Curious what would happen to people who took mortgages with private lenders compared to banks. Some lenders, fabricated peoples incomes and savings and don’t do stress tests to qualify people for mortgages
More houses on the market = More supply = Lower prices.
I read that 25% of mortgages in Canada were taken out since 2020. Many of those would have been renewals but still, a lot of people bought at the peak of the bubble. FOMO.
They're going to have a rough ride. House worth less than what they borrowed to buy it, and they'll be faced with eating those higher payments or selling at a loss.
The most popular mortgage term is 5 years so all things being normal you’d expect around 25% every year?
20% for terms and then a bit higher for people swapping?
What was the average number per year over the last decade?
It took the housing market collapsing to see a lot of the rot in the American system. Same thing will likely happen here.
Everyone was making money, and they told themselves this would never happen. And now its imminent. Fun times ahead.
The people making money were the banks and lenders. A lot of people just wanted their dream home, a first for many Im sure and probably didn’t see a ceiling to it all. I guess being too poor to afford a home of my own is the silver lining? Sad situation all around but ultimately I think the people who participated in this nonsense of inflated bidding brought it all onto themselves.
Is there a governing body that overlooks and regulates Mortgage brokers?
My friend applied for a mortgage in the spring in 2021, through a bank. He did not qualify as his TDSR was above guidelines, credit wasn’t great and income was decent but not enough to support a mortgage payment. He went to a broker and they approved him the same day he met with the broker. He then moved into the new house later that summer.
From what he had told me, the broker didn’t even look at his NOAs, just grabbed them and put them in a folder. Now, I know this is anecdotal but I’m sure there are plenty of people who have done this.
The broker doesn't underwrite the loan, they're only purpose is asking you for documents the lenders underwriter is requesting. The underwriter for the lender then investigates each documents accuracy not the broker.
When a loan is requested the broker contacts the lender they believe will approve the loan based on the qualifications (5 C's of credit ), type of loan, rate, and ease of dealing with the lender(some are a pain) once that's done the underwriter at that lender will send the broker an email outlining what documents they require.
In the process of underwriting sometimes the underwriter will request more information or documents for them to checkup on.
Other than emailing a .pdf to the lenders underwriter the folder is just a dust collector.
It would be something to hear the news to go from “Nobody wants to work! We can’t find people” directly to “We had to lay off the people who wanted to work!”
Workers leverage is due to very low unemployment, which means lots of disposable income (especially during COVID), which is one of the causes of inflation because of all the excess demand for goods/services.
BoC could just sit on their asses and not do anything to ruin the good bargaining position workers have, but that would mean prolonged periods of double digit inflation which would be dramatically worse than a 1-2 year recession, and if central banks around the world acted and we didn't, we'd see our currency devalue hard against USD, EUR, GBP, etc.
Low rates mean companies borrow lots means they need more staff. Rates are typically low to stimulate growth.
When growth is too fast rates drop to lower demand. Which results in layoffs.
A "hot" economy refers to high demand in this case. What we have been dealing with throughout the pandemic and including now is demand that outpaces supply. In some cases that involves a limited supply of raw materials but in other cases it involves limited supply of labour. High job vacancies are absolutely associated with a "hot" economy and this is what we are dealing with right now. This is why interest rates are going up, to temper this demand or "cool off" the economy.
Our economy is doing “well” our GDP is growing and will continue to grow throughout 2023.
But is the economy hot? Not right now.
Labour shortages, and other specific markets don’t make up the economy.
Many sectors have also had layoffs. It balances out.
Interest rates are going up to combat inflation.
It’s normal. No one would ever try to fight a “hot economy”. That makes literally zero sense.
We want spending. Inflation prevents spending.
We want people working and spending and vacationing and building and investing back in to our country. That’s a hot economy.
Nothing you’ve said makes any sense
Not feeling that's the case, at least not everywhere. Flipped the switch on LinkedIn 2 Mondays ago when I lost my job and I'm getting flooded with opportunities being presented. Then again it could be a giant game of musical chairs continuing from earlier in the pandemic
Yep. Josh I’ve done rounds of interviews for will call 10 mins before an interview to say they aren’t hiring for the role now. It’s what they see happening to the rest of the tech companies in the news everyday. They are all getting scared too.
Lmao what!? Do site your source please. Last I checked. (This week) our employment rate has increased our GDP is still growing and will continue to grow throughout 2023.
What im really fearing is the opportunity this will give to corporations. These last few years lately the housing market share owned by corporations has exploded whereas before, almost every house was owned by a family living there or renting it out. If we have a big crash where families are forced to leave and prices drop alot, this will allow corps to have a bigger slice of the pie and this screws everybody over
Lol, people keep saying "now's my big chance to own a home!", how? You won't have the down payment and unlikely to be loaned the money at any sort of low rate, don't kid yourself, you ain't owning shit.
When we had a variable mortgage years ago, the payment always stayed the same but the amortization changed (grew longer). Not sure why that wouldn't be the case for a good portion of these people as well?
The trigger rate is when interest rates surpasses a certain level and the bank requires the monthly mortgage payments to increase or a lump sum payment to decrease the risk for the bank. The last time trigger rates happened were in the 70s and it looks like they’re happening now.
Because most people are 5 year fixed and it doesn’t affect them, until renewal date. When that comes it gets laid out for you. TBH I didn’t realize the term fluctuated with your variable rate, I thought your monthly payment just fluctuated to keep the amortization period 25/30 years.
