Zero Down mortgage and property

[The Cosworth]

I am moving back to Calgary in the spring for a promotion in another company, and this means that I need somewhere to live.

I have started to save for a downpayent of a condo, but haven't gotten very far... about $2000 right now and could have between 5 and 6 when I move.

I am looking right now at condo's and am thinking the only way to afford one is to get a cheap one (which is hard to find) or getting a 40 year, zero down mortgage.

Now I have heard that a zero down mortgage is a bad idea, but is it a worse idea then renting? I was looking around at renting, and IF we can find a place the costs will be retarded.



I am 21 and will be making 50k a year, but am stupid and have a $500.00 a month car payment... which I never though I would say... but I wish I hadn't bought my car. Anyway that is sort of besides the point, but where is a good place to start when looking at what I can afford?

[urban.one]

You want to know how much you will qualify for?

https://www.vancity.com/MyMoney/Tools/Calculators/MortgageQualifier/

A remember even with 0 down, you still need closing costs.


Originally posted by brendankharris
I am moving back to Calgary in the spring for a promotion in another company, and this means that I need somewhere to live.

I have started to save for a downpayent of a condo, but haven't gotten very far... about $2000 right now and could have between 5 and 6 when I move.

I am looking right now at condo's and am thinking the only way to afford one is to get a cheap one (which is hard to find) or getting a 40 year, zero down mortgage.

Now I have heard that a zero down mortgage is a bad idea, but is it a worse idea then renting? I was looking around at renting, and IF we can find a place the costs will be retarded.



I am 21 and will be making 50k a year, but am stupid and have a $500.00 a month car payment... which I never though I would say... but I wish I hadn't bought my car. Anyway that is sort of besides the point, but where is a good place to start when looking at what I can afford?

[Dritto]

Well man, I am in the same situation as you right now, making a similar amount of $$. In my opinion a 40 year is bad idea... I am pretty much convinced that renting is the best idea. Finding a decent place is definitely going to cost you.

One decent idea is to look at real estate in some of the surrounding communities as in my experience it's easier to find decent rental property. Places like Cochrane, Airdrie or Okotoks are places to think about if you don't mind the extra commute. I've seen houses for rent (duplex type thing, nothing big.. but with 2 car attached garage, and at least it's YOUR space) for $1200 - $1500 which isn't too awful if you have someone to share rent with.

I hate the idea of a 40 year as you are basically renting, and will most likely never ever own the house (live there until you're 60??) and a house SHOULD be an investment. The real estate here is valued so high that it'll never maintain these prices for ever, and you'll pretty much certainly have to sell for much less than you bought for if you decide to live there for a few years. Even if you could find someone to take over the remainder of the mortgage, which could be easy or impossible depending on how house prices go in the next few years, you'd still likely have been better off renting...

It's a CRAP time to be young and looking to buy a house. And you lose lose so much money on a 40 year to interest, I think it should probably be a last, last, last resort when finding a place to live.

Anyway, like I say, I'm in a similar situation and this is the conclusion I've come to. For someone in this situation I am 100% for renting in this current real estate market... I don't know about this for sure so don't take it as truth, but I've seen that someone this this level of income would be very lucky to get a mortgage for more than $300,000, which might buy a decent condo, and maybe not. Not many (if any) places are going to mortgage $400k-$500k to buy a house to a young person on $50k/year, no matter what the amortization period.

Good luck what ever you decide! Definitely check out some of the communities surrounding Calgary as mentioned, it's not as tough to find property, even though it is still expensive...

[Supa Dexta]

Originally posted by brendankharris
I am moving back to Calgary in the spring for a promotion in another company

Ha.. it's called a new job.. And you don't seem to stick with them very long..

[Weapon_R]

Renting is never a good idea if you can afford to buy. Problem is, even with a 40 yr amm., you're still looking at around 175k which isn't going to buy you a trailer right now. You'll need something to put down.

