+25 Year Amortization for Mortgages

[arthur]

patriot, rates are not increasing, they are on hold or even headed down.

We have a very large RRSP that more than funds the loan we would be taking but putting the Mortgage in the RRSP means no interest deductibilty and a need to take Mortgage Insurance.

I believe RE in Canada, in certain areas, in certain neighbourhoods will remain stable, but a capital Loss would at least be Tax deductible.

Rents are going to be paid, whether to strangers or to us, rents will still be paid, our way, the Boys get a nicer environment and are not moving every couple of years.

Morbid as it may be, Reality is that My Dad will not survive more than 5 to 10 more years, if that long, and reality is that a cash infusion will occur that will be more than enough to pay off these Mortgages, if we so desire.

The Rents will be around Market Value, this is no freebie.

[rails]

The Rents will be around Market Value, this is no freebie.

Until....Gee Dad...Mom, I signed a lease on a new Lexus and can't afford to pay the rent this month

or

Mom..Dad, your grandson wants to play hockey and needs to go to hockey school and get top of the line hockey equipment. We can't afford rent and this also. You tell him he can't go...OK! Oh, did I mention that your granddaughter wants to get into figure skating and if we can't afford hockey we sure can't afford this also. At the same time...tell her also.

[arthur]

rails, both My sons are University Grads, have caused not dime one of problems, have never asked for money, paid their own way through School, and if we can buy them a Lexus and pay for top line equipment, that upsets you??

The facts that some have been able to accrue more assets than others, assets that will be passed on, generally creates a feeling of inadequacy and jealousy from those who haven't.

We are creating a Tax write Off, participating in Real Estate, getting stable Tenants,and that is bad??

I guess we could rent to some dead beat who stuffs us for the rent, and that is O.K.

$50,000 is the minimum Down Payment for a condo in TO, tough to save for.

The alternative would be to give it to the Church, NOT.

[dakota]

Arthur wrote

The facts that some have been able to accrue more assets than others, assets that will be passed on, generally creates a feeling of inadequacy and jealousy from those who haven't

Really?

[arthur]

dakota, on the feelings of inadequacy I will always defer to the expert.

[rails]

rails, both My sons are University Grads, have caused not dime one of problems, have never asked for money, paid their own way through School, and if we can buy them a Lexus and pay for top line equipment, that upsets you??

Then buy them the Lexus

The facts that some have been able to accrue more assets than others, assets that will be passed on, generally creates a feeling of inadequacy and jealousy from those who haven't.

Where did jealousy enter into this?

We are creating a Tax write Off, participating in Real Estate, getting stable Tenants,and that is bad??

Don't let the tax tail wag the investment dog.

I guess we could rent to some dead beat who stuffs us for the rent, and that is O.K.

Or don't have rental property at all.

$50,000 is the minimum Down Payment for a condo in TO, tough to save for.

You just said they are University Grads. Why can't they save the $50K down payment? If it's just the $50K why not just cash in $100K of RRSPs and give them the money?

The alternative would be to give it to the Church, NOT.

Again that would be your choice. If it's a tax write off you are looking for then this would get a nice tax break.

The point I'm saying is that when you have money dealings with relatives and friends, problems my arise.

[dakota]

dakota, on the feelings of inadequacy I will always defer to the expert.

You stay away from that mirror, no telling what you will come up with

[arthur]

Son tells us that He is thinking of moving to Hawaii with girl friend, Boss says that's fine since he works out of his home.


Hawaii rents, in some areas , cheaper than Toronto.

Aloha.

Oh yeah, Expensive cars has never been my thing, once had a Mercedes on order, decided old Volvo would do just fine, canceled order, but I do like that new '08 Accord, a Red one.

[kcowan]

Sounds like a lot of confusion there.
- give each kid $50k to so with as they please (loving Dad not a control freak)
- wait for your inheritance from your Dad to backfill the $100k and more
- compared to the estate taxes you will be paying then, any tax bite now will be marginal so stop fretting about "gaming" the CRA
- keep life simple

[dakota]

Oh yeah, Expensive cars has never been my thing, once had a Mercedes on order, decided old Volvo would do just fine, canceled order, but I do like that new '08 Accord, a Red one.

Hmm so you've changed your mind about the 'vette?

[pitz]

A U.S. article. A borrower in the US can lock in a mortgage rate for 30 years and can pay down or pay off the loan at any time without penalty. Canadian borrowers typically can lock in rates only for five years though I think there are some deals with 8-year commitments. A Canadian can't pay down a closed mortgage beyond whatever penalty-free privileges were granted when the loan was issued, and can't pay off the loan penalty-free except when the term comes up for renewal. So, while his argument is very interesting, I think it would entail a substantial amount of risk here.

