BOC Hits 5%

[GreyGhost]

Some of her Facebook is open. If you scroll down and find the posts of selling the mattress and headboard, it will shed some light for her story.
There is also the ad from the agent for her house. She says it was a custom built house but from what I see, it's just a cookie cutter house in a suburb of a suburb.

"Custom built" in that the builder happily sold you upgrades that you selected. It is a cookie cutter house in a suburb of a suburb.

Due to the number of houses in that subdivision, half the subdivision goes to one school, half to another. That is not good for a feeling of community nor having friends you interact with often.

 

[nobbie48]

Some of her Facebook is open. If you scroll down and find the posts of selling the mattress and headboard, it will shed some light for her story.
There is also the ad from the agent for her house. She says it was a custom built house but from what I see, it's just a cookie cutter house in a suburb of a suburb.

Custom built means custom built for the first owner. Unless there were massive upgrades it means nothing.

Many upgrades decrease the price. I don't want an inground pool and they cost a lot to fill in. A lot of people don't like handicap accessories.

 

[crankcall]

Custom means something different to everyone. And I agree unless it’s something like super insulated, full I beam floor joists , or oversized garage , it means nothing . You can do like I did once and have a curly maple kitchen door set made . Cigar roll perfect veneers, perfect white tone . Next it was painted white .


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[nobbie48]

Custom means something different to everyone. And I agree unless it’s something like super insulated, full I beam floor joists , or oversized garage , it means nothing . You can do like I did once and have a curly maple kitchen door set made . Cigar roll perfect veneers, perfect white tone . Next it was painted white .


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For me it's a two bedroom bungalow with a six car garage and a seperate heated shop for smelly stuff. Indoor pool would be nice and a side room for the printing press with current plates for Candian fifties so I can afford to run the place.

 

[crankcall]

I just got a letter from Scotia that they will reduce my HELOC by 234.00 a month for the next 25 yrs to bring the equity into a 65% ratio . So it drops by $70k which , I don’t care , but it’s already not at 65% and the house is valued at 1.2 , I think the banks are looking down the road and terrified at the exposure they have sold .


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[anterabae]

I just got a letter from Scotia that they will reduce my HELOC by 234.00 a month for the next 25 yrs to bring the equity into a 65% ratio . So it drops by $70k which , I don’t care , but it’s already not at 65% and the house is valued at 1.2 , I think the banks are looking down the road and terrified at the exposure they have sold .


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They're doing this because OSFI is forcing them to, not because they want to.

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[GreyGhost]

They're doing this because OSFI is forcing them to, not because they want to.

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Sort of. Ofsi is forcing ltv reduction to 65%. Loan is well defined but value is grey and in CC's case, well over 1.2. Especially with a 25 year horizon, this will need to get adjusted often. To be honest, there is a very high chance that "value" increase by far more per month than his available loan decreases. This seems like the bank went with the easiest/cheapest way to tell ofsi they were aiming for compliance. It also does not materially affect the vast majority of their borrowers as it is just trimming unused headroom. For a very small percentage that have managed to max out loan, this could matter as you need to make payments to buy down loan but if you push, I suspect bank would adjust value so they can show compliance and your payments remain unchanged.

 

[anterabae]

Sort of. Ofsi is forcing ltv reduction to 65%. Loan is well defined but value is grey and in CC's case, well over 1.2. Especially with a 25 year horizon, this will need to get adjusted often. To be honest, there is a very high chance that "value" increase by far more per month than his available loan decreases. This seems like the bank went with the easiest/cheapest way to tell ofsi they were aiming for compliance. It also does not materially affect the vast majority of their borrowers as it is just trimming unused headroom. For a very small percentage that have managed to max out loan, this could matter as you need to make payments to buy down loan but if you push, I suspect bank would adjust value so they can show compliance and your payments remain unchanged.

Oh they're absolutely going with the simplest option because employees don't do grey area very well.

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[crankcall]

I had not read the OFSI report . That makes more sense , as I have met few banks that won’t loan you enough to choke on.


