Comment by lbourdages
5 days ago
70 years? That's just plain false.
This website from the government of Canada here says the max term is 25 years, or 30 if it is your first property: https://www.canada.ca/en/financial-consumer-agency/services/...
Edit: ah, I missed one part. You can have longer terms if you have more than 20% cash down. TIL.
They didn't say 70 year mortgages, they said 70 years to pay off a mortgage, which is still a bit exaggerated (maybe), but would come from the contingent of people who got themselves into variable rate fixed payment mortgages for comically expensive properties, and that had a significant amount of interest remaining before the feds started cranking up interest rates.
If rates go up from 2% to 6+% while you're holding onto a $2m detached house, it's a bad situation to be in.
https://www.bankofcanada.ca/2022/11/staff-analytical-notes-2...
> If rates go up from 2% to 6+% while you're holding onto a $2m detached house, it's a bad situation to be in.
I find it mind boggling that banks will lend money to people that cannot sustain a 4% increase to their mortgage rate. Rates have been over 10% in the 80's!
Well, as far as I understand, in Canada we do have relatively conservative lending practices, such that you do need to be able to pass an income stress test of some amount, you're only able to lock in terms of 5-10 years instead of a fixed 30yr, and if you qualify for and choose a 5% down payment you'll have to fork out for CMHC mortgage insurance, so from a lending perspective it's more stable. That said, it's crazier to me that people will take on that liability rather than the fact that lenders will lend it.
As soon as someone hits what they think is a high salary, they'll borrow as much as possible, not thinking they'll ever lose that job or interest rates will increase. This changed a bit in the last 5 years, hopefully for the long-term, so places like Toronto are seeing 90%+ decreases YoY in certain realty segments.
Canadians' household debt numbers are absolutely wild and millenials without wealthy parents are and will continue to experience an increasingly tenuous financial future.
As an example, there's an older guy down the street from me who's long since paid his house off. For property tax assessment purposes, his house is worth $40k CAD, while the land is worth $1.6m CAD. It's just a standard plot in what used to recently be one of the poorest neighborhoods in the country
"Rates have been over 10% in the 80's!"
House prices relative to income were much lower back then.
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Nope, it’s true and even hit higher, this is one example of many: https://files.catbox.moe/rpp5fp.mp4
Yeah, it’s a scam, the whole thing is one giant scam, yet it’s legal and normalized and everyone is ok with it!
People refinance to take lower rates or pull equity out of the property and that resets the clock.