Your Household Income vs Mortgage Size

[killramos]

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Yep. But you have to admit the real reason why this is.

90% of retirements in this country are based on real estate always increasing in value (probably more).

Canada’s whole economy is built on real estate always appreciating.

If Trudeau gets his way our treasury is going to be built on it too lol

[HiTempguy1]

My whole immediate family believes in Real Estate much more than the stock market.

Our experiences have led us in that direction. Might not be technically right, but it works for us, so I will stick with it. I'd also rather invest in my business vs the stock market.

[RX_EVOLV]

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My whole immediate family believes in Real Estate much more than the stock market.

Our experiences have led us in that direction. Might not be technically right, but it works for us, so I will stick with it. I'd also rather invest in my business vs the stock market.

Same here. My parents always taught us owning real estate is the #1 priority, and everything is secondary. I remember moving ~4-5 times as a kid yet we've never sold a single property. We just rent the oldone out and buy a new one, and I always thought that was normal until it was my turn to buy my first place and realizing how difficult it was. The downside is my parents always had a mortgage their entire working lives (they are now in their 70s and retired), but the upside is they now have multiple properties spanning across China, HK, Van and Calgary. Now that I'm actually older and have to really start thinking about retirement, I'm quite envious of their positions and a bit sad and disappointed that at this moment won't be able to do the same for my family.

If I win the lottery or if my business is successful, you can bet I'll be out there buying up real estates before I invest in the stock market!

[JRSC00LUDE]

I don't understand the poll options.

[Xtrema]

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People saying 100-115k average household income in Calgary which is one of the highestin the country, and leveraging 2.5-4 is crazy but how the hell does it get done in Vancouver or Toronto?

Money laundering.

[austic]

we are about 2. we put 20% down for a conventional and using gross income

[Swank]

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I don't understand the poll options.

Confused me too, I think your position is x and each number is a multiplier i.e. 2 <= x < 3 would mean your initial mortgage would have been between 2 times and 3 times your household income.

[Mitsu3000gt]

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I don't understand the poll options.

Low number good, high number bad haha.

Mortgage divided by household income = X

[rx7boi]

Give him more credit, I think he at least understands that part haha.

Poll could have just been hyphenated and went 1-2, 2-3, 5+ etc without going through all the bullshit of greater than X but less than X.

[tonytiger55]

When I was in baking it was take your salary and x5. After having to fix peoples financial profiles and bail people out I learned even though thats how much you qualify for, DOES NOT MEAN YOU SHOULD.

Also this gets skewed with the type of real estate people want vs what they can actually afford over 25 years. i.e mini mansion, house, townhouse and condo.
A lot of people/clients want to have the same kind of lifestyle before owning a home too. It does not always work like that. They don't seem to understand they need to put money aside to deal with things that will come up.

A friend of a friend was hell bent on owning a house. But she lacked maintenance skills, there was the other factor of property tax, utilities being higher. So she ended up selling and moving into a condo.

It comes down to lifestyle, affordability with money aside in dealing with shit that comes up. Because as you get older, needs change, as well as life events WILL come up. Your mortgage person or Financial adviser (from what I have seen here) will NOT calculate those factors.

[Mitsu3000gt]

One of my best friends is a mortgage specialist, and he tells me the most surprising thing is how hard people try to hide things from him (like huge debt, bad credit, etc.) These are people going out of their way to be intentionally deceptive so they can over-leverage themselves even more and dig even deeper into a financial hole. It's shockingly common. When there are no immediate consequences, so many people just don't have a clue how to deal with their finances.

[Ekliptix]

I made some assumptions about the instructions, then voted: Mortgage amount borrowed / gross household income.

[gqmw]

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Sure but average joes in those areas, curious how mortgages and leverage works out there

For Toronto, would say your "average joe" is probably renting long term. Most people who end up buying these days are above average earners and they're probably around 3.5-5x gross on the mortgage. The other option though is definitely to buy further out in the GTA, where the tradeoff is you get something decently priced but you commute over an hour. But even the outskirts are going up in price.

[Buster]

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I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

Ya, I think I've made that point around here a few times.

RE is popular not because it is inherently a good asset to hold, but because it is one of the only asset classes where the average joe can apply leverage. And significant leverage at that. Ask someone if they want to take their retirement stock holdings and apply leverage at 4:1 or 5:1 and they would call you crazy. And yet people do it all the time with RE - with all of the inherent problems of the asset class.

I own my primary residence, but I don't really consider that ownership a positive trait.

[Xtrema]

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I've heard the leverage you gain on real estate is the reason most people find real estate viable, thoughts? I agree with your points.

https://www.investopedia.com/article...-net-worth.asp

Just like everything in investment, it can go both way.



While it sucks to use 2019 (pretty shitty right now) as reference. If you bought an average priced home in 2010, you would have gained $50K in value.

But during that time, you would have paid:

$20K in CoC taxes
~$100K in Mortgage interest

So really, you spent $120K for $50K gain. That's before you have to pay a realtor ~$10K to offload it. So if you put in $50K down to buy that house, you just lost all of it. And that's before whatever repairs you have to do in that decade.

But if you pay $1500/mth for 120 months, you would have lost $180K in rent. Say your $50K turns into modest $65K in 10 years, that mean your cost of shelter is around $165K.

So like Buster said, as investment it sucks. But if you need a roof over your head anyway, it could be cheaper but basically a wash if the house you own need any major repairs

People who wins the RE game all bought before 2004.

https://findcalgary.files.wordpress....yearprices.png

[ercchry]

^^the assumptions in your math hurt my head...

So right now apples to apples houses, rent is higher than mortgage. Mortgage has a principal portion which is essentially a forced savings account... if you spent $180k in rent, you would have spent less on a mortgage (let’s call it a wash after property taxes). You would get about half of that back over a 10yr span assuming 25yr initial am. If it appreciates $50k, and it costs about $20k to “unload it” then you still net a $30k gain on your initial down payment... PLUS you get back all that equity you built by paying a mortgage which in this cause we could call $90k... so you get $50k dp, $90k equity, and the $30k gain (which as a primary residence is tax exempt btw) vs $15k gain on your $50k investment... which 20% of will go to cap gain tax...

Boom, numbers are stupid and no one has a crystal ball

[max_boost]

So much marth lol

[Buster]

RE rates of return should be risk adjusted. People rarely look at it that way though.

[msommers]

This is a really interesting read guys. Cheers.