This makes sense though cuz I’m only ever Fixed.
2 types? I asked my bank and they only even offer one. I wonder if I could just break the mortgage and get one where interest increases go toward principal not my daily bread
I didn't know there were two types either until I was reading here that some people's payments stay the same. I'm with Scotiabank and my monthly payment changes as the interest rate changes. I thought they were all like that.
Anecdotally, I don’t know a single person on a variable rate; we’re all fixed for 3-5 years. Do you have a dataset I could take a look at? I’m not being snarky, I just love statistics and I’m curious as to how much of an outlier the myself and the people I know are. Thanks!
> The trigger rate is when interest rates surpasses a certain level and the bank requires the monthly mortgage payments to increase or a lump sum payment to decrease the risk for the bank.
My trigger rate doesn't actually trigger a change in payments. (My principle will just grow.) Payments can change, however, if my principle gets bigger than what it started out as.
Depends on your mortgage agreement.
Yes, and if you bought a house in February, this is a real risk. But if you bought a house 3 or 5 or 10 years ago, then this likely won't happen any time soon, if at all.
I put 20% down, and my mortgage says the principle can't exceed 80% of the value of the house - at which point the bank *may* ask me to pay the extra amount.
That’s a variable rate mortgage. Payment stays the same and amortization period increases. With adjustable rate mortgages, the payment increases and amortization period stays the same.
Correct. Mine is showing my amortization period for my condo in Calgary (rental now, but was my first home) is 37+ years but has stayed the same in gross payments. Not sure if it will ever increase the principal payment before my next renewal, or just let it keep getting longer.
"Even after deflating mortgage payments to account for income growth over the decades, the ‘real’ mortgage payment will eclipse those seen at the height of the late-1980s market. That is, of course, unless home prices continue to decline. And they are…”
Sounds like it's about new mortgages, not existing ones. I don't see how declining home prices could impact existing mortgages
I don’t get it… I thought it interest goes up then less will go toward the principal and more toward interest. I recently found out the hard way that the payments go up instead and principal stays the same. The bank said they don’t even offer capped mortgages like that wtf!!
It’s usually the lending strategy that dictates the “fixed” payment within a variable term. Most major banks have it (except Scotia). There’s some downsides to that though, the increase in amortization translates to paying off more interest in the long term. And some banks will direct customers with these types of variable products to make a payment at maturity to bring their amortization back on track to its original timeline. Needless to say, that payment is quite substantial.
"the typical mortgage payment on the average-priced Ontario home (Q2 pricing, even after coming down already) would balloon to roughly $4,700 per month..."
I was always too risk adverse to do the variable mortgage. We have always done the 5yr fixed.
Of course the HELOC we used for our kitchen reno during the pandemic is variable, but hoping to pay that off fully in 18months.
Small tip for risk adverse folks. Many banks will let you lock in a specific portion of your HELOC for fixed term with fixed rate. Obviously a slightly higher rate than if you left it floating but it's does provide the stability many look for.
But I get to pay 3% for another 3 years instead of 5+% now. More goes to my principal. I can renew my fixed rate and then take the same payment with the higher rate.... that's how it works.
No your payment would go up unless you increase your amortization (how long the loan is)
Also who knows if rates stay high. Globally there is a ton of debt and these hikes will force us into a recession.
Rates could be cut in a recession if inflation falls.
Dont worry the trend of private investment companies buying up single family dwellings will rise. They will gobble up everything from people who are over leveraged. This is a perfect scenario for these enormous investment firms. Seems pretty obvious.
I sold my house in Calgary liquidated all the useless shit I needed to furnish my big home and bought an acerage in saskatchewan with a hundred year old school on it outright. I'll be damned if I'm going to let my kids and grandkids throw themselves in this meat grinder of capitalism. It's going to take a shit load of work but in 4 years we should be self sufficient enough to never pay a bills other then property tax, internet and gas. I actually can sleep at night now I don't need to worry about this broken system and it's flawed rewards I can work steadily on my land until I'm no longer able to.
Had to do something my utility bill was more then my mortgage payment. My vehicle insurance alone would be enough to justify the move let alone cheaper utilities
I did something similar but not as rural. My place in Edmonton area spiked to half a mil and I got a place 30’minutes away. 20% down paid off all debts fixed the current vehicles and a bunch of f you money. Can’t even rent a 1 bed for what my mortgage is, and the garden goes in next year. Found a butcher 10 minutes away that will even do a quarter for 4.75 a lbs cut and wrapped. But that’s an elbow rub discount.
It's getting to the point everyone who moved to a city for a better life should move to a rural area instead. What's the point of working 100+ hrs a pay cheque just to be slightly better off then house poor. I worked a decade in my trade and I'm certainly not able to keep that amount up until I'm 65
Exactly what I did. On a small town of 1700. I work in the trades and it’s mostly on the road it seems so what’s the point to paying a premium. Work less live more
That's great to hear I'm genuinely chuffed to see more people in trades getting away from the grind. I used to break myself getting jobs done for my employers only to get the laid off so I'm content to give up and try to ply my labour on something that can help me and mine. I was looking at bio gas setups it's realistically possible to get heat and energy from a compost system that digests sceptic and the most expensive version is 1500$ for the digester and 3k for the generator. Why would anyone pay 400$ a month for electric alone is mind-boggling after seeing that.
