CO-Signer on a Mortgage
- Thread starter LittleSin
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A bunch of the mortgage borrowing laws were just recently modified in Canada Littlesin... make sure you're up to date on what changed (stuff like no more 30 year mortgages, changes in minimum down payments... etc).
These are the main changes but there is also some reduction on HELOC equity I believe:
Co-signing a mortgage can be done but only people who trust you unconditionally would even consider doing it as they are on the hook for payments if you default. I'm guessing you're considering family to co-sign?
- The maximum amortization period for a government-insured mortgage was lowered from 30 years to 25 years.
- Maximum borrowing limit from 85% to 80% of the value of the home on refinances.
- Limiting GDS to 39% and TDS to 44%, regardless of credit score.
- Maximum purchase price for government-insured mortgages is $1 million.
Co-signing a mortgage can be done but only people who trust you unconditionally would even consider doing it as they are on the hook for payments if you default. I'm guessing you're considering family to co-sign?
Don't be so sure... Over here, mortgages of 35 years were recently banned, because it turned out that, for the same amount borrowed, you actually ended up paying MORE per month than you would on a mortgage of 30 years, because of the build-up of interest over a longer period and such. The difference in monthly payments between, say, 5 years and 10 years, is dramatic, of course, but on higher numbers of years, the difference becomes really small to the point of disappearing and turning against the consumer.No more 30 years mortgage?
Fuck.
I'll never be a home owner.
Actually, a state banking official once told me, the most beneficial way would be to take out a mortgage on 10 years or so, with a big lump payment at the end; then take out a second mortgage on ten years for the lump sum and pay that off. No matter what you put in as expectations for the economy to evolve over the coming years, this came out vastly superior over a single mortgage over 20 years, or even over 25 or 30 years.
Of course, using loans/mortgages to pay back other loans/mortgages is exactly what governments and most large corporations do....But it's illegal for individuals
Anyway, my point being: people count on a longer time to have smaller payments for the same capital, but this isn't always true. Especially at totday's market rates.
*eyebrows raised*
Anyways, realistically the minimum is 5%. If you pay down 20%, you don't have to pay for mortgage insurance but for a $275,000 mortgage it's a downpayment $55,000. I don't think you're in a position to make a downpayment of that type AND pay closing costs.
At a budgeted $975 a month, plus property taxes (Another $120 per month) at an interest rate of 4%, you can comfortably afford a $185,000 mortgage.
Looking around Paradise/Conception Bay, I'm finding properties like:
http://www.realtor.ca/propertyDetails.aspx?propertyId=12110427&PidKey=1089857641
http://www.realtor.ca/propertyDetails.aspx?propertyId=12130756&PidKey=-784809784
Always open to more questions.
Oh thank god. My heart jumped into my throat at a 20% down payment.
Anyways, I was thinknig about moving slightly out side of town. I'm a sucker for scenery and the prices tend to get better.
Petty Harbor would be a good place. It's barely a 10 minute drive from St. Johns and the high way is close by. I'd be about a half hour away from my parents and inlaws but whatever, they drop in uninvited far to much anyways.
So, these tqo properties have my attention.
http://www.exitrealtynl.com/listing-details.aspx?oid=176760
http://www.exitrealtynl.com/listing-details.aspx?oid=176781
This one is an apparent fixer upper but I'm not against that. I'm retty handy and, what I can't do, I know others who can at really good prices.
http://www.exitrealtynl.com/listing-details.aspx?oid=178731
Wish there was inside pictures.
Anyways, I was thinknig about moving slightly out side of town. I'm a sucker for scenery and the prices tend to get better.
Petty Harbor would be a good place. It's barely a 10 minute drive from St. Johns and the high way is close by. I'd be about a half hour away from my parents and inlaws but whatever, they drop in uninvited far to much anyways.
So, these tqo properties have my attention.
http://www.exitrealtynl.com/listing-details.aspx?oid=176760
http://www.exitrealtynl.com/listing-details.aspx?oid=176781
This one is an apparent fixer upper but I'm not against that. I'm retty handy and, what I can't do, I know others who can at really good prices.
http://www.exitrealtynl.com/listing-details.aspx?oid=178731
Wish there was inside pictures.
Necronic
Staff member
Well, like I said, 20% down is *good*, but not necessary. I definitely would not go as low as 5%, but that's just me. See, for me I'm planning on raiding my 401k for a large part of my down payment, remember you can do this (oh wait your canadian I have no idea what you guys can do).
Also, I'm looking at the properties you listed, and reading your original post I am confused (or maybe my mental amortization calculator is crap). You said that there was "no way you could afford a 1100$ rent", but the houses you are linking are like 180k, which will give you like 1100$ mortgage, and that doesn't include property taxes or maintenance costs.