[Thaco]

You guys, the term means nothing, i bought a condo just 6 months got, i got it 0% down @ 5.45%


The amortization means nothing. My mortgage says 40 on paper, but i have elected to pay Bi-weekly, and paying an extra $60 per payment ($120 per month) which has shortened my mortgage down to 23 years!!! Also i have the option to make additional monthly payments and additional payments every year on my anniversary up to 20% of the property's value each year those features mean a lot more to me than the number 40, as that's all it is for me. it was just a number on paper so i could get approved... don't let it scare you.

[Weapon_R]

Originally posted by Thaco
You guys, the term means nothing, i bought a condo just 6 months got, i got it 0% down @ 5.45%


The amortization means nothing. My mortgage says 40 on paper, but i have elected to pay Bi-weekly, and paying an extra $60 per payment ($120 per month) which has shortened my mortgage down to 23 years!!! Also i have the option to make additional monthly payments and additional payments every year on my anniversary up to 20% of the property's value each year those features mean a lot more to me than the number 40, as that's all it is for me. it was just a number on paper so i could get approved... don't let it scare you.

The term can be changed upon renewal also. For the sake of the initial qualifying, however, it does mean something because a longer amortization can give the borrower more money

[Weapon_R]

Originally posted by Supa Dexta


Ha.. it's called a new job.. And you don't seem to stick with them very long..

Oh ya, for you to qualify you're going to need to show some job stability. Usually 1 year, some high risk lenders will allow for 6 months, although it's doubtful for no a downpayment mortgage. From your initial posts it looks like you just started in the workforce, and already are moving jobs, so you'll need to sit tight for a while before you can borrow.

[The_1]

Originally posted by Thaco
You guys, the term means nothing, i bought a condo just 6 months got, i got it 0% down @ 5.45%


The amortization means nothing. My mortgage says 40 on paper, but i have elected to pay Bi-weekly, and paying an extra $60 per payment ($120 per month) which has shortened my mortgage down to 23 years!!! Also i have the option to make additional monthly payments and additional payments every year on my anniversary up to 20% of the property's value each year those features mean a lot more to me than the number 40, as that's all it is for me. it was just a number on paper so i could get approved... don't let it scare you.

:werd: this is the way you should look at the 35-40 year mortgage

[Sorath]

u still gotta pay lawyer fees man... dont think u can afford anything right now, not unless ur creditscore is close to the 7s

[benyl]

Amortization term is everything. It is the % that is nothing.

The difference between a 5% mortgage and a 5.5% mortgage isn't that much over 25 years. It is $60 / month for a $200,000 mortgage.

But the difference between a 5% mortgage over 40 years and a 5% mortgage at 15 years, is huge! It is $630 / month.

But Thaco is right.

I bumped my mortgage payment $100 / month and my amortization period dropped from 25 years to 17 years.

[The Cosworth]

Originally posted by Dritto
Well man, I am in the same situation as you right now, making a similar amount of $$. In my opinion a 40 year is bad idea... I am pretty much convinced that renting is the best idea. Finding a decent place is definitely going to cost you.

One decent idea is to look at real estate in some of the surrounding communities as in my experience it's easier to find decent rental property. Places like Cochrane, Airdrie or Okotoks are places to think about if you don't mind the extra commute. I've seen houses for rent (duplex type thing, nothing big.. but with 2 car attached garage, and at least it's YOUR space) for $1200 - $1500 which isn't too awful if you have someone to share rent with.

I hate the idea of a 40 year as you are basically renting, and will most likely never ever own the house (live there until you're 60??) and a house SHOULD be an investment. The real estate here is valued so high that it'll never maintain these prices for ever, and you'll pretty much certainly have to sell for much less than you bought for if you decide to live there for a few years. Even if you could find someone to take over the remainder of the mortgage, which could be easy or impossible depending on how house prices go in the next few years, you'd still likely have been better off renting...

