Blade_of_tyshalle posted:

Which part of the country are they in? I'm not sure if Mike Holmes ventures out of the GTA too much.

Tonton Macoute posted:

The parliament in my country is about to pass a change in bankruptcy law, which should make all future mortgage debt non-recourse. The banks are throwing a tantrum, stating that it will destroy house affordability and doom poor families to homelessness forever. What's the bear consensus of non-recourse vs recourse house debt. Which is worse and why?

Tonton Macoute posted:

I am not actually interested in Canadian real estate and furthest West (and closest to Canada) I've been is France. Yet, I keep checking this thread for general real estate bubble chat. Alright, here's my question:

- The parliament in my country is about to pass a change in bankruptcy law, which should make all future mortgage debt non-recourse. The banks are throwing a tantrum, stating that it will destroy house affordability and doom poor families to homelessness forever. What's the bear consensus of non-recourse vs recourse house debt. Which is worse and why?

DailyDumSum posted:

I'm thinking of purchasing a condo in Toronto. Please point to resources where it would show me that it is a bad idea.

For reference, it's a 2 bed + 2 bath for 450K.

DailyDumSum posted:

I'm thinking of purchasing a condo in Toronto. Please point to resources where it would show me that it is a bad idea.

For reference, it's a 2 bed + 2 bath for 450K.

melon cat posted:

There is no simple, clear-cut answer to this. Who's the builder? Which part of Toronto is the condo in? How much are the maintenance fees (and what's covered under the fees)?

LemonDrizzle posted:

However, non-recourse is very bad if you're the kind of bear who desperately wants to see new homebuyers driven out of their homes and into destitution.

LemonDrizzle posted:

Neither is intrinsically better or worse for bears, but a sudden shift from recourse to non-recourse could lead to a sharp reduction in credit availability (i.e. force banks to suddenly adopt more rigorous lending standards), which would tend to reduce the number of buyers who are able to proceed and thus pull prices down.

LemonDrizzle posted:

However, non-recourse is very bad if you're the kind of bear who desperately wants to see new homebuyers driven out of their homes and into destitution.

LemonDrizzle posted:

Neither is intrinsically better or worse for bears, but a sudden shift from recourse to non-recourse could lead to a sharp reduction in credit availability (i.e. force banks to suddenly adopt more rigorous lending standards), which would tend to reduce the number of buyers who are able to proceed and thus pull prices down.

LemonDrizzle posted:

However, non-recourse is very bad if you're the kind of bear who desperately wants to see new homebuyers driven out of their homes and into destitution.

Lexicon posted:

How would that work? Existing homebuyers would somehow be driven out of their homes?

Cultural Imperial posted:

Has this ever happened anywhere in the world?

DailyDumSum posted:

I'm thinking of purchasing a condo in Toronto. Please point to resources where it would show me that it is a bad idea.

For reference, it's a 2 bed + 2 bath for 450K.

Baronjutter posted:

Yeah, rent, it owns. Depending the rent/buy ratio in your city even if you want to buy you're still better off renting for like 20+ years, like you come out ahead financially even if there isn't a crash.

quote:

Jane and John seem to be sliding ever deeper into debt and don’t quite know what to do about it.

He is 39, she is 41. They have two children, four and three. Given John’s $165,000-a-year salary, they should be okay.

But living in one of Canada’s most expensive cities on one income – if only for a few years – can be challenging. They’ve had to refinance their house and take out a line of credit. They also have a car loan. They have little in the way of savings.

Fortunately, John has a partly indexed defined-benefit pension plan that will pay him about $86,000 a year in current dollars if he stays with his current employer until he retires.

In the meantime, Jane is casting about for solutions.

“Should we live in a less expensive house?” she asks in an e-mail. “Are we spending exorbitantly? It feels like we never have extra money.

“We still have an assortment of hand-me-down and university furniture, we don’t fly anywhere on trips, we can’t afford to do landscaping in the yard. I don’t really buy expensive clothes – I buy many things second-hand,” Jane writes.

“I do need to get a job, but will this solve the problems?”

We asked Michael Cherney, an independent financial planner in Toronto, to look at Jane and John’s situation.

What the expert says

Jane and John are just making ends meet, Mr. Cherney says. John’s take-home pay is entirely eaten up by monthly expenses. Some changes are in order.

The easiest solution is for Jane to go back to work, Mr. Cherney says. She is looking for a part-time job in marketing that would pay from $18,000 to $39,000 a year for a four-day week.

“This would be especially invaluable to the family given Jane’s low tax rate,” Mr. Cherney says. “This would bring in between $15,700 and $30,900 a year and would allow a range of savings options” – paying down the mortgage, saving for retirement, saving for the children’s education and taking advantage of tax-free savings accounts.

