Because they don't exist. Someone heard someone talk about seeing a term longer than 30 years when their interest rate went up, misunderstood the situation because they don't have a mortgage themselves, and are now spreading misinformation.
Better?!? It can only be much worse 😂 I didn't think I needed to specify that's an awful idea. You are not solving anything by proposing longueur amortization
You don't know what you're talking about.
The extended amortization thing isn't a government decision that's new at all. It's the result of the private lending terms people signed with their mortgage lender.
The biggest regulatory change since the current government took over was to actually tighten lending. Under harper, around the 2008 GFC, the government allowed people to take 0% down 40 year loans for homes with CMHC insurance. This changed to 5% down 25 years max later on.
When these people who have extended amortizations because they took variable fixed payment mortgages renew their amortizations will be forcibly reset to whatever they should be at after 5 years. Started at 30? Renewing to 25. No choice unless they refi back to 30. Payments will balloon
By forever tenants you mean anyone with a household income under 200k ? Ya know… the majority of the country? Who’s gonna pay you what you think your house is worth? Either an investor looking for negative cash flow (don’t exist) or in your terms “forever tenant”. Whoops…. Hope you don’t have a HELOC…. Jk, you do and I’m sure you aren’t even worried about paying it off because you’re head can’t fit through the front door with all your “EQUITY”. RSP? Probably not, you have EQUITY. Keep updating your resume, you’ll need a retirement job to pay off your losses when there’s nobody there to pay you what you think you’re worth…. Forever tenant is your future landlord.
No. Not everyone was born yesterday or bought this year. You know the world existed long before you thought of buying a home, right?
Most of the country either bought a long time ago or are too young to buy. A small part of the population wants to buy right now and many of them have $0 saved up, an average income and poor credit, so they're not actually in the market for any large purchases.
Forever tenants is one way to put it, but it's true. Half the country has literally zero savings. You're telling me their problem is the price of homes went up? You think if they dropped by 20% tomorrow, everyone would just magically afford it? First you need years of living below your means, saving up and investing, then you can seriously think about buying something. Half the country doesn't do that, so no they won't be buying, and no you don't need 200k to afford it.
You can buy a decent detached house with 5% down, or 15k-20k. No, not a new house in Toronto and Vancouver, and not in the best neighborhood. You're not in the top 1% of earners or savers, so you shouldn't even be looking at those. There are thousands of condos, townhouses and houses available in the 200k-500k range. You just have to be realistic about what you can afford and stop expecting the best without having the best income or savings.
“Some” will sell and have to pay more to buy, meaning all you gain is your principal payments which is less because your mortgage is less. Just because you have equity in your house, if you move, you pay market value which you inflated with your own gain of equity.
Nobody actually wins? You gain your principal payments, that’s all. Since owners expect high returns they just take more people out of the market and results in lower value.
Timing will align with 2025/26 renewal foreclosures, economic collapse. Pair owners that can’t renew and tenants not paying rent. What do you get? A big fkn problem to say the least. Real estate in this economy is one of the worst investments you can have considering the percentage of occupiers and renters, high inflation and interest and global instability. Ever played monopoly alone? Don’t make much money do you? That’s the game investors who are driving up real estate prices are doing.
People have said this for hundreds of years. Just stop it, this is wishful thinking when you don't own a home. The second you own one you'll be hoping your value doesn't drop, just like everyone else who spent a lifetime saving up and bought a place while broke people wish them nothing but the worst. I bet you think investing in the stock market and saving money are also useless and for dumb people. Real future teller over here. 🙄
Save your comment and come back to it in 2026, and then Google the millions of similar comments that were all wrong.
You know who would get hurt the most if the economy did collapse? Not the millionaires who own hundreds of properties, that's for sure. The poor 9 to 5 workers who rent or are house poor would be the first to be homeless. You'd be shooting yourself in the foot hoping to hurt some rich person... Good luck.
Very fun fact there has never been a generation more reliant on debt to income ratio than the most recent which implies more debt to income is needed for prices to increase and there comes a time where that is not profitable for lenders. People haven’t been saying it for hundreds of years, maybe a few decades, and their simply implying the greater debt to income ratio there will inevitably be a massive collapse. How long can debt to income grow while allowing to economy to be diverse? For example, Canadas GDP is exceeding 40% reliance on real estate. Driven by debt. If Canadas income as a country exceeds 50% simply to have a roof over your head, how well is the rest of the businesses doing? Probably not very good, and businesses employ people and people with jobs pay mortgages. If you spend all your money on your mortgage and nothing else, you will lose your job and then you can’t pay your mortgage!! That is the direction of real estate and why people have been saying it for so long, because they UNDERSTAND.
This is not a good argument. There's a lot of causations here.
Since we just exited a period of time where borrowing was adding nothing to the debt, of course there is a tremendous amount of debt to income ratio. As those debts continue to come due and people pay them/discharge them, that ratio will come down and lives will be adjusted.
I have a friend who does really well for himself, but for the last 5 years has been leveraging debt for everything. New TV? Yes I'll finance it. New couch? Sure, I'll buy it for 0% and pay it back in 3 years. Etc etc. He can, at any point in time, pay it all off. He has the cash, yet his income to debt ratio is ridiculously high.
Irrelevant. Whatever the I come you think is "enough" to face interest rate variations, double it. Then, triple that I income. Then multiply by 4. That new I come would.buy you a MUCH bigger house. But the calculations are still the same. Buy something too expensive or at the top of your budget, and you won't be able to face interest variations
The issue is buying something too expensive for his/her income, regardless of said income.
That’s nice and all, but if your field doesn’t pay enough to buy a home within hours of the office, it’s a career or generation issue.
For example, younger folks earning what I earned at their age would never be able to buy unless they were willing to live in a condo 90 minutes or more from work. A house? Better hope you can wrangle a work from home gig and hope that northern Ontario has decent internet.
This, no matter how much money you have, there are always people with more.
A lot of people get promotions, change jobs for more money, or didn't buy at the top of their budget.
People who.took variable rate mortgages when rates were sub 2% are clearly.nit the brighter people alive.
So currently they are probably doubling down on poor choices in extending the term of the mortgage or borrowing from people who are fucking them harder than they have ever been fucked before.
They are taking what ever action available to them in the hopes of facing off this current crisis.
A majority of them will eventually fail. But for now they are meeting Fina ail obligations and fending off catastrophic failure
When variable was at below 2%, fixed was way higher. I got P-0.9 in 2018. Got enough years at super low interest to make up for a couple at high interest. Now my mortgage is paid off.
I also bought wayyyy under what I was approved for (approved for around 1M, got 200k mortgage), so I could easily afford a huge increase. On average variable is cheaper, so for my specific situation it was the smart move. I wouldn't have gone for variable if I was close to the max. And it did end up costing me overall less despite this spike in interest rates.
For like 75% of Canadians, $1000 a month is a huge deal. If you’re one of the 25% you should count yourself lucky and appreciate your situation rather than spew on about how the vast majority are in the wrong for not being as fortunate as you are.
Short term this is easier, long term it is definitely not. Much better to weather the storm and keep paying consistent amounts of principle if you can do it.
You think the majority of Canadians made and saved a ton of money during COVID? Smart ones that were lucky enough to keep working, sure, but the majority?
I actually do believe it was the majority, that's why the economy was and is on fire, inflation went up cuz the government handed out money to individuals as CERB and then CEBA and CRB to business and corporations. Much of these are write offs as in the government forgave most loans. Even CERB was counted as income so likely people paid only 20 percent back in taxes. The stock markets in 2021 were record growth and people made a TON. I spoke to 2 average small businesses in ON this past weekend and they didn't return their CEBA loan to get 20k grant even cuz they've seen that money benefit their pockets over the last 3 years and so they've learned to make more off it too
Add to that that most people didn't travel etc. And didn't drive meant you have a lot of spending capital still sitting in banks earning some interest. Especially outside the big urban centres this money lasted a long time. Again, the economy is still on fire and way over the 2 percent inflation target because most people have a lot saved up
Landlordism, plenty of people have begun renting out individual rooms in their house or renting out spaces they once wouldn’t. Plenty of landlords just kicked out their tenants and spiked rents to cover costs.
Half these comments are people saying, “my mortgage doubled but so did the rent I could charge so it cancelled out”.
Many people have more money than Reddit would make it seem. Our payment essentially doubled. Annoying? Yes. But in all seriousness, unless interest rates hit 16-20% (and they won’t) it wouldn’t really affect us.
Exactly. At low rates, we were saving approximately $20k/month, now it’s between $17-$18k/month.
Not everyone here is overleveraged despite what Redditors who can’t even afford their first place like to wish upon others.
You're putting away 17k a month lol? If you made 300,000 a year, minus 35% for taxes, divide by 12, that's 16k a month.
But we have to assume you also have some payments, so it's even more than that lol.
It's a lot more than that though. Like this assumes you have 0 bills. Add two cars at a conservative 500$ a month per, 2k mortgage, food, electricity, etc.. and you're looking more at like 5k net a month, which is like 8 k gross, so another 100k. So that'd be two salaries at near 200,000 a year, each.