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[Dresden]

My mortgage broker gal pal says it’s like nothing changed , daily calls about how to get 1.5m mortgage when you make $79k a year. And drive a nice financed car and still hold 40k in student debt ( and your not holding a medical degree)


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This is completely opposite to everything I'm seeing and hearing from smart realtors and developers.
You have 2 groups of people - those that are scrambling to renew and those who are putting off moving.
The over-leveraged house flippers are feeling the squeeze and looking to offload.

Some observations:

General consensus amongst the finance big-brains (bond market) is higher for longer. Anyway you slice it, the gravy train of low rates has come to an abrupt end and the most debt-reliant sectors are hit hard first; housing being high on the list.

RE agents are still out here touting the predictable spiel: rates are bound to come down soon! The libs will never let the market crash! etc.
Some will fall for it; most can see right through the desperation.

Developers are being squeezed on financing rates and are putting off projects as they just cannot make the numbers work - especially in Toronto where municipal development fees can get to over $150K PER UNIT of a 400 unit building. Demand in the rental market is currently holding up price action. Throw in mass influx of students/immigration with a hot mess of a housing strategy and existing homeowners should benefit from the stupidity by not seeing their home values erode too quickly.

IF and that's a big IF the labour market cracks, good luck to everyone who has all of their net worth tied up in housing.

Chances this happens again are slim, but not zero:

 

[mimico_polak]

How do I get in on this private money lending racket without overexposing myself?

Ontario sees a jump in riskier private mortgages as homebuyers look beyond banks for funding

From 2021 to 2022 there was a more than eight per cent increase in the number of people choosing a private mortgage, according to the Financial Services Regulatory Authority of Ontario.

www.thestar.com

 

[GreyGhost]

How do I get in on this private money lending racket without overexposing myself?

Ontario sees a jump in riskier private mortgages as homebuyers look beyond banks for funding

From 2021 to 2022 there was a more than eight per cent increase in the number of people choosing a private mortgage, according to the Financial Services Regulatory Authority of Ontario.

www.thestar.com

Start lending money to desperate people at high rates. Have a good lawyer help you set it up.

It's not a good fit for you. To get paid, given the amount of money borrowed and rates, you need to pull the plug and make them sell the asset.

EDIT:
FWIW, I know someone that followed a similar route a decade or so ago. High interest auto loans with trackers and disablers on all vehicles. He has multiple lamborghinis now. Probably lots of destruction in his wake when people lose their charger they financed at 24%.

 

[mimico_polak]

Start lending money to desperate people at high rates. Have a good lawyer help you set it up.

It's not a good fit for you. To get paid, given the amount of money borrowed and rates, you need to pull the plug and make them sell the asset.

Ugh....damn those internal ethics and morals...

I'd probably say 'ok, well let's see what we can do to make this work'.

My old realtor did this...he got a few houses because contractors couldn't make payments.

'Oh you can't pay me? Awesome! Looks like I own your house now!'

 

[nobbie48]

Start lending money to desperate people at high rates. Have a good lawyer help you set it up.

It's not a good fit for you. To get paid, given the amount of money borrowed and rates, you need to pull the plug and make them sell the asset.

EDIT:
FWIW, I know someone that followed a similar route a decade or so ago. High interest auto loans with trackers and disablers on all vehicles. He has multiple lamborghinis now. Probably lots of destruction in his wake when people lose their charger they financed at 24%.

I like the idea of the cheque cashing places. 10% for two weeks. $200 for $20. Lots of small loans instead of a huge one that could take you out in a heartbeat. What does $10,000 become in a year compounded at 10% every two weeks?

10000​

11000​

12100​

13310​

14641​

16105.1​

17715.61​

19487.17​

21435.89​

23579.48​

25937.42​

28531.17​

31384.28​

34522.71​

37974.98​

41772.48​

45949.73​

50544.7​

55599.17​

61159.09​

67275​

74002.5​

81402.75​

89543.02​

98497.33​

108347.1​

 

[Evoex]

How do I get in on this private money lending racket without overexposing myself?