It's a CRAP time to be young and looking to buy a house. And you lose lose so much money on a 40 year to interest, I think it should probably be a last, last, last resort when finding a place to live.

Anyway, like I say, I'm in a similar situation and this is the conclusion I've come to. For someone in this situation I am 100% for renting in this current real estate market... I don't know about this for sure so don't take it as truth, but I've seen that someone this this level of income would be very lucky to get a mortgage for more than $300,000, which might buy a decent condo, and maybe not. Not many (if any) places are going to mortgage $400k-$500k to buy a house to a young person on $50k/year, no matter what the amortization period.

Good luck what ever you decide! Definitely check out some of the communities surrounding Calgary as mentioned, it's not as tough to find property, even though it is still expensive...

Yeah my dad lives in Coventry hills, but I have been out of the house for a while and don't know if I could move back in (if I was in financial trouble of course I could, but I am not right...) He works in Langdon as a teacher at the school and my step mom is a teacher in Airdrie.

Because of my car I am limited to spending around $1000.00 a month without limiting my standard of living, seeing as gas, bus pass, and insurance will go up.

So I was hoping of getting a hand from my parents, but an apartment may still be the way to go

[The Cosworth]

Originally posted by Supa Dexta


Ha.. it's called a new job.. And you don't seem to stick with them very long..

??
:dunno:


Originally posted by Weapon_R


Oh ya, for you to qualify you're going to need to show some job stability. Usually 1 year, some high risk lenders will allow for 6 months, although it's doubtful for no a downpayment mortgage. From your initial posts it looks like you just started in the workforce, and already are moving jobs, so you'll need to sit tight for a while before you can borrow.

fair enough, this is my second job as a technologist

My choices were to move to Vancouver for my same position (they were relocating all of us in a corporate restructuring or whatever the hell they are calling it), or quit and go to another company. I chose the later... Vancouver FTL

[Thaco]

Originally posted by brendankharris


Yeah my dad lives in Coventry hills, but I have been out of the house for a while and don't know if I could move back in (if I was in financial trouble of course I could, but I am not right...) He works in Langdon as a teacher at the school and my step mom is a teacher in Airdrie.

Because of my car I am limited to spending around $1000.00 a month without limiting my standard of living, seeing as gas, bus pass, and insurance will go up.

So I was hoping of getting a hand from my parents, but an apartment may still be the way to go

I'd say move back home and put all of your money away for savings, in 1 year then go talk to a broker.. you'll have $15000 to put down and 1 year of stability, which will speak big time compared to your current situation.

[USED1]

I have a 0% down, 40 year mortgage and have every intent on paying it off in 10 years. Right now I increased my payments by 300/month, pay bi-weekly (accelerated) and do a double up payment once per year. In addition to that I put a minimum of $5000/year towards the principle.

Just because it is a 40 year amm. doesn't mean you have to pay it off over the 40 years. As you make more money, put more towards your mortgage.

[Supa Dexta]

Originally posted by brendankharris


??
:dunno:

Not sure if I have the right guy, but I thought You were the one who tried MWD for a short bit, then went to BC and I thought I read of you wanting to switch jobs down there, or move or sumtin.., and now moving back for another job.. Not sure if thats you though..

[The Cosworth]

Originally posted by Supa Dexta


Not sure if I have the right guy, but I thought You were the one who tried MWD for a short bit, then went to BC and I thought I read of you wanting to switch jobs down there, or move or sumtin.., and now moving back for another job.. Not sure if thats you though..

Yeah I was an MWD/DD with Schlum as a summer student a couple years ago. I worked on a temp contract part time during my second year for a design company in O&G. Then when I graduated I got a job with a utility in BC (they wanted to move me around with work, restructuring), and now they want to move us to Vancouver (there are 10 of us province wide, they want to centralize us) for the same pay (BS) so I need to move on, I cant live in Vancouver for 45 g's a year.

So really I have quit one job (not yet either), I have had 4 but 2 of them were temp contracts.