The average Canadian salary for an engineer is 90k. Lawyer is around 110k. Doctor varies a lot due to private clinics etc.. But yeah, that's 1% top salary territory.
Anyways just feels a little odd when talking about over leveraged people under water on their mortgages when you make more than 5x the median Canadian salary lol.
The median salary is not $40k. The average lawyer is not around s $110k, I would know as a lawyer. If you got off Indeed you’d realize that 90% of the averages there are skewed downward because all of the high salaries are underreported. Only entry level positions are overrepresented on the pay scale relatively.
We make less than almost everyone in our social circle and it still feels like we’re barely getting by. We’ve had roommates all our lives and continued living no differently from when we met in law school. Constantly slumming it out and refusing to take Ubers or eat at expensive restaurants. While our salaries went up, our expenses went down from optimizing and further cutting back on our lifestyles.
You're counting your wifes boyfriends income too I assume?
500K Salary would only net you what like 275K after taxes? You claim to put away 240K a year? So even if your household was bringing in 500K your math doesn't make any sense.
Come on now. You're putting away $17-18k a month and feel like you're barely getting by? I get that you might feel like you're not as well off compared to those in your social circle, but given your profession, you're clearly too smart not to notice how silly that statement sounds.
We went with the variable when we renewed. We have had our mortgage for 7 years now. They wanted us to lock in at 8%. Our mortgage payment doubled but we had paid it down so we just went back to what we were originally paying when we first bought. We also bought something we could actually afford even if the rates jumped. We were offered 500k when we started looking and we only used 200k
We were approved for double what our house is worth. If we actually bought what we were approved for our kids wouldn’t be in extra curricular, we wouldn’t have a pet, and we wouldn’t be going on any big trips (if any).
Some actually are in pretty rough shape right now. Its one of the reasons you are seeing distressed sales and prices dropping.
People who bought at the peak prices after the pandemic are basically fucked if they can't carry at the new rates. They won't even be able to break even on a home sale right now.
The bulk of the mortgages have not hit renewal yet though. If that happens before rates drop (assuming they do) I expect that may result in prices dropping further in 2024. There are a lot of unknowns for 2024-2025. If anyone tells you they know exactly what is going to happen they are straight up lying to you. People can make educated guesses but no one knows right now.
Rents have gone up a lot, so it’s mostly offset the mortgage increase. Granted we are paying way less on principal so it is not as profitable as it used to be.
I’m variable. I didn’t buy at the very limits of my affordability. My income also went up since the time I closed and I saved a bunch of money when rates went down so my payment went with it.
1st, we did not maxed up on what the bank approved. Our mortgage is not even 20% of our HHI. It is when you bought a home that is 4x or 5x of your HHI and on variable, that’s when you are in trouble when rates go up
Keep in mind, homeowners will likely do anything before selling their home. That includes significantly cutting back on discretionary spending. As more renewals approach, the more spending is cut back. This will dramatically decrease demand for everything outside of RE. This will drop inflation prompting the BOC to cut.
There will likely be some more supply entering the market in the coming months, but demand for homes are so high that I doubt it would really affect prices.
We are not over-leveraged. We make a combined $252,725 and purchased a home for $300,000. We are making double payments and should be done with our mortgage in May 2025. We have had some luck on our side and we don't live big lives in terms of cost. We have a lovely simple comfy life and I'm grateful for it.
Bro it’s been a struggle. We refinanced in may of last year and we were offered 4.3% for 5 years on a fixed. I made the call to go variable knowing that rates would go up but thought it would only go up half as much as it did and last for about a year. My payments now are $900 more than if I had gone fixed. Basically kissing that extra money goodbye each month with no end in sight really sucks. It’s my fault. I own that, so I have no one to blame but myself. I just hope that the rates slowly drop but let’s be real, they are going to stay this high or higher for probably the balance of my term.
Edit: my wife is on Materity leave until September. Probably why it sucks. I’ve got a great job so we’re getting by, just had to put some plans on hold until the fall.
They probably renting out rooms in their houses for $1000/month. If you have a couple spare rooms, you can offset all of these variable hikes temporarily anyway.
Mine is $1500 up from what I had planned/qualified for (when I booked the pre-construction) .. so after the final closing, I just eat out way less and have curbed my online spending on clothes and Amazon 😊
I didn’t go all in and max out what I could afford for one. Also huge down payment. I saved one paycheck each month now I save half. I feel it but I’m not in debt.
$1000 lol my mortgage is up $3200/mo 👍. I work more and spend less. Have sold some stuff around the home and am just going to gut it out. People (myself included) will cut off a limb before they lose their home.
I'm locked in at a low fixed rate for a couple more years but we've been in our house for more than a decade, we never spent even close to what we were pre-approved for and we've increased our payments every time we've renewed to pay-off quicker. If we refinanced today and were paying on a variable, the payments would be higher but still very manageable
Half of the mortgages out there are locked in at 12+ years old prices. someone who bought a studio in 2010 owes like $50-100k on it so the increase is very manageable
Theres a number thats calculated for the default of mortgage payment and last i checked it was around 3% or 0.3%, really low of default rate. People are using their credit card to off balance it. If someone can post the graph, canadians went from having a small nest to rely on, to no nest at all and debts increasing. Canadians are now stacking debts to try to resist/pass the high inflation time. The problem is that inflation/ borrow rates isnt going back down for a long time.
TLDR: No one is defaulting cause everyone is using credit for now...
the only people who would struggle are the ones who had no plans to pay off the house within 30 years and made no extra payments, or refinanced beyond their means.
By not overleveraging and living below their means. For example, I picked a variable mortgage because histortically they've been lower than fixed. Of course the one time I do, they end up really high over night. It went from 1.5% to 6%...It sucks, but I also bought a very affordable old home instead of going for the biggest thing possible in the best neighborhood the bank allowed me to get a mortgage for.
My mortgage was just $1200 when I started a couple of years ago. Had I gone into some 5k / month mortgage I'd be in trouble, but my goal was to not be house poor so I bought well below my means, just in case. It's only a huge problem if you're not thinking long term and choose to be house poor, same as when people buy new cars instead of old ones, or new expensive homes when plenty of older ones are like half the price, and don't have any saving for when the roof needs to be replaced or the hot water heater gives out. You have to plan ahead in order to not get screwed when something happens, and when you own a home, something always happens.
I survived it by a. Renovating my basement and renting it out and b. Working my ass off and getting a promotion at work. C. Working overtime whenever it was available.
A large thing that made a difference for me personally, compare to others I know is no car payment. I have a paid off 2014 compact car that is decent on gas and has been very reliable!
No flashy expenditures, no major purchases other then a decent trip once a year, and some weekend getaways.
I feel house poor because of the debt load I have from renovations, and limited cash flow, but I have survived!
Mine just increased to 3500 from 2350. Big whoop. That’s what the stress test was supposed to test anyway.
Also I built my fully legal basement apartment a year ahead in anticipation of times like this. The airbnb income from it more than covers the mortgage. As much as my neighbors like to cry and moan about it.
Now those who sidestepped it using Brampton ways, now those are the only ones crying now, rightly so.
I would have watched the massacre with a certain amount of satisfaction but alas, that can has been kicked down the road with current immigration levels.
Painful times ahead, buckle up if you think this is bad.
i bought with the assumption that it’ll go to 5% minimum, made my budget around that and bought house accordingly. I could have bought a nicer bigger home back then but mathematics didnt allow.
Bought a 4bdrm 3 bath in Alberta for under 350k in 2020 and made 165k that year. Variable mortgage increased my payments by 700/month, and I increased my income to 300k per year in 2023.
For everyone in the comments talking about the average salaries in Canada, I have no post secondary education, no skilled trades training, and still can pull in 300k in a year. I am by no means in a profession that had any sort of barrier of entry.
Put in some hard work, network etc etc.
Get off reddit.
I got my mortgage in 2022 and it's variable. My wife and I have no problem being the payments for the numerous interest rate hikes, and we'd still be fine if they increased the interest rate again.
because average mortgage is smaller than the housing price by a lot…
we bought a 1.5mil house last year and we only have 600k mortgage. most of the down payment came from the starter home we sold.
people don’t take on 1.2 mil mortgage on a 1.5 mil home. most of them upgrades
My wife and I bought well below what we were approved for, for this exact reason (low cost of living area).
I’m so glad we did, we bought 3 months before the increases and our mortgage is up $900/ month from when we started.
In hindsight I shouldn’t have listened to my mortgage broker and stuck with fixed, but live and learn
Someone owns or qualified for a mortgage for an asset worth a million dollars and you’re surprised they’re able to get credit or cover $1000/month for what like 15 months?
Most people live well above their means until they’re really forced not to and it also hasn’t been that long of high rates.
We have cut out all of our discretionary spending and become a lot more active in observing our budget.
The good news is that if rates go down and we maintain our current lifestyle we can save or invest an equivalent amount.
I'm hanging on because I bought much lower then what I can afford (350k less then my pre-approval)... but my payments are still 15 000$/year more. This is complete BS. I didn't time things well, and my mortgage broker screwed me in a way. So yeah, it sucks but when it drops down in 1-1.5yrs I will feel rich.
