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Old 11-03-2013, 12:36 PM   #1526
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Originally Posted by sekin67835 View Post
my thought process: say I buy a house with a basement suite for around 600k (at the suburbs) I rent the basement for 1000 dollars and live at the upper level. Based on his said calculations of 20% mortgage and 3% interest rate wouldn't I still be better off than renting? (I didn't do any math, but I feel like this puts me in a better position than renting.

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For 600k, I am going to guess the house is way out in the boonies, so do you really think you can get $1000 a month to rent out the basement when you can rent a basement suite for $800 in Vancouver.
Also, if the unit goes unrented, that is extra $$$ you will have to come up with to pay the mortgage.
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Old 11-03-2013, 12:44 PM   #1527
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what info lol? this is just basic math showing potential risks and rewards of buying vs renting. you don't need to have "qualifications" to be able to figure it out for yourself
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Qualifications in RE???

I wouldn't consider people with a RE license a good source of information when it comes to economics or personal finance.
xpl0sive, I am talking about you post that the bank will require you to put down more money when you go to renew the mortgage.

JT, so if op has no qualifications in the RE then he is just talking out of his ass.
We know Gridlock, Dinosaur, 4444, and ieatclams qualifications. What about xpl0sive. What makes him an expert where we need to believe what he has just said.
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Old 11-03-2013, 12:47 PM   #1528
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xpl0sive, I am talking about you post that the bank will require you to put down more money when you go to renew the mortgage.

JT, so if op has no qualifications in the RE then he is just talking out of his ass.
We know Gridlock, Dinosaur, 4444, and ieatclams qualifications. What about xpl0sive. What makes him an expert where we need to believe what he has just said.
Did you just crawl out from under a rock? I'm giving a POTENTIAL outcome of what MAY happen if you bought an apartment today and it went down 20% over the next 5 years. It MAY happen or it MAY not. It's something that SHOULD be considered when thinking about Buying VS Renting. I'm not PREDICTING that it will happen, just pointing out that it HAS happened in the US and it CAN happen here.

I don't need to post any "qualifications" and go into details about my personal finance just to make you think my points are valid. You can read my post and use it or ignore it and move on with your day.
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Old 11-03-2013, 12:57 PM   #1529
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Did you just crawl out from under a rock? I'm giving a POTENTIAL outcome of what MAY happen if you bought an apartment today and it went down 20% over the next 5 years. It MAY happen or it MAY not. It's something that SHOULD be considered when thinking about Buying VS Renting. I'm not PREDICTING that it will happen, just pointing out that it HAS happened in the US and it CAN happen here.
Buying RE is always going to have risk. But what you said about the bank requiring more money when one goes to renew their mortgage is not true.
I've renewed my mortgage twice now and both times the bank never asked us about the value of the unit.
I am asking you for sources that the bank will require you to put more money down to renew a mortgage.
Without sources, then to me you are just talking out of your ass.
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Old 11-03-2013, 01:00 PM   #1530
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Buying RE is always going to have risk. But what you said about the bank requiring more money when one goes to renew their mortgage is not true.
I've renewed my mortgage twice now and both times the bank never asked us about the value of the unit.
I am asking you for sources that the bank will require you to put more money down to renew a mortgage.
Without sources, then to me you are just talking out of your ass.
The bank did not require you to put more money down because your property did not go down in value. If you actually READ my post, you would understand the point I'm making. I did not say that it WOULD happen for a FACT. I said it CAN happen.
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Old 11-03-2013, 01:04 PM   #1531
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ur analysis is awesome. Can you run it on a 10 - 15 yr scenario? I think it creates a better argument for people who consider a long term investment in housing. 5 years is a bit more on the speculative side. I would imagine over 10-15 years, the equity growth due to the payments(not RE market growth) will be better due to the amortization schedules. Thanks in advance
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Old 11-03-2013, 01:04 PM   #1532
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The bank did not require you to put more money down because your property did not go down in value. If you actually READ my post, you would understand the point I'm making. I did not say that it WOULD happen for a FACT. I said it CAN happen.
So where is your sources that says it can happen in Canada.
I think you are confusing renewing a mortgage with remortgaging.
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Old 11-03-2013, 01:12 PM   #1533
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xpl0sive, I am talking about you post that the bank will require you to put down more money when you go to renew the mortgage.