It looks like I will be living somewhere (parents or apartment) and saving money for a place, don't think I can swing it at this point

[urban.one]

From National Post Nov7-2007


Mortgages: Go long
Adding up total interest costs leads to absurd conclusions
ALEX MACMILLANFinancial Post
The recent creation of 40-year and longer mortgages has given rise to criticisms that such financing options merely encourage people to throw away more money on interest payments. Here is the sort of example used to demonstrate this essentially silly proposition.


Consider a $300,000 home financed completely by a 7% mortgage with a 25-year amortization period. The total $330,374 worth of interest paid over 25 years would exceed the purchase price of the house. Spread over 40 years, the mortgage interest paid would be $584,426, almost twice the price of the house.


Critics reason that more interest is worse than less interest, hence stretchedterm mortgages are bad.


But let’s look at the logical conclusion that flows from such an argument. Considering the above $300,000, 7% mortgage, apparently a 10-year amortization term is superior to 25 years, since the interest paid would be only $161,138, rather than $330,374. A one-year mortgage is better still, since the interest paid would be only $11,330. In fact, the best way to finance a home is one that requires no interest payments at all. All homes should be purchased with cash!


Since the least-interest-is-best principle leads to such an unacceptable conclusion, there must be something wrong with the logic. The error is that critics who employ such reasoning do not consider the time value of money. That is to say, such critics treat a $1 today as the same thing as $1 a year from now, 25 years from now, or even 40 years from now.


Suppose you could earn 7% on your savings. If I were to borrow a dollar from you today, would you not consider my repayment of $1.07 a year from now as being just equivalent to the dollar you are lending me today (not a penny more or less)? What if instead you were the borrower? Suppose you wished to buy something today, but had to take out a one-year loan to finance it. Say the best interest rate you could get was 7%, and that you were willing to borrow at this rate. Would you not consider each $1.07 that you must repay a year from now as perfectly satisfactory with respect to, and in fact equivalent to, each dollar you are able, via the loan, to get your hands on today?


At a 7% interest rate, $1.07 to be paid a year from today is not the same as (is not equivalent to) $1.07 today. The $1.07 a year from now is exactly equivalent to $1 today. That is, the equivalent value today (or, using finance lingo, the present value) of monies paid or received at future points in time is arrived at by simply knocking off the interest. If someone obtains a $300,000 mortgage today at 5%, 7% or any other interest rate, and for any period, whether one year, 20 or 40 years, the equivalent value today of the total mortgage payments to be made in the future (principal and interest) is precisely $300,000, the amount of borrowed principal.


Since simply adding up the dollar amount of payments to be made on a mortgage without regard for each dollar’s different present value is plain silly and cannot be used to say anything useful about mortgages, how then should people approach the issue of interest and mortgage amortization?


With respect to interest costs and paying down consumer and mortgage debt, there are two important points to remember.


First, accumulated saving, otherwise referred to as investment or equity, is the difference between one’s assets and debts. New saving or, synonymously, new investment or increases in equity thus may be formed either by increasing assets or by reducing debt.


Second, since Canadians cannot deduct mortgage or consumer-loan interest for tax purposes, paying off consumer or mortgage debt is typically the best riskfree investment a Canadian borrower can make. Paying down debt is a risk-free investment because such action increases one’s equity with certainty by precisely the amount of the debt repayment. And, unlike risky investments, there is no doubt with respect to the rate of return or interest rate saved (earned) in the process. For example, for a person, say, in a 43% tax bracket, paying down principal on a 7% mortgage debt is equivalent to earning a risk-free interest investment return of 12.3% before taxes. Naturally, the fastest way to increase one’s equity is to pay down higher interest-rate debt first (for example, credit-card debt) before seeking to pay off mortgage principal.


