YOUR SAY ... comments on, ‘The Conservative Plan on Housing is a Recipe for Disaster – And not very Conservative’
I have
read Johns comments on this, and I offer the following comments:I have been in the real estate industry for 37 years, longer than John was a lawyer and I co-owned and managed the second highest producing real estate office in western Canada so I am quite comfortable in speaking to this.
In a previous comment, John implied that with this imitative, we were going to crash similar to what happened in the US in 2008 then threw out some stats that were not even relevant to this and to compare us to the US is frankly a joke.
The reason the US market crashed is because the banks down there would loan you 100% of purchase price to buy a home and then to add insult to injury, you could write off the interest on your mortgage payment on your income tax. This was a complete joke because every time there was an increase in market values, Americans would refinance their home so they could go buy motor-homes, boats, toys of all shakes because they could write it off. That is why 80% of Americans will never own their home upon retirement.
John
conveniently forgets to tell you the whole story as he only tells you what he
wants to tell you, to believe his position.
Now you know why the US market crashed, it was out of control because of
poor lending practices.
In Canada, we have stringent lending guidelines which are developed to help reduce this type of behaviour. For example, need 5 to 10 % down payment, out of your own pocket to get a mortgage, as well as many other qualifying factors.
The issue of going back to 30 year amortizations is not something that I would ever suggest people to do. If, however, this is the only way they can afford it, then it is up to the buyer to make the decision to do this -- or not -- and common sense should apply.
For example; a $300,000 mortgage at 4% over 25 years would require payments of $1578 per month; the same mortgage over 30 years is $1,426 – a difference of $152 per month -- for the benefit of being able to be able to buy that first home. That said, I believe if a buyer cannot afford the additional $152 per month, then they should NOT buy that home, period.
The bigger problem is some (many?) millennial's having such high and unrealistic expectations. They want a new home with a 2-car garage, 2 cars in driveway, and more. Their unrealistic expectations make them want that ‘perfect’ home for their first home, instead of buying something they can afford and being realistic about it. Therein lies the problem, not the additional $152 per month.
As far as stress tests go, this can be argued on both sides. Up front, it helps to reduce anyone getting into trouble, if and when their mortgage comes due -- that is a good thing. However, to apply the stress test on the renewal of a mortgage is a joke. If the buyer has proven they can make payments for the term of their loan, and they apply the stress test, technically they may not qualify by definition.
That does not mean they cannot make the payment, so if bank does not renew based on guidelines, that could put the homeowner onto a very stressful situation that is NOT necessary. If the homeowner continues to exercise due diligence, and have a clean credit rating, they will continue to make their payments.
John implies the Conservatives are wrong by trying to make housing more affordable, and comparing us to the US, and that is a joke for all the reasons I have mentioned, and more.
As far as John is concerned, if the Conservatives did nothing, he would blame them for doing nothing. When they come up with a good plan, he says it is dismal and we will crash like the US. But ... he conveniently forgets to tell you the whole picture. In his mind the Conservatives are damned if they do and damned if they don’t!
I personally do not like 30-year mortgages, but I believe the responsibility belongs on the buyer to make sure they are prudent in their buying a home, and that they use common sense in this matter – after all, it is a huge investment.
Plan properly, use common sense, and you will be as safe as you can be.
~~~ Ernie Beadle
In Canada, we have stringent lending guidelines which are developed to help reduce this type of behaviour. For example, need 5 to 10 % down payment, out of your own pocket to get a mortgage, as well as many other qualifying factors.
The issue of going back to 30 year amortizations is not something that I would ever suggest people to do. If, however, this is the only way they can afford it, then it is up to the buyer to make the decision to do this -- or not -- and common sense should apply.
For example; a $300,000 mortgage at 4% over 25 years would require payments of $1578 per month; the same mortgage over 30 years is $1,426 – a difference of $152 per month -- for the benefit of being able to be able to buy that first home. That said, I believe if a buyer cannot afford the additional $152 per month, then they should NOT buy that home, period.
The bigger problem is some (many?) millennial's having such high and unrealistic expectations. They want a new home with a 2-car garage, 2 cars in driveway, and more. Their unrealistic expectations make them want that ‘perfect’ home for their first home, instead of buying something they can afford and being realistic about it. Therein lies the problem, not the additional $152 per month.
As far as stress tests go, this can be argued on both sides. Up front, it helps to reduce anyone getting into trouble, if and when their mortgage comes due -- that is a good thing. However, to apply the stress test on the renewal of a mortgage is a joke. If the buyer has proven they can make payments for the term of their loan, and they apply the stress test, technically they may not qualify by definition.
That does not mean they cannot make the payment, so if bank does not renew based on guidelines, that could put the homeowner onto a very stressful situation that is NOT necessary. If the homeowner continues to exercise due diligence, and have a clean credit rating, they will continue to make their payments.
John implies the Conservatives are wrong by trying to make housing more affordable, and comparing us to the US, and that is a joke for all the reasons I have mentioned, and more.
As far as John is concerned, if the Conservatives did nothing, he would blame them for doing nothing. When they come up with a good plan, he says it is dismal and we will crash like the US. But ... he conveniently forgets to tell you the whole picture. In his mind the Conservatives are damned if they do and damned if they don’t!
I personally do not like 30-year mortgages, but I believe the responsibility belongs on the buyer to make sure they are prudent in their buying a home, and that they use common sense in this matter – after all, it is a huge investment.
Plan properly, use common sense, and you will be as safe as you can be.
~~~ Ernie Beadle
I have read
what you wrote Alan, in response to John, and I would have to say you did a
good job.
The point in Scheer lengthening the amortization period is not to expect people to now take 30 years to pay off their house, it is just to lower the payment for the first 5-year term of the mortgage. Then, upon renewal of the term in 5 years, they can choose to shorten the amortization to any time they want -- based on what they can afford.
Plus, there is no reason why they can not make extra payments during the first 5-year term which will effectively shorten the 30-year period as well.
~~~ Sean Upshaw
The point in Scheer lengthening the amortization period is not to expect people to now take 30 years to pay off their house, it is just to lower the payment for the first 5-year term of the mortgage. Then, upon renewal of the term in 5 years, they can choose to shorten the amortization to any time they want -- based on what they can afford.
Plus, there is no reason why they can not make extra payments during the first 5-year term which will effectively shorten the 30-year period as well.
~~~ Sean Upshaw
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