JT, so if op has no qualifications in the RE then he is just talking out of his ass.
We know Gridlock, Dinosaur, 4444, and ieatclams qualifications. What about xpl0sive. What makes him an expert where we need to believe what he has just said.
He never proclaimed to be an expert, I certainly don't take advice from anyone without doing my own DD.

Real estate agents by default have zero qualifications in finance/economics, an RE license is nothing, it's a piss-ant little ethics course geared towards protecting RE companies. In Alberta it can be obtained in less than 2 months part time with virtually no pre-reqs.

You're such a knob.
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Old 11-03-2013, 01:13 PM   #1534
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houses are a bit different since I feel that land will always be worth something. But to buy anything decent, with a basement suite where people would actually want to live, on the mainland, i.e Vancouver/Burnaby/Coquitlam, you will need to spend around $1,000,000 - $1,200,000, which means you need a $200,000-$240,000 down payment and a $160,000-$200,000/year family income to actually be able to afford that mortgage. I would think that most people on this forum are not there just yet.
.
I kind of disagree with you there. I've seen basement suites that were tiny additions to a basement rented for top dollar, completely subterranean in a million dollar property off main street.

I've also seen beautiful apartments retrofitted into a house that don't feel at all like basements in houses under 400k(depending on location).

God, on basement suites...and I wish I took pictures, I really do, but this guy called me this summer for his basement suite. He wanted laminate floors, cause you know, HGTV says tenants like laminate floors.

Funny, as he had a quality 6 feet of ceiling space and it smelled like cat piss. I seriously had to duck for bulkheads. Oh, did I mention his foundation and basement floor had cracked and heaved by about 6 inches? Yeah, just surf that laminate right on over it.

The layout was horrendous, the house was falling apart and the look on his face when I mentioned a price of $3 sq. ft was priceless. The idea of spending $3 fucking dollars a foot caused panic! Dude...this shit needs $10 a foot. Every foot. All of them. Paint, floors, doors, windows, ceilings. All of it.

"Are you painting?"

No.

Of course. No, people really dig on yellow and blue.

You know your apartment is going to be either a brothel or drug den, right? Eaten alive.

He had just bought it, a block off Cambie for money that I couldn't even bring myself to ask. And I assumed that the suite was a big part of his affording his house.

There are MANY ways to have an income suite. Properly is the preferred one.
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Old 11-03-2013, 01:14 PM   #1535
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So where is your sources that says it can happen in Canada.
I think you are confusing renewing a mortgage with remortgaging.
So are you saying that a price correction absolutely cannot happen in Canada?

You are clearly in the market as you already pointed out, so you are emotionally invested. You are a perfect example of the majority, who live their day to day life with their head in the clouds, not wanting to look at the potential downside.
All I did was show how things could go wrong if you bought into the market at today's prices and you got upset about it, started asking for "sources". My sources are MATHEMATICS and STATISTICS.
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Old 11-03-2013, 01:14 PM   #1536
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SumAznGuy,

xpl0sive took the time to post A LOT of valuable and detailed information for everyone to read. The info he provided is legit and available anywhere online...you can read it here and discuss or you can take the time yourself and find it online elsewhere...do your own calculation and come to similar conclusions. Demanding his "qualification" is a little uncalled for and rather accusatory. As far as I know, none of us are QUALIFIED. Some of us work in a related industry, some of us know from experience, and some of us are just really well read and interested in this specific market.

We discuss, provide information, analyze new articles, critique projections, and share funny anecdotes relating to the real estate market/industry. We all have opinions but none of us are right and wrong and none of us require PROOF to share those thoughts.

Not cool, bro.
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Old 11-03-2013, 01:18 PM   #1537
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I kind of disagree with you there. I've seen basement suites that were tiny additions to a basement rented for top dollar, completely subterranean in a million dollar property off main street.

I've also seen beautiful apartments retrofitted into a house that don't feel at all like basements in houses under 400k(depending on location).

God, on basement suites...and I wish I took pictures, I really do, but this guy called me this summer for his basement suite. He wanted laminate floors, cause you know, HGTV says tenants like laminate floors.

Funny, as he had a quality 6 feet of ceiling space and it smelled like cat piss. I seriously had to duck for bulkheads. Oh, did I mention his foundation and basement floor had cracked and heaved by about 6 inches? Yeah, just surf that laminate right on over it.

The layout was horrendous, the house was falling apart and the look on his face when I mentioned a price of $3 sq. ft was priceless. The idea of spending $3 fucking dollars a foot caused panic! Dude...this shit needs $10 a foot. Every foot. All of them. Paint, floors, doors, windows, ceilings. All of it.