Also, I'm looking at the properties you listed, and reading your original post I am confused (or maybe my mental amortization calculator is crap). You said that there was "no way you could afford a 1100$ rent", but the houses you are linking are like 180k, which will give you like 1100$ mortgage, and that doesn't include property taxes or maintenance costs.
I put the numbers in an online calculator using the rate my father in law told me and it came out to be about 850.00 a month.
That might be VERY wrong though. I'm sorta stumbling around in the dark and math is not a strong point of mine. The minute numbers enter into a situation it's like my can't understand anything.
That might be VERY wrong though. I'm sorta stumbling around in the dark and math is not a strong point of mine. The minute numbers enter into a situation it's like my can't understand anything.
Eh? $180,000 over 25 years at 4% is 946.84. Subtract out the downpayment of 5% of 180,000 and you're left with $171,000 which is $899.49. Add closing costs of about $5000 and various other expenses and I think $975/month is a reasonable expectation for a $180-$185,000 house.
But don't take my word for it: http://www.cmhc-schl.gc.ca/en/co/buho/buho_012.cfm
You can transfer RRSPs for your downpayment here and then pay them back over an extended period or include the repayment as income on your tax return.[DOUBLEPOST=1341749414][/DOUBLEPOST]Do you know what the property taxes will be?
Littlesin, if you happen to have some kind of RRSP's you can utilize the home buyers plan (HBP) to withdraw money from those RRSP's to use in your down payment.
Also, Adam is bang on with his mortgage calculations. $975 a month seems like a pretty good estimate for a monthly payment on a $180,000 home with %5 down (and that I believe includes estimated property taxes).
Also, Adam is bang on with his mortgage calculations. $975 a month seems like a pretty good estimate for a monthly payment on a $180,000 home with %5 down (and that I believe includes estimated property taxes).
Hm.
I think I may have to put this off for at least another year. Steve makes about $950 a check right now. In another year he'll have a rise, plus bonuses and such. Also, maybe I'll have a better income.
It'll also give us time to build up a bigger down payment.
Thank you all for you information thus far, though!
I think I may have to put this off for at least another year. Steve makes about $950 a check right now. In another year he'll have a rise, plus bonuses and such. Also, maybe I'll have a better income.
It'll also give us time to build up a bigger down payment.
Thank you all for you information thus far, though!
Necronic
Staff member
Hmm, my calculator came out with different numbers but it was a US calculator. Anyways, my main point/advice was that you need to be reaaaalllly conservative when it comes to buying a house (financially). Renting an apartment has a lot less risk involved in it because you are only committed through the end of your lease, and even then the worst that can happen is that you get evicted and have a negative mark on your credit history. Failing to make mortgage payments is a whole different level of fucked.
For that extra risk/commitment that you carry with home owning, you need to include that into your estimates on how much money you are willing to spend. If I could afford 1k$/mo in rent, I probably wouldn't go for a mortgage that was more than 800$. I need that extra cash for the times when my AC or heater dies and needs to be replaced, or when (god forbid) my wife or I loose their job. Because it's such a huge commitment you have to be more conservative.
I don't know what you make/what your income is, but based on the 1100$ comment I would not suggest going for something that costs 975$/mo. 125$/mo in unexpected maintenance costs puts you into the realm of the unaffordable. I have had a lot of friends that have bought houses they shouldn't have. I recently watched someone go through a foreclosure. It's a terrible experience. The single most important thing about buying a house is making sure that you can afford it without any extra stress.
For that extra risk/commitment that you carry with home owning, you need to include that into your estimates on how much money you are willing to spend. If I could afford 1k$/mo in rent, I probably wouldn't go for a mortgage that was more than 800$. I need that extra cash for the times when my AC or heater dies and needs to be replaced, or when (god forbid) my wife or I loose their job. Because it's such a huge commitment you have to be more conservative.
I don't know what you make/what your income is, but based on the 1100$ comment I would not suggest going for something that costs 975$/mo. 125$/mo in unexpected maintenance costs puts you into the realm of the unaffordable. I have had a lot of friends that have bought houses they shouldn't have. I recently watched someone go through a foreclosure. It's a terrible experience. The single most important thing about buying a house is making sure that you can afford it without any extra stress.
Newfoundland is in an odd spot right now where its actually cheaper to buy then to rent. Most landlords are what would be considered "slumlords" in other places...my own land lord being amongst them.
Now, don't get me wrong! We actually have it pretty good in someways. We rent a house for 650.00 a month. That doesn't sounds bad...but there's barely any insulation in the walls and electrical is old...so we're talking and extra 600.00 a month once oil heat comes into it in the winter. Then we have no yard as, the reason that the rent is so cheap, there's a garage that our land lord owns in what would be the backyard. We have to drive about 15 minutes for Jet to go anywhere he can play...and that's if I have the car.
Also, there's ben a few fires in the garage and break ins centered aruond them ore expensive cars that make us nervous.
