Can’t save a dime?

The Vancouver Sun has some good tips for people who are completely unable to save up for the largest purchase of their life.  People who either spend too much on entertainment and shopping or simply don’t earn enough to save.  Buy a house.

Yes. Because the people that should be buying real estate are people who are unable to save up a few thousand dollars.

Their advice ranges from the ridiculous (reign in spending habits) to the sublime (ask mommy and daddy for a down payment).

Saving money for a down payment, especially in British Columbia’s high-priced housing markets, is one of the biggest challenges that homeowners face, but mortgage experts say, it’s not impossible.

The minimum down payment new homeowners need is five per cent of a home’s purchase price, which can be particularly difficult to accumulate for those in the most need: young people, often with student debt and lifestyles that involve a lot of restaurant meals and going to movies once or twice a week.

Yeah, that’s 5 percent goal is super-tough, but it just might be achievable according to ‘mortgage experts’.  You can always tap into your RRSPs, and don’t forget that you can get yourself a zero-down loan (we call them ‘cash-back’ mortgages).

…some lenders have a cashback option that can be used against a down payment. “The clients have to take posted rates [not discounted] and some lenders will give you five per cent of the mortgage amount as cash back. On $400,000 that would be $20,000, the five-per-cent down payment that is required.”

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Yalie
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Yalie

From a previous comment:

Garth Turner, (whom I read but of whom I am certainly no acolyte) said it well a couple of days ago, when he wrote that Vancouver that was destroyed by real estate.

No kidding Vancouver was destroyed by real estate. The only thing is, most of its residents won’t realize it until after the bubble finally bursts. And even then they’ll get cause and effect completely wrong, believing that the city was destroyed by falling house prices.

Which is kind of like believing that the Titanic was destroyed by its impact with the bottom of the ocean.

VMD
Member

[Fitch downgraded outlook of Home Capital Group & its subsidiary Home Trust to Negative]
4/9/2012

The revision of the Outlook to Negative is based on emerging concerns regarding home price valuations and household debt levels in Canada, which given HCG’s focus on non-conventional borrowers could potentially translate into increased credit costs. These risks could potentially be magnified by HCG’s concentrated business model.

Predominantly a Canadian residential mortgage lender, the company focuses on borrowers who do not qualify for prime mortgages offered by the major Canadian banks. HCG’s typical clients consist of the self-employed, small business owners, individuals with poor or limited credit histories, as well as newly arrived immigrants to Canada.

http://www.reuters.com/article/2012/04/09/idUSWNA456620120409

blueskies
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blueskies

from the VanSun article:

“”Look what the homeowner gets,” Mr. Poliquin says. “There is the return on equity. That is what the home gains in owner equity every month as the debt declines. The more you pay and the sooner you pay, the faster you gain equity through the mortgage.””

……..only IF prices continue increasing.
If you get your >15% price drop you are essentially pissing against the wind.

victoria
Member
victoria

I think they also published – this was a few years ago – use your credit card for a down payment. Then there was the article on buying homes with friends – we know how that goes.

To me being in your twenties you should be going out with friends, dating, eating out, clubs, traveling, and having fun as well as focussing on a career. I know too many people who got married very young i.e. the mortgage, kids etc. (this was in the early 80s) and I have to say – for most it didn’t end well.

So – you should be tied to a $400,000 box in the sky at a time when you should be discovering yourself and enjoying adulthood.

patriotz
Member

“”Look what the homeowner gets,” Mr. Poliquin says. “There is the return on equity. That is what the home gains in owner equity every month as the debt declines. The more you pay and the sooner you pay, the faster you gain equity through the mortgage.””

That has nothing to do with owning a house. That’s simply the return on paying off a debt, which is independent of what collateral (if any) there is.

Poliquin also doesn’t have a clue what return on equity is, which is the net earnings of the asset minus financing costs relative to the owner’s equity. Which in the case of a house purchased today, is negative since the rental value is less than expenses.

Clockbike
Member
Clockbike
I’m going to get a good chuckle whenever someone tells me I’m paying down their mortgage. The landlord of the house next door failed to do a proper background check on his tenants. They failed to pay rent for the three months they were in there. They flooded the bathrooms, stole the electric heater, left broken glass everywhere and purposely opened the refrigerator and freezer doors to run up the hydro bill on the way out. Then they asked for their deposit back. I laughed so hard. They were probably pissed off about all the black mold that had been growing. Hey, maybe the landlord wouldn’t of had any problems if we didn’t complain at city hall. Complain about what? The deck was too close to our property line, landlord had to come back months after buying the place and… Read more »
registered
Member
registered

5 patriotz Says: …equity .. is the net earnings of the asset minus financing costs relative to the owner’s equity. Which in the case of a house purchased today, is negative since the rental value is less than expenses.”

An entertaining expansion on that subject from Peter Schiff for anyone with an hour to spare:

http://youtu.be/EgMclXX5msc

Patiently Waiting
Member
Patiently Waiting

“Then they asked for their deposit back. I laughed so hard.”

Yes, and I bet the landlord had to hand it over. No opening/closing inspections, or a landlord’s failure to apply with 15 days after the end of the lease, means the tenants will automatically win.

