http://whispersfromtheedgeoftherainforest.blogspot.com/2010/08/denial.html


At that time Canadian home prices had started to dip as affordability became the worst on record in many cities. That's when the CMHC publicly admitted that it was ordered by the Federal Government to approve as many high risk borrowers as possible to prop up the housing market and keep credit flowing.

As a result, in 2008, some 42% of all high risk applications were approved; a 33% increase over 2007. That trend continued through 2009 and 2010.

And then there is the CMHC. While it guarantees $770 Billion in mortgages, it only has about $9 billion in equity, a massively overextended position.

CBC notes that "it's more leverage than any U.S. bank or lending institution ever had."
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You will love this RE utube video:

http://www.youtube.com/watch?v=XJlaEtZ7zT0&feature=player_embedded


It's a right time to buy because it's seller's market.
It's a right time to buy becasue it's balance market.
It's a right time to buy because it's buyer's market.

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http://www.findcalgary.ca/page_content-19.html

SFH Calgary

Average price
July 2010:465k
Aug 2010 (1-23):442K
Total sold: 915

Median price Aug (1-23)
July 2010(1-23):400k
Aug 2010 (1-23):395K
Total sold(1-23): 640

Quote:

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Originally posted by ashedfc

Excellent Rahul.
In fact, I have already started advising all my clients to take as much home equity as possible (so, in case of a housing meltdown at least their equity doesn't disappear).

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ashedfc. Quick Q.

Only thing I can understand to make +ve equity is by downsizing or moving to smaller town if you have substantial home equity (mostly works for retired people).


1. What do you not advice clients to pay the debt(mortgage) asap with such a low interest these days?

2. What is the advantage to use home as an ATM machine (cash as much as possible) before RE cool down (crash)?

3. How these people going to refinance after couple of yrs (some are due in next 2,3 yrs) if they use home as ATM now?

0/40 and 5/35 owners are already own more than home value is.

Quote:

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Originally posted by ashedfc

How do you protect from a RE falling market.
1. Sell - if selling is feasible (most people cannot do, because you still need a place to live)
2. Take a Credit Line - Only if you have enough equity & you qaulify for a Home equity credit line.
3. Take a Second mortgage - the interest rates are prohibitive (or may be refinance the first one to as much as possible). Unless its a 2nd mortgage as line of credit (I know of a bank which gives Prime +0.5%, 2nd mortgage, minimum 50K, & total loan to value 80%). Even, First mortgage rates are all historic lows.

Each situation is different, each are possible strategies. However, it all depends on a persons individual circumstance.
There are banks/ financial institutions lending as of now, but imagine if housing prices crashes, then they will also become very conservative in their underwriting requirements.

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ashedfc. Thanks for the answering my queries.

1. But its still good to pay mortgage principal faster. It's old saying that pay all the debt when interest rates are low.

2. I agree on point this point that take money for savings/rainy days/RRSP..if not ready for that. But keep the refinancing in mind while RE pricing are coming down.

3. & 4. agreed

Quote:

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Originally posted by ashedfc

Quote:

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Originally posted by rahul_singh23

Rahul your Q are answered in serial order -

THe reason why its not recommended to pay down mortgage is -
1. Interest rates are very low - so by paying down the savings on interest is going to be negligible.

2. Taking equity need not mean using home as an ATM. Its means an ATM only when you blow up the money in vacation, casino, etc.etc. Rather take the equity & save it completely away from the lender (in a chequing account, savings account, GIC, balanced fund, etc.etc). This way if worst happens & you loose your job, than you have something of your own.
Keep in mind -if housing value crashes (or goes down) it will also increase unemployment, & many will loose job (equity in your home will disappear with falling prices, & any bank does not like to lend to an unemployed person).

3. Asset is still there - its away from home equity, protected seperately. Refinancing is done on the basis of total assets vs total liabilities (not just home equity vs mortgage).

4. 0/40 & 5/35 are already in trouble - they have no equity, they can do nothing, only pray for home prices to stay up. This is the Canadian subprime, a disaster waiting to explode.

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