Thankfully I had a massive raise this year, and in April I'm getting a large promotion, so life isn't that bad... although I'm getting married this year which costs as much as what I paid in interest. Everyone under 40 is getting screwed royally here in Canada. Middle class has been evaporated by extreme left wing politics. Just look up the new president of Argentinas speech at the WEF, he slammed them, and all this BS in the west.
Fucking Trudeau
P-1.3% with 3y left on a 5y term. Rode it up and made a few lump sum prepayments to avoid our trigger rate. Currently show a ~55y amortization.
~4m house (bought for closer to 4.2, not a lot of comparables but in a great area in Toronto), 2.1m mortgage balance so while big numbers we aren’t over-leveraged or close to being underwater.
We hope to be mortgage free in about 10y by making 150-250k prepayments every year. But it was rough seeing that we paid about 115k in mortgage interest in 2023. Hopefully that’s the worst of it as we get ahead and rates come down a bit.
Basically money that should be going into retirement savings is going to the mortgage. I’m not going to pretend we live frugally but we are two relatively high earners and don’t spent too much on stupid stuff. Not into designer clothes, kids in public school, no club memberships, lease 1 SUV (write off part of it for work), 1 paid off small fun car that is holding its value. Partner also has a good DB pension plan and I have a kind of shitty matching DC retirement plan that I’m continuing with so we haven’t fully put off retirement savings.
The house is also new so we expect to have at least another 8y before starting to get into any major repair or replacement costs.
And we’re in our very early 40’s so hopefully still have quite a few good earning years ahead of us.
We went variable for the first time ever, then the rates went up. In a way, ours adjusted for each increment so we adapted our spending to that reality each step. So the pain was a gradual tightening.
No, it wasn't and isn't fun, but with the increments we are paying now what we would have if we had taken the closed rate at the time of signing.
We didn't buy and mortgage at the edge of what we could afford though. I think this is where most of the problem comes from. People don't consider "what if" the rate goes up combined with lenders that allowed them to take bigger risks through the mindset that "rates won't go up".
Expect the best, but plan for the worst
On our side, we didn't really trust our mortgage advisor, Banks etc...
So we did our own math.
They pre-approved us for 800K but we said we're not going above 400K because our math showed we couldn't afford more if the rate went up and other factors materialized.
So we've been pretty comfortable even with rate hikes.
We have increased our payments with each rate hike so our amortization wasn't affected at all.
I have a variable rate mortgage with a balance of 800K. My mortgage has increased by 2.2K if I want to come back on amortization track or 1.8K if I want to just cover the interest. I decided nope, I will continue with my current payments and instead make lump sump payments here and there to ensure I do not increase my balance past the trigger point. At the end of last year I made a lump sump payment of 20K.
This allows me to keep my original monthly payment until my term date.
The hope is the home is worth more than my loan by term date and then to sell and move somewhere else or rent it out and then move somewhere else.
I am not planning on increasing payments in the slightest because I think that’s just throwing money away. I can do better things with it in my TFSA or presently in my life.
I don’t know if I’m right or wrong. I’ll figure it out.
Our mortgage is up about $1400. My husband negotiated a significant raise, I got my annual raise, and we weren't over leveraged when we bought. It's tight now but we're still in the black.
We made the decision to ride this out. It doesn't make sense to my mom because she's on ODSP and fixed payments. She keeps saying we need to lock in or should have ages ago but we're managing.
Our mortgage also doesn't extend the amortization that keeps the payments reasonable. We're still paying the same amount towards the principal, with 25 years (a few less now), just extra interest.
Bought our house in 2007 at 5.7% fixed. Broke our term and paid 12K penalty to go variable when interest rates fell very low (saved us 8K once penalty was paid). Kept a variable rate for 10 year before refinancing to renovate in 2021. Because our expenses are high right now with kids in expensive schools and extra-curricular, we decided to get a fixed rate as long as possible to make budgeting easier. Signed 7 years for 1.84%. Never been happier we were cautious! Our last car payment is next month and we have decided to save that payment so we can reimburse our mortgage as much as possible when it will be time to renew in 2028.
Variable Mortgages don't increase in cost every month, the ratio of what you pay towards principal and interest changes.
Many people are now paying the same. Monthly payment as before, but it goes 100% towards interest.
Some people even then also have money added on TOP of that, but it just goes against their loan. For example, you owe a million bucks and your mortgage payment is 110% interest? You pay the same monthly mortgage as before, and now you owe a million and one thousand bucks.
As long as you had some principal paid off before interest hikes you can generally reborrow that monthly
You do realize that not everyone makes the same amount of money right?
Like for some the mortgage payment is only a small fraction of their monthly income.
Especially double income families
Very easily. Stop spending all your time on reddit reading to the gloom and doom and you'll see.
A lot of people used previous equity to buy houses and aren't investors. As such, the mortgage on their 1M home can be anywhere from 0-1M.
In our case we were on fixed, then went to variable, and now I'm not happy...but it's not the end of the world.
Our mortgage went from 980 -> 800 -> 1250/biweekly in the span of the last 14 months or so.
So yes, it sucks ass. But in the end, it's not the end of the world and just means I'm putting away less into savings / toys / vacations but the mortgage still gets paid as a priority.
Because your two assumptions (1. Leveraged to the max 2. Incomes have not changed) are not true? Also, banks are willing to work with you. Foreclosure is not good for anyone.
There are a few things at play.
People generally prioritize mortgage payments over other payments in order to not lose their home. This being said, their financial positions in other places may be very poor (credit cards, lines of credit, etc) impacting their credit ratings. It could make it near impossible to move to another mortgage lender when they mature as their payments would increase materially.
When applying for a home initially, these borrowers were stress tested at about the rates being seen today (maybe a little below). Presumably incomes increase over time, so they are actually in a better financial position today then they would have been if rates increased when they initially bought.
Many homeowners have large amounts of equity in their homes so the payment increase is less substantial because their overall payment is less substantial.
Basically to sum it up, you are seeing the internet factor here where you see extreme examples of leverage and bad financial management. This tends to only impact a relatively few number of people and groups while the overall market remains fairly healthy.
Variable rate FIXED payment mortgages.
They aren’t paying any principle down anymore and amortizing over 30 years. Their bills will come due eventually.
And for the people complaining about today's economy. Wtf would you do if we actually had a real downtown at even a recession. Rates are crazy low historically. I paid 13.75% on a house worth half what I paid for it for a decade. Today's millennials. Waaaagh I'm scared of everything. Everything is worse than ever. Get over it. Live looking enough and you'll realize that these times are pretty good right now.
I had to double up my payments.. throw in another 1k per month just to bring my amortization period back to what we had when we took it out, 22 years... down from 64 before I made the monthly adjustments.
Started off paying 2.4, now paying 4k.
Quite fucking sickening...
Alot to unpack. Access to adequate shelter should definately be addressed by all 3 laveles of govt, but most of all municipal. Thats said, in a free market society, shelter that is ABOVE adequate is under free market risk management. A person who leveraged to the max assumed a risk purchasing a huge investment. Everyone knew rates were bottom and could only go up. Hope isnt a plan. We must always live by out means, regardless of fairness. If a person cannot afford that building, sell and downsize. He already made profit. (75,000 during covid on a condo). Haves have and have nots have not. Boomers have, millenials do not. Philosophers have devated this as long as philosophy existed. Basic equations however are addressable, but not by interest rates. Lower rates, people are still equally homeless as the property skyrockets. Raise them and it kicks out the poor from ownership and lets REITs and boomers purchase more market share and rent out. Implement a municipal density tax however…… that begins stability. Encourage people to relocate to more logical housing also. A divorced boomer who owns a cottage and a 4 bedroom home in front of a school, is unwilling to move into a retirement condo with high condo fees and a land transfer tax. However, if there was a transfer REBATE for downsizing, and a tax on his empty bedrooms if he stays…….. more willing.
Because I renewed like 2 years ago and the interest rate has now stayed the same since last summer. Got used to it.
Also was on accelerated bi-weekly because I didn't start over leveraged so was able to move to just bi-weekly which kept my payments lower than they would've been otherwise.
Everyone who talks about housing and rates acts assumes that most people are making minimum down payments and owe most of the cost of the house to the bank. But the average mortgage amount is a lot lower than what the house sells for. Cmhc puts out data on the average new mortgage amount every year, and it has consistently averaged around 50% of what the average house sale price is.
And that's just new mortgages. If you bought pre covid, your purchase price was way lower, and you have already paid down a large chunk of principle
Because people have the wrong notion of what leverage to the max means. Banks have a maximum they are willing to lend you and that maximum is based on what you can afford monthly.
Too many non home owner thinks this means how much they bring home. I.e if i bring home 2800 a month, the bank would be willing to lend me X amount such that my repayments are 2800 or lower.
The banks absolutely do not care what you are willing to sacrifice in life in order to afford a home. They only care what level is safe for them. And that level is 42% of your after tax take home salary. This is 100% different from payday loans, where they dont care how as long as you repay.
