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Old 06-27-2012, 11:10 PM   #21
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30 years ago, and maybe still for all I know, 50 year mortgages were common in Germany.
50 years fixed?
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Old 06-28-2012, 11:52 AM   #22
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I doubt that Germany has a fixed rate, Canada doesn't offer a fixed rate I know that for sure. Fixed rate mortgages seem to be an american thing.
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Old 06-28-2012, 01:11 PM   #23
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I doubt that Germany has a fixed rate, Canada doesn't offer a fixed rate I know that for sure. Fixed rate mortgages seem to be an american thing.
Umm, we definitely have fixed rates in Canada. Usually 5 year fixed is the max, though I think I've seen 7 occasionally. It's definitely a good thing right now. I sure wouldn't get anything other than a fixed rate when I buy a house later this year.
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Old 06-28-2012, 01:36 PM   #24
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Umm, we definitely have fixed rates in Canada. Usually 5 year fixed is the max, though I think I've seen 7 occasionally. It's definitely a good thing right now. I sure wouldn't get anything other than a fixed rate when I buy a house later this year.

Sorry - you are correct it is fixed vs. an Adjustable rate mortgage, but to the typical US consumer a 5 year fixed isnt "fixed" enough for them, they are looking for the entire ammortization term to be fixed.

I live in MI but also own a "camp" in ON, i enjoy talking to my canadian neighbors about the differences in culture. When I talk with them about mortgages they are usually very suprised that we do zero down and lock the rate for 30 years.
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Old 06-28-2012, 08:41 PM   #25
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Sorry - you are correct it is fixed vs. an Adjustable rate mortgage, but to the typical US consumer a 5 year fixed isnt "fixed" enough for them, they are looking for the entire ammortization term to be fixed.

I live in MI but also own a "camp" in ON, i enjoy talking to my canadian neighbors about the differences in culture. When I talk with them about mortgages they are usually very suprised that we do zero down and lock the rate for 30 years.
Ah - so you have educated me, then. I had no idea fixed rate in the US could refer to that long of a time. I don't know how banks or consumers could deal with being locked in for such a long time.
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Old 06-28-2012, 09:16 PM   #26
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Ah - so you have educated me, then. I had no idea fixed rate in the US could refer to that long of a time. I don't know how banks or consumers could deal with being locked in for such a long time.
Sell the loans to investment banks which create MBS. The only US bank/S&L I know of that keeps it's loans in portfolio is Washington Federal.

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Old 06-28-2012, 09:33 PM   #27
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Ah - so you have educated me, then. I had no idea fixed rate in the US could refer to that long of a time. I don't know how banks or consumers could deal with being locked in for such a long time.
Consumers are technically locked in to a loan, but they can also refinance into a different loan. I imagine the percentage of original 30 year loans being paid off as written are quite small.
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Old 06-28-2012, 10:48 PM   #28
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Oh, I missed the consumers part. The US 30 year fixed mortgage is for consumers the biggest free lunch there is. All win, no loss. Unless of course you borrow too much, but that has nothing to do with the term. In fact, the longer the better, because as long as you can service it, you will not have to try to re-fiance, and of course get turned down on insufficient collateral.

Everyone should come to America and buy a house.

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Old 06-28-2012, 10:57 PM   #29
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Let me turn the question on its head assume you were a person who had money to lend, would you make a 30 year fixed loan, if you did you would seriously need your head examined, just like buying a 30 year tbond would be stupid today. So if one would not make the loan where is the sucker to come from except the government?
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Old 06-28-2012, 11:12 PM   #30
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Let me turn the question on its head assume you were a person who had money to lend, would you make a 30 year fixed loan, if you did you would seriously need your head examined, just like buying a 30 year tbond would be stupid today. So if one would not make the loan where is the sucker to come from except the government?
Obviously there are a lot of stupid buyers then. If not, rates would be much higher than they are.

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Old 06-28-2012, 11:20 PM   #31
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I doubt that Germany has a fixed rate, Canada doesn't offer a fixed rate I know that for sure. Fixed rate mortgages seem to be an american thing.
In that case, the cited article is very misleading. They don't say a five year mortgage with a fixed interest rate and a 30 year amortization schedule. They say a 30 year mortgage. At the time of the great depression, in the US we had mostly 5 year mortgages. And that is mostly why there was a housing depression. People did not have the income to qualify for a refinance, and as time went on, neither did they have the collateral. Really, if mortgages are only fixed for 5 or 7 years in Canada (what we in the US call an adjustable or ARM), borrowing more than 50-65% or so is risky. Unless of course the allowed interest rate increases are small and infrequent. A good place to pay cash, and likely that is why there is a lot of cash house purchased on the Euro continent.

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Old 06-29-2012, 09:19 AM   #32
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Sell the loans to investment banks which create MBS. The only US bank/S&L I know of that keeps it's loans in portfolio is Washington Federal.