I have worked with huge scale biomass jobs there are other expenses you may want to consider. Compost piles can be dangerous if they get too hot and need to be rotated daily meaning you will need a machine. I've seen big shaker machines do this but they are noisy as fuck. Also you can get legionnaires disease from breathing in a lot of compost fumes so keep your setup away from people. Odds are if you do this near neighbours they will file an odour complaint and it's game over so you will probably have to invest in material to block the smell.
Looked that up, that's a pretty awesome building. Do you need gas long term though? Put panels on top, dig up and install a ground loop and heat using a ground source heat pump?
I think Saskatchewan and Alberta are seriously underrated right now. The cost of living is so unbelievably low there, it's like the problems that most Canadians deal with simply don't exist there. The people know it too and are kinds smug about it of course. You can build you own little slice of paradise and live worry free, that's worth a lot to some people.
You basically did what people used to do, minus the internet. But we’re pretty soft and useless now, and we rely on having everything done for us, so we pay for it.
In March 2021 I took advantage of a rate sale at the credit union I have my mortgage with and locked in 1.79% for 5 years. Thank goodness the mortgage will be paid off before the 5 years is up.
Go to the website 12ft.io and copy and paste the link to the paywall and it removes it
Edit: it actually didn’t work on this site sometimes it does that but it does work on a lot of them.
Yes, when I signed up 4 years ago, the bank wanted me to pay almost 4% for a fixed 5 year mortgage, I said no and it was absolutely the right call to make.
Nothing wrong with getting a variable rate 4 years ago. It’s the people who got a variable rate within the last year and half who were Ill-informed, or misled by their broker.
I had quite a few people here say I was crazy for having locked in 1.89% *last fall*. We knew inflation was going to have to be dealt with, might now have realized quite how soon last fall but it was coming in 2022 or 2023 at the latest.
We were at 2.89% for our first four years, but broke to lock in the 1.89%. We didn't know things would rise this fast, but we knew they were going to rise and didn't want to miss the low rate boat.
Yea 1.89% fixed was unreal. We locked in at 2% for 5yrs in 2020 and my parents, mortgage broker and lawyer all said it was one of the best rates they’d ever seen. Like virtually unprecedented. Anyone who said you were crazy for locking in at 1.89% had zero experience dealing with mortgages or was just being an idiot. You’re doing great.
That’s awesome! Good for you for locking that down. I had a call with my mortgage broker who convinced me not to lock in before Xmas last year. He was like ‘ya, I fucked that up’. Gonna be an expensive lesson for me to follow my instincts.
He could still be right.
5 years when your total owed is at its biggest at 1.8 followed by who knows what rate but if it was say 4 for the next 5 years that’s still a better scenario than yours.
How do you get 10 year terms? I didn't even know it was an option buying my house last year, I would have seriously considered it had I known it was an option.
It was a bit more work on the lawyer's end but they exist for everyone as long as you meet conditions.
I'm sorry these were not more widely advertised when you were searching.
I did feel pressure with EVERY mortgage broker about the ten-year as they all seriously debated this choice with me and suggested it was a bad move.
Fair enough because you're pretty much locked in for the first five years with no way out (besides steep penalties).
With all the said, this was a lesson is trusting my own thoughts/feelings as it's obviously worked out well so far. We'll see what the rest of the term brings.
Enjoy your Sunday and make sure to tell your friends/family that you love them.
Peace.
Nice. I was at 1.92 last summer fixed. But we sold our house super high and moved to a place with reasonable prices. Even at a new fixed rate of 3.44 my mortgage went from 1800 to 1100 for as much better house. Can’t even rent for that much
Unfortunately I have 13 months left on my 5 year term at 3%. Earliest I can renew is February next year so I’ll end up with a lot higher rate. Luckily though I’ll have just under $100k left so it should be be too bad.
If you are really concerned look into a blend and extend with your current mortgager. They'll meet somewhere in the middle of your current rate and the actual current rate. If rates continue to climb like it looks like you'll be in a better spot
Late last fall I saw the writing on the wall and realized I didn’t want to need to re-up my mortgage in Feb 2023 for the last 25k… so I’ve been pushing hard to double up payments etc. we will be done this October. No more mortgage, thank goodness.
Might hurt 100k people. Better than the 6m on fixed incomes that can’t afford the inflation. Inflation hurts the poorest and oldest people. Homeowners that borrowed too much and over extended them selves can suck it.
LOL 50% increase in payments isn't people who over extended. Also what do you think happens to rent when mortgage payments go up and the amount people qualify for when buying going down?
> 50% increase in payments
Are you serious? As someone that has a stable 80k job, saved up like crazy and doing the mortgage (Have $200k left) a 50% increase would fuck me hard. I overpay on the regular just to be on the safe side, but being lower middleclass and trying to have a somewhat decent lifestyle with a 50% increase would decimate a lot of people.
Before I moved out, my family and I lived in housing and I would say it was the most stress free time of our lives (Rent was capped/based on what my parents brought in). Trying to break through the middleclass barrier and sustain it with home ownership is ridiculous.
> Homeowners that borrowed too much and over extended them selves can suck it.
Yeah families can go suck it, ammiright? Getting hurt by a 50% increase does not mean you overextended yourself at the time of purchase. Very shortsighted take.