Also the Americans get interest deductibility, whereas Canadians typically pay their mortgages out of pre-tax income.

This makes a huge difference in the preference of Canadians towards shorter mortgages -- and rationally, all Canadians with mortgage debt should be maximizing paydown of that debt, or swapping the non-deductible debt for deductible inveestment debt.

True 20-year mortgages are available through Firstline and presumably others. But their use is highly discouraged for obvious reasons.

[arthur]

dakota, I went for a ride in the neighbour's new Corvette, far too much power for me, I don't know how they avoid tickets, things go like hell.

[Nemo2]

dakota, I went for a ride in the neighbour's new Corvette, far too much power for me, I don't know how they avoid tickets, things go like hell.

Does my buddy, your BIL, still have that '84 Corvette POS?

[dakota]

dakota, I went for a ride in the neighbour's new Corvette, far too much power for me, I don't know how they avoid tickets, things go like hell.

Well..back to the Caddilac

[arthur]

Nemo, Yea, it is supposed to be going to missy, but who knows, wifey wants it gone, TM doesn't.

[Nemo2]

Nemo, Yea, it is supposed to be going to missy, but who knows, wifey wants it gone, TM doesn't.

'Wifey' drove it to Toronto, Jan 1989, when my l/wife & I returned from Saudi.......she said THEN that she was embarrassed to drive the damn thing.

[twa2w]

Canadian borrowers typically can lock in rates only for five years though I think there are some deals with 8-year commitments.

RBC offers a 7, 10 and a 25 year term.

current rates

7 Year 7.550
10 Year 8.000
25 Year 8.900

I believe the 10 and 25 year terms are funded out of RBC pension funds. Great rate for fixed income portion of the pension - low risk.

These mortgages can be ported from one house to another, and have a variety of prepayment options. Of course if you sell and don't rebuy you will pay 3 month interest penalty - not sure if an IRD applies. If it does it could be huge.
Cheers
J

[beluga]

Thought I would start a new thread on this to avoid hijacking the other thread which pointed out the article:

http://www.thestar.com/Business/article/420166

Not that anyone on either opinion has given an argument that's simple enough for my foggy mind to grasp, I would like to think Mark Carney and the people who do research and analysis for him might have a somewhat reliable opinion into whether 40 year mortgages causes higher house prices in Canada.

[pitz]

Since the 40-year amortization is essentially an 'affordability' product that's teamed with 5% or 0% mortgage insurance through CMHC, my big personal concern is whether or not CMHC is properly pricing the cost of the mortgage insurance to reflect the risk involved.

I mean, in the US, at least the mortgage insurers have private sector capital standing behind most of the mortgage insurance (ie: PMI), and private sector capital standing behind Fannie Mae/Freddie Mac (albeit probably not enough to withstand any significant level of default). In Canada, those risks are mostly socialized, while obviously the private sector is able to profiteer in a risk-free fashion on the back of the taxpayers.

[beluga]

I think mispriced risk backed by public funds is not "only in Canada, eh?"

http://polecolaw.newsvine.com/_news/200 ... f-subprime

[nisser]

I think so. 0% down mortgages are doing the same. I think once the two things came available there was a surge or new buyers on the market; both first time buyers and speculators. Before all this, not everyone could afford a house simply because they didn't have the money for a downpayment and/or couldn't afford to make the monthly payments. This simply made buying an available option to many that were priced out of it before thus increasing demand, and shooting prices up.

[patriot1]

Low/no down payment and extended amortizations do not support higher house prices long term. Only fundamentals can do that.

They just borrow demand from the future with interest, as we are seeing in spades in the US (and saw in Japan).

I will also add that any taxpayer bailout of CMHC, or a de facto bailout by raising premiums across the country to cover defaults almost entirely in BC, Alberta, and Toronto, will face fierce opposition in the rest of the country, most obviously in Quebec.

[dimo]

No doubt, that mortgage has its own advantages over credit cards. Particularly for those who have much more debt, and cannot fix the problem by means of credit cards, mortgage with affordable rates is just what they need to get out of financial crisis.
Espeically house mortgage is well spread over the world.

[pitz]

dimo, don't know if you're just spamming some websites in your tagline(if you are, the mods will take care of that), or if you're looking to make a meaningful contribution, but seriously, how many overspenders' bad credit habits are cured through refinancing their credit card debt onto a cheaper HELOC?

I personally think that in most cases, people who do the refinance shuffle just end up racking their credit cards again, because, if they were irresponsible in the first place, odds are, they will be irresponsible again.

[spencer]

The 40 year mortgages and the 0% just prolonged the housing boom, but they will also make the housing decline much worse...