“She and her husband have been spending the money that their house “made” for the past 7 years. They now owe double the mortgage that they originally put on the house, but the house is “worth” three times as much.”

“A nice lady told me that she and her husband have been spending the money that their house “made” for the past 7 years. They now owe double the mortgage that they originally put on the house, but the house is “worth” three times as much. Based on the area and date of purchase, I estimate that they mortgaged 300k, spent another 300k of their equity, and now sit on 900k of nominal equity (and of course owe 600k). They used the income so she could stay home with kids, and he could set up his own business.
However, the wife has recently had to take a job… because the husband is getting very worried that values may contract soon, and this means they will need to start paying down the mortgage… and means no more HELOCing.”

‘The Poster Formerly Known as Anonymous’, at VREAA, 17 Jun 2012 11:54am

If you have a $300K mortgage on a $900K house, and housing prices drop 33%, you lose half your equity.
If you have a $600K mortgage on a $900K house, and housing prices drop 33%, you lose all your equity.
– vreaa

13 responses to ““She and her husband have been spending the money that their house “made” for the past 7 years. They now owe double the mortgage that they originally put on the house, but the house is “worth” three times as much.”

  1. That ain’t working

    • Vancouver In The Rearview

      That’s the way you do it.
      Get your money for nothing and your chicks for free.

      – Mark Knopfler

      • But he recently had to change some of the words. The offending lyrics were changed to the following:

        That little realtor with the earing and the makeup,
        Yah buddy, that’s his own hair
        That little realtor got his own jet airplane
        That little realtor is a millionaire.

        Soon, those lyrics will be in need of another revamp.

  2. Ralph Cramdown

    I remember the good old days when people would keep personal financial details (like giving a second mortgage) to themselves, and everyone else would just have to wonder/gossip about how they afforded it all…

  3. homelessindunbar

    We have friends that are using their HELOC to pay for private school for their three small children. I don’t think anyone is paying down their mortgages these days….

  4. 4SlicesofCheese

    My landlord had the place looked over last year and we thought they were going to sell, so we directly asked them if they were going to sell.
    Turns out the were getting appraised for a HELOC.

  5. joe_blown_away_by_high_housing_costs

    “more than half of respondents agreed that Vancouver is becoming a resort town for the wealthy and that there is too much foreign ownership of real estate. This view was particularly common among people aged 25-34, a group whose responses to many survey questions revealed a marked cynicism about the state of their communities compared with other age groups.”

    I am in this age group and this accurately describes how I feel.

    http://www.vancouversun.com/news/whoarewe/Social+isolation+reaching+effects+neighbours+survey+says/6797280/story.html#ixzz1yA8WiS8T

    • joe -> Thanks for that link. Interesting article (and comments)… worth reading and considering. I’ll headline it.

    • From the article: “Resort town.” There’s that expression again. Yep, those beaches were sooo busy this past weekend. I was out shooting for one of the local papers all weekend long and you know what I saw more than anything else? Raincoats/umbrellas/sad faces/flooding/darkness/emptiness.

      Sometimes it sounds like I loathe the BPOE. I don’t. It has its charms – sometimes. But it’s overpriced in just about every way imaginable, and it certainly seems to be getting rainier/yuckier with each passing year.

      And everywhere there’s new housing going up. Everything’s a freaking construction zone, including, of course, my own neighbourhood. Multiple signs on every single corner, trucks clogging up the roadways, incessant hammering, an infestation of BMW-driving realtors. Ack. I just dry-heaved.

      • “Resort town”: a place to launder large sums of money. Geneva and Grand Cayman have/had their secretive banks. Vancouver has a limited supply of SFH’s with zero restrictions on foreign ownership within a country having the easiest immigration policy in the world. Go figure. It’s certainly not the weather that makes Vancouver a resort town.

  6. This anecdote isn’t directly pertinent to Vancouver, but close. The quote was left by “Island Advisor” (who appears to be a mortgage broker, and to his or her credit, seems fairly astute). The quote can be seen in it’s entirety at the website “Canadian Mortgage Trends”: http://tinyurl.com/bqgdety

    “I have met with a number of clients recently whom are in over their head and underwater on their properties… One common characteristic is their mind frames around finances are not reflective of our current economical environment and hold onto past advice that is no longer serving them!

    For one client even though they put 20% down a few years ago and made excellerated payments. They are Looking to sell to use the equity to pay off credit card debt that has accrued… we crunched the numbers and after their massive IRD penalty $35K and $30K+HST Realtor fees mixed with a good 10% drop in Victoria Real estate they walk away with no equity to pay off any cards… Even if they had curtailed spending further and put additional money on their mortgage up until now they would have to sell their home to access it and that currently isnt feesable.”

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