Mortgage Help

[FOOTSNIFFER]

I wouldn't be surprised it drops 50% in 5 years. better to rent than own during this time.

Interest rates are likely to stay at rock bottom levels for a long time, so I doubt we'll see a drop of this magnitude. But I wouldn't be surprised at a 25% drop, followed by years of little or no price appreciation. It's definitely better to rent than buy.

 

[LateComer]

It was a high ratio, house was bought for 254K it has been appraised for 240K - real estate 4-6%, they are saying I am 20K short, I bought just b4 recession when houses were high. It was looked at by two different real estate agents in March and at that time it had dropped to 220K since then it has gone up to 240K real estate said we would list at 250K but don't expect to get it.

If your current mortgage balance is, say $245K, you would have to put up some cash to qualify. If the house appraises at $240K you should qualify for a mortgage of $228K (95% of $240K). This means you would have to come up with $17K in cash ($245K - $228K). This assumes your credit is good and your ratios are OK. It may be worth it to come up with the cash. Walking away is not really an option as you would still be on the hook for any shortfall if the bank sells the house for less than you owe on the mortgage. This is different than some states in the US that are non-recourse.

 

[fun-guy]

I have a recent rental property that my bank gave me 50% larger mortgage then the purchase price.

I'd like to know which Canadian bank offered you a mortgage at 150% of the purchase price. I've been buying and selling rental property for decades and never did I hear a bank even remotely suggest to offer a first mortgage higher than 95% of the purchase price. They must be insane if this is true, or they're an American bank which caused all this subprime mess and financial instability around the world the last few years.

 

[james t kirk]

Mikehorn is giving you great advice. Use a mortgage broker. There are lots of lenders out there in addition to the major banks. The other company you spoke with cannot possibly know the value of your home unless they had an appraisal done...so...speak to a reputable broker. They will help.
You might also consider taking out a homeowners line of credit to try and offset any cash difference ... I believe they can lend you up to 80% of your homes value...interest rates are still quite low ( if your credit is good then you should be able to get prime or prime + 1 ).
Good luck!

Steph

Negative....

You can't get a line of credit on your house (i.e. a secured line of credit with a lien placed agsinst the house) in ADDITION to the mortgage where the sum total is greater than the worth of the property. What they do is quite simple - they determine how much the house is worth. You can then get a line of credit up to 80% yes, but only to a limit of 3 times salary (maybe a bit more) but they also deduct any other liens against the property.

In other words, you can't have a line of credit AND a mortgage against the same property for MORE than the house is worth. (They check liens, believe me.)

The best he might be able to do is an unsecured line of credit or two. Used to be the banks were giving away lines of credit (I got one from BMO in the mail (unsolicited) at Prime + 1 without even asking for it.) But those days are gone. Now the rates are Prime +3 or Prime + 4 IF you can even get them to grant you a line of credit. And even then, the limit is maybe 15 to 20 grand for your average guy.

 

[james t kirk]

I have a recent rental property that my bank gave me 50% larger mortgage then the purchase price.

Usually, that's called fraud, but hey, good deal if you can get it.

Mortgage fraud conducted through Real Estate Lawyers believe it or not consistutes the vast majority of all legal proceedings against lawyers by the Law Society of Upper Canada.

 

[james t kirk]

I wouldn't be surprised it drops 50% in 5 years. better to rent than own during this time.

Wishful thinking on your part. I guess you rent and figure to own.

The drop in real estate prices will depend on a lot of things - the interest rates for one, unempolyment for another.

 

[zardoz]

You guys are all wrong. Canadian bank this, Canadian governemnt that. It doesn't make much difference while so much of the speculative activities are driven by foreign investors. Canada is a small country compared in the world at large. After collapse of US housing market, a lot of foreign money floods into Canada resulting in Canadian housing bubble. It does not matter how hard government makes mortgage is, not at all. So housing price in this country will continue to climb into $1 million before iit starting to cool. Or if US economy starts to recover then these foreign investors will pull money out of Canada and go back to the US, whichever happens first.

 

[james t kirk]

You guys are all wrong. Canadian bank this, Canadian governemnt that. It doesn't make much difference while so much of the speculative activities are driven by foreign investors. Canada is a small country compared in the world at large. After collapse of US housing market, a lot of foreign money floods into Canada resulting in Canadian housing bubble. It does not matter how hard government makes mortgage is, not at all. So housing price in this country will continue to climb into $1 million before iit starting to cool. Or if US economy starts to recover then these foreign investors will pull money out of Canada and go back to the US, whichever happens first.

Can you try that again in English?

Here's a fact, the Canadian population may be small, but the economy is not. Secondly, Real Estate prices in Canada were negatively impacted by the recession and have still not regained to the levels where they were two or three years ago. Whether or not that is too high or not is an arguement unto itself, however, the fact remains that Real Estate prices in Canada did not take off when the US market crashed. Quite the contrary.

You're just hoping there is a major price chop so you can get into the market, but again, there needs to be a catalyst for that to occur.

The Canadian banks don't operate as the US banks did (in the case of the subprime mortgages). Futhermore, compared to other industrialized countries - real estate in Canada is a bargain.

 

[LateComer]

Can you try that again in English?

Here's a fact, the Canadian population may be small, but the economy is not. Secondly, Real Estate prices in Canada were negatively impacted by the recession and have still not regained to the levels where they were two or three years ago. Whether or not that is too high or not is an arguement unto itself, however, the fact remains that Real Estate prices in Canada did not take off when the US market crashed. Quite the contrary.

You're just hoping there is a major price chop so you can get into the market, but again, there needs to be a catalyst for that to occur.

The Canadian banks don't operate as the US banks did (in the case of the subprime mortgages). Futhermore, compared to other industrialized countries - real estate in Canada is a bargain.

Canadian prices are low indeed. Here is an article I found about the Kiev market (Jan 2008 figures) which compares a number of cities including Toronto.

http://www.go2kiev.com/view/realestateprices.html

 

[Another_Mod]

You may also wish to contact your real estate lawyer and check to see if you have title insurance.

from what I understand If there's a mortgage on the property, it has title insurance . A lending institution would not put themselves at risk by not having it.

 

[Nickelodeon]

I wouldn't be surprised it drops 50% in 5 years. better to rent than own during this time.

I don't agree with your opinion on the future of the marketnbut your conclusion may be right for the OP.

No expert is predicting A market collapse in Canada....just moderate price adjustment. But the OP is sitting on so much debt, it might may sense to get out of the market.

The cold reality is that he doesn't have a house to lose if his mortgage is more than the value of the house. It never was even close to being his house the same way that I don't own my leased car.

 

[zardoz]

Can you try that again in English?

Here's a fact, the Canadian population may be small, but the economy is not. Secondly, Real Estate prices in Canada were negatively impacted by the recession and have still not regained to the levels where they were two or three years ago. Whether or not that is too high or not is an arguement unto itself, however, the fact remains that Real Estate prices in Canada did not take off when the US market crashed. Quite the contrary.

You're just hoping there is a major price chop so you can get into the market, but again, there needs to be a catalyst for that to occur.

The Canadian banks don't operate as the US banks did (in the case of the subprime mortgages). Futhermore, compared to other industrialized countries - real estate in Canada is a bargain.

Canada is a small country economically as well. Nominal GDP is not even one tenth of USA, 1/3 of China or Japan, ranked 10th just behind Spain! When US housing market collapsed people pulled money out but did not jump into Canada right away for the fear that Canada will be affected just like the US. When it became clear that Canadian banks were in much better shape than expected, then these cash rich foreign investors jumped in. For the last year and half, US housing price continued to decline while Canadian counterpart was going up.

