Vancouver's Real Estate Market

[Traum]

Originally Posted by Gerbs

Would you have an issue refinancing for the following?

Purchase a home for $900,000
$180,000 down payment

$780,000 left on mortgage after five years.

Assessed value / Independent Asseses value is $690k? Household Income has stayed flat at $145k

I'm sure the banks have gob tons of rules to determine mortgage renewal eligibility. In this case, they'd probably ask the homeowner to cough up a whole bunch of money so that the lent out amount does not exceed their internal maximum percentage (while taking homeowner income into account).

It's all standard banking practice, and there is nothing personal about it.

[JDMDreams]

^^^ that doesn't make sense, how can you owe more than you originally borrowed after 5 years on a mortgage

[Traum]

Happens in market crashes. Throughout my time here in Vancouver (for 30+ yrs now?), I don't think the RE market has ever gotten quite that bad, but didn't the US went through a round of that in the past? IIRC, the US mortgage rules were significantly softer on the borrowers, and borrowers pretty much "just lose their house" to foreclosure.

But in the 2003 era in Hong Kong, a lot of people have negative equity because the RE market there crashed hard, and people were unable to pay the lender (banks or financial institutions) when the lender started calling in for portions of their loan. Some people killed themselves over the inability to service the loan (and they were losing their homes). It was really very tragic.

[SumAznGuy]

Originally Posted by Traum

Happens in market crashes. Throughout my time here in Vancouver (for 30+ yrs now?), I don't think the RE market has ever gotten quite that bad, but didn't the US went through a round of that in the past? IIRC, the US mortgage rules were significantly softer on the borrowers, and borrowers pretty much "just lose their house" to foreclosure.

But in the 2003 era in Hong Kong, a lot of people have negative equity because the RE market there crashed hard, and people were unable to pay the lender (banks or financial institutions) when the lender started calling in for portions of their loan. Some people killed themselves over the inability to service the loan (and they were losing their homes). It was really very tragic.

I think you mis-read what JDM asked.

$900,000 house, $180,000 down.
Assuming 3.7% interest rate on $720,000, after 5 years, the remaining balance should be $623,453 assuming no doubling down or missing payments.

No way the amount owed should be $780,000.

[320icar]

Originally Posted by 68style

Anyone see that letter in the Province discussing how many people have effectively failed the stress test and be unable to renew their mortgages because of the property value decline?

Going to cause a major shitstorm.... government learning at our expense that they can’t regulate their way out of fuckery!

https://theprovince.com/opinion/lett...box=1578276965

Sick. Maybe I’ll be able to buy a place once people start defaulting

[Traum]

Originally Posted by 68style

Anyone see that letter in the Province discussing how many people have effectively failed the stress test and be unable to renew their mortgages because of the property value decline?

Going to cause a major shitstorm.... government learning at our expense that they can’t regulate their way out of fuckery!

https://theprovince.com/opinion/lett...box=1578276965

Assuming that the story is real, I can only say that as much as I sympathesize with the situation, people need to realize there are inherent risks involved when real estate properties are purchased. In this case, I'd say the couple have unfortunately made the follow string of unwise decisions:

- purchasing a property without taking into account that the market was already obviously heading towards a downturn in as early as summer 2018

- choosing a property that required leveraging themselves to the limit

- opting only for a 1 yr term on mortgage renewal given the market trends at the time of purchase

I can't understand how any of those decisions can be blamed on the NDP gov.

[SumAznGuy]

Originally Posted by Gerbs

Would you have an issue refinancing for the following?

Purchase a home for $900,000
$180,000 down payment

$780,000 left on mortgage after five years.

Assessed value / Independent Asseses value is $690k? Household Income has stayed flat at $145k

Generally speaking, the mortgage is based off of what you can afford. If income hasn't changed, and they were approved for $720K the first time around, no reason they wouldn't qualify for a mortgage renewal.

That being said, your numbers don't add up. Not sure how/why a home bought for $900K is only assessed at $690K after 5 years.
That's like a 23% drop, technically more since the first 3 years would have seen increases and the last 2 years have seen market decreases.

