On 6/4/2014 3:17 PM, Kurt Ullman wrote:
In article ,
(Gordon Burditt) wrote:
Don't mortgage rates vary with "good credit" vs. "bad credit" in
Canada?
But yes, just recently some financial instututions here in Canada began
offering 1.99% mortgages (3 year fixed term I think). That's the entire
You have *THREE YEAR* mortgages? On a $200k house with $10k down,
that means payments of $5,277.00 *just for the principal*. Very
few people are going to be able to afford that. (And if they can,
do they really need a mortgage at all?) Or, if it has a big payment
at the end, you're placing yourself between a rock and a hard place
if you're forced to refinance after 3 years not knowing if you can
(at any interest rate, and you'll be in big trouble if you are now
"upside-down" at the end of 3 years).
Sounds like maybe a 3-year ARM (and nothing bad ever happens there).
More likely HG has nary a clue about what he is talking about.
Nah, it's that the Canadian mortgage market differs substantially from
the US market in a few ways. For starters, the mortgage is tied to the
borrower, not the property, so the loan is portable. If the mortgage
holder wants to buy a different house, the mortgaged is carried over
to the new property. Canadian mortgages are five-year mortgages that
are amortized over 25 years, after which the borrower can pay off the
loan or roll over the mortgage for the remaining balance. That of
course exposes the borrower to the risk of the interest rates having
gone up in the interim. Conversely, the prepayment penalties are very
steep, to discourage borrowers from taking advantage of a decline in
rates. And Canadian homeowners can't deduct their mortgage interest.
The Canadian system also requires banks to retain their loans, not
sell them off to a third party. So their system puts more financial
responsibility on the borrower, but also makes the originating lender
responsible for the loan if it goes bad. Which is a major reason why
their housing/mortgage market has remained stable while we went
through a bubble and a crash.
Longer term mortgages provide payment stability to the home buyers. On
the other hand, in the US the average length of home ownership is only
seven years, so most of the time buyers aren't in it for the full 30
years anyway.