And people just walk into my house or try to force their way in because they assume we are the "waiting room". It can get bad, as well, when its the weekend, someone wants something done with their car and they won't LEAVE because they don't believe us that we only rent from the owner.
I was looking at moving into another house...the average right now is between 1100-1500 dollars a month in rent, pou...and that's in the "bad" neighborhoods!
It's a frustrating position to be in. I really do feel blessed ot have rent this cheap...but it seems like there are more and more downsides.
Now, don't get me wrong! We actually have it pretty good in someways. We rent a house for 650.00 a month. That doesn't sounds bad...but there's barely any insulation in the walls and electrical is old...so we're talking and extra 600.00 a month once oil heat comes into it in the winter. Then we have no yard as, the reason that the rent is so cheap, there's a garage that our land lord owns in what would be the backyard. We have to drive about 15 minutes for Jet to go anywhere he can play...and that's if I have the car.
Also, there's ben a few fires in the garage and break ins centered aruond them ore expensive cars that make us nervous.
And people just walk into my house or try to force their way in because they assume we are the "waiting room". It can get bad, as well, when its the weekend, someone wants something done with their car and they won't LEAVE because they don't believe us that we only rent from the owner.
I was looking at moving into another house...the average right now is between 1100-1500 dollars a month in rent, pou...and that's in the "bad" neighborhoods!
It's a frustrating position to be in. I really do feel blessed ot have rent this cheap...but it seems like there are more and more downsides.
My friend is renting a two bed room apartment in a welfare neighborhood for 650 a month. It goes up from there.
Hell, my inlaws rent out a one bedroom, basement apartment for 700.00 a month.
Rent is CRAZY right now.
Well, crazt for Newfoundland. I'm sure it's worst in, like, New York or something.
I was about to say, here in the SF Bay Area a two-bedroom for $650 is a ridiculously good deal. Some friends of mine are renting a tiny, tiny little shithole one-bedroom apartment in a crappy neighborhood. They pay $900 a month. And this isn't even the actual city!
Says the poster from Saskatchewan who is seeing houses flip for kazillions of dollars overnight!
Necronic
Staff member
Risk is a cost, so, I would almost argue the opposite. Renting doesn't build equity, but it also never exposes you to risk/liability.
You're also counting on the housing market not taking a dive on you. There's a lot of people now that are under-water on their mortgages that aren't building any equity at all.
You could argue the opposite, but you'd be wrong. If you look at a house as an investment instead of a place to live, you're doing it wrong.
Renting still has risk including but not limited to the fact that 1) you have no control over what your rent is and 2) you can be forced to move within specified timelines written into your local tenancy act. I'd posit that risks for renting are HIGHER than they are for buying if only because you can be reasonably certain you aren't going to force yourself out of your own home.
Of course, that only remains true under the condition that you intend to remain in your house over a longer term and that you didn't exceed your ability to borrow in order to purchase the home. I have little to no sympathy for people that purchased McMansions on NINJA loans, sub-prime loans, no down payment, ARMs, etc. While financial institutions do have a responsibility to provide all of the information lawfully required to a purchaser, unfortunately there are too many idiots out there who don't understand even the fundamental components to home ownership; hell, we have kids locally that we've been teaching interest rates, because their parents had no idea.
Necronic
Staff member
At first glance this seems to be contradictory, but I think we're actually on the same page/in agreement, I was just focusing more heavily on the second thing you said (it shouldn't be looked at as an investment, even though it sort of is.)
If it's solely seen as an investment, it's no better than gambling. When I buy a house, I don't buy it because I'm looking to make money on it, I'm buying it because I intend to live in it for X years. When looking over the longer term, I can pay $1100/month for rent that goes into John Q Smith's bank account, or I can pay $900/month for a mortgage that goes into Adam S Mon's home equity. In some markets right now, you're right, people are underwater in that their mortgage exceeds their equity. That does go away eventually, and the only reason that people are especially concerned about it is because a lot of people use the equity in their house as a cheap form of credit card, refinancing their house to afford toys, vacations, etc. that they wouldn't be normally.
That said, there are still a fair few cases where people are underwater because the market has fallen out from under their house. In that case, it really shouldn't matter because if the plan is to live in the house, you shouldn't care too much about the equity in the home. Unfortunately, in many of the areas where the market has fallen out, it's also areas of high unemployment. So, you've got a house that you owe more for than its worth and it will cost you to unload it, yet you're forced to unload it in order to find work to pay for your housing.
That said, there are still a fair few cases where people are underwater because the market has fallen out from under their house. In that case, it really shouldn't matter because if the plan is to live in the house, you shouldn't care too much about the equity in the home. Unfortunately, in many of the areas where the market has fallen out, it's also areas of high unemployment. So, you've got a house that you owe more for than its worth and it will cost you to unload it, yet you're forced to unload it in order to find work to pay for your housing.
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