Friday, April 20, 2007

Reality Check- Open Discussion

Have at it. Talk about what you wish today.

Some ideas:
- young irresponsible, overleveraged flippers
- really junky, overpriced houses for sale - send the link
- anecdotes of people committing financial suicide

The inventory update will come later today. Have fun.


Bryan & Sheila said...

I saw this online today:

I drive by this place almost every day (MLS V606448). I believe it sold last spring for $600K. The place was gutted (literally gutted, not renovated). For the last 6 to 9 months it has had a giant for sale sign with a $990K price tag. Last week I noticed it’s listed on MLS for $138K more.

Justin said...

I have just heard from my financial planner that CMHC is now only requiring 20% (instead of 25%) for a downpayment without requiring CMHC insurance coverage. 1) Can anyone else confirm this? 2) As per previous posts on VHB this would seem to be another possible source of fuel for the current market.

My logic is:
At 25%
You have $100,000
You can get $400,000
*and save up to $9300 in premiums
At 20%
You have $100,000
You can get $500,000
*and save up to $12400 in premiums

mohican said...

justin - you heard correctly - the bill to lower the downpayment amount to 20% received royal assent on March 29th.

No CMHC / Genworth mortgage insurance is necessary if you have a downpayment of 20% or more.

Livingsword said...

Open comment Fridays? Great idea!

I know this is a financial page but I am hooked on the image you posted. That cheetah is amazing and so is his potential soon to be dinner. But although a cheetah can run up to 105kmh and get to that speed within 2 seconds they are still considered a vulnerable species.

High numbers do not always dictate success.

Clarke said...

Last week I was talking to a business associate who was happy that he and his family were able to get a house in Vancouver before being priced out forever. The purchase price was 1.1 mil, and it sounds like a lot of family savings went into it.

I wished him well. I would not term it financial suicide, but definitely a big self inflicted financial injury.

I think suicide will be the idiots lining up to buy into those condo developments with the aim of flipping them when they complete in the next year or so.

mohican said...

I know of a few people (mostly young and unsophisticated) who have purchased 2, 3, 4, or more condos and plan to sell when the construction completes.

I think this is a really big unknown in the market right now is how much 'non-end-user' owners there are out there right now just waiting to sell. The speculator market, by all accounts, is quite large and it is very unhealthy for the market.

Warren said...


Did any of the other CMHC rates change for 5%, 10%, etc? Can you remind us what they are at each cut off level?


What is the impact of somebody going bankrupt or foreclosing on a property that has not been completed, is there any difference? Since the bank doesn't transfer the money to the developer until the possession date I'm wondering if there is a difference on how things will shake out. IE: the developer putting it back on sale at market value rather than going through the courts as a foreclosure auction.

casual observer said...

Warren: Did any of the other CMHC rates change for 5%, 10%, etc? Can you remind us what they are at each cut off level?

The changes in the down payment threshold before mortgage insurance is required are not from CMHC. They are changes to the banking act brought about by Bill C-37.

For the last 40 years, banks have not been allowed to lend more than 75% of a home's appraised value without the mortgage being insured. This has now been increased to 80%.

I don't believe that the CMHC insurance rates for other thresholds would change, due to the fact that this was a legislative change to the banking act. According to CMHC's website, CMHC Rates those rates are as follows:

Loan Size (% of Lending Value) .....Premium

Up to and including 80% .................1.00%
Up to and including 85% .................1.75%
Up to and including 90% .................2.00%
Up to and including 95%
...Traditional Down Payment ...........2.75%
...Flex Down Payment ...................2.90%
Up to and including 100% ................3.10%

I think that the area where this will have the most impact is with HELOC's, as now the banks can offer up to 80% of a home's appraised value.

Warren said...

Hey thanks for the detailed answer. Good point about HELOCs. Are Genworth rates identical?

casual observer said...


Genworth's rates are basically identical, except if you want some sort of portability option for your mortgage insurance. (Don't know what they mean by that. Didn't feel like reading the website example to find out.)

The only other piece of info is that both CMHC and Genworth add a 0.20% surcharge for each 5 years beyond the traditional 25 year amortization. (eg) 30 yr mort = +0.20%, 35 yr mort = + 0.40%, 40 yr mort = + 0.60%.

Hope this helps.