"Are you painting?"

No.

Of course. No, people really dig on yellow and blue.

You know your apartment is going to be either a brothel or drug den, right? Eaten alive.

He had just bought it, a block off Cambie for money that I couldn't even bring myself to ask. And I assumed that the suite was a big part of his affording his house.

There are MANY ways to have an income suite. Properly is the preferred one.
Sorry, which part do you disagree with? The fact that you need to spend $1mil to buy a house with a basement suite in Vancouver/Burnaby/Coquitlam?

Last time I checked, the cheapest houses in Vancouver/Burnaby that were not complete tear downs were going for around $1mil. You may find something a bit cheaper in Coquitlam. I'm not talking about properties anywhere else. That would put you behind bridges and add significant time to your commute, if you worked in Vancouver/Burnaby, like most people do.
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Old 11-03-2013, 01:26 PM   #1538
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Sorry, which part do you disagree with? The fact that you need to spend $1mil to buy a house with a basement suite in Vancouver/Burnaby/Coquitlam?

Last time I checked, the cheapest houses in Vancouver/Burnaby that were not complete tear downs were going for around $1mil. You may find something a bit cheaper in Coquitlam. I'm not talking about properties anywhere else. That would put you behind bridges and add significant time to your commute, if you worked in Vancouver/Burnaby, like most people do.
Yeah...I guess.

I tend to think Vancouver as GVRD, instead of arbitrary Vancouver lines. There are suitable houses in NW for 5-600k. Coquitlam, drop a 100kish.

These are just guesses....I'm barely qualified
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Old 11-03-2013, 01:28 PM   #1539
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Yeah it sounds like only "qualified" members should be allowed to post here
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Old 11-03-2013, 01:49 PM   #1540
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Let me clearly write it out for xpl0sive.
What are his sources that says the bank will ask for more money when one goes to renew their mortgage if the market has fallen.

At no point did I disagree that the market cannot correct and drop.

What I am saying is someone qualified for a mortgage, and when it is time to renew, not borrow more money, would the bank really demand more money.
For the last time, I am asking for Canadian sources as the US banking rules differ from those in Canada.
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Old 11-03-2013, 02:51 PM   #1541
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When I ask for qualifications, I am asking for reasons why we should listen to what you have to say.
We know Gridlock and Dinosaur have some clout in what they say since they are actively looking/working in the industry.
I respect what 4444 has to say because he is in the market and has an econ back ground.
I respect what ieatclams has to say because his post seem to be well thought out and he does try to back them up.

On appearance, I like what you wrote xpl0sive. It was well thought out and the math backed it up. What I was asking was for sources that says the banks will ask for more money when you go to renew.

It is based on this that now I am changing my opinion.
You quoted my responses and even went as far as talking about my experience, so you know I was talking about the bank asking for money when you go to renew your mortgage.
Then you go off and start name calling, including JT for calling me a knob, and saying I am one of those people that believe the market can only go up.

For the record, I believe in market corrections. Do I believe in the bubble bursting in the next 5 years, I do not. Maybe, it could happen. Massive earthquake, world war 3, European market meltdown, China, etc.... These are things we cannot predict and can only guestimate based on history. I agree with 4444 that money is cheap to borrow and there are many people who are mortgaged to the tits and when/if the market falls, they will be the ones to get hurt the most.
I also believe that the market prices are too high right now to make being a landlord, a good investment.

I also believe RE is about long term. 5 years is a very short period of time to look at in terms of renting vs buying and I refuse to get into that debate as you will always be able to find examples to support your argument.

As for your comment about the banks asking for money because the market has fallen, well that is just not true. I am a curious person, that is why I asked for sources. I don't care to call anyone out. This is the internet, so I am not butt hurt, but I am curious. Knowledge is power and I can tell everyone that banks do not do that. I called RBC and asked a mortgage specialist and she said they do not look at market price changes on your property when you go to renew a mortgage.
However, they will when you refinance/remortgage/apply for a second mortgage because to them, that mean there is some financial difficulties in your life that makes it a risk to loan you money.
Just in case anyone is thinking i am pulling this out of my ass, you can PM the number for the RBC mortgage customer service line, or google it. I don't want anyone to think I have a vested interest and am trying to sell something here.
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Old 11-03-2013, 03:03 PM   #1542
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Just for the sake of argument lets assume a market correction does happen. It comes time for a person to renew their mortgage and instead of having 20% equity they now only have 10 or 5%. Do you honestly think that the bank will simply renew their mortgage and not require them to at least purchase mortgage default Insurnace?