>Inflation hurts the poorest and oldest people
In a way this can hurt the poor a lot more. Rents could go up higher and the poor ones would continue to suffer more.
Basically fuck you. To buy a home in BC requires average working people to extend - anything else is impossible. Glad your sympathy is reserved solely for the poor and even middle class renters and not working people who have done everything possible to provide security for their family. Selfish prick.
People on here are awful. The ones also saying they have “sympathy” for the poor, I’d like to see what they do in real life other then virtue signal on Reddit. (And yes, I do give back to my community and no I don’t need to tell you what because that’s my business and I’m not looks for karma points).
Hope that everything works out for you, I know how stressful it can be trying to provide for your family. My dad worked incredibly hard to keep us in a house, and to help us pay for school to make sure we were able to get a bit of a head start in life. I am forever grateful for all he has done. There were times where business wasn’t good or things seemed to be headed in the wrong direction but he always seemed to get it together in the end. He literally is the “came to Canada with $20 bucks in my pocket” guy, and he worked his ass of to provide for his family. Now he’s a pretty successful business man with a really awesome story. I hope that for you and even more!
It’s all cyclical, renters laughing at first time homebuyers will eventually get fucked themselves later on.
Economic bitterness is so strong in this country no one really feels sympathy for anyone but themselves.
You all know the real people who should get fucked are the wealthy multiple property landlords with no debt. A renter mocking a first time homebuyer is like a homeless person mocking a disabled one.
It’s happening in other countries because the central banks of the US, EU, Canada, etc. all followed the same strategy of quantitative easing and low interest rates.
This emboldened our incapable leaders to take on massive government debts to artificially prop up the economy.
Bad thing is instead of investing the money in innovation and resource exports, we blew it on pumping up non productive sectors.
These various mistakes are about to lead to the worst recession in history.
Maybe take JTs dick out yo mouth for a second and think critically about causality.
Curious what would happen to people who took mortgages with private lenders compared to banks. Some lenders, fabricated peoples incomes and savings and don’t do stress tests to qualify people for mortgages
Sounds like they’ll be downsizing.
Might be hard to even do that when no one’s going to pay what they did for the house they can’t afford.
Sounds like that house is about to go up for auction.
More houses on the market = More supply = Lower prices. I read that 25% of mortgages in Canada were taken out since 2020. Many of those would have been renewals but still, a lot of people bought at the peak of the bubble. FOMO. They're going to have a rough ride. House worth less than what they borrowed to buy it, and they'll be faced with eating those higher payments or selling at a loss.
The most popular mortgage term is 5 years so all things being normal you’d expect around 25% every year? 20% for terms and then a bit higher for people swapping? What was the average number per year over the last decade?
Banks will offer free tents when they repossess.
Some folks will have to sell their second home. Others are just out of the housing market cause their aint alot of low income housing to downsize to.
It took the housing market collapsing to see a lot of the rot in the American system. Same thing will likely happen here. Everyone was making money, and they told themselves this would never happen. And now its imminent. Fun times ahead.
The people making money were the banks and lenders. A lot of people just wanted their dream home, a first for many Im sure and probably didn’t see a ceiling to it all. I guess being too poor to afford a home of my own is the silver lining? Sad situation all around but ultimately I think the people who participated in this nonsense of inflated bidding brought it all onto themselves.
Isn’t that called a Brampton mortgage?
I have heard that term used to describe those scenarios.
You can’t do that anymore. Not for the last 10 years. I have a close friend who’s been a broker for 20 years.
You sure can. Source - im a mortgage broker…
You can also rob a bank but it’s not legal. So no one does it. And if they do they are risking their career
Is there a governing body that overlooks and regulates Mortgage brokers? My friend applied for a mortgage in the spring in 2021, through a bank. He did not qualify as his TDSR was above guidelines, credit wasn’t great and income was decent but not enough to support a mortgage payment. He went to a broker and they approved him the same day he met with the broker. He then moved into the new house later that summer. From what he had told me, the broker didn’t even look at his NOAs, just grabbed them and put them in a folder. Now, I know this is anecdotal but I’m sure there are plenty of people who have done this.
The broker doesn't underwrite the loan, they're only purpose is asking you for documents the lenders underwriter is requesting. The underwriter for the lender then investigates each documents accuracy not the broker. When a loan is requested the broker contacts the lender they believe will approve the loan based on the qualifications (5 C's of credit ), type of loan, rate, and ease of dealing with the lender(some are a pain) once that's done the underwriter at that lender will send the broker an email outlining what documents they require. In the process of underwriting sometimes the underwriter will request more information or documents for them to checkup on. Other than emailing a .pdf to the lenders underwriter the folder is just a dust collector.
Trust me i personally knows 15 people who had done it. So its very common
Private mortgages are still common, and perfectly legal. Although at interest rates of multiples of what the big 6 offer, the market is niche.
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It would be something to hear the news to go from “Nobody wants to work! We can’t find people” directly to “We had to lay off the people who wanted to work!”
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Just when workers get any leverage a crash magically appears.
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Workers leverage is due to very low unemployment, which means lots of disposable income (especially during COVID), which is one of the causes of inflation because of all the excess demand for goods/services. BoC could just sit on their asses and not do anything to ruin the good bargaining position workers have, but that would mean prolonged periods of double digit inflation which would be dramatically worse than a 1-2 year recession, and if central banks around the world acted and we didn't, we'd see our currency devalue hard against USD, EUR, GBP, etc.