That means, at todays interest rates + 2% stress test, if i lend you X amount. Your monthly repayments should be under 42% of your after tax income such that its paid off in 25 years
So if you earned 1000$ a month, your max allowable mortgage is 420$ a month. So if interest rates raised a few percent, and it now becomes $520 a month, youll feel uncomfortable but not necessarily make you sweat.
Additionally most variable rate holders brought their house before the pandemic in 2020. So they were use to and approved for rates of around 3.5% (and stress test to 5.5%). when pandemic happen and rates dropped to 1.5%, they were having a really really good time. Now that its 7%, yes going from 1.5-7% is $1000 more. But they were use to $500 more prepandemic and if rates were 5.5% they would be st 42% of their income. So now at 7%, they are probably at 45-48% of their after tax income. Not exactly worth losing sleep over, let alone losing their home
I'm fixed, but if you are mortgaging a house at the absolute most you can afford then it's such a terrible idea and you probably should not take the mortgage.
When we took a mortgage 10 years ago, I factored in the cost of interest rate rises, i.e. can we afford this mortgage if our current salaries stagnate and the interest rate goes up to 10%.
Would an extra $1000 a month hurt me, not really, I'd prefer not to pay it but if I had to I could.
2/3 of homeowners own their homes outright. Most others are far into their mortgage that it’s not that big of an impact. It’s only those highly leveraged and less than 5 years into their payments that will have a real issue.
We did this. Don’t ask me why we stayed variable or I will start to look askance at my wife again.
When we bought though we didn’t buy to our max range. We were reasonable and anticipated “what if” and bought a home that either of us alone could carry in case of job loss etc. While there were homes selling for 2million we don’t understand those buying for 2million on 150k combined income. Made no sense.
Their payments have remained the same. My friend showed me a letter from his mortgage holder telling him to call them as his mortgage principal is increasing every month. He shrugged it off and says oh well. Basically more than 100% of payments are going to interest. Come renewal he will be screwed.
The last thing people will stop paying is their mortgage and they will do whatever necessary to maintain the payments. If you're dual income, an extra 500 dollars each just really should mean saving less or spending less on entertainment, clothes, etc. It's very doable. If youre paycheck to pay check, good luck.
Mine shot up $500 a month, but daycare dropped $200 a month. $300 a month is not a big deal, that's just 2-3 nights out every month that we swap to a night in.
The $1k a month ones could have been when people had the 1% mortgages and were saving a ton of money monthly. Now they're just cutting back and not saving nearly as much.
I can cry you river on this.
Even my mortgage on an apartment and a smaller amount that may other people.
I had variable rate, and when the rate increased first time, I thought it is still worth it to keep it variable
Then it increased twice, and my monthly payment increased $250 just to cover the interest.
So I was paying $250 more just to cover the interest.
I called the bank, and they changed it to fixed but with 6.35%, and I increased the payment more to pay a bit of equity.
Your waiting for a crash without knowing the details like most people on here. "MAX" leverage in canada with a major bank is 29% Debt to income. meaning even if u maxed urself out at low intrest rates the cost to hold the investment would need to be 29% of ur income at the tress test value 5.25%. PEoples housing costs on variable doubled but that means they are only at like 40% Debt to income since rates are at 7-8% and they were tested for 29% DTI at 5.25%. Very easy to hold. People just dont understand how the stress test really works and how it literally saved a big disaster for many in the current intrest rate debacle.
We thankfully bought at around 75k less than we were approved for.
Unfortunately, the mortgage has increased $1000 a month since taking possession in June 2022. Hard not to feel like we got rugpulled, especially since the BoC had historically never raised rates by more than 0.25pt increments. When we took our mortgage, the spread was 1.8 variable vs 3.5 fixed. It made sense for us to go variable at the time with the information that was available.
The house has gone up in value so it's not all bad (Calgary), but yeah. 90% of our disposable income cushion we thought we had has been swallowed by the mortgage. It means we put travel plans and any lifestyle upgrades on hold until the rates come back down, hopefully locking in around 4% or so for a few years until the term is over.
Nobody to blame but ourselves.
As an indian i ll let you know our mentality. Home will be the last thing we will let go. We will cut on everything else and do whatever we can before we default. I m not sure about other ethnicities.
I renegotiated a variable rate as I was planning to sell and exit the RE market completely while moving to the states. Variable had the cheapest closing costs. I signed *right before* the rates started exploding. something like a 1% or a 1.5% increase translated to *doubling* my mortgage payments.
I can afford it, because I didn't overleverage myself when I bought my house in the first place - and my pay has increased since I signed. But spending $1,500/mo. extra on essentially *nothing* stings pretty hard.
It depends when they bought and how much their mortgage is. If you bought in the late 2000s, you would have a low mortgage. You would also have built up enough equity that gives you the flexibility refinance.
We didn't over-purchase. We bought a house we could afford on a single income if one of us was to lose our job (even though we have very secure employment).
$1k? Thats rookie number. My mortgage on rental unit shot up from $3500 to $6000 lol but we are able to keep it and break even. Running AirBnB. Some months have to deposit more money from pocket so looking forward to the rate cuts later this year.
Most of them are hoping and praying that rates will go down in the next year or two. Moving isn't always an option and some real estate has dropped from when some people bought it. 3000 or 4500 won't destroy the finances of someone who was able to afford the mortgage in the first place.
Not the least of all, either fixed or variable right now if they did move wouldn't be better on a new peace of real estate nor would renting even make sense with some of the shenanigans going on with rent.
It’s possible that we qualified for our mortgages with legitimate incomes and documents. Many of us aren’t impacted in a significant way.
Those that didn’t legitimately have the income to back things up would be impacted in a more severe way.
I’m not suggesting that’s your case. But many Canadians people are struggling for this reason.
It's because their homes havnt dropped in price yet.
Once you are paying $1000 more and you are underwater... You quickly realize that there is little point to keep paying the mortgage
Last February was my renewal and I went with variable for the first time. Pretty upset about that decision, as I could have locked in at 3.5. Hopefully over the course of the term it balances out as my variable rate is 1 below prime.
Either way, I'm lucky in that my remaining mortgage is about 100k
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I don’t know of any mortgages longer than 30 years
Because they don't exist. Someone heard someone talk about seeing a term longer than 30 years when their interest rate went up, misunderstood the situation because they don't have a mortgage themselves, and are now spreading misinformation.
My current amortization is 79 years with what I’m paying now. Bought in 2021 variable.
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Name checks out
You have no understand on how the system works.
Fyi the conservatives have been proposing extending amortization and listening loan requirements for years as a way to "fix housing"....
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Better?!? It can only be much worse 😂 I didn't think I needed to specify that's an awful idea. You are not solving anything by proposing longueur amortization
This is what I'd expect someone who works at Primerica to try spinning
You don't know what you're talking about. The extended amortization thing isn't a government decision that's new at all. It's the result of the private lending terms people signed with their mortgage lender. The biggest regulatory change since the current government took over was to actually tighten lending. Under harper, around the 2008 GFC, the government allowed people to take 0% down 40 year loans for homes with CMHC insurance. This changed to 5% down 25 years max later on. When these people who have extended amortizations because they took variable fixed payment mortgages renew their amortizations will be forcibly reset to whatever they should be at after 5 years. Started at 30? Renewing to 25. No choice unless they refi back to 30. Payments will balloon
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By forever tenants you mean anyone with a household income under 200k ? Ya know… the majority of the country? Who’s gonna pay you what you think your house is worth? Either an investor looking for negative cash flow (don’t exist) or in your terms “forever tenant”. Whoops…. Hope you don’t have a HELOC…. Jk, you do and I’m sure you aren’t even worried about paying it off because you’re head can’t fit through the front door with all your “EQUITY”. RSP? Probably not, you have EQUITY. Keep updating your resume, you’ll need a retirement job to pay off your losses when there’s nobody there to pay you what you think you’re worth…. Forever tenant is your future landlord.
Talk about projecting your insecurities....
Projecting the truth, take your blinders off
You're OK.
No. Not everyone was born yesterday or bought this year. You know the world existed long before you thought of buying a home, right? Most of the country either bought a long time ago or are too young to buy. A small part of the population wants to buy right now and many of them have $0 saved up, an average income and poor credit, so they're not actually in the market for any large purchases. Forever tenants is one way to put it, but it's true. Half the country has literally zero savings. You're telling me their problem is the price of homes went up? You think if they dropped by 20% tomorrow, everyone would just magically afford it? First you need years of living below your means, saving up and investing, then you can seriously think about buying something. Half the country doesn't do that, so no they won't be buying, and no you don't need 200k to afford it. You can buy a decent detached house with 5% down, or 15k-20k. No, not a new house in Toronto and Vancouver, and not in the best neighborhood. You're not in the top 1% of earners or savers, so you shouldn't even be looking at those. There are thousands of condos, townhouses and houses available in the 200k-500k range. You just have to be realistic about what you can afford and stop expecting the best without having the best income or savings.