If Jane does not find work, they could consider selling their home and downsizing to a less expensive one, preferably with a basement apartment, the planner says.

They have about $215,000 of equity in the house, which could easily be whittled down to $150,000 after all the costs involved in moving to a new house are factored in, Mr. Cherney says.

“But if they could add a basement apartment to the mix, perhaps getting $1,000 a month in rent, that would be worth it,” he says.

Regardless, Jane and John “would benefit from reviewing their monthly expenses,” the planner notes. With so much of their income going to debt repayment, they are “particularly vulnerable to interest-rate increases.”

To lower their heating and electricity bills, they could “time-shift” laundry, dishwashing and other “electricity gobblers,” turn lights off, and put heating and air conditioning on a timer, he says.

They are paying $786 a month to lease a late-model car.

“They have expressed concern about car safety, though I would point out that there are many low-cost options that have five-star safety ratings,” Mr. Cherney says.

He suggests they get someone to take over their lease and buy a good used car that is still under warranty.

Gifts and vacations could also be pared. Instead, the family could enjoy “staycations” or lower-cost camping trips, he says. Grooming, too, could be reduced.

The payoff will be worthwhile, Mr. Cherney says.

“Assuming they can achieve some combination of the above, they will have no problem achieving their goal of retiring at John’s age 60 with an income of $70,000 a year after tax,” he says. “In fact, they should be able to achieve an indexed income of $94,000 in current dollars” when Canada Pension Plan and Old Age Security benefits are included.

Jane and John are good candidates for income splitting, Mr. Cherney notes. John can transfer up to half of his pension income to Jane and benefit from her lower marginal tax rate. This should also allow him to avoid the OAS clawback, and allow Jane to claim the $2,000 pension income credit. They can also split their CPP benefits.

***

Client situation:

The people: John, 39, Jane, 41, and their two children.

The problem: How to get back on track financially to reverse their high debt and low savings.

The plan: Jane is looking for work. Once she finds a job, her income will help to pay down the mortgage and save for the future. Cut spending where possible and consider buying a used car instead of leasing.

The payoff: No more money worries.

Monthly net income: $8,800

Assets: Home $800,000; bank account $3,060; term deposits $550; RRSPs $11,215; RESP $6,390; present value of his pension plan $81,200. Total: $902,415

Monthly disbursements: Mortgages $2,855; utilities, insurance, maintenance $445; auto lease $785; other transportation $270; groceries $1,000; clothing $280; line of credit $395; student loan $80; credit cards $140; gifts, charitable $250; vacation, travel $335; children’s activities $230; grooming $200; other personal discretionary $205; doctors, dentists $250; life insurance $145; drugstore $20; telecom, TV, Internet $210; his pension plan contributions $700. Total: $8,795

Liabilities: Mortgage $372,865 at 2.79 per cent; mortgage $212,840 at 2.2 per cent; line of credit $73,850 at 4.5 per cent; credit cards $5,690; loan $14,150 at 7.65 per cent. Total: $679,395

quote:

“We still have an assortment of hand-me-down and university furniture, we don’t fly anywhere on trips, we can’t afford to do landscaping in the yard. I don’t really buy expensive clothes – I buy many things second-hand,”

flashman posted:

What's going on with the two mortgages? Is that on the same house?

Grand Theft Autobot posted:

How the gently caress do these morons only have $3k in the bank? Are they eating fuckin caviar off strippers' asses for every meal of the day?

melon cat posted:

I used to manage clients with this type of income. On a daily basis, I nearly fainted when I saw what their paycheque amount was. But despite how much money they made, they always found a way to out-spend themselves. If they make $150K/year, they'll spend $300K. If they make $300K a year, they'll spend $600K. They also max the poo poo out of their HELOCs, and have multiple vehicle leases.

And in most cases, their savings/investment accounts had next to nothing.

Baronjutter posted:

If I made 165k a year I could literally have a million in the bank after 6-7 years, maybe sooner if I was investing it all.

Baronjutter posted:

If I made 165k a year I could literally have a million in the bank after 6-7 years, maybe sooner if I was investing it all.

blah_blah posted:

There's this thing called taxes, you don't just divide by 6.

Grand Theft Autobot posted:

How were they so bad at this? I can't even begin to understand how this works.

Baronjutter posted:

I'd get rich flipping a house or two.

triplexpac posted:

So my friends saw a house on Wednesday night, put in a bid last night and bought the house. I don't think they did a home inspection... hope it all works out for them!

Pixelboy posted:

That's usually a contingency on the offer.

You know that's a thing?

blah_blah posted:

Offers having no subjects is pretty common in Vancouverstupid.

Kalenn Istarion posted: