This was posted to the ‘9. Delaying Buying’ thread by ‘lousyspellr’ –
“Married 10 years, my wife and I have both been working and saving while renting our home. We live in a fantastic suite in an older, but well-maintained house. We’re in a great location and love everything about it. We had our first child 2 years ago and are expecting another in a few months. We hope to be able to make it work, but it’s starting to feel a little tight. We have been in a position to buy for many years, and have watched in dismay as prices have soared beyond our reach. I try not to have regrets, we have been very happy in our rented suite, and haven’t EVER seen a rent increase. Our savings are good and we have no debt. Have made some good investments, but lately other investments (mutual funds mostly) have not performed so well. I find myself at a loss as to what to do with our saved downpayment. I do not want to risk it, but would of course like it to earn as much as possible while not tied-up in RE. It’s hard to believe the there won’t be a market correction at some point given what we’re seeing: US economic crisis, the forestry sector downturn, an Olympic world party that will come and go leaving the province significantly in debt and Olympic ’speculators’ sadly disappointed (I hope), ever increasing housing supply with little change in demand, the completion of many large construction projects leading to increasing unemployment in that sector… I’m sure you can think of many more.”
This remarkable story from M- at rob chipman’s blog (
” I have some friends who recently bought a house. Their annual combined income is $80-90K. They had a ~$250K down payment. In order to finance their house, they took out a $900K loan, secured against the house. Loan, not a mortgage. Interest-only. Since they are calling their house an “investment,” they will deduct the loan interest off of their incomes (never mind that this is illegal in Canada– you can deduct interest incurred for investments, but not for your primary residence). The house does not have a rental suite, and they are not planning on installing one.
To summarize: 90K income, $900K loan, so no principal payments. $50K per year in interest payments. $10K remaining after legit taxes will likely go towards taxes, insurance, heat, electricity, maintenance. Living expenses will come from illegal tax writeoffs.
And did I mentioned they’re planning on having kids soon? That was the whole reason behind the purchase of a house…”
M- later (added –
“One of their parents has a fair bit of savings– when they run into financial problems, they could probably call on part of their inheritance early. …So the downside risk of buying now probably looks limited. There was a lot of pressure from their parents to buy a house. I don’t know why they didn’t buy something a little more modest, though.”
This from DaMann at rob chipman’s blog
“My wife and I bought 3 years ago, a very modest TH out in Steveston. It was only $270 k at the time, which for us was more than we wanted to pay. We had only one child at the time and my wife was working part time. Now we have two kids and my wife is not working. I make above the average household income for Vancouverites, not by much but definitely more, and we are barely living above the poverty line. I’M serious! We haven’t bought clothes for ourselves in almost a year. All we do is pay a mortgage, strata and taxes. I’ve never been more poor in my life. Now the place is worth $380k and I honestly don’t think we will see these prices again for 10 years ( after the crash comes). There will be no more Olympics to hype things up, we have borrowed most of the young buyers for the next 10 years to service the current boom. So many people are going to be hurting that have bought at the peak that RE will be a dirty word in Vancouver. So yes we will probably sell and get out of this insanity and just rent or move to the island and rent and wait. Then maybe we can start living again. (Keep in mind this was a $270k place. I have no F#$%^ clue how people are buying $500k places. I know people doing it and they are barely getting by, but they will certainly not be able to have families or change their income levels ( 2 people working). They are mortgage slaves.)”
This from Strataman on Rob Chipman’s blog
“(That’s) assuming that CMHC treats the same applicant in different areas the same. It doesn’t. My son is pre-approved for a CMHC mortgage in Vancouver and has been for some time, he had the offer of an equivalent job/pay in Williams Lake. Same down payment half the mortgage in Williams Lake..turned down by CMHC…probably because CMHC is basically a speculator and WL properties are expected to stagnate. Interesting isn’t it? Half the debt (roughly) same income, same downpayment (much larger percentage) and no go? If CMHC really believed Vancouver properties would stagnate, a lot of approved financing would dissappear, so in effect CMHC is creating the bubble and feeding it, the minute they have to admit or are forced to admit that prices will stagnate, watch out! Freeze on lending bigtime.”
[Will be archived under ‘Where Do They Get The Money?’.]