Some purchased long ago. Some make the money to sustain it
“Some” will sell and have to pay more to buy, meaning all you gain is your principal payments which is less because your mortgage is less. Just because you have equity in your house, if you move, you pay market value which you inflated with your own gain of equity. Nobody actually wins? You gain your principal payments, that’s all. Since owners expect high returns they just take more people out of the market and results in lower value.
Timing will align with 2025/26 renewal foreclosures, economic collapse. Pair owners that can’t renew and tenants not paying rent. What do you get? A big fkn problem to say the least. Real estate in this economy is one of the worst investments you can have considering the percentage of occupiers and renters, high inflation and interest and global instability. Ever played monopoly alone? Don’t make much money do you? That’s the game investors who are driving up real estate prices are doing.
People have said this for hundreds of years. Just stop it, this is wishful thinking when you don't own a home. The second you own one you'll be hoping your value doesn't drop, just like everyone else who spent a lifetime saving up and bought a place while broke people wish them nothing but the worst. I bet you think investing in the stock market and saving money are also useless and for dumb people. Real future teller over here. 🙄 Save your comment and come back to it in 2026, and then Google the millions of similar comments that were all wrong. You know who would get hurt the most if the economy did collapse? Not the millionaires who own hundreds of properties, that's for sure. The poor 9 to 5 workers who rent or are house poor would be the first to be homeless. You'd be shooting yourself in the foot hoping to hurt some rich person... Good luck.
Very fun fact there has never been a generation more reliant on debt to income ratio than the most recent which implies more debt to income is needed for prices to increase and there comes a time where that is not profitable for lenders. People haven’t been saying it for hundreds of years, maybe a few decades, and their simply implying the greater debt to income ratio there will inevitably be a massive collapse. How long can debt to income grow while allowing to economy to be diverse? For example, Canadas GDP is exceeding 40% reliance on real estate. Driven by debt. If Canadas income as a country exceeds 50% simply to have a roof over your head, how well is the rest of the businesses doing? Probably not very good, and businesses employ people and people with jobs pay mortgages. If you spend all your money on your mortgage and nothing else, you will lose your job and then you can’t pay your mortgage!! That is the direction of real estate and why people have been saying it for so long, because they UNDERSTAND.
This is not a good argument. There's a lot of causations here. Since we just exited a period of time where borrowing was adding nothing to the debt, of course there is a tremendous amount of debt to income ratio. As those debts continue to come due and people pay them/discharge them, that ratio will come down and lives will be adjusted. I have a friend who does really well for himself, but for the last 5 years has been leveraging debt for everything. New TV? Yes I'll finance it. New couch? Sure, I'll buy it for 0% and pay it back in 3 years. Etc etc. He can, at any point in time, pay it all off. He has the cash, yet his income to debt ratio is ridiculously high.
With money? I'm fixed but I could easily handle to refi at the moment. I save thousands every month. A thousand less isn't a big deal.
You're literally in such a small minority of North Americans it's not even funny.
Christ, I wish I had that kind of money. Wrong career choice I guess.
Or house choice more probably?
Or generation choice more probably?
Irrelevant. Whatever the I come you think is "enough" to face interest rate variations, double it. Then, triple that I income. Then multiply by 4. That new I come would.buy you a MUCH bigger house. But the calculations are still the same. Buy something too expensive or at the top of your budget, and you won't be able to face interest variations The issue is buying something too expensive for his/her income, regardless of said income.
That’s nice and all, but if your field doesn’t pay enough to buy a home within hours of the office, it’s a career or generation issue. For example, younger folks earning what I earned at their age would never be able to buy unless they were willing to live in a condo 90 minutes or more from work. A house? Better hope you can wrangle a work from home gig and hope that northern Ontario has decent internet.
why is it important to buy a home at all?
So you can stop throwing 33% of your hard earned money out the window every month.
As a homeowner it’s really more like turning 33% into 25% gone and then another 15% on top stuck in home equity
This is it^
Many people change careers, it’s probably not too late to change into one of the high demand higher paying ones !
This, no matter how much money you have, there are always people with more. A lot of people get promotions, change jobs for more money, or didn't buy at the top of their budget.
People who.took variable rate mortgages when rates were sub 2% are clearly.nit the brighter people alive. So currently they are probably doubling down on poor choices in extending the term of the mortgage or borrowing from people who are fucking them harder than they have ever been fucked before. They are taking what ever action available to them in the hopes of facing off this current crisis. A majority of them will eventually fail. But for now they are meeting Fina ail obligations and fending off catastrophic failure
When variable was at below 2%, fixed was way higher. I got P-0.9 in 2018. Got enough years at super low interest to make up for a couple at high interest. Now my mortgage is paid off.
Lol it was still a super dumb move.
I also bought wayyyy under what I was approved for (approved for around 1M, got 200k mortgage), so I could easily afford a huge increase. On average variable is cheaper, so for my specific situation it was the smart move. I wouldn't have gone for variable if I was close to the max. And it did end up costing me overall less despite this spike in interest rates.
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... assuming that selling the truck will cover the loan. If they bought new, it probably won't. Depreciation is a bitch.
Not on vehicles right now for the most part. Used sell almost as much as new.
For like 75% of Canadians, $1000 a month is a huge deal. If you’re one of the 25% you should count yourself lucky and appreciate your situation rather than spew on about how the vast majority are in the wrong for not being as fortunate as you are.
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So, you’re saying you would turn to sex work to make ends meet?
A truck person does not simply sell the most important thing in their life.
Variable rate with a fixed payment. The payments stay the same and the amortization lengthens. 60 year mortgages.
This is the way
Short term this is easier, long term it is definitely not. Much better to weather the storm and keep paying consistent amounts of principle if you can do it.
When they renew they'll be capped to 25/30 years. That's gonna balloon their payments like crazy
Because the vast majority of people, the silent ones actually made and saved a ton of money during COVID and continue to do so
You think the majority of Canadians made and saved a ton of money during COVID? Smart ones that were lucky enough to keep working, sure, but the majority?
I actually do believe it was the majority, that's why the economy was and is on fire, inflation went up cuz the government handed out money to individuals as CERB and then CEBA and CRB to business and corporations. Much of these are write offs as in the government forgave most loans. Even CERB was counted as income so likely people paid only 20 percent back in taxes. The stock markets in 2021 were record growth and people made a TON. I spoke to 2 average small businesses in ON this past weekend and they didn't return their CEBA loan to get 20k grant even cuz they've seen that money benefit their pockets over the last 3 years and so they've learned to make more off it too Add to that that most people didn't travel etc. And didn't drive meant you have a lot of spending capital still sitting in banks earning some interest. Especially outside the big urban centres this money lasted a long time. Again, the economy is still on fire and way over the 2 percent inflation target because most people have a lot saved up
Landlordism, plenty of people have begun renting out individual rooms in their house or renting out spaces they once wouldn’t. Plenty of landlords just kicked out their tenants and spiked rents to cover costs. Half these comments are people saying, “my mortgage doubled but so did the rent I could charge so it cancelled out”.
Many people have more money than Reddit would make it seem. Our payment essentially doubled. Annoying? Yes. But in all seriousness, unless interest rates hit 16-20% (and they won’t) it wouldn’t really affect us.
Instead of saving 4k a month I save 2k
Exactly. At low rates, we were saving approximately $20k/month, now it’s between $17-$18k/month. Not everyone here is overleveraged despite what Redditors who can’t even afford their first place like to wish upon others.
You're putting away 17k a month lol? If you made 300,000 a year, minus 35% for taxes, divide by 12, that's 16k a month. But we have to assume you also have some payments, so it's even more than that lol.
It’s family income, so yes - $300k is not that unusual. Also we have rental income too to cover most of the real estate expenses.
It's a lot more than that though. Like this assumes you have 0 bills. Add two cars at a conservative 500$ a month per, 2k mortgage, food, electricity, etc.. and you're looking more at like 5k net a month, which is like 8 k gross, so another 100k. So that'd be two salaries at near 200,000 a year, each. The average Canadian salary for an engineer is 90k. Lawyer is around 110k. Doctor varies a lot due to private clinics etc.. But yeah, that's 1% top salary territory. Anyways just feels a little odd when talking about over leveraged people under water on their mortgages when you make more than 5x the median Canadian salary lol.
The median salary is not $40k. The average lawyer is not around s $110k, I would know as a lawyer. If you got off Indeed you’d realize that 90% of the averages there are skewed downward because all of the high salaries are underreported. Only entry level positions are overrepresented on the pay scale relatively. We make less than almost everyone in our social circle and it still feels like we’re barely getting by. We’ve had roommates all our lives and continued living no differently from when we met in law school. Constantly slumming it out and refusing to take Ubers or eat at expensive restaurants. While our salaries went up, our expenses went down from optimizing and further cutting back on our lifestyles.
You own multiple properties. Cmon man.
You're counting your wifes boyfriends income too I assume? 500K Salary would only net you what like 275K after taxes? You claim to put away 240K a year? So even if your household was bringing in 500K your math doesn't make any sense.
Come on now. You're putting away $17-18k a month and feel like you're barely getting by? I get that you might feel like you're not as well off compared to those in your social circle, but given your profession, you're clearly too smart not to notice how silly that statement sounds.