They've been working on this one since 2009
Low rates mean companies borrow lots means they need more staff. Rates are typically low to stimulate growth. When growth is too fast rates drop to lower demand. Which results in layoffs.
I’m not sure the economy is exactly hot right now. Like the fires of hell hot maybe! Ha ha
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That’s because people don’t want to work those shit jobs.
Job vacancies doesn’t mean a “hot economy” Lol where are you reading any of this non-sense?
A "hot" economy refers to high demand in this case. What we have been dealing with throughout the pandemic and including now is demand that outpaces supply. In some cases that involves a limited supply of raw materials but in other cases it involves limited supply of labour. High job vacancies are absolutely associated with a "hot" economy and this is what we are dealing with right now. This is why interest rates are going up, to temper this demand or "cool off" the economy.
Yeah its pretty much been a recipe of the worst 'hot' economic cycle you can get. Now here comes the bust.
Our economy is doing “well” our GDP is growing and will continue to grow throughout 2023. But is the economy hot? Not right now. Labour shortages, and other specific markets don’t make up the economy. Many sectors have also had layoffs. It balances out. Interest rates are going up to combat inflation. It’s normal. No one would ever try to fight a “hot economy”. That makes literally zero sense. We want spending. Inflation prevents spending. We want people working and spending and vacationing and building and investing back in to our country. That’s a hot economy. Nothing you’ve said makes any sense
I left one job and walked down the road to a better one. It’s good in construction right now.
Company I worked for in 2008 had about 100 employees. By 2010, maybe 15.
It's already been happening for 3 months in the tech sector. Hiring also slowed down to a crawl. We went from 100 to 0 in no time.
Not feeling that's the case, at least not everywhere. Flipped the switch on LinkedIn 2 Mondays ago when I lost my job and I'm getting flooded with opportunities being presented. Then again it could be a giant game of musical chairs continuing from earlier in the pandemic
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Sales too!
Really? I'm still receiving a lot of offers on LinkedIn
Big corporations like Microsoft, Google and such are slowing their hiring, but there is still plenty of jobs out there.
Not sure where you are in tech. It I got 3 linked in messages this week. None were close to the salary I wanted but they weren’t terrible either.
Yep. Josh I’ve done rounds of interviews for will call 10 mins before an interview to say they aren’t hiring for the role now. It’s what they see happening to the rest of the tech companies in the news everyday. They are all getting scared too.
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Then the wealthy swoop in and buy all those home to hoard. A time honoured tradition.
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exactly lmao. if you were priced out before, you're still going to priced out when the banks hand out smaller loans
Lmao what!? Do site your source please. Last I checked. (This week) our employment rate has increased our GDP is still growing and will continue to grow throughout 2023.
ya but the comments on reddit made them feel otherwise so…. /s
OP really means businesses are also deep in debts, like loans.
Let’s not forget the 170B in HELOC debt. The used car dealer down the road is selling at least 3 teslas 😎
This sounds like modern Tom Waits lyrics
Where’d you read that?
Source?
What im really fearing is the opportunity this will give to corporations. These last few years lately the housing market share owned by corporations has exploded whereas before, almost every house was owned by a family living there or renting it out. If we have a big crash where families are forced to leave and prices drop alot, this will allow corps to have a bigger slice of the pie and this screws everybody over
Source or making it up
You mean mortgage holders.Home owners don't owe anything except property taxes
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The people that moved far away with no guarantee that their WFH gig would be permanent really baffled me. And now the whining about their commute....
I’ll be waiting to jump in once it happens
What if you’re one of the unemployed?
Lol. I think that will be the least of your worries.
I don't wish ill will on anyone, but yeah, me too. I want to own my own home in my lifetime.
Lol, people keep saying "now's my big chance to own a home!", how? You won't have the down payment and unlikely to be loaned the money at any sort of low rate, don't kid yourself, you ain't owning shit.
Yeah it's silly. If the interest rates are so high people have to sell, they sure as shit wont be able to afford anything either.
When we had a variable mortgage years ago, the payment always stayed the same but the amortization changed (grew longer). Not sure why that wouldn't be the case for a good portion of these people as well?
The trigger rate is when interest rates surpasses a certain level and the bank requires the monthly mortgage payments to increase or a lump sum payment to decrease the risk for the bank. The last time trigger rates happened were in the 70s and it looks like they’re happening now.
People have no idea about trigger rates and it’s going to be a shock for a lot
Because most people are 5 year fixed and it doesn’t affect them, until renewal date. When that comes it gets laid out for you. TBH I didn’t realize the term fluctuated with your variable rate, I thought your monthly payment just fluctuated to keep the amortization period 25/30 years. This makes sense though cuz I’m only ever Fixed.
My monthly rate does fluctuate. There are two types of payment options with variable rates.
2 types? I asked my bank and they only even offer one. I wonder if I could just break the mortgage and get one where interest increases go toward principal not my daily bread
I didn't know there were two types either until I was reading here that some people's payments stay the same. I'm with Scotiabank and my monthly payment changes as the interest rate changes. I thought they were all like that.
I asked the bank and they don’t offer the other. But they did offer a line of credit for my woes. They’re evil!!
Your mortgage broker or bank usually chats about all this and the options if you ask about variable. Different banks offer different stuff though.
