posted on: 11-05-06 17:59:10
Sorry-Dbl post
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I am a Gents and not a Ladies.
Quote:
Originally posted by Garvo Gujarati
In the bay area normal 3 bedroom house's median price is 700K. A nice house (which most of the desi's own or dream to own) costs 1.5M. Also note these 700K houses are old houses and almost all desis pay 100K in the remodeling.
Suppose you put a downpayment of 100K, mortgage payments with traditional 20 year loan would be about 4K per month. How can one afford this?
If someone can put a downpayment of 100k (that's lot of savings), they should be making more than 100k annually in the Bay area. So 4k per month appears to be ok.
It's supply and demand and the economy. Bubble or no bubble.
DIO