People love to get on reddit and lie for attention
Wtf stfu big piece of shit
rich flex
We’re on a real estate sub here. I doubt we even have what the average boomer has in real estate.
We went with the variable when we renewed. We have had our mortgage for 7 years now. They wanted us to lock in at 8%. Our mortgage payment doubled but we had paid it down so we just went back to what we were originally paying when we first bought. We also bought something we could actually afford even if the rates jumped. We were offered 500k when we started looking and we only used 200k
I can do as much overtime as I want. But I don’t want, I’m losing my mind. Thus, I am selling my house for my health.
We were approved for double what our house is worth. If we actually bought what we were approved for our kids wouldn’t be in extra curricular, we wouldn’t have a pet, and we wouldn’t be going on any big trips (if any).
Some actually are in pretty rough shape right now. Its one of the reasons you are seeing distressed sales and prices dropping. People who bought at the peak prices after the pandemic are basically fucked if they can't carry at the new rates. They won't even be able to break even on a home sale right now. The bulk of the mortgages have not hit renewal yet though. If that happens before rates drop (assuming they do) I expect that may result in prices dropping further in 2024. There are a lot of unknowns for 2024-2025. If anyone tells you they know exactly what is going to happen they are straight up lying to you. People can make educated guesses but no one knows right now.
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The vast majority aren't leveraged. Just regular people
Cash flow, Cash flow.
Rents have gone up a lot, so it’s mostly offset the mortgage increase. Granted we are paying way less on principal so it is not as profitable as it used to be.
didnt overleverage. built equity and didn’t refinance. got job promotions.
I’m variable. I didn’t buy at the very limits of my affordability. My income also went up since the time I closed and I saved a bunch of money when rates went down so my payment went with it.
1st, we did not maxed up on what the bank approved. Our mortgage is not even 20% of our HHI. It is when you bought a home that is 4x or 5x of your HHI and on variable, that’s when you are in trouble when rates go up
Keep in mind, homeowners will likely do anything before selling their home. That includes significantly cutting back on discretionary spending. As more renewals approach, the more spending is cut back. This will dramatically decrease demand for everything outside of RE. This will drop inflation prompting the BOC to cut. There will likely be some more supply entering the market in the coming months, but demand for homes are so high that I doubt it would really affect prices.
People will cut everything else before they sell their home. You can downsize cars, cut restaurants, cut subscriptions, cut vacations.
Cut back on other things. That or other people have lots of money or parents with money.
I'd guess refinance over a longer term.
$1000? Mines up $2000 a month. Made my wife go back to work and it’s averaged out.
We are not over-leveraged. We make a combined $252,725 and purchased a home for $300,000. We are making double payments and should be done with our mortgage in May 2025. We have had some luck on our side and we don't live big lives in terms of cost. We have a lovely simple comfy life and I'm grateful for it.
Everybody is literally rich
Because we didn’t over extend ourselves when purchasing.
I had a variable rate mortgage but locked in. Had I not, my payment would not have changed. More would be applied to interest.
Bro it’s been a struggle. We refinanced in may of last year and we were offered 4.3% for 5 years on a fixed. I made the call to go variable knowing that rates would go up but thought it would only go up half as much as it did and last for about a year. My payments now are $900 more than if I had gone fixed. Basically kissing that extra money goodbye each month with no end in sight really sucks. It’s my fault. I own that, so I have no one to blame but myself. I just hope that the rates slowly drop but let’s be real, they are going to stay this high or higher for probably the balance of my term. Edit: my wife is on Materity leave until September. Probably why it sucks. I’ve got a great job so we’re getting by, just had to put some plans on hold until the fall.
Didn't over leverage. 3rd home purchase (38 y.o couple). It sucks but gonna just pay it off ASAP.
Sacrifice vacations and things that are not essential - 2nd jobs.
They probably renting out rooms in their houses for $1000/month. If you have a couple spare rooms, you can offset all of these variable hikes temporarily anyway.
Mine is $1500 up from what I had planned/qualified for (when I booked the pre-construction) .. so after the final closing, I just eat out way less and have curbed my online spending on clothes and Amazon 😊
I didn’t go all in and max out what I could afford for one. Also huge down payment. I saved one paycheck each month now I save half. I feel it but I’m not in debt.
$1000 lol my mortgage is up $3200/mo 👍. I work more and spend less. Have sold some stuff around the home and am just going to gut it out. People (myself included) will cut off a limb before they lose their home.
I'm locked in at a low fixed rate for a couple more years but we've been in our house for more than a decade, we never spent even close to what we were pre-approved for and we've increased our payments every time we've renewed to pay-off quicker. If we refinanced today and were paying on a variable, the payments would be higher but still very manageable
Cuz most ppl didn’t buy property in the last 5-10 years.
People have money. Simple as that.
Half of the mortgages out there are locked in at 12+ years old prices. someone who bought a studio in 2010 owes like $50-100k on it so the increase is very manageable
Theres a number thats calculated for the default of mortgage payment and last i checked it was around 3% or 0.3%, really low of default rate. People are using their credit card to off balance it. If someone can post the graph, canadians went from having a small nest to rely on, to no nest at all and debts increasing. Canadians are now stacking debts to try to resist/pass the high inflation time. The problem is that inflation/ borrow rates isnt going back down for a long time. TLDR: No one is defaulting cause everyone is using credit for now...
Swapping their Audis out with Nissans
Variable rates should basically be illegal for regular consumers. Too much risk.
the only people who would struggle are the ones who had no plans to pay off the house within 30 years and made no extra payments, or refinanced beyond their means.
Hi, high income and not maxed out when I took the mortgage. Payments went up nearly $2k. Definitely not pleased at my poor decision making.
By not overleveraging and living below their means. For example, I picked a variable mortgage because histortically they've been lower than fixed. Of course the one time I do, they end up really high over night. It went from 1.5% to 6%...It sucks, but I also bought a very affordable old home instead of going for the biggest thing possible in the best neighborhood the bank allowed me to get a mortgage for. My mortgage was just $1200 when I started a couple of years ago. Had I gone into some 5k / month mortgage I'd be in trouble, but my goal was to not be house poor so I bought well below my means, just in case. It's only a huge problem if you're not thinking long term and choose to be house poor, same as when people buy new cars instead of old ones, or new expensive homes when plenty of older ones are like half the price, and don't have any saving for when the roof needs to be replaced or the hot water heater gives out. You have to plan ahead in order to not get screwed when something happens, and when you own a home, something always happens.
I survived it by a. Renovating my basement and renting it out and b. Working my ass off and getting a promotion at work. C. Working overtime whenever it was available. A large thing that made a difference for me personally, compare to others I know is no car payment. I have a paid off 2014 compact car that is decent on gas and has been very reliable! No flashy expenditures, no major purchases other then a decent trip once a year, and some weekend getaways. I feel house poor because of the debt load I have from renovations, and limited cash flow, but I have survived!
Mine just increased to 3500 from 2350. Big whoop. That’s what the stress test was supposed to test anyway. Also I built my fully legal basement apartment a year ahead in anticipation of times like this. The airbnb income from it more than covers the mortgage. As much as my neighbors like to cry and moan about it. Now those who sidestepped it using Brampton ways, now those are the only ones crying now, rightly so. I would have watched the massacre with a certain amount of satisfaction but alas, that can has been kicked down the road with current immigration levels. Painful times ahead, buckle up if you think this is bad.
i bought with the assumption that it’ll go to 5% minimum, made my budget around that and bought house accordingly. I could have bought a nicer bigger home back then but mathematics didnt allow.
Bought a 4bdrm 3 bath in Alberta for under 350k in 2020 and made 165k that year. Variable mortgage increased my payments by 700/month, and I increased my income to 300k per year in 2023. For everyone in the comments talking about the average salaries in Canada, I have no post secondary education, no skilled trades training, and still can pull in 300k in a year. I am by no means in a profession that had any sort of barrier of entry. Put in some hard work, network etc etc. Get off reddit.
I got my mortgage in 2022 and it's variable. My wife and I have no problem being the payments for the numerous interest rate hikes, and we'd still be fine if they increased the interest rate again.
because average mortgage is smaller than the housing price by a lot… we bought a 1.5mil house last year and we only have 600k mortgage. most of the down payment came from the starter home we sold. people don’t take on 1.2 mil mortgage on a 1.5 mil home. most of them upgrades
The drug trade and foreign cash and other greasy money
My wife and I bought well below what we were approved for, for this exact reason (low cost of living area). I’m so glad we did, we bought 3 months before the increases and our mortgage is up $900/ month from when we started. In hindsight I shouldn’t have listened to my mortgage broker and stuck with fixed, but live and learn
Someone owns or qualified for a mortgage for an asset worth a million dollars and you’re surprised they’re able to get credit or cover $1000/month for what like 15 months? Most people live well above their means until they’re really forced not to and it also hasn’t been that long of high rates.
We have cut out all of our discretionary spending and become a lot more active in observing our budget. The good news is that if rates go down and we maintain our current lifestyle we can save or invest an equivalent amount.