Ontario sees a jump in riskier private mortgages as homebuyers look beyond banks for funding

From 2021 to 2022 there was a more than eight per cent increase in the number of people choosing a private mortgage, according to the Financial Services Regulatory Authority of Ontario.

www.thestar.com

My wife did this a few years ago, high risk mortgage loan. She was way down on the creditor list, but put in about $80k. 1 year return was about 12% but they did everything possible to delay her getting paid out, took an extra 2.5 months and she got an extra 1% for her trouble.

 

[Mad Mike]

How do I get in on this private money lending racket without overexposing myself?

Ontario sees a jump in riskier private mortgages as homebuyers look beyond banks for funding

From 2021 to 2022 there was a more than eight per cent increase in the number of people choosing a private mortgage, according to the Financial Services Regulatory Authority of Ontario.

www.thestar.com

We got a project iproperty n Porcupine 2 years back, bought it for next to nothing from CMHC. I decided it was too much work so I sold it, closed last week. Because it had been gutted to the studs, nobody would mortgage the property - lots of offers but nobody could arrange financing. So, we decided to offer a VTB 1st mortgage at 7.5% interest on a 2 year term for up to 60% LTV - another flurry of offers that were not subject to financing -- SOLD!

The legal work is easy, and the costs are usually borne by the borrower. It cost about $850 in legal fees to draw up and register the mortgage.

I don't want to be in that business. It can be just as messy as landlording. If things go wrong, you need the cashflow to cover the bills and legal costs of getting the property back and the occupants out.

 

[nobbie48]

My wife did this a few years ago, high risk mortgage loan. She was way down on the creditor list, but put in about $80k. 1 year return was about 12% but they did everything possible to delay her getting paid out, took an extra 2.5 months and she got an extra 1% for her trouble.

First mortgage has some merit but as they go to second and third the risk factor gets scary. As I understand it only the first mortgage holder can initiate repossession.

I don't follow mortgages but gather they are in the 5-6% range but a GIC can bring in close to that with about zero risk. I don't have enough spare cash to take on the first mortgage of a large chunk of a million.

 

[GreyGhost]

First mortgage has some merit but as they go to second and third the risk factor gets scary. As I understand it only the first mortgage holder can initiate repossession.

I don't follow mortgages but gather they are in the 5-6% range but a GIC can bring in close to that with about zero risk. I don't have enough spare cash to take on the first mortgage of a large chunk of a million.

First mortgages are 5-7%. Private mortgages are normally at least 10% higher. Over the past few years, I've heard numbers of 10-20% for the private mortgages.

A whole lot are refusing to renew the private mortgage. My suspicion is they were watching LTV and realize the owners are getting close to zero equity. Once the equity is all used up, you need to get your money back from that buyer asap as you can't get blood from a stone.

 

[nobbie48]

First mortgages are 5-7%. Private mortgages are normally at least 10% higher. Over the past few years, I've heard numbers of 10-20% for the private mortgages.

A whole lot are refusing to renew the private mortgage. My suspicion is they were watching LTV and realize the owners are getting close to zero equity. Once the equity is all used up, you need to get your money back from that buyer asap as you can't get blood from a stone.

If the buyer put 30% down and the house price goes down 30% the ice becomes very thin which in turn drives prices even lower creating a fire storm.

Investors with loads of cash can wait it out until the various governments start throwing our tax dollars into the fire to house the immigrant and student populations, boosting the prices back up.

Why isn't housing solely the federal federal responsibility? Why have three levels of government tripping over each other to shovel cash into the furnace?

We don't need passports or permission to go from Toronto to Barrie or Timmins. Chose where you want to live based on the balanced availability of housing and income and your skills.

 

[GreyGhost]

Why isn't housing solely the federal federal responsibility? Why have three levels of government tripping over each other to shovel cash into the furnace?

Every politician wants control. Tons of money and influence being thrown around when you can convert a field at $20K per acre into development land at >$1M per acre.

The really crazy thing is that the less you put down, the better your rate. The mortgage insurance you buy is backed by the government of canada. If they crash house prices too hard, the feds are on the hook for a number so big it would make your head spin. Something like 35% of the mortgages in Canada are backed by the feds and their unlimited pool of money/self-balancing budget.