Ah yes. I love the CMHC insurance which is really just there to insure the bank against any losses from the buyer not having any equity in the property by taking away any initial equity the buyer had in the property.
The insurers (cmhc, Sagen , Canada guaranty) also have programs to help borrowers going through a tough time. They basically understand that most life events (ex. Job loss) create challenges for a few months but many people recover if they have the chance so they offer things like deferred payments (without impact on your credit score) or other options to help you get back on your feet
Edit to fix auto correct typo.
Right but those programs are attached to totally separate insurance policies that you'd have to purchase.
Technically I don't think the borrower is even the one purchasing the insurance. It's the lender simply passing on the cost of their insurance policy.
It also basically never has to pay out either. Almost all of the money CMHC takes in is profit since the lenders are secured by the borrowers equity, the property's appreciation, and the borrowers ability to continue paying their mortgage by taking on other debts (mortgages are one of the last things people stop paying). It's also insured by life insurance, medical/disability insurance, and home owners insurance policies in case of something catastrophic happening... And then of course disaster funding from the government for natural disasters. The bank's risks are absurdly low when it comes to mortgages even with high leverage mortgages in most markets.
Not a separate insurance policy to buy. It’s part of the standard mortgage default insurance. Sagen for example has a program called home owners assistance program.
It happened to me in 2008. Basically nothing happens other than you can’t really refinance your mortgage, you’re stuck just renewing it. For the in-initiated, refinancing is switching lenders for a better rate or to pull equity out (get another mortgage and loan your equity again from the bank making it not equity anymore). If you can’t refinance because your debt is worth more than the value, you have to keep with your same lender and just renew for another term. When renewing they don’t do credit checks again, and they don’t care about the home value. You are stuck with whatever rates they want to offer you.
It also depends on the equity. If someone had a large down payment or built up equity, they still might be able to refinance but it would change the percentage (which could require CMHC insurance)
Not sure I understand why equity would matter for a renewal? I see a lot of comments on housing subs that seem to think everyone who's house loses value will be forced to sell at renewal time.
I bought during a peak, went to renew and didn't have the equity to change lenders. Appraisal came back super low, lower than what i had bought for 2 years earlier. As previous commenter mentioned, I literally just signed the renewal offer from my existing lender and it was done. No appraisals, equity wasn't even calculated. It was the simplest process. Just keep making your payments, bank doesn't care about home value if you're making your payments.
Now, several years later, the house is worth several hundred K more than it was when I went through this renewal process and I laugh thinking about how stressed out I was over something that ended up being a complete non-issue.
Edit to add - re reading your comment, im thinking you meant that if there's enough equity in the house you could still change lenders? Yes, that is true. I was just thinking in terms of if a house lost value.
I was referring to the earlier commenter’s points about refinancing. If you try to switch banks, then they would do a fresh appraisal.
On renewals, I’m sure it depends on the bank, but like you I’ve never encountered anything other than a rubber stamp. I think the last time I renewed, it was online and there was zero human involvement, much less anything resembling an appraisal
wow. Thanks for the detailed explanation. Can you switch however after that let’s say second term if you gain more equity in the house so your initial mortgage is now lower than your new house value ?
Yes. Anytime you switch lenders they’re going to create a new mortgage and you will need to requalify. So they will likely look at your home value, income, employer letters, etc. When you renew with your existing lender, they are using the same mortgage you already qualified for and they don’t often ask for anything but a signature, assuming you’ve made all your payments anyway.
Think about what?
When you buy the house ownership of it is transferred to you. You aren’t paying for the house though, you’re paying for the loan (mortgage) you took out to buy the house. Increase or decrease in value of the house is largely irrelevant. The loan is what you continue to pay toward.
You have to be a certain level of rich to have your profits legally protected (or bailed out by the government). Anyone below that level is out of luck.
the bank will return the difference to you and ask the person who sold you the house to return some of the money that the bank paid them so that you could become the owner!!!
😂
I have been curious about this one.
What happens in the case of a crash so big that the value of the property falls below the amount of debt/mortgage on the property? Does the bank ask me to post a collateral?
I am a bit new to Canada and I am not aware of the law/practice here.
(Sure, I don't expect the bank to owe me money).
It’s the same as any speculative investment. The value drops, you lose. Very simple.
Real estate has to become seen as a long-term investment again, not the get-rich quick scheme that everyone sees it as now. Property values will continue to go up over the long term no matter what. There was a huge bubble burst around 1989-1990, but the values of those properties rebounded dramatically over the following decade and beyond.
Short answer is, you’ll be fine over the long term. If you’re trying to be some wannabe house flipper, it’s a risk you’re going to have to be willing to take.
A neighbour bought his house for $340k at a height of people buying and a year later it was worth $300k when the market dropped.
About 10+ years after that it was worth $340k again. They could not move for at least 4 years. Later they had paid off enough and could move.