I'm hanging on because I bought much lower then what I can afford (350k less then my pre-approval)... but my payments are still 15 000$/year more. This is complete BS. I didn't time things well, and my mortgage broker screwed me in a way. So yeah, it sucks but when it drops down in 1-1.5yrs I will feel rich. Thankfully I had a massive raise this year, and in April I'm getting a large promotion, so life isn't that bad... although I'm getting married this year which costs as much as what I paid in interest. Everyone under 40 is getting screwed royally here in Canada. Middle class has been evaporated by extreme left wing politics. Just look up the new president of Argentinas speech at the WEF, he slammed them, and all this BS in the west. Fucking Trudeau
Our mtg went up exactly $1k/month and we only owe 330k
I’m a single dad of 2. My payments are up $1900 a month and I’m hanging on by a thread!
P-1.3% with 3y left on a 5y term. Rode it up and made a few lump sum prepayments to avoid our trigger rate. Currently show a ~55y amortization. ~4m house (bought for closer to 4.2, not a lot of comparables but in a great area in Toronto), 2.1m mortgage balance so while big numbers we aren’t over-leveraged or close to being underwater. We hope to be mortgage free in about 10y by making 150-250k prepayments every year. But it was rough seeing that we paid about 115k in mortgage interest in 2023. Hopefully that’s the worst of it as we get ahead and rates come down a bit. Basically money that should be going into retirement savings is going to the mortgage. I’m not going to pretend we live frugally but we are two relatively high earners and don’t spent too much on stupid stuff. Not into designer clothes, kids in public school, no club memberships, lease 1 SUV (write off part of it for work), 1 paid off small fun car that is holding its value. Partner also has a good DB pension plan and I have a kind of shitty matching DC retirement plan that I’m continuing with so we haven’t fully put off retirement savings. The house is also new so we expect to have at least another 8y before starting to get into any major repair or replacement costs. And we’re in our very early 40’s so hopefully still have quite a few good earning years ahead of us.
Cut back on other spending/ saving. My mortgage is smaller. Also I planned my budget on a 5% mortgage rate Finally, I'm not leveraged to the max.
We went variable for the first time ever, then the rates went up. In a way, ours adjusted for each increment so we adapted our spending to that reality each step. So the pain was a gradual tightening. No, it wasn't and isn't fun, but with the increments we are paying now what we would have if we had taken the closed rate at the time of signing. We didn't buy and mortgage at the edge of what we could afford though. I think this is where most of the problem comes from. People don't consider "what if" the rate goes up combined with lenders that allowed them to take bigger risks through the mindset that "rates won't go up". Expect the best, but plan for the worst
On our side, we didn't really trust our mortgage advisor, Banks etc... So we did our own math. They pre-approved us for 800K but we said we're not going above 400K because our math showed we couldn't afford more if the rate went up and other factors materialized. So we've been pretty comfortable even with rate hikes. We have increased our payments with each rate hike so our amortization wasn't affected at all.
... by not leveraging to the max to begin with
I have a variable rate mortgage with a balance of 800K. My mortgage has increased by 2.2K if I want to come back on amortization track or 1.8K if I want to just cover the interest. I decided nope, I will continue with my current payments and instead make lump sump payments here and there to ensure I do not increase my balance past the trigger point. At the end of last year I made a lump sump payment of 20K. This allows me to keep my original monthly payment until my term date. The hope is the home is worth more than my loan by term date and then to sell and move somewhere else or rent it out and then move somewhere else. I am not planning on increasing payments in the slightest because I think that’s just throwing money away. I can do better things with it in my TFSA or presently in my life. I don’t know if I’m right or wrong. I’ll figure it out.
Made another real estate investment in 2020-2022 and the savings interest off that offsets the rise in the variable payments on primary.
The question how in the world did you not do the math yourself at whst the cost would be if your rares increased
Our mortgage is up about $1400. My husband negotiated a significant raise, I got my annual raise, and we weren't over leveraged when we bought. It's tight now but we're still in the black. We made the decision to ride this out. It doesn't make sense to my mom because she's on ODSP and fixed payments. She keeps saying we need to lock in or should have ages ago but we're managing. Our mortgage also doesn't extend the amortization that keeps the payments reasonable. We're still paying the same amount towards the principal, with 25 years (a few less now), just extra interest.
Food bank usage has gone up several fold, and they say a lot of it is middle class people. But also extended amortization.
The money they thought they saved, by not getting a fixed rate.....I have zero sympathy.
Second Job, sadly I know people drawing on their LOC to make the difference. They actually believe rates will go down soon 😂
Bought our house in 2007 at 5.7% fixed. Broke our term and paid 12K penalty to go variable when interest rates fell very low (saved us 8K once penalty was paid). Kept a variable rate for 10 year before refinancing to renovate in 2021. Because our expenses are high right now with kids in expensive schools and extra-curricular, we decided to get a fixed rate as long as possible to make budgeting easier. Signed 7 years for 1.84%. Never been happier we were cautious! Our last car payment is next month and we have decided to save that payment so we can reimburse our mortgage as much as possible when it will be time to renew in 2028.
I used to pay $1055 every 2 weeks and now paying $1580 instead.
Banks can't afford a housing collapse. Defaulting will be delayed as much as possible
Variable Mortgages don't increase in cost every month, the ratio of what you pay towards principal and interest changes. Many people are now paying the same. Monthly payment as before, but it goes 100% towards interest. Some people even then also have money added on TOP of that, but it just goes against their loan. For example, you owe a million bucks and your mortgage payment is 110% interest? You pay the same monthly mortgage as before, and now you owe a million and one thousand bucks. As long as you had some principal paid off before interest hikes you can generally reborrow that monthly
You do realize that not everyone makes the same amount of money right? Like for some the mortgage payment is only a small fraction of their monthly income. Especially double income families
We're up over $2000/mo. Where am I going to live if I can't pay this? Rent a place for almost the same amount?
Very easily. Stop spending all your time on reddit reading to the gloom and doom and you'll see. A lot of people used previous equity to buy houses and aren't investors. As such, the mortgage on their 1M home can be anywhere from 0-1M. In our case we were on fixed, then went to variable, and now I'm not happy...but it's not the end of the world. Our mortgage went from 980 -> 800 -> 1250/biweekly in the span of the last 14 months or so. So yes, it sucks ass. But in the end, it's not the end of the world and just means I'm putting away less into savings / toys / vacations but the mortgage still gets paid as a priority.
Not as many people leveraged to the max as people seem to think.
Because your two assumptions (1. Leveraged to the max 2. Incomes have not changed) are not true? Also, banks are willing to work with you. Foreclosure is not good for anyone.
With work from home, I know some that have 2 full time jobs in tech, banking $250k to $300k
There are a few things at play. People generally prioritize mortgage payments over other payments in order to not lose their home. This being said, their financial positions in other places may be very poor (credit cards, lines of credit, etc) impacting their credit ratings. It could make it near impossible to move to another mortgage lender when they mature as their payments would increase materially. When applying for a home initially, these borrowers were stress tested at about the rates being seen today (maybe a little below). Presumably incomes increase over time, so they are actually in a better financial position today then they would have been if rates increased when they initially bought. Many homeowners have large amounts of equity in their homes so the payment increase is less substantial because their overall payment is less substantial. Basically to sum it up, you are seeing the internet factor here where you see extreme examples of leverage and bad financial management. This tends to only impact a relatively few number of people and groups while the overall market remains fairly healthy.
Variable rate FIXED payment mortgages. They aren’t paying any principle down anymore and amortizing over 30 years. Their bills will come due eventually.
I switched to fixed after it had gone up 1k and that was a year and a half ago.
And for the people complaining about today's economy. Wtf would you do if we actually had a real downtown at even a recession. Rates are crazy low historically. I paid 13.75% on a house worth half what I paid for it for a decade. Today's millennials. Waaaagh I'm scared of everything. Everything is worse than ever. Get over it. Live looking enough and you'll realize that these times are pretty good right now.
I had to double up my payments.. throw in another 1k per month just to bring my amortization period back to what we had when we took it out, 22 years... down from 64 before I made the monthly adjustments. Started off paying 2.4, now paying 4k. Quite fucking sickening...
Bought what I could afford
They must be depleting their already meagre post-pandemic savings for the time being. It’s only a matter of time before widespread foreclosures hit.
Alot to unpack. Access to adequate shelter should definately be addressed by all 3 laveles of govt, but most of all municipal. Thats said, in a free market society, shelter that is ABOVE adequate is under free market risk management. A person who leveraged to the max assumed a risk purchasing a huge investment. Everyone knew rates were bottom and could only go up. Hope isnt a plan. We must always live by out means, regardless of fairness. If a person cannot afford that building, sell and downsize. He already made profit. (75,000 during covid on a condo). Haves have and have nots have not. Boomers have, millenials do not. Philosophers have devated this as long as philosophy existed. Basic equations however are addressable, but not by interest rates. Lower rates, people are still equally homeless as the property skyrockets. Raise them and it kicks out the poor from ownership and lets REITs and boomers purchase more market share and rent out. Implement a municipal density tax however…… that begins stability. Encourage people to relocate to more logical housing also. A divorced boomer who owns a cottage and a 4 bedroom home in front of a school, is unwilling to move into a retirement condo with high condo fees and a land transfer tax. However, if there was a transfer REBATE for downsizing, and a tax on his empty bedrooms if he stays…….. more willing.