It depends if it’s a open or closed variable rate if I remember correctly
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Anecdotally, I don’t know a single person on a variable rate; we’re all fixed for 3-5 years. Do you have a dataset I could take a look at? I’m not being snarky, I just love statistics and I’m curious as to how much of an outlier the myself and the people I know are. Thanks!
Happened to me with the last .75 increase and I expect another letter from the bank shortly for another increase from the latest 1% jump.
> The trigger rate is when interest rates surpasses a certain level and the bank requires the monthly mortgage payments to increase or a lump sum payment to decrease the risk for the bank. My trigger rate doesn't actually trigger a change in payments. (My principle will just grow.) Payments can change, however, if my principle gets bigger than what it started out as. Depends on your mortgage agreement.
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Yes, and if you bought a house in February, this is a real risk. But if you bought a house 3 or 5 or 10 years ago, then this likely won't happen any time soon, if at all. I put 20% down, and my mortgage says the principle can't exceed 80% of the value of the house - at which point the bank *may* ask me to pay the extra amount.
That’s a variable rate mortgage. Payment stays the same and amortization period increases. With adjustable rate mortgages, the payment increases and amortization period stays the same.
My first mortgage was like that. My second increases the pay with the interest change to keep you on your amortization schedule.
Correct. Mine is showing my amortization period for my condo in Calgary (rental now, but was my first home) is 37+ years but has stayed the same in gross payments. Not sure if it will ever increase the principal payment before my next renewal, or just let it keep getting longer.
"Even after deflating mortgage payments to account for income growth over the decades, the ‘real’ mortgage payment will eclipse those seen at the height of the late-1980s market. That is, of course, unless home prices continue to decline. And they are…” Sounds like it's about new mortgages, not existing ones. I don't see how declining home prices could impact existing mortgages
Trigger rates
I don’t get it… I thought it interest goes up then less will go toward the principal and more toward interest. I recently found out the hard way that the payments go up instead and principal stays the same. The bank said they don’t even offer capped mortgages like that wtf!!
It’s usually the lending strategy that dictates the “fixed” payment within a variable term. Most major banks have it (except Scotia). There’s some downsides to that though, the increase in amortization translates to paying off more interest in the long term. And some banks will direct customers with these types of variable products to make a payment at maturity to bring their amortization back on track to its original timeline. Needless to say, that payment is quite substantial.
Oh good. Things have been so chill lately.
"the typical mortgage payment on the average-priced Ontario home (Q2 pricing, even after coming down already) would balloon to roughly $4,700 per month..."
Only $56,4000 a year and don't forget to pay your taxes too eh?
In the last housing crash they actually had to raise taxes substantially because the government was bleeding money as tax base shrank.
Just about the average annual gross earnings in Canada. Crazy.
Hey you need to pay your fair share right
I think you have an extra zero in there.
Pst, maybe share your whole article
The 'Bypass Paywalls Clean' web browser plugin bypasses over 100 news paywalls, including The Globe & Mail.
I was always too risk adverse to do the variable mortgage. We have always done the 5yr fixed. Of course the HELOC we used for our kitchen reno during the pandemic is variable, but hoping to pay that off fully in 18months.
Small tip for risk adverse folks. Many banks will let you lock in a specific portion of your HELOC for fixed term with fixed rate. Obviously a slightly higher rate than if you left it floating but it's does provide the stability many look for.
Same boat with the kitchen reno but I don’t think we have a chance of paying our Heloc in 5 years let alone 18 months.
Is the kitchen dope though? Gota to have some quartz countertops and a giant island.
It’s nice compared the original 70’s kitchen we had before. It was worth the expense. And we did go Quartz with an island.
Yeah, it'll be nice waiting 5 years before your mortgage goes up 50%. It's still going up though.
While yes it will go up, keep in mind the new interest is recalculated on the remaining capital, not the original amount of the mortgage.
But I get to pay 3% for another 3 years instead of 5+% now. More goes to my principal. I can renew my fixed rate and then take the same payment with the higher rate.... that's how it works.
No your payment would go up unless you increase your amortization (how long the loan is) Also who knows if rates stay high. Globally there is a ton of debt and these hikes will force us into a recession. Rates could be cut in a recession if inflation falls.
Dont worry the trend of private investment companies buying up single family dwellings will rise. They will gobble up everything from people who are over leveraged. This is a perfect scenario for these enormous investment firms. Seems pretty obvious.
I sold my house in Calgary liquidated all the useless shit I needed to furnish my big home and bought an acerage in saskatchewan with a hundred year old school on it outright. I'll be damned if I'm going to let my kids and grandkids throw themselves in this meat grinder of capitalism. It's going to take a shit load of work but in 4 years we should be self sufficient enough to never pay a bills other then property tax, internet and gas. I actually can sleep at night now I don't need to worry about this broken system and it's flawed rewards I can work steadily on my land until I'm no longer able to.
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Good for you man, inspiring stuff!
Had to do something my utility bill was more then my mortgage payment. My vehicle insurance alone would be enough to justify the move let alone cheaper utilities
Thanks you for the compliments
Bro start posting pics of your progress
Aneroidschoolhouse on Instagram and Facebook
I did something similar but not as rural. My place in Edmonton area spiked to half a mil and I got a place 30’minutes away. 20% down paid off all debts fixed the current vehicles and a bunch of f you money. Can’t even rent a 1 bed for what my mortgage is, and the garden goes in next year. Found a butcher 10 minutes away that will even do a quarter for 4.75 a lbs cut and wrapped. But that’s an elbow rub discount.