[westopher]

Originally Posted by SumAznGuy

I think you mis-read what JDM asked.

$900,000 house, $180,000 down.
Assuming 3.7% interest rate on $720,000, after 5 years, the remaining balance should be $623,453 assuming no doubling down or missing payments.

No way the amount owed should be $780,000.

Well, people in Vancouver fucking love HELOCs to buy new range rovers and Audis. That could account for the increase in owed amount.

[blkgsr]

Originally Posted by 68style

Anyone see that letter in the Province discussing how many people have effectively failed the stress test and be unable to renew their mortgages because of the property value decline?

Going to cause a major shitstorm.... government learning at our expense that they can’t regulate their way out of fuckery!

https://theprovince.com/opinion/lett...box=1578276965

what a stupid article....i read up until "now the father and daughter are $200K in dept"

well no shit the father is down $200K, he took it out against his own house

[Hehe]

Originally Posted by JDMDreams

^^^ that doesn't make sense, how can you owe more than you originally borrowed after 5 years on a mortgage

It can and it had happened many times before in even a shorter time. It's just so many here have never experienced one in their adult years.

Take the US 2008 meltdown as an example. The few hardest-hit areas lost 75% of their value from peak to bottom... within 2-3yrs time.

So, a 1M house went down to 250k. If one were to renew that mortgage, they have to come up with the difference. That's why many in the US simply decided to walk away from their homes. They were so deep underwater that it made more sense to just go out to the market to buy two or more houses for the same amount of money that they owed for the one they had.

A house is an asset... sure. But as any asset, its value can change and there's no MINIMUM. Take the now $2 home on the island for example. It's that low because it's no longer safe to even stay on top of it, let alone living in it.

So, never believe in that "house can only appreciate" bullshit.

[Hondaracer]

The structure yes, I’d argue that in a place like Vancouver However with such low density, The land itself will always appreciate.

[hud 91gt]

The value can certainly be less then you owe but US mortgages are completely different then Canadian and the major reason for the US meltdown. They actually have to requalify for their mortgages. Here, as long as you can make your payments (interest rates stay low), you aren’t going to lose your house, nor is anyone going to try and take it away.

Walking away and declaring bunkruptcy isn’t a nice process. Although if you live like nost (debt and payments without assets), maybe it is. Lol

[1337]

I think people in this thread are confusing between renewal and refinancing.

[SumAznGuy]

Originally Posted by westopher

Well, people in Vancouver fucking love HELOCs to buy new range rovers and Audis. That could account for the increase in owed amount.

OP took the time to include $145K combined yearly income. Don't think they would have purposely left out the fact that they had to borrow against their home to buy an RR or Audi hence why the money owed would have exceeded the initial mortgage after 5 years.

It would be nice if OP would clarify.

***Just noticed 1337 is right. OP wrote refinance. Wonder if they really meant renewing or did they really spent above their means and need to refinance to cover the bills.

[Gerbs]

What would happen in refinance and renewal? ^

I just made that scenario up since that's what happened in the US in 07. Where the home value went below the mortgage value.

[SumAznGuy]

Originally Posted by Gerbs

What would happen in refinance and renewal? ^

I just made that scenario up since that's what happened in the US in 07. Where the home value went below the mortgage value.

Generally, renewal is almost guaranteed. The bank did all the work to make sure you qualified for the first mortgage.

Re-financing means you are getting a new mortgage so you will need to go through the process again. One of the examples is what Westopher mentioned. You owe a lot of debit so you re-finance or get a home line of credit to pay off the debt. Usually the Heloc is at a lower rate than the interest from CC's or other loans.

This is what happened in the US. They bought a house for $200K and it went up to $400K. They took a line of credit against this new found "equity" and bought new cars, funiture or trips. Then when the market turned around, the bank calls and they don't have the money to pay off the difference.

[blkgsr]

my mortgage renewal is up in april.

going to be roughly 1/5th or even that of my house "value"

i have probably $30K left of my truck loan at 3.49%

would you say it would be best to roll that into my mortgage or just pay the truck loan off separately?