Banks are in the business of making money for their investors. Their primary concern is protecting their investors. If banks start blindly renewing mortgages and people start defaulting on those mortgages, the banks will fail. It already happened in the US.

Sorry for the short response as I'm not at my computer at the moment. I can elaborate on my point later.
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Old 11-03-2013, 03:10 PM   #1543
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Just for the sake of argument lets assume a market correction does happen. It comes time for a person to renew their mortgage and instead of having 20% equity they now only have 10 or 5%. Do you honestly think that the bank will simply renew their mortgage and not require them to at least purchase mortgage default Insurnace?

Banks are in the business of making money for their investors. Their primary concern is protecting their investors money. If banks start blindly renewing mortgages and people start defaulting on those mortgages, the banks will fail. It already happened in the US.

Sorry for the short response as I'm not at my computer at the moment. I can elaborate on my point later.
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Is this your opinion or do you have anything to back this up.
At this point, I contacted my bank and they assured me the banks do not do this. Are you saying my bank lied to me?
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Banks are open on Sundays?





Regardless, even if it's not currently the case in Canada, would there be anything stopping them from introducing a similar clause into new contracts? And would there even be a guarantee that existing mortgages will be grandfathered?

You can always hope for the best, but make sure you plan for the worst first.
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On appearance, I like what you wrote xpl0sive. It was well thought out and the math backed it up. What I was asking was for sources that says the banks will ask for more money when you go to renew.
.
The bank is not legally obligated to renew your mortgage.

So let's say your bank does not want to renew because you are in a position of having negative home equity, they essentially see you as a high risk client and would prefer to pass you off on another institution.

So you go hit the mortgage brokers, lets' say you basically have 0$ to put down, and the house you are living in currently has a market value of 500k, and you owe 550k. (Due to a downtrend in RE sales etc.)

No other lenders will approve you, because the second they take you on as a customer, they immediately put themselves in a position of carrying a 50k cash debt risk in addition to those risks associated with RE market price downtrends and foreclosure process losses.

So back to your bank, you can't get anyone else to finance you, and you beg them for help, knowing full well the only other option will be to walk away from the house in which case the bank will foreclose, and then chase you down for the money they end up out of pocket. (I believe this is regulated by Province, some of which have non re-course clauses, some don't)

The bank may give you criteria, something to the effect of "If you can come up with 75k cash we can renew" etc.

So yes, the bank can refuse your renewal due to negative equity, for an example of this, see the below;

Lender Refuses to Renew, Owners Face Foreclosure | Calgary Real Estate Review

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They had mortgaged their house through a mortgage broker and the Lender was GE Money. GE Money told them that it no longer wanted to renew.

The clients are self employed. They are not able to qualify for a mortgage at this time. Also, the house is valued at no more than what is owed on the mortgage.

This may be a one shot instance. However, in the 1980′s many small mortgage companies refused to renew mortgages in Alberta. Basically they were pulling their money out of Alberta in light of the property devaluation that occurred here at that time. I have heard rumors that more of the small lenders are doing that now.
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Are you saying my bank lied to me?
Yes, your bank has lied to you.
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Old 11-03-2013, 03:20 PM   #1547
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Banks are open on Sundays?





Regardless, even if it's not currently the case in Canada, would there be anything stopping them from introducing a similar clause into new contracts? And would there even be a guarantee that existing mortgages will be grandfathered?

You can always hope for the best, but make sure you plan for the worst first.
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Old 11-03-2013, 03:25 PM   #1548
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And what do you think would happen if 5 years from now, or whenever it's time to renew your mortgage, you are in a position where you don't have enough equity in your home to qualify for a renewal? The bank will say "sorry can't renew you" and you'll say "but....but... I called a 1-800 number 5 years ago and some person told me this wouldn't happen?!?!?"
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Old 11-03-2013, 03:35 PM   #1549
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Quote:
Originally Posted by dinosaur View Post
You should never calculate the purchase of a property to include a rental. Rentals are not guaranteed and can cost you A LOT of money if things turn sour.

Any rental income should be viewed as a bonus income.
That's true... For everywhere but Vancouver, because it's different here, and everyone has a rental. It is different here.

It is different here.

It is, right?
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Old 11-03-2013, 03:51 PM   #1550
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Banks are open on Sundays?




TD is open Sundays...not ALL branches however.
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