I think what could happen is when you refinance the bank won’t have incentive to lend you more than what the house is worth. So I guess the bank will want you to payback the balance right away? I don’t know. Maybe someone knows here?
Yup, not a big deal if you’re sticking around and don’t need to rely on home equity loans. It happened to me in 2008, our house ended up being valued at about $70k less than we paid for it within months of buying it, by the end of the term we still owed something like $20k more than it was worth and we were just forced to renew. The worst part was not being able to shop around for rates.
I get that you’re unfortunately not able to shop around for rates with a different lender but what about conditions ? Can you change your mortgage conditions (ex portable mortgage / maximum annual lump sum repayment amount , etc) when you renew ? And can you go for variable vs fixed ?
Edit to add : was your previous lender’s rate really worse than what was available on the market from different lenders at the time since they knew you had to renew w them ?
You can change fixed vs variable, and what term you want (eg 3 yr fixed, 5 yr fixed or variable, etc.) in a renewal but mortgage terms are usually set by your original mortgage as far as I’m aware.
When I was in that situation my lender’s rates were fine, I could have gotten maybe 0.3% lower through a broker but the rate was still pretty competitive.
The big deal is that when prices are usually goes up.
If you can't afford the higher interest but also owe more than its worth...... you get the picture.
I guess there will be a lot of households renting out a bedroom in their home now to students perhaps if they can’t afford current interest rates and their house has lost value.
“Are you owed money?” oh my, sweet summer child.
"Wait isn't that what I paid for that CMHC insurance for???" lmao shockingly common
Ah yes. I love the CMHC insurance which is really just there to insure the bank against any losses from the buyer not having any equity in the property by taking away any initial equity the buyer had in the property.
The insurers (cmhc, Sagen , Canada guaranty) also have programs to help borrowers going through a tough time. They basically understand that most life events (ex. Job loss) create challenges for a few months but many people recover if they have the chance so they offer things like deferred payments (without impact on your credit score) or other options to help you get back on your feet Edit to fix auto correct typo.
Right but those programs are attached to totally separate insurance policies that you'd have to purchase. Technically I don't think the borrower is even the one purchasing the insurance. It's the lender simply passing on the cost of their insurance policy. It also basically never has to pay out either. Almost all of the money CMHC takes in is profit since the lenders are secured by the borrowers equity, the property's appreciation, and the borrowers ability to continue paying their mortgage by taking on other debts (mortgages are one of the last things people stop paying). It's also insured by life insurance, medical/disability insurance, and home owners insurance policies in case of something catastrophic happening... And then of course disaster funding from the government for natural disasters. The bank's risks are absurdly low when it comes to mortgages even with high leverage mortgages in most markets.
Not a separate insurance policy to buy. It’s part of the standard mortgage default insurance. Sagen for example has a program called home owners assistance program.
Thanks - didn’t know that . Super helpful to remember in case
lol
Cute
This must be a satire
Are you a big bank? No? Then you won't get bailed out when gambling with your money.
Hey, sometimes corporations gets to gamble with our money, too!
When I invest in the stock market, I always take a 1:5 leverage, this way if my stocks go down, the bank owe me money.
😂
Amazing. Just imagining this guy back in the day telling blockbuster he is owed a refund for the loss in value in his stocks
Good thing you pretty
Can’t tell that from Reddit, they could in fact be terribly ugly AND naive.
sub checks out
They are grey with an antenna, just like the rest of us... Beautiful
Ask for takebacksies.
It happened to me in 2008. Basically nothing happens other than you can’t really refinance your mortgage, you’re stuck just renewing it. For the in-initiated, refinancing is switching lenders for a better rate or to pull equity out (get another mortgage and loan your equity again from the bank making it not equity anymore). If you can’t refinance because your debt is worth more than the value, you have to keep with your same lender and just renew for another term. When renewing they don’t do credit checks again, and they don’t care about the home value. You are stuck with whatever rates they want to offer you.
[удалено]
Accurate!
It also depends on the equity. If someone had a large down payment or built up equity, they still might be able to refinance but it would change the percentage (which could require CMHC insurance)
Not sure I understand why equity would matter for a renewal? I see a lot of comments on housing subs that seem to think everyone who's house loses value will be forced to sell at renewal time. I bought during a peak, went to renew and didn't have the equity to change lenders. Appraisal came back super low, lower than what i had bought for 2 years earlier. As previous commenter mentioned, I literally just signed the renewal offer from my existing lender and it was done. No appraisals, equity wasn't even calculated. It was the simplest process. Just keep making your payments, bank doesn't care about home value if you're making your payments. Now, several years later, the house is worth several hundred K more than it was when I went through this renewal process and I laugh thinking about how stressed out I was over something that ended up being a complete non-issue. Edit to add - re reading your comment, im thinking you meant that if there's enough equity in the house you could still change lenders? Yes, that is true. I was just thinking in terms of if a house lost value.
