State of economy

[queens49]

Man, I was at RCSS today and was texting and overheard a conversation between 3 workers. One was saying that he just bought a condo at Bathurst/Front for $240,000 with a downpayment of $7,000 and his monthly mortgage payments would be $700 / mth. If I was hearing correctly, there's no wonder why there's a credit crunch right now. The banks were lenient in giving out loans to people who should never of been allowed to qualify for a mortgage. The guy is borrowing $233,000 and not even taking into account interest, the maximum mortgage is 35 years now, so that should be around $6,700 / mth in mortgage payments. I have no idea how he is able to get $700 / mth unless the condo corporation is giving a special rate for XX amount of time to entice people to buy. What the hell is the guy going to do when he pays the real amount? The kicker is that I think he said his goal is to work part-time and go to George Brown College for business...Ugh, I just can't believe it.

[MAZDA Kitten]

What is RCSS

[S.F.W.]

RCSS= Real Canadian Super Store

[MAZDA Kitten]

oooh we dont have them here in Hamilton not sure about Sauga but I wouldnt shop in a store owned by Loblaws. Sorry off topic LOL

Now back to the state of our economy....

[Exclusive_Wheel]

Just a heads up you math is little wrong ;)

6700x12=80,400

80,400 x 35 years =2,814000

taking into account zero interest the payment would be $514/mth

[Exclusive_Wheel]

* 554/mth lol

[queens49]

* 554/mth lol

Crap, you are right. I was tired and only divided by years.

[iconicrocket]

What interest rate did he get?

Prime minus 10% ? lol. Hmmm.. if my math is right its around 1.386%.

[jaimie08mazda3]

know what. that actually isnt that bad.

[rajin929]

Don't know how these guys do it. Wonder what kind of interest rate he's at as well LOL

I'm worried that I won't have enough to buy a place of my own and be able to afford the cost of ownship and here I see people around me that are probably more in debt and making less than me doing it LOL

[queens49]

Don't know how these guys do it. Wonder what kind of interest rate he's at as well LOL

I'm worried that I won't have enough to buy a place of my own and be able to afford the cost of ownship and here I see people around me that are probably more in debt and making less than me doing it LOL

Exactly. He was telling two other people what his goal was, and he wanted to go to GBC and work PT. He was saying he was working it out so he could still get paid the premium wage, which he said was $10/hr. So, at $10/hr working 40 hours a week * 4 = 160 hrs / mth. Meaning he'll get $1600 /mth BEFORE tax. To me, that is cutting it really close, income vs expenses. What happens if the interest rate goes up, and he has to pay more? Too many people think short term about finances and not long term. Look at what happened in the States, people got huge houses b/c they got sub-prime mortgages and when it was time to pay the real rates, they couldn't afford it anymore.

[Flagrum_3]

You ever think maybe the guy was just 'Full of Shit' :chuckle ...Sounds alittle too good to be true and it's not uncommon for people to make it sound like they always get the best deal in town!!.....He would have to have a substantial income for a bank to ever give him a deal like that and from the sounds of it he doesn't.........So....put it down to BS.:chuckle


_3

[Xerox]

... Look at what happened in the States, people got huge houses b/c they got sub-prime mortgages and when it was time to pay the real rates, they couldn't afford it anymore.

Sub-prime mortgage crisis has nothing to do with below prime interest rates. :)

[queens49]

Sub-prime mortgage crisis has nothing to do with below prime interest rates. :)

"ARMs (Adjustable Rate Mortgage) are somewhat misleading to subprime borrowers in that the borrowers initially pay a lower interest rate. When their mortgages reset to the higher, variable rate, mortgage payments increase significantly. This is one of the factors that lead to the sharp increase in the number of subprime mortgage foreclosures in August of 2006, and the subprime mortgage meltdown that ensued."

[Xerox]

The term "sub-prime" has a couple of definitions. When the term is used to describe the crisis in the US it has nothing to do with the prime interest rates (although as you quoted was a factor). The term subprime is used rather to describe borrowers that were deemed "subprime" - basically people with lower income that normally would not have qualified for the loan if not for the banks love for mortgage-backed security.


Look at what happened in the States, people got huge houses b/c they got sub-prime mortgages and when it was time to pay the real rates, they couldn't afford it anymore.

It happened because the banks lended to subprime borrowers. That's what I'm getting at.

[Malcolm991]

It's actually a great time to buy if you have a good stable job. Interest rates are down and so are property values.

[JMAK74]

The term "sub-prime" has a couple of definitions. When the term is used to describe the crisis in the US it has nothing to do with the prime interest rates (although as you quoted was a factor). The term subprime is used rather to describe borrowers that were deemed "subprime" - basically people with lower income that normally would not have qualified for the loan if not for the banks love for mortgage-backed security.



It happened because the banks lended to subprime borrowers. That's what I'm getting at.

Believe they're also known as NINJA mortgages:

No Income, No Job or Assets

JMAK

[queens49]

The term "sub-prime" has a couple of definitions. When the term is used to describe the crisis in the US it has nothing to do with the prime interest rates (although as you quoted was a factor). The term subprime is used rather to describe borrowers that were deemed "subprime" - basically people with lower income that normally would not have qualified for the loan if not for the banks love for mortgage-backed security.



It happened because the banks lended to subprime borrowers. That's what I'm getting at.

I agree with you. The point I was trying to make is that people are getting things like mortgages based on current rates, and not thinking about the future. For the sub-prime, they were offered low introductory rates that they could manage, but once the regular rate kicked in, they couldn't afford it anymore. In the case of the RCSS worker, based on the numbers, ~50% of his pay is going towards mortgage payments. What happens when the prime rate goes up a few percentage points? Is he going to be able to make the payments? I just think there's a problem where people are buying beyond their means. The banks share responsibility for loaning to high risk people, but people have to take responsibilities themselves. The bank isn't forcing anybody to borrow money.

[queens49]

It's actually a great time to buy if you have a good stable job. Interest rates are down and so are property values.

Yup, next year is going to be very interesting for housing. A great buying opportunity.

[She_Prime]

Yup, next year is going to be very interesting for housing. A great buying opportunity.

Well that's when I'm buying so yay for everything!!!

[Go_Habs_Go]

Exactly. He was telling two other people what his goal was, and he wanted to go to GBC and work PT. He was saying he was working it out so he could still get paid the premium wage, which he said was $10/hr. So, at $10/hr working 40 hours a week * 4 = 160 hrs / mth. Meaning he'll get $1600 /mth BEFORE tax. To me, that is cutting it really close, income vs expenses. What happens if the interest rate goes up, and he has to pay more? Too many people think short term about finances and not long term. Look at what happened in the States, people got huge houses b/c they got sub-prime mortgages and when it was time to pay the real rates, they couldn't afford it anymore.

there is NO WAY that someone working at 10$/hr could afford a 230,000$ mortgage. Even in the glory days of sub-prime mortgages in the US no bank would give that kind of loan to someone making 10$/hr. Puh-lease!

The guy was full of caca-pooh and it was oozing out of his mouth!!!

Instead of going back to college he should be going back to Elementary school and learning the basics on how to communicate truthfully to people LOL!!

[rajin929]

in general though, people do live way beyond thier means.

I always say "those who LOOK rich, are probably the ones who can LEAST afford it".

I have a few friends that flash out in the brand new (insert car here), yet only put in $10at a gas pump to go out on a Saturday night HAAHHAHAHA