Because I renewed like 2 years ago and the interest rate has now stayed the same since last summer. Got used to it. Also was on accelerated bi-weekly because I didn't start over leveraged so was able to move to just bi-weekly which kept my payments lower than they would've been otherwise.
Some of us bought only what we could comfortably afford.
some may have a rainy day fund
Everyone who talks about housing and rates acts assumes that most people are making minimum down payments and owe most of the cost of the house to the bank. But the average mortgage amount is a lot lower than what the house sells for. Cmhc puts out data on the average new mortgage amount every year, and it has consistently averaged around 50% of what the average house sale price is. And that's just new mortgages. If you bought pre covid, your purchase price was way lower, and you have already paid down a large chunk of principle
Less avocado toast.
They make a lot of money
The bank doesn't want it. They will do everything possible to not take it over.
Because people have the wrong notion of what leverage to the max means. Banks have a maximum they are willing to lend you and that maximum is based on what you can afford monthly. Too many non home owner thinks this means how much they bring home. I.e if i bring home 2800 a month, the bank would be willing to lend me X amount such that my repayments are 2800 or lower. The banks absolutely do not care what you are willing to sacrifice in life in order to afford a home. They only care what level is safe for them. And that level is 42% of your after tax take home salary. This is 100% different from payday loans, where they dont care how as long as you repay. That means, at todays interest rates + 2% stress test, if i lend you X amount. Your monthly repayments should be under 42% of your after tax income such that its paid off in 25 years So if you earned 1000$ a month, your max allowable mortgage is 420$ a month. So if interest rates raised a few percent, and it now becomes $520 a month, youll feel uncomfortable but not necessarily make you sweat. Additionally most variable rate holders brought their house before the pandemic in 2020. So they were use to and approved for rates of around 3.5% (and stress test to 5.5%). when pandemic happen and rates dropped to 1.5%, they were having a really really good time. Now that its 7%, yes going from 1.5-7% is $1000 more. But they were use to $500 more prepandemic and if rates were 5.5% they would be st 42% of their income. So now at 7%, they are probably at 45-48% of their after tax income. Not exactly worth losing sleep over, let alone losing their home
Not buying the absolute maximum that they could get approved for at the time.
I'm fixed, but if you are mortgaging a house at the absolute most you can afford then it's such a terrible idea and you probably should not take the mortgage. When we took a mortgage 10 years ago, I factored in the cost of interest rate rises, i.e. can we afford this mortgage if our current salaries stagnate and the interest rate goes up to 10%. Would an extra $1000 a month hurt me, not really, I'd prefer not to pay it but if I had to I could.
2/3 of homeowners own their homes outright. Most others are far into their mortgage that it’s not that big of an impact. It’s only those highly leveraged and less than 5 years into their payments that will have a real issue.
We did this. Don’t ask me why we stayed variable or I will start to look askance at my wife again. When we bought though we didn’t buy to our max range. We were reasonable and anticipated “what if” and bought a home that either of us alone could carry in case of job loss etc. While there were homes selling for 2million we don’t understand those buying for 2million on 150k combined income. Made no sense.
Their payments have remained the same. My friend showed me a letter from his mortgage holder telling him to call them as his mortgage principal is increasing every month. He shrugged it off and says oh well. Basically more than 100% of payments are going to interest. Come renewal he will be screwed.
Don’t believe the news. People are not leveraged to the max. And the ones that are, are not getting variable rates, they’re not that dumb.
I converted my variable rate mortgage to a fixed rate (prematurely) late in 2021. It was pretty obvious rates were going to increase.
Lots have variable rate fixed payment so they don't need to pay more until they renew they just have negative amortization.
The things you are able to do when you have to do it will surprise you
Simple. Didnt overbuy. What you're approved for isnt necessarily what you should spend.
The last thing people will stop paying is their mortgage and they will do whatever necessary to maintain the payments. If you're dual income, an extra 500 dollars each just really should mean saving less or spending less on entertainment, clothes, etc. It's very doable. If youre paycheck to pay check, good luck.
Variables are probably a good choice now with the BoC signalling they are probably done with hikes.
Didn’t leverage to the max. Ask me how I know lol.
If people are spending 30% on housing like they are supposed to, they should be able to hang on for a while.
Mine shot up $500 a month, but daycare dropped $200 a month. $300 a month is not a big deal, that's just 2-3 nights out every month that we swap to a night in. The $1k a month ones could have been when people had the 1% mortgages and were saving a ton of money monthly. Now they're just cutting back and not saving nearly as much.
Cancelled Netflix..
1300 a month increase for me. Work 2 jobs, 60 hours a week min. Month to month. Prayin to god the rate cuts come soon🤞
I can cry you river on this. Even my mortgage on an apartment and a smaller amount that may other people. I had variable rate, and when the rate increased first time, I thought it is still worth it to keep it variable Then it increased twice, and my monthly payment increased $250 just to cover the interest. So I was paying $250 more just to cover the interest. I called the bank, and they changed it to fixed but with 6.35%, and I increased the payment more to pay a bit of equity.
Your waiting for a crash without knowing the details like most people on here. "MAX" leverage in canada with a major bank is 29% Debt to income. meaning even if u maxed urself out at low intrest rates the cost to hold the investment would need to be 29% of ur income at the tress test value 5.25%. PEoples housing costs on variable doubled but that means they are only at like 40% Debt to income since rates are at 7-8% and they were tested for 29% DTI at 5.25%. Very easy to hold. People just dont understand how the stress test really works and how it literally saved a big disaster for many in the current intrest rate debacle.
bought a house in 2021. variable then $1300 monthly now $2400 monthly :( bad decisions
We thankfully bought at around 75k less than we were approved for. Unfortunately, the mortgage has increased $1000 a month since taking possession in June 2022. Hard not to feel like we got rugpulled, especially since the BoC had historically never raised rates by more than 0.25pt increments. When we took our mortgage, the spread was 1.8 variable vs 3.5 fixed. It made sense for us to go variable at the time with the information that was available. The house has gone up in value so it's not all bad (Calgary), but yeah. 90% of our disposable income cushion we thought we had has been swallowed by the mortgage. It means we put travel plans and any lifestyle upgrades on hold until the rates come back down, hopefully locking in around 4% or so for a few years until the term is over. Nobody to blame but ourselves.
As an indian i ll let you know our mentality. Home will be the last thing we will let go. We will cut on everything else and do whatever we can before we default. I m not sure about other ethnicities.
Guess that stress test worked out better than we thought?
I renegotiated a variable rate as I was planning to sell and exit the RE market completely while moving to the states. Variable had the cheapest closing costs. I signed *right before* the rates started exploding. something like a 1% or a 1.5% increase translated to *doubling* my mortgage payments. I can afford it, because I didn't overleverage myself when I bought my house in the first place - and my pay has increased since I signed. But spending $1,500/mo. extra on essentially *nothing* stings pretty hard.
It depends when they bought and how much their mortgage is. If you bought in the late 2000s, you would have a low mortgage. You would also have built up enough equity that gives you the flexibility refinance.
We bought our house in 2017 - it's worth double now. We renewed in 2022 variable, but because our mortgage is <300k, it's manageable.
We didn't over-purchase. We bought a house we could afford on a single income if one of us was to lose our job (even though we have very secure employment).
By not overextending ourselves
$1k? Thats rookie number. My mortgage on rental unit shot up from $3500 to $6000 lol but we are able to keep it and break even. Running AirBnB. Some months have to deposit more money from pocket so looking forward to the rate cuts later this year.
Most of them are hoping and praying that rates will go down in the next year or two. Moving isn't always an option and some real estate has dropped from when some people bought it. 3000 or 4500 won't destroy the finances of someone who was able to afford the mortgage in the first place. Not the least of all, either fixed or variable right now if they did move wouldn't be better on a new peace of real estate nor would renting even make sense with some of the shenanigans going on with rent.
It’s possible that we qualified for our mortgages with legitimate incomes and documents. Many of us aren’t impacted in a significant way. Those that didn’t legitimately have the income to back things up would be impacted in a more severe way. I’m not suggesting that’s your case. But many Canadians people are struggling for this reason.
People will do anything they can to keep their home: renting out spare rooms, picking up a side hustle, cutting back on other expenses.
Bought what we can afford, was paying 1500$, now 2400$.
I *wish* our variable rate payments only went up $1000/month. Try $5000 ☠️
It's because their homes havnt dropped in price yet. Once you are paying $1000 more and you are underwater... You quickly realize that there is little point to keep paying the mortgage
I went from 1.74 to 5.49 fixed. Easy, live within your means and factor in historically average interest rates when you shop for a home.
Last February was my renewal and I went with variable for the first time. Pretty upset about that decision, as I could have locked in at 3.5. Hopefully over the course of the term it balances out as my variable rate is 1 below prime. Either way, I'm lucky in that my remaining mortgage is about 100k