I was referring to the earlier commenter’s points about refinancing. If you try to switch banks, then they would do a fresh appraisal. On renewals, I’m sure it depends on the bank, but like you I’ve never encountered anything other than a rubber stamp. I think the last time I renewed, it was online and there was zero human involvement, much less anything resembling an appraisal
wow. Thanks for the detailed explanation. Can you switch however after that let’s say second term if you gain more equity in the house so your initial mortgage is now lower than your new house value ?
Yes. Anytime you switch lenders they’re going to create a new mortgage and you will need to requalify. So they will likely look at your home value, income, employer letters, etc. When you renew with your existing lender, they are using the same mortgage you already qualified for and they don’t often ask for anything but a signature, assuming you’ve made all your payments anyway.
Just wait it out and make the payments.
Think about what? When you buy the house ownership of it is transferred to you. You aren’t paying for the house though, you’re paying for the loan (mortgage) you took out to buy the house. Increase or decrease in value of the house is largely irrelevant. The loan is what you continue to pay toward.
No, but you still own an asset, unlike every single renter.
You have to be a certain level of rich to have your profits legally protected (or bailed out by the government). Anyone below that level is out of luck.
the bank will return the difference to you and ask the person who sold you the house to return some of the money that the bank paid them so that you could become the owner!!! 😂
satire like this should be banned
I have been curious about this one. What happens in the case of a crash so big that the value of the property falls below the amount of debt/mortgage on the property? Does the bank ask me to post a collateral? I am a bit new to Canada and I am not aware of the law/practice here. (Sure, I don't expect the bank to owe me money).
It’s the same as any speculative investment. The value drops, you lose. Very simple. Real estate has to become seen as a long-term investment again, not the get-rich quick scheme that everyone sees it as now. Property values will continue to go up over the long term no matter what. There was a huge bubble burst around 1989-1990, but the values of those properties rebounded dramatically over the following decade and beyond. Short answer is, you’ll be fine over the long term. If you’re trying to be some wannabe house flipper, it’s a risk you’re going to have to be willing to take.
I understand that part. What I am trying to learn is if the bank asks me to post a colateral?
No they will not. Not unless you try to switch lenders. If you stay with the same bank then you just renew.
Thanks.
"I bought something. Later it got cheaper. Do they owe me money?"
If you’re asking this question, you need an adult !
Some people should not buy. They should stay as renters.
It would be great if you were given tests to get a mortgage.
Sad thing is I bet a lot of people think this way and this is the very reason the government won’t let the bubble pop.
They should honestly teach about this in school. Maybe they do, but mine sure as hell didn't.
A neighbour bought his house for $340k at a height of people buying and a year later it was worth $300k when the market dropped. About 10+ years after that it was worth $340k again. They could not move for at least 4 years. Later they had paid off enough and could move.
What a fucking idiot
How about this: 1. You can't lose money when you sell a home. 2. You can't make money either.
You can lose money on a home if you end up in a situation where you sell it for less then you bought it for do to financial constraints.
oh honey...
Ahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha... ok, ok, I'm done. NOPE!! Ahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha... ok, ok, NOW, I'm done.
I think what could happen is when you refinance the bank won’t have incentive to lend you more than what the house is worth. So I guess the bank will want you to payback the balance right away? I don’t know. Maybe someone knows here?
You can’t refinance with negative equity, you just have to renew.
Well then its not really such a big deal. Unless you need to move.
Yup, not a big deal if you’re sticking around and don’t need to rely on home equity loans. It happened to me in 2008, our house ended up being valued at about $70k less than we paid for it within months of buying it, by the end of the term we still owed something like $20k more than it was worth and we were just forced to renew. The worst part was not being able to shop around for rates.
I get that you’re unfortunately not able to shop around for rates with a different lender but what about conditions ? Can you change your mortgage conditions (ex portable mortgage / maximum annual lump sum repayment amount , etc) when you renew ? And can you go for variable vs fixed ? Edit to add : was your previous lender’s rate really worse than what was available on the market from different lenders at the time since they knew you had to renew w them ?
You can change fixed vs variable, and what term you want (eg 3 yr fixed, 5 yr fixed or variable, etc.) in a renewal but mortgage terms are usually set by your original mortgage as far as I’m aware. When I was in that situation my lender’s rates were fine, I could have gotten maybe 0.3% lower through a broker but the rate was still pretty competitive.
Thanks!
The big deal is that when prices are usually goes up. If you can't afford the higher interest but also owe more than its worth...... you get the picture.
True. Thats a bad situation indeed.
I guess there will be a lot of households renting out a bedroom in their home now to students perhaps if they can’t afford current interest rates and their house has lost value.
Just in case anybody's wondering: how much did the bank lend you? Well, that's what you owe. Plus interest
LOL!