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Chuck Norris · 09-11-2009, 07:34 AM

I can't stress enough that people should not base their mortgage on the best case scenario.

Countless times I would see people ask how much they qualify for. The bank would say something like "Based on the current variable rate of 2.5% you qualify for $500,000. The person would run out and try and find something for $500,000 and even look at things for $525,000 expecting a negotiated price near $500,000.

This is the single biggest problem that faced the US a few years ago. Have we not learned what happens yet?

Simply put, we are at historical lows for interest rates. It is likely to stick around with us for a while but the only likely direction for interest rates to move is up. If you're on the limit at 2.5%, what happens when the interest rates go up to 5%?

If someone is on the edge at 2.5% and purchased a $500,000 home, their mortgage (assuming the statistically incorrect assumption it is a 20% down payment) is $400,000. A monthly payment of $1577 on a 30 year term.

In a few years, it would not be unrealistic to consider rates to be at 5% which means this mortgage would now be $2134 or an extra $560 a month.

Some of you might say that $2134 is still easy to pay off, but for someone that was on the limit at $1577, $2134 is not possible. Sooner or later, no matter how much money you make or have, you will reach a limit. This is why I also suggest someone play it safe.

Too many people want to be the big baller and king only to wind up going bankrupt or having the bank take away their home, car, and furniture.

The only reason people were getting away with it the last while is because the capital appreciation of homes were so rapid, it was justifiable. Prices, at best, are likely to be stagnant. My money is on the fact there will be some sort of a pullback or correction over the next few years. Real estate does not run at double digit returns for a long time without some kind of pullback.

No market does and right now, you'd be buying near the, if not already, the end of that party.

I use myself as an example although I stress, I am a bit on the weird side. I am happy to live in a $150,000 condo in Surrey even though I could live in a big home in Vancouver West. I don't have a family, I'm never home anyway. Why stress out about a mortgage or a home that makes me have face so I can think some random people will be impressed.

Something I learned, most average people are anything but impressed when you have something better than them. At my age, they'd probably think my parents paid for it and even if they knew it was mine, they'd probably still think I'm a reject and talk shit about me as they drive by my house. Face is such a fucking joke and was created so companies could sell a bunch of shit to people who are too insecure and stupid to know any better.

Besides, how much face do you have when the repo men are raping your girl and taking the furniture out of your house while a realtor is walking prospective buyers through your recently foreclosed home?

09-11-2009, 07:34 AM	#32
Chuck Norris Unauthourized Spammer Join Date: Jun 2005 Location: . Posts: 494 Thanked 64 Times in 20 Posts Failed 0 Times in 0 Posts	I can't stress enough that people should not base their mortgage on the best case scenario. Countless times I would see people ask how much they qualify for. The bank would say something like "Based on the current variable rate of 2.5% you qualify for $500,000. The person would run out and try and find something for $500,000 and even look at things for $525,000 expecting a negotiated price near $500,000. This is the single biggest problem that faced the US a few years ago. Have we not learned what happens yet? Simply put, we are at historical lows for interest rates. It is likely to stick around with us for a while but the only likely direction for interest rates to move is up. If you're on the limit at 2.5%, what happens when the interest rates go up to 5%? If someone is on the edge at 2.5% and purchased a $500,000 home, their mortgage (assuming the statistically incorrect assumption it is a 20% down payment) is $400,000. A monthly payment of $1577 on a 30 year term. In a few years, it would not be unrealistic to consider rates to be at 5% which means this mortgage would now be $2134 or an extra $560 a month. Some of you might say that $2134 is still easy to pay off, but for someone that was on the limit at $1577, $2134 is not possible. Sooner or later, no matter how much money you make or have, you will reach a limit. This is why I also suggest someone play it safe. Too many people want to be the big baller and king only to wind up going bankrupt or having the bank take away their home, car, and furniture. The only reason people were getting away with it the last while is because the capital appreciation of homes were so rapid, it was justifiable. Prices, at best, are likely to be stagnant. My money is on the fact there will be some sort of a pullback or correction over the next few years. Real estate does not run at double digit returns for a long time without some kind of pullback. No market does and right now, you'd be buying near the, if not already, the end of that party. I use myself as an example although I stress, I am a bit on the weird side. I am happy to live in a $150,000 condo in Surrey even though I could live in a big home in Vancouver West. I don't have a family, I'm never home anyway. Why stress out about a mortgage or a home that makes me have face so I can think some random people will be impressed. Something I learned, most average people are anything but impressed when you have something better than them. At my age, they'd probably think my parents paid for it and even if they knew it was mine, they'd probably still think I'm a reject and talk shit about me as they drive by my house. Face is such a fucking joke and was created so companies could sell a bunch of shit to people who are too insecure and stupid to know any better. Besides, how much face do you have when the repo men are raping your girl and taking the furniture out of your house while a realtor is walking prospective buyers through your recently foreclosed home?