Author Topic: Garth Turner - Real Estate in Canada  (Read 512791 times)

SharperDingaan

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Re: Garth Turner - Real Estate in Canada
« Reply #540 on: June 21, 2015, 06:43:45 PM »
Sorry but the 7% number is inaccurate.

Per the CMHC website the minimum is 5% for a single family dwelling and 10% for murbs. This 7% may be accurate for a brand new entrant with no prior real estate history, but it ignores the thousands of other trade up transactions where buyers already have significant equity from their previous home. If the 7% were representative, most Canadian posters on this board would have a mortgage equaling 93% of their house value - just how likely is that? http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm

Folks finance the land transfer tax, they do not pay it out of pocket. The Ontario tax on a 629K property is 1.26% (7,910) of the property value, the interest cost would be 197/year; $17/month is not a show stopper.
http://www.fin.gov.on.ca/en/tax/ltt/

First time buyers are not buying 629K townhouse condo's either, as they cannot withstand the bidding wars. Different story for a 200K condo - but that is not the market we are talking about. But even if folks do take out the CMHC insurance, they will finance it. The CMHC premium for a 20% down payment is 1.25% of the home value. Again, $16/month is not a show stopper.

Rent also goes up every year if you have a terrible landlord. No difference.

SD
« Last Edit: June 21, 2015, 07:20:02 PM by SharperDingaan »


Liberty

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Re: Garth Turner - Real Estate in Canada
« Reply #541 on: June 22, 2015, 05:19:19 AM »

The average down payment in Canada is 7% not 25%.

Thank you! I have always wanted to find this statistic because it's frustrating to hear Americans talk about Canadians as the world's most prudent folks. You just cannot have 25% down payments as common place without lots of other problems (given the size of houses globally).

This meme about Canadians being financially prudent will be looked back on later with great amusement.
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wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #542 on: June 22, 2015, 06:50:56 AM »
I am relying on my memory so could be wrong on the numbers - 50% of all mortgages in Canada at this point are insured. That implies there was something missing in the underwriting - either the 20% down payment wasn't there, there was no proof of income, etc.

The 3 insurers are CMHC, Genworth and Canada Guaranty. CMHC had virtually pulled out of the market because after the crisis they had insured 50% of all mortgages in Canada.

I believe that 50% of mortgages would amount to over $600 B in a country with GDP of $1.7 trillion or so.

Maybe this is rational, maybe it isn't. Maybe it is prudent, maybe not.


augustabound

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Re: Garth Turner - Real Estate in Canada
« Reply #544 on: July 02, 2015, 02:24:04 PM »
We bought in 2011 for $349 and as of last January when new phases were released, our model is up to $505. Our next door neighbour who just sold for $629 paid $369 in 2011.
Yes, in Bradford, Ontario.  :o
And it continues.

We had our home appraised for our mortgage renewal this September. Our broker wants to be able to lock us in to 2.25% so he's getting the ball rolling now.

The appraisal came in at $560.
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wisdom

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Schwab711

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Re: Garth Turner - Real Estate in Canada
« Reply #547 on: July 09, 2015, 03:51:32 PM »
Who holds the loans in Canada? Do the big 4 keep them on their books or are their MBS or Canadian mortgage funds out there? Who is poised to take the losses?

LesPaul

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Re: Garth Turner - Real Estate in Canada
« Reply #548 on: July 09, 2015, 04:00:47 PM »
http://www.financialexpress.com/article/industry/banking-finance/ordinary-canadians-turn-bankers-as-shadow-mortgage-lending-rises/98032/

anecdotal evidence on how these purchases are being financed.

No idea how big this market is - but I've seen a few of these deals on the desks of an acquaintance - private 2nd mortgage with a 9% or 10% interest rate and a 1% fee upfront - interest only payments for 12 months or so.

Personally, if this was something I'd want to invest in, I'd probably just put my money into a First National (FN.TO - 7.5% Yield) or MCAN (MKP.TO - 9.5% Yield) today. At least most of those mortgages are backed by CMHC...although who knows how far that would get you in a crisis!

wisdom

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Re: Garth Turner - Real Estate in Canada
« Reply #549 on: July 09, 2015, 04:37:33 PM »
I believe 50% of the mortgages are held by CMHC, Genworth and Canada guaranty. I could be wrong (relying on memory here) but i think these are 90-80% backed by the government.

The majority of the remaining mortgages are likely to be held by regulated FI's the banks, credit unions, etc. But, it is easy to beat the system if you know how to play the game which brokers/lenders do.

1) banks do not report mortgages on credit bureau's - thus, borrowers lie about primary residence v RE for investment. As far as the new FI is concerned this would be the only mortgage this individual would have.
2) by under holdco and the mortgage/HELOC is not reported on credit bureau. Lie when you apply for your next mortgage under another holdco,  whether you have a mortgage or not (similar to point 1)
3) often the down payment can be from an equity take out on the above properties as they increase in value.
4) Brokers/lenders advice individuals to apply for as many lines of credits as possible once a mortgage is approved to come up with the 5% down payment.
5) of course - private lenders - it is common to have small pools of  upto $10 mil or so lending to purchasers who do not have down payments or to builders. Often the source of the funds in first place are HELOCs on properties.

Back in 2007 individuals took out HELOC's at P minus 1% or so and lent to borrowers before getting burnt. This time around the money chasing this market seems to be more organized though often linked to brokers or pooled funds with no previous experience in downturns.

Often the term on these are for 1 year at 12-14%.

The down payments can come from private mortgages. If true, the official stats on %age of houses that have less than 20% down or the number of investment properties are, in my opinion, under reported.

The article about flipping also shows that a lot of the demand being reported may be artificial because the properties are being bought by either speculators or builders who plan to tear down and build more expensive homes. We will know at some point whether it is the end user buying or just flippers creating this demand.