Ha
There are actually still a fair number of lenders that will portfolio loans, usually have to be low loan to value LTV, and very strong credit. it is getting harder to find a lender that will though. My credit union will only portfolio 10 year fixed or 7 year balloons
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Old 06-29-2012, 01:51 PM   #33
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Oh, I missed the consumers part. The US 30 year fixed mortgage is for consumers the biggest free lunch there is. All win, no loss. Unless of course you borrow too much, but that has nothing to do with the term. In fact, the longer the better, because as long as you can service it, you will not have to try to re-fiance, and of course get turned down on insufficient collateral.

Everyone should come to America and buy a house.

Ha
I have come around to this type of thinking. I just refinanced back to a 30 year recently, and am taking advantage of the low rates. My pension is cola'd and my mortgage fixed, I don't care if it ever gets paid off.
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Old 06-29-2012, 02:10 PM   #34
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I have come around to this type of thinking. I just refinanced back to a 30 year recently, and am taking advantage of the low rates. My pension is cola'd and my mortgage fixed, I don't care if it ever gets paid off.
I see many people that are in effect doing a reverse mortgage by cashing out on their mortgage with a 30 year term tuck away enough proceeds to make the payments for a while and die owing 80% of the value.
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Old 06-29-2012, 05:19 PM   #35
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I see many people that are in effect doing a reverse mortgage by cashing out on their mortgage with a 30 year term tuck away enough proceeds to make the payments for a while and die owing 80% of the value.
Ethical behavior is so old fashioned.
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Old 06-30-2012, 10:15 AM   #36
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It gets worse. The government has suspended all immigration for the remainder of the year. This means that rich Chinese and Iranian people can no longer buy their Canadian citizenship with $1.6 million. This was fueling the speculative markets in Vancouver and Toronto, especially in condos.
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Effective July 1, 2012, Citizenship and Immigration Canada will temporarily cease accepting new applications to the Federal Skilled Worker (FSW) and Immigrant Investor programs.
Breaking: Temporary Moratorium on Some New Immigration Applications - Canadavisa News

Half of their investment ($800K) could be in RE. I think temporary pickers are still allowed.
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Old 06-30-2012, 01:33 PM   #37
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Ethical behavior is so old fashioned.
Maybe you could point out what is unethical about this? Is the applicants age not available, or are the mortgage companies not allowed to consult a life expectancy table?

If bank gives a 30 year mortgage to a 65 yo, they cannot be so dumb that they do not undertstand that this dude is unlikely to complete his payment schedule. They have their collateral nonetheless.

I really do not think that we have to worry overmuch about protecting the banks from the people.

Ha
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Old 07-02-2012, 07:07 AM   #38
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Maybe you could point out what is unethical about this? Is the applicants age not available, or are the mortgage companies not allowed to consult a life expectancy table?

If bank gives a 30 year mortgage to a 65 yo, they cannot be so dumb that they do not undertstand that this dude is unlikely to complete his payment schedule. They have their collateral nonetheless.

I really do not think that we have to worry overmuch about protecting the banks from the people.

Ha
It would be a Regulation "B" violation. ...

(2) Age, receipt of public assistance. (i) Except as permitted in this paragraph, a creditor shall not take into account an applicant's age (provided that the applicant has the capacity to enter into a binding contract) or whether an applicant's income derives from any public assistance program.
(ii) In an empirically derived, demonstrably and statistically sound, credit scoring system, a creditor may use an applicant's age as a predictive variable, provided that the age of an elderly applicant is not assigned a negative factor or value.
(iii) In a judgmental system of evaluating creditworthiness, a creditor may consider an applicant's age or whether an applicant's income derives from any public assistance program only for the purpose of determining a pertinent element of creditworthiness.
(iv) In any system of evaluating creditworthiness, a creditor may consider the age of an elderly applicant when such age is used to favor the elderly applicant in extending credit.

Item ii starts out great; with empirically sound and all but ends with the elderly cant be assigned a negative factor.

I can tell you as a lender we are very cautious to avoid even the hint of a Reg B violation.

At least in the housign market there is some kind of collateral, try denying a charge card to the elderly. Open end credit that may never get paid down. eeek
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The Tipping Point?
Old 07-02-2012, 10:08 AM   #39
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The Tipping Point?

Lessons 1
Talking about bubbles and the inevitability of a quick meltdown in Canada.

Have we reached the tipping point yet?
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Old 07-02-2012, 10:33 AM   #40
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I see many people that are in effect doing a reverse mortgage by cashing out on their mortgage with a 30 year term tuck away enough proceeds to make the payments for a while and die owing 80% of the value.
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Ethical behavior is so old fashioned.
I don't see the ethics issue either. The deceased estate is still on the hook for the mortgage, right? So if there are no funds, the bank takes back the house - this is a collateralized loan.

Which bills are excused at death? There could be ethics issues in knowingly running those up if you knew your demise was a near term likelihood.

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