[hud 91gt]

Assuming the interest rates are the same, do you have the fortitude to pay lump sums on your mortgage if you roll it into one. You will end up paying much more in the end if you have 15 years left on your mortgage, versus 4 on your truck.

[SumAznGuy]

Originally Posted by blkgsr

my mortgage renewal is up in april.

going to be roughly 1/5th or even that of my house "value"

i have probably $30K left of my truck loan at 3.49%

would you say it would be best to roll that into my mortgage or just pay the truck loan off separately?

Just for shits and giggles, 15 year mortgage, after 5 years at 2.7% interest rate, you would still owe $21K on the truck and almost $3500 in interest and you still have 10 more years to pay off the rest of the truck but monthly payments would be $203 per month.

On paper it doesn't see like a lot of $$$ but like what Hud said, you will end up paying more for your truck than the 4 year loan.

[Hehe]

Originally Posted by SumAznGuy

Generally, renewal is almost guaranteed. The bank did all the work to make sure you qualified for the first mortgage.

Re-financing means you are getting a new mortgage so you will need to go through the process again. One of the examples is what Westopher mentioned. You owe a lot of debit so you re-finance or get a home line of credit to pay off the debt. Usually the Heloc is at a lower rate than the interest from CC's or other loans.

This is what happened in the US. They bought a house for $200K and it went up to $400K. They took a line of credit against this new found "equity" and bought new cars, funiture or trips. Then when the market turned around, the bank calls and they don't have the money to pay off the difference.

I've never checked in detail, but I do not believe a clause is in place in the mortgage agreement that the lender MUST renew for as long as the borrower is able to pay.

We just "generally" assume the renewal to take place without a hitch as long as the borrower has no problem of paying.

Nevertheless, from the bank standpoint of view, RE mortgages are supposed to be a low risk investment (relatively). If that changes when they need to start taking more risk on their lending, don't be surprised that they ask for additional backing when it comes to renewal.

[SumAznGuy]

Originally Posted by Hehe

I've never checked in detail, but I do not believe a clause is in place in the mortgage agreement that the lender MUST renew for as long as the borrower is able to pay.

We just "generally" assume the renewal to take place without a hitch as long as the borrower has no problem of paying.

Nevertheless, from the bank standpoint of view, RE mortgages are supposed to be a low risk investment (relatively). If that changes when they need to start taking more risk on their lending, don't be surprised that they ask for additional backing when it comes to renewal.

There is usually a clause for the opposite so that banks can walk away and not renew the mortgage in case they feel there is too much risk.

I've gone through the renewal process 3 times now, and all 3 times have pretty much "been any change in employment." No, ok we are good to go.

And "oh your credit looks good, you have also been qualified for a line of credit, etc...."

Banks are in it to make money off interest. As long as you work and have steady income, banks are willing to lend. How much is the only issue.

[donk.]

wait..... so am i, or am i not supposto buy the new Z06 with my HELOC?

[westopher]

I mean, I say do it, as long as you don’t end up owing more than your homes worth at the end of it lol.

[Traum]

Originally Posted by donk.

wait..... so am i, or am i not supposto buy the new Z06 with my HELOC?

You know, this isn't all that different from how people take out student loans for ugrad, only to blow the money on travelling, partying, boozes, etc.

So hey, if you managed that first time OK, what's the harm in pulling the same stunt all over again the second time, right?

[JDMStyo]

Originally Posted by 1337

I think people in this thread are confusing between renewal and refinancing.

Having worked in a bank, renewals generally do not require re-approval unless you are considering switching FI/banks in which case they'd need income verification and all that again.

1) With renewals - your principal stays the SAME. Payment may vary a bit based on changed interest rates and the mix of principal/interest changes but it's largely an automated process.
It's a quick signing and at best changing terms/type of mortgage.

2) Re-finance/new application gives you flexibility of BORROWING more and/or adding a HELOC. This is likely what happened with the OP's case as it makes no sense principle is higher than how you started 5 years ago.