With the above two points in mind, one should employ the following steps when approaching the issue of home purchase and mortgage finance:


If the home purchaser has high interest-rate consumer debt, any savings currently invested in risk-free instruments (bank deposits, GICs, etc.), over and above that required for a rainy day reserve, should be used to pay down such debt. If no such debt exists, then use all available risk-free savings above the rainy day reserve as down payment, thus lowering the required mortgage principal and saving more risk-free interest after tax than could be earned elsewhere.


Given the mortgage interest rate, the mortgage amortization period (whether it is 10, 20 or 40 years) should be that consistent with the desired maximum monthly payment that will not interfere with other higher-priority spending or investment. If there is no term long enough to bring the monthly payment down to the above comfort-level amount, the particular home and associated mortgage are not affordable.


Even though some people may wish to place some of their savings in risky investments (for example, vehicles like stocks or exchange-traded funds), since paying down mortgage principal is typically the best risk-free investment Canadians can make, one should try and obtain a mortgage that will allow extra principal repayments at little or no cost.


Alex MacMillan is a retired economics and finance professor at Queen’s University.

[Hakkola]

Originally posted by Thaco
You guys, the term means nothing, i bought a condo just 6 months got, i got it 0% down @ 5.45%


The amortization means nothing. My mortgage says 40 on paper, but i have elected to pay Bi-weekly, and paying an extra $60 per payment ($120 per month)


:eek:
I'm sorry, how much are you paying a month on your mortgage?

[Thaco]

Originally posted by Hakkola



:eek:
I'm sorry, how much are you paying a month on your mortgage? $600 every 2 weeks(actual payment is $540), the condo is worth just over $200k

[HRD2PLZ]

I have sold quite a few properties to young buyers who have opted for zero down mortgages. I would personally rather put a down payment on the mortgage but for those who have the income but no sizeable down payment its a good alternative. Gets them out of renting and into their own property so that you can build equity.
The zero down product has really changed (for the better) in the past year. Its a good product and has helped many people get onto the property ladder.

[autosm]

Originally posted by brendankharris
I am moving back to Calgary in the spring for a promotion in another company, and this means that I need somewhere to live.

I have started to save for a downpayent of a condo, but haven't gotten very far... about $2000 right now and could have between 5 and 6 when I move.

I am looking right now at condo's and am thinking the only way to afford one is to get a cheap one (which is hard to find) or getting a 40 year, zero down mortgage.

Now I have heard that a zero down mortgage is a bad idea, but is it a worse idea then renting? I was looking around at renting, and IF we can find a place the costs will be retarded.



I am 21 and will be making 50k a year, but am stupid and have a $500.00 a month car payment... which I never though I would say... but I wish I hadn't bought my car. Anyway that is sort of besides the point, but where is a good place to start when looking at what I can afford?



Rent ,don't buy prices could go down a lot . The chances of them going up is slim in my opinion. Look at all the unrest in the US and the possible fall out up here.

[The Cosworth]

Thanks for all your help guys. I guess that I will just have to see how things are going come the new year

[Tik-Tok]

Originally posted by HRD2PLZ
I have sold quite a few properties to young buyers who have opted for zero down mortgages. I would personally rather put a down payment on the mortgage but for those who have the income but no sizeable down payment its a good alternative. Gets them out of renting and into their own property so that you can build equity.
The zero down product has really changed (for the better) in the past year. Its a good product and has helped many people get onto the property ladder.


Tell me about it, my wife and I grabbed the 0 d.p. thing when it first came out, RIGHT before the boom. If we had decided not to do it, we would have completely missed the opportunity to buy out house as cheap as we did, and would probably be stuck in a condo somewhere.

[$lick_rYz]

Originally posted by Dritto

I hate the idea of a 40 year as you are basically renting, and will most likely never ever own the house (live there until you're 60??) and a house SHOULD be an investment.

you don't have to live in the same house for 40 years...you can sell it in a couple of years and make a profit on the sale (build up equity in the house) and upgrade to a nicer house and put the money earned in the house as downpayment on the new house

[urban.one]

^^ And most people incomes increase as they progress in their careers.