Canada is also a country of immigrants, this makes real estate market more accessible to foreign investors. The people I know in their 20s and 30s who live in Toronto have parents and family in Asia. When they compare Asian housing price against Canadian housing price, it seems Canadian housing price is a bargain, and plus stock market is pretty shakey and gold is at all time high. It seems obvious investing in real estate in Canada is a good option especially their children are here to watch and handle their investments. Even if they do not sell it, it also leaves them a place to live if they choose to come to Canada.

I did not gather statistics but just from my personal observation, it seems Canadian real estate market is fueled by disproportinately high percentage of foreign investors who don't even live here. Housing market is booming not because we have too many people and too few houses for them to live but because there are no better alternative investment vehicles for people to put their money in, so people with cash starts to flip houses. It will only come back to real sustainable level when people gain confidence in stock market, or US or Asian economy takes off.

 

[james t kirk]

^^^Our population is one tenth of the USA and 1 fiftieth of China, and 1/4 of Japan. Spain has 10 million people more than Canada and their GDP is about the same

According to the CIA World Fact book, Canada's GDP is 13'th in the world - but we only have 32 million people. Compare that to the USA with slightly over 300 million, or China with 1.3 billion.

Toronto and Vancouver have a large immigrant population. Outside of that - not so much. Not even Montreal has that large of immigrant population because the immigrants all want to speak English and the Bill 101 scares them off.

You are obviously an immigrant and your thinking is skewed along the immigrant is all so important lines.

 

[zardoz]

^^^Our population is one tenth of the USA and 1 fiftieth of China, and 1/4 of Japan. Spain has 10 million people more than Canada and their GDP is about the same

According to the CIA World Fact book, Canada's GDP is 13'th in the world - but we only have 32 million people. Compare that to the USA with slightly over 300 million, or China with 1.3 billion.

Toronto and Vancouver have a large immigrant population. Outside of that - not so much. Not even Montreal has that large of immigrant population because the immigrants all want to speak English and the Bill 101 scares them off.

You are obviously an immigrant and your thinking is skewed along the immigrant is all so important lines.

I agree with all the facts you mentioned, especially about Montreal has less immigrant population. you just proved my point, as Montreal housing prices are not as inflated as Toronto or Vancouver.

 

[FOOTSNIFFER]

I did not gather statistics but just from my personal observation, it seems Canadian real estate market is fueled by disproportinately high percentage of foreign investors who don't even live here. Housing market is booming not because we have too many people and too few houses for them to live but because there are no better alternative investment vehicles for people to put their money in, so people with cash starts to flip houses. It will only come back to real sustainable level when people gain confidence in stock market, or US or Asian economy takes off.

Interesting perspective. I talk to lawyer heavily involved in the Real estate law at Starbucks alot who sort of confirmed this view, in that he told me that there was a heck of a lot of foreign money coming into the Toronto market. Affordability, as in declining for the averge buyer, has to trump those considerations. Even while housing prices have softened, the costs of home ownership continues its upward trajectory, this in a market with stagnant average incomes, and the largest demographic chasm between the boomers and next generation in the world (around 32%). Average age of boomers is 52-54....and they're not in the best financial shape for retirement. Guess what they're going to attempt to sell when they figure out that cat food isn't what they have in mind as old people food..

 

[Mencken]

From what you say about the price you paid and current value the house is basically at the same value.

The bank that wants you to leave is partially bluffing. They can refuse to renew your mortgage, yes. But if you continue to make payments I'm not so sure what they can do about it. It depends on the wording in your mortgage, and also laws that apply. A lawyer with experience in foreclosure defense would be your best option.

They could certainly choose to renew your mortgage, even if property values have dropped. There is nothing in law to stop that...in fact, if your mortgage is up to date I'm not sure they can refuse to renew.

Anyway...see a lawyer.

Don't try to bail them out of what is essentially their problem.

 

[The Saint]

Forget banks you will have to find other venues to get a loan. If your credit is excellent and your income/cash flow is there, you might fight someone willing to take the risk but beware you will 1) pay higher interest 2) sign personal guarantees 3) pledge all assets etc but the money is out there and available