To buy or not to buy.
The financial facelift in today’s Globe and Mail focuses on a vancouver couple that would really like to buy a house, but are priced out of the market. Or are they?
“George and Colleen have a sympathetic banker. He has offered to finance the purchase of a house with the understanding that there would be no payments until George has finished his training. That’s very accommodating, but five years of compound interest would be a huge sum to pay, the planner adds.”
Their situation is looked at by a financial planner from Kelowna, Derek Moran who points out that they could stretch to buy a condo, but doesn’t recommend it right now:
“George and Colleen could downsize their plans. A condo for $400,000 would be an alternative to a house. Some banks will lend up to the full value of a home. Without any down payment, a mortgage at 5.3 per cent with a 25-year amortization would cost $2,395 a month, not including property purchase tax, GST and mortgage insurance costs. It would be paid off by the time George is 57 and Colleen 59.
Is it worthwhile to take on a $400,000 debt to buy accommodations similar to those they already rent for $1,200 a month? In spite of the advantages of ownership, it makes sense to continue renting, Mr. Moran insists. Buying would cost twice as much each month in mortgage charges as current rent and would expose the couple to the risk of a housing collapse as well as property tax increases and rising interest rates.”
It’s interesting that they bring up the possibility of a housing collapse, and even put some potential numbers on that situation:
“If George and Colleen find that real estate prices soften, they could save as much as $100,000 on a $400,000 condo. With the financing costs added in, that saving would actually be $296,368 by the time the mortgage is paid off.”
Isn’t it amazing how $100,000 becomes almost $300,000?
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September 23rd, 2006 at 1:53 pm
..actually I think they have a vulture for a banker.
September 23rd, 2006 at 11:27 pm
Tonight on CTV local news, it was mentioned that the RE market is cooling with sale of condos down 13% and houses down 25%. And Mandalay Richmond is still half unsold.
Vancouver School Board is facing a $1.5M budget bombshell as 1200 kids didn’t show up after the summer holidays. To overcome this funding shortfall, 70 teachers will have to move schools, teachers will be oncall, class size increasing. It appears that parents are moving out of Vancouver to Surrey, Langley, Abbotsford, Aldergrove…
So who are buying up all those houses in Vancouver?
I know a handful who bought half a dozen houses each as investment:
- Out-of-town and foreign investors
- Absentee new Canadians
September 24th, 2006 at 8:52 am
Look at eric latta’s listing at ericlatta.com
He has one at Strachan point, West van that he has dropped over $200K.
And anotheron Rockridge taht he dropped…wait for it…drum roll….$531,000!
Both are still well over-priced.
To buy in this market when reductions are just starting is financially foolhardy.
September 24th, 2006 at 10:09 am
http://tinyurl.com/zav5n
- Click button for streaming video of newscast
- Select Saturday
anonX
September 24th, 2006 at 9:57 pm
So who are buying up all those houses in Vancouver?
I know a handful who bought half a dozen houses each as investment:
- Out-of-town and foreign investors
- Absentee new Canadians
Is this a joke? Or, you just happen to know some foreigners that think buying a 6 pack of houses here, now, is a good idea?
September 24th, 2006 at 10:00 pm
Aren’t doctors notorious for bad financial moves .. and the beat goes on.
September 25th, 2006 at 8:09 am
I always have a problem with peoples’ expectations in that column. Somehow getting more realistic with expectations isn’t an option as far as financial planners are concerned.
September 25th, 2006 at 1:57 pm
I’m currently in Toronto looking at the job market and house prices and I’ve 95% made up my mind to move here. I can earn more and even though some people say prices are high here they’re nothing like vancouver. You can get a decent centrally located house here for under $400k!
Thats more like it! Goodbye rain, hello snow!