Junkyard Find: 2014 Mitsubishi Mirage - Murilee Martin TTAC

[highwire]

But the rule of thumb for a mortgage has always been 2.5-3x annual income. That metric has long been abandoned in this era of free money. The traditional financial rules are being ignored in all areas.

Agreed. Also, the interest paid on a mortgage paid off in 2-3 years is much less than the interest paid in 4-5 years. Homes do not appreciate in value that much over that time (unless in some expensive cities), therefore it is better to save that money and use it to buy in cash, or at least with a significant downpayment- 40-50%.

[Fummins]

I agree, but not many people can afford to put 40-50% down on a house unless it's dirt cheap. You could probably buy a house for 50k but you'd be a couple hours away from any decent job. You can't buy a vacant lot around here for under $150k. My first tiny starter home was $250k. It was a struggle to come up with 5%down living cheque to cheque with one income. But it was better than paying the same amount to a landlord and owning nothing.
But comparing cost of living, cars and real estate between Canada and the States isn't easy. Your dollar is worth more and I'm sure interest rates and min wage are different enough to make it hard to compare the two.

[Eggman]

Agreed. Also, the interest paid on a mortgage paid off in 2-3 years is much less than the interest paid in 4-5 years.

Interesting. I don't think I've ever heard of a two year mortgage.

[Fummins]

They used to offer a 40 year zero down payment mortgage here, maybe 12ish years ago. A buddy got one and had like a 6-7% interest rate. Had very little to nothing paid off after 5 years. I thought it was pretty hilarious.

[Fummins]

Interesting. I don't think I've ever heard of a two year mortgage.

I wish mine was paid off in 2 lol.
I might be on crack but I heard some places in Europe houses are so expensive/unaffordable(where is that Fry meme?) it could take a few generations to pay it off.

[dspace9]

But the rule of thumb for a mortgage has always been 2.5-3x annual income. That metric has long been abandoned in this era of free money. The traditional financial rules are being ignored in all areas.

Yea, that 2.5-3x rule sounds about right. Mortgage payment should be around 20% of your monthly income, or less ideally. I got into the real estate game pretty young, and on top of that I went on the cheap fixer/upper end (big yard though).

It's funny that the "rich" have impressive homes, that are mortgaged to the hilt. No thanks.

I'd rather retire early than impress strangers with gilded garbage-new home builds.

[Cobrajet]

I agree, but not many people can afford to put 40-50% down on a house unless it's dirt cheap. You could probably buy a house for 50k but you'd be a couple hours away from any decent job. You can't buy a vacant lot around here for under $150k. My first tiny starter home was $250k. It was a struggle to come up with 5%down living cheque to cheque with one income. But it was better than paying the same amount to a landlord and owning nothing.
But comparing cost of living, cars and real estate between Canada and the States isn't easy. Your dollar is worth more and I'm sure interest rates and min wage are different enough to make it hard to compare the two.

My house might be considered a 'starter'. It is small, built in the 1970s. On a large lot in a nice, quiet neighborhood. It was completely remodeled by the previous owners...an elderly couple...right before the husband died and the market tanked. I bought the house completely redone in 2013 for what they had paid for it in 2005!

It cost me $175,000. No way I could have come up with the $35,000 down payment for a conventional loan, so I had to go FHA (Federal Housing Administration). Instead of putting 20% down, you put 3% down and pay a private company to insure your mortgage. Hated paying that $200 private mortgage insurance (PMI) every month, but it got my foot in the door with a $5,000 down payment instead. I refinanced to a conventional loan last summer, as I had since accrued quite a bit more than 20% in equity due to making extra payments and the market going up. I assume they don't have anything like this in Canada?

The house is worth a ridiculous $285,000 now. My mortgage is a little over $1,000 a month. To rent the same house around here would be about $1,700 a month. Sometimes financing is a good idea!

[Mark]

My house might be considered a 'starter'. It is small, built in the 1970s. On a large lot in a nice, quiet neighborhood. It was completely remodeled by the previous owners...an elderly couple...right before the husband died and the market tanked. I bought the house completely redone in 2013 for what they had paid for it in 2005!

It cost me $175,000. No way I could have come up with the $35,000 down payment for a conventional loan, so I had to go FHA (Federal Housing Administration). Instead of putting 20% down, you put 3% down and pay a private company to insure your mortgage. Hated paying that $200 private mortgage insurance (PMI) every month, but it got my foot in the door with a $5,000 down payment instead. I refinanced to a conventional loan last summer, as I had since accrued quite a bit more than 20% in equity due to making extra payments and the market going up. I assume they don't have anything like this in Canada?

The house is worth a ridiculous $285,000 now. My mortgage is a little over $1,000 a month. To rent the same house around here would be about $1,700 a month. Sometimes financing is a good idea!

Buying a home is an investment.

Cars are endless money pits. Doesn't matter if it is a Mirage or a Range Rover. Vehicles are not investments!!!!

Vehicles and homes should be separate discussions.

Cobrajet's above post is a good example of this. Financing a home shouldn't be compared to buying a car.

[Fummins]

Yeah, if you don't have 20% down the have cmhc. It's insurance that protects the lender. You need a min 5% for a downpayment.
I bought my first place in 2013 for $260000. Stayed there for almost 5 years, sold it in 2018 had a downpayment for a $430,000 place.

Wife sold her place shortly after and now we have a way bigger place than both of our old ones combined and we're paying less overall each for the mortgage. My little house was $1500/month including property tax, the new place is $2400(1200 each). Before my first house I was paying around $1250 to rent a small 2 bedroom 2 level apartment.

Right now a friend of mine is renting a newer house the same size as my old one for $2000/month. I'm in the wrong business, but I wouldn't want to deal with crappy renters.

[dspace9]

Yea like the ol' concrete mix in the toilet routine. I have thought of buying a duplex, no thanks. You can't put a price on having your own house and no roomies.