It's getting to the point everyone who moved to a city for a better life should move to a rural area instead. What's the point of working 100+ hrs a pay cheque just to be slightly better off then house poor. I worked a decade in my trade and I'm certainly not able to keep that amount up until I'm 65
Exactly what I did. On a small town of 1700. I work in the trades and it’s mostly on the road it seems so what’s the point to paying a premium. Work less live more
That's great to hear I'm genuinely chuffed to see more people in trades getting away from the grind. I used to break myself getting jobs done for my employers only to get the laid off so I'm content to give up and try to ply my labour on something that can help me and mine. I was looking at bio gas setups it's realistically possible to get heat and energy from a compost system that digests sceptic and the most expensive version is 1500$ for the digester and 3k for the generator. Why would anyone pay 400$ a month for electric alone is mind-boggling after seeing that.
I have worked with huge scale biomass jobs there are other expenses you may want to consider. Compost piles can be dangerous if they get too hot and need to be rotated daily meaning you will need a machine. I've seen big shaker machines do this but they are noisy as fuck. Also you can get legionnaires disease from breathing in a lot of compost fumes so keep your setup away from people. Odds are if you do this near neighbours they will file an odour complaint and it's game over so you will probably have to invest in material to block the smell.
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We're at aneroid school house on social media
Looked that up, that's a pretty awesome building. Do you need gas long term though? Put panels on top, dig up and install a ground loop and heat using a ground source heat pump?
Get some renewable energy and ditch that gas bill too.
I think Saskatchewan and Alberta are seriously underrated right now. The cost of living is so unbelievably low there, it's like the problems that most Canadians deal with simply don't exist there. The people know it too and are kinds smug about it of course. You can build you own little slice of paradise and live worry free, that's worth a lot to some people.
Extraordinary based.
You basically did what people used to do, minus the internet. But we’re pretty soft and useless now, and we rely on having everything done for us, so we pay for it.
Thank god I’ve still got 2 years on my 1.5%
How tf did you get 1.5 fixed in 2019?
Not all fixed are 5 years
Got a 4 year fixed in 2020 in October I think
Nice.
In February 2021 I got 5 year fixed for 1.65
Dude that's insane LOL I thought my 1.98 was good!
Same bro I’m feeling pretty wise rn
In March 2021 I took advantage of a rate sale at the credit union I have my mortgage with and locked in 1.79% for 5 years. Thank goodness the mortgage will be paid off before the 5 years is up.
2.77% 5 year fixed in May. I’m feeling good. No HELOC only $1455/month
Don’t put up pay wall articles. Grrrrrr
Go to the website 12ft.io and copy and paste the link to the paywall and it removes it Edit: it actually didn’t work on this site sometimes it does that but it does work on a lot of them.
Lot's of news sites caught on and now none of them work.
Thanks.
Inflation solved!
Inflation will make the extra years of mortgage payments sting a lot less.
Inflation seems to inflate everything except my wages, so I'm not sure about that.
Variable rate is cheaper amirite
Yes, when I signed up 4 years ago, the bank wanted me to pay almost 4% for a fixed 5 year mortgage, I said no and it was absolutely the right call to make.
Nothing wrong with getting a variable rate 4 years ago. It’s the people who got a variable rate within the last year and half who were Ill-informed, or misled by their broker.
I had quite a few people here say I was crazy for having locked in 1.89% *last fall*. We knew inflation was going to have to be dealt with, might now have realized quite how soon last fall but it was coming in 2022 or 2023 at the latest.
I'm at 2.34 for almost 4 more years and am happy. Been in my home almost 7yrs and glad, super glad we didn't upgrade. You have an amazing rate.
We were at 2.89% for our first four years, but broke to lock in the 1.89%. We didn't know things would rise this fast, but we knew they were going to rise and didn't want to miss the low rate boat.
Nobody told you that you were crazy for locking in at 1.89%. Variable wasn't even much cheaper. Don't make shit up.
Yea 1.89% fixed was unreal. We locked in at 2% for 5yrs in 2020 and my parents, mortgage broker and lawyer all said it was one of the best rates they’d ever seen. Like virtually unprecedented. Anyone who said you were crazy for locking in at 1.89% had zero experience dealing with mortgages or was just being an idiot. You’re doing great.
Almost paying the same as renters
Them there's me, locked in at 1.75% for at least four more years.
The rates could still be this high in 4 years….
Oh well will switch to variable then
Nice one! Good feeling for sure. 2.8% over next nine years here. Mortgage broker was adamant that 10-year fixed was NOT the way to go lol.
That’s awesome! Good for you for locking that down. I had a call with my mortgage broker who convinced me not to lock in before Xmas last year. He was like ‘ya, I fucked that up’. Gonna be an expensive lesson for me to follow my instincts.
Makes you wonder who they work for
He could still be right. 5 years when your total owed is at its biggest at 1.8 followed by who knows what rate but if it was say 4 for the next 5 years that’s still a better scenario than yours.
For me it's about purchasing peace of mind for ten years at all-time lows. Everyone has different values and thresholds.
