According to this article over at the CBC, Canadians love a good home equity line of credit – they’re practically addicted to that sweet sweet HELOC money at rock bottom rates.
“We are addicted for sure. Who wouldn’t be addicted to something so easy [to get]?” says 35-year-old Ali about the free-flowing lines of credit that have enabled him to splurge on the finer things in life.
“It’s easy, accessible cash at a very cheap price. The banks make it so easy for you to obtain it,” says the software engineer.
Some people say the national reliance on debt is a risk to our economy and to the lifestyles of the indebted. But the Canadian Bankers Association isn’t worried and spenders say they are aware of the risks:
While Ali and Haji like to spend, they believe they’re behaving responsibly and say they’re aware of potential pitfalls. That’s why they’re still undecided about another loan.
“If you get a line on this [house] and God forbid something happens to me or [my wife] and we are unable to sustain our lifestyle or stream of income that we have, then we would be in trouble and that may lead to us losing this house,” says Ali.
And that’s why some rooms in the family’s home remain empty. Ali shows CBC News his large, mostly barren master bedroom and talks about his grand plans to furnish it — sometime in the future.
“Without the credit line, it’s slow,” he laments.
But things could always change. The couple says just last week the bank called, inquiring if the family was interested in another loan.
Read the full article here.
Many Franks pointed out what has to be the most bizarre ‘financial facelift’ feature yet over at the Globe and Mail.
You think you have money troubles? Look at these poor people!
[Eric] earns $200,000 a year working one day a week in a medical clinic. But his real love is teaching, which he does one day a week at a university; this earns him $100,000 a year.
“It is financially possible for them to do the things that are important to them, although by doing so, they will run a cash flow deficit of $50,000 a year until the children leave home,” Mr. MacKenzie says. Over time, their annual deficits will add up to more than $1-million in additional debt.
They are living rent free in a relative’s house (they pay taxes, utilities and upkeep) and “regret not having bought a house years ago,” Eric writes in an e-mail.
Eric and Ilsa are fortunate because their parents are willing to put a home equity line of credit on their own home to extend them the $1-million they need to build, and to finance their annual deficit, the planner notes.
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.”