BTW it is our duty to make sure every tenant we know is aware of this 🙂

VCI Admin
Admin

Re-diculous alerted us to a problem where many user accounts were set to a status that was unable to comment since we upgraded the site. That should be fixed now. Also as promised, all user accounts with zero comments have been deleted.

interesting
Guest
interesting

Shadow Banks on Trial as China’s Rich Sister Faces Death

When a Chinese court sentenced 28- year-old Wu Ying, known as “Rich Sister,” to death for taking $55.7 million from investors without paying them back, it sparked an unexpected firestorm that has drawn in China’s top leadership.
Her crime involved a common, illegal practice in China: raising money from the public with promises to pay back high interest rates. Known as shadow banking, these underground lending and investing networks are estimated to total $1.3 trillion, according to Ren Xianfang, an economist with IHS Global Insight Ltd. (IHS) in Beijing. That’s the size of the 2011 U.S. government deficit.

http://www.bloomberg.com/news/2012-04-10/shadow-banks-on-trial-as-china-s-rich-sister-faces-death.html

Re-diculous
Member
Re-diculous

test

Re-diculous
Member
Re-diculous

Great article today by Rob Carrick
“The hidden threat of home ownership”
http://vancouvercondo.info/2012/04/cant-save-a-dime.html#comment-151038

…could also be named: “The hidden cost of financial ignorance”

vangrl
Member
vangrl
i find this article one of the most infuriating yet, mortgage brokers and realtors are scrambling to try and get young peeps to buy at ridiculous levels, they must be hurting like crazy with sales down as far as they are. Sad thing is that everyone is so “house broke” right now because of all the hype/pumpers/low-rates that drove prices up, that no one has any money to do anything else. I live in Kitsilano and I can’t believe how many stores and restaurants have closed down along 4th, Broadway and South Granville….it’s pretty crazy, every week another place closes. A friend of mine said that the super high end restaurant that he works at is surviving, but that they had to change their menu to cater to Chinese, because rich Chinese were now the majority clientele, that the “regulars”… Read more »
BoogyBear
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BoogyBear

A lot of those stores along 4th avenue, were started up with money from the shop owner’s home equity credit lines.

“there are never icebergs this far south this time of year.”

wreckonomics2
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wreckonomics2

Can’t save up 5% for a down payment?

Yeah, no sub-prime problem here!

🙄

Anonymous
Guest
Anonymous

@wreckonomics2: And much like the US, it wasn’t exposed until prices fell.

Arthur Fonzarelli
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Arthur Fonzarelli
Living in the city for the past ten years, trying to save up money for a DP hasn’t been easy with the cost of living… basically saved about $30K in five years (also paying off student loans). Nobody should be buying property valued at $400-$500K if you can’t save $40-$50K in my opinion. I now have a young family and stable job and need to have a SFH in the next year or so because we simply need the space and quiet, and in 25 years I’ll almost be 65. Looking at Squamish, despite the long commute. Any thoughts from people on how the SFH market there will hold up there relative to Burnaby, New West, Van East? Can get in at $400K for something livable, $450K actually not bad. Note – looks like condos and THs are a different… Read more »
patriotz
Member

@Arthur Fonzarelli:
All the space you want for $1650/month:

http://vancouver.en.craigslist.ca/nvn/apa/2946266574.html

Now what do you think a SFH should sell for?

Best place on meth
Member
Best place on meth

These mortgage experts/house pumpers are filthy human beings for trying to sucker people into borrowing down payments just to keep their ponzi scheme going and commissions coming in.

Luckily there’s nothing the deperate SOB’s can do as we’ve hit the wall and there simply aren’t enough buyers left no matter what they try.

Meanwhile, great news from Beijing as new home prices are down 20% year over year.

http://www.chinadaily.com.cn/cndy/2012-04/10/content_15008918.htm

Girlbear
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Girlbear

@VMD: This news on Home Capital downgrade should not bode well for Genworth Canada either…

Girlbear
Guest
Girlbear
Anonymous
Guest
Anonymous
@patriotz: But, but, but…you can’t paint the walls, or hang mirrors/paintings in a rental! Oh, wait…you mean, you can?!? Yes, you can. My significant other (SO) and I moved into a lovely new rental in East Van (2BR main floor plus large attic–plenty of room for the nieces/nephews when they want to sleep over) not far from the PNE for $1400/month. The large southern exposure deck with sun (on those rare days we get sun here on the wet coast) all day is a wonderful bonus. Oh, and we just re-painted a couple of rooms to match my SO’s sense of style. She makes good decisions (she’s with me after all 😉 ). We’ve also put some holes in the walls to hang assorted pieces. Now, here’s the really cool part: when we move out (which hopefully won’t be for… Read more »
VanRant
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VanRant

@Girlbear: This is good new! Now Mr F will have to notice cause it’s in his backyard.

/dev/null
Member
/dev/null
So, a serious question from someone who *is* managing to save some money. We’ve been renting a SFH for a long time and for us the decision not to buy eight years ago worked out for the best. We’ll continue to rent forever with prices this high but if they come down to something reasonable then we’d consider buying. If the Great Correction does come to Vancouver/Canada I have heard people say that the banks will significantly cut back on mortgage lending and so “the bearz will be screwd and unable to buy anyway!”. This seems like a specious argument to me but I’m not financially savvy so I thought I would ask here. If I had 20% to plunk down, and the monthly would be at a sane level relative to my income, how hard would it be to… Read more »
Arthur Fonzarelli
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Arthur Fonzarelli
@patriotz I think the SFHs in the $450K range there – say 2000 sq ft in decent shape and usually with structural integrity and sometimes superficial reno’s – SHOULD be listed at about $350K and no lower. Rent will cover mortgage of $350K for 25 yrs with rates even at 6% if we did have to sell in 5 yrs. If we rented now we’d be paying more for rent than for equivalent house if we rented the basement suite. But throw out the suite and the math doesn’t work – the renter wins. In 5 yrs with renewal rate at 6% carrying costs to own will be about the same as renting equivalent. But I’m pushing 40 pretty soon and want to have a house paid off by 60 at latest… and we don’t own our principal residence now.… Read more »
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