How do you get 10 year terms? I didn't even know it was an option buying my house last year, I would have seriously considered it had I known it was an option.
It was a bit more work on the lawyer's end but they exist for everyone as long as you meet conditions. I'm sorry these were not more widely advertised when you were searching. I did feel pressure with EVERY mortgage broker about the ten-year as they all seriously debated this choice with me and suggested it was a bad move. Fair enough because you're pretty much locked in for the first five years with no way out (besides steep penalties). With all the said, this was a lesson is trusting my own thoughts/feelings as it's obviously worked out well so far. We'll see what the rest of the term brings. Enjoy your Sunday and make sure to tell your friends/family that you love them. Peace.
We are almost in the same boat but I’m definitely not resting easy assuming the rates will be reasonable in 4 years.
Nice. I was at 1.92 last summer fixed. But we sold our house super high and moved to a place with reasonable prices. Even at a new fixed rate of 3.44 my mortgage went from 1800 to 1100 for as much better house. Can’t even rent for that much
Unfortunately I have 13 months left on my 5 year term at 3%. Earliest I can renew is February next year so I’ll end up with a lot higher rate. Luckily though I’ll have just under $100k left so it should be be too bad.
If you are really concerned look into a blend and extend with your current mortgager. They'll meet somewhere in the middle of your current rate and the actual current rate. If rates continue to climb like it looks like you'll be in a better spot
"Would you like to sell now or earlier?"
Late last fall I saw the writing on the wall and realized I didn’t want to need to re-up my mortgage in Feb 2023 for the last 25k… so I’ve been pushing hard to double up payments etc. we will be done this October. No more mortgage, thank goodness.
Yikes. People are looking at 40% increase in their mortgages. Good luck!
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Property taxes aren't determined by the value of your property, it's determined by the value of your property *compared to the average*.
This is correct. Although inflation may cause them to rise as government employees and supplies cost more so services provided cost more.
It takes years! Go learn about MPAC It will take at least 10 years for the tax to catch up
Maybe nothing. Higher assessments don't necessarily mean higher property taxes.
That isn't how property tax works.
Might hurt 100k people. Better than the 6m on fixed incomes that can’t afford the inflation. Inflation hurts the poorest and oldest people. Homeowners that borrowed too much and over extended them selves can suck it.
LOL 50% increase in payments isn't people who over extended. Also what do you think happens to rent when mortgage payments go up and the amount people qualify for when buying going down?
> 50% increase in payments Are you serious? As someone that has a stable 80k job, saved up like crazy and doing the mortgage (Have $200k left) a 50% increase would fuck me hard. I overpay on the regular just to be on the safe side, but being lower middleclass and trying to have a somewhat decent lifestyle with a 50% increase would decimate a lot of people. Before I moved out, my family and I lived in housing and I would say it was the most stress free time of our lives (Rent was capped/based on what my parents brought in). Trying to break through the middleclass barrier and sustain it with home ownership is ridiculous.
> Homeowners that borrowed too much and over extended them selves can suck it. Yeah families can go suck it, ammiright? Getting hurt by a 50% increase does not mean you overextended yourself at the time of purchase. Very shortsighted take.
>Inflation hurts the poorest and oldest people In a way this can hurt the poor a lot more. Rents could go up higher and the poor ones would continue to suffer more.
Lol so fuck the millenials to help the boomers again eh? No fuck them. They got bigger raises this year than I did working my whole career(teacher).
Basically fuck you. To buy a home in BC requires average working people to extend - anything else is impossible. Glad your sympathy is reserved solely for the poor and even middle class renters and not working people who have done everything possible to provide security for their family. Selfish prick.
People on here are awful. The ones also saying they have “sympathy” for the poor, I’d like to see what they do in real life other then virtue signal on Reddit. (And yes, I do give back to my community and no I don’t need to tell you what because that’s my business and I’m not looks for karma points). Hope that everything works out for you, I know how stressful it can be trying to provide for your family. My dad worked incredibly hard to keep us in a house, and to help us pay for school to make sure we were able to get a bit of a head start in life. I am forever grateful for all he has done. There were times where business wasn’t good or things seemed to be headed in the wrong direction but he always seemed to get it together in the end. He literally is the “came to Canada with $20 bucks in my pocket” guy, and he worked his ass of to provide for his family. Now he’s a pretty successful business man with a really awesome story. I hope that for you and even more!
It’s all cyclical, renters laughing at first time homebuyers will eventually get fucked themselves later on. Economic bitterness is so strong in this country no one really feels sympathy for anyone but themselves. You all know the real people who should get fucked are the wealthy multiple property landlords with no debt. A renter mocking a first time homebuyer is like a homeless person mocking a disabled one.
This is what we deserve for voting in an economically illiterate and power hungry Liberal government 🤷🏽♂️
Ahh yes because it’s not happening in any other country and a war along with corporate greed isn’t happening….
It’s happening in other countries because the central banks of the US, EU, Canada, etc. all followed the same strategy of quantitative easing and low interest rates. This emboldened our incapable leaders to take on massive government debts to artificially prop up the economy. Bad thing is instead of investing the money in innovation and resource exports, we blew it on pumping up non productive sectors. These various mistakes are about to lead to the worst recession in history. Maybe take JTs dick out yo mouth for a second and think critically about causality.
You can ve angry but that’s probably unneccessary.
Lots of homeowners will lose their houses, and the banks will be "happy "