MovieChat Forums > 99 Homes (2015) Discussion > Should be required viewing for anyone pl...

Should be required viewing for anyone planning to get a mortgage

posted 8 years ago by al666940-3
18 replies | jump to latest

Whether you think underwater homeowners are lazy bums or victims (and whether government and banks have rigged the game or are just better at playing it), you should always have this in mind:
- The bank is NOT doing you a favour by lending you: it's making money off it. So it's in their interest (not yours) to lend you as much as possible, regardless of your ability to pay (they make money quicker off foreclosing).
- Realtors are NOT doing you favours. AT best they'll be straight with you (whatever advice they provide is biased to their advantage: to sell/flip homes).
- If you don't understand mortgage rates (fixed, variable), then GO TO AN INDEPENDENT ACCOUNTANT and PAY him for 1 hour consultation. You cannot afford not to understand this when shopping for a mortgage.
- Use the golden rule of thumb when shopping for a mortgage: counting utilities/property taxes/strata/everything you have to pay monthly, go for no more than 33% your NET income.
- NEGOCIATE when shopping for a mortgage: you have the power to take your business elsewhere, so you can look for the better rate.
- Read the fine print in anything you sign, especially the mortgage agreement (hire a lawyer if needed, best investment you'll ever make)
- If you're too poor for any of this, don't buy. Sorry if it sounds harsh but you'll regret it if you do.

And all this is assuming the banks are being straight with you (not actually cheating you and lying to you).

[–] micirisi 8 years ago

I tend not to like banks either but they did me a favor by loaning me $ last three times I bought a home. 1979 bought a $40K home with 10% down and ~10% interest. Sold it four years later for $59K. 1984 bought a home
for $245K (variable interest, paid off after three years) and sold it for $1.5M twenty years later. The banks did me another favor by loaning $ for the home in which I now reside. I am not a flipper, only buy what I perceive as quality property to live in. Loaned me $ in 1989 and now the home is paid for and worth six times what I paid. Thank you evil banks.

He killed sixteen Czechoslovakians. Guy was an interior decorator.

[–] al666940-3 8 years ago

Nothing in your post negates anything I said. You just happened to have made a wise investment and wiser sitting on it long enough to make it work.

[–] slidell333 8 years ago

Plus he was buying and selling homes when there was money to be made off of living in a house for a few years, paying the mortgage, and selling it. That is long gone unless you find a really great deal and put some sweat equity into it. My parents did the same thing, buying homes starting in the early 80's and selling them every 5-10 years. Real Estate isn't what it used to be.

I def. agree that everyone should read the OPs post. You're not buying a house. You're buying a mortgage.

[–] marx686 8 years ago

Good idea. Its not rocket science tho. You get a loan, and if you pay every month, its never a problem. The interest rates fluctuate..get a fixed rate loan and sleep well at night.
I've owned 2 homes since the 90s. :)

[–] al666940-3 8 years ago

"get a fixed rate loan and sleep well at night"

Yeah, which has to be renegotiated every 2 to 5 years. So even then you're not in the clear.

[–] marx686 8 years ago

Im sorry, are the rules different in the UK? Here a 30 year loan is fixed for 30 years...thats it! :)

[–] marx686 8 years ago

I keep forgetting IMDB is a British board. And and a much younger group who arent homeowners mostly. :)

[–] al666940-3 8 years ago

Dude, this is NOT an UK board.

I'm from Canada. There's no such thing as a 30 year term (that equals the mortgage period). No bank or lender will give you a fixed rate for more than 5 years (that's the longest term available), after which you have to renegotiate the following term, based on current market conditions.

That's why you're on edge even with a fixed rate mortgage.

[–] marx686 8 years ago

Canadian rules might be different. :)
Here in the USA, the rate never changes over the life of a fixed rate loan. Never.
We do have variable rate loans which are a bad deal for working people.
My 30 year fixed rate loan will never change unless I do a refinance.
And yes IMDB is based in the UK, it was started by a Brit a number of years back.
Just curious AL666, do you own a home in Canada?

[–] marx686 8 years ago

Well AL I googled mortgages in Canada an it seems the 5 year loan fixed is the most popular loan. Canada does have a 10 year mortgage and an 18 year loan at horrendous rates!
The 30 year, fixed rate loan is the most popular here in the States. I have one right now as Im retired and have a set income. Some borrowers use a variable rate loan with a balloon payment later--BAD idea and that's how some folks get in trouble.
Heres what I found for Canada!

http://www.bmo.com/main/personal/mortgages/mortgage-rates

Cheers!

[–] al666940-3 8 years ago

Yes I own a townhouse, so I know all about it, and the "Canada does have a 10 year mortgage and an 18 year loan at horrendous rates" pretty much speaks for itself as to why it's not an option, thus nobody even considers it.

[–] marx686 8 years ago

It must be hard to pay off a big mortgage in 10 or 18 years. Holy Maple Leaf!

[–] slidell333 8 years ago

We have in the US fixed rate 30 year mortgages. I had one at 3.0% for the entire term. What caused many people to lose their homes was the ballon variable rate mortgages that many were unaware, or told to just refinance at that time, that went from say 4 or 5% to over 10% on up! And many were in such financial trouble due to the economy that when the ballon payment came around .....good luck getting it refinanced! They couldn't so they were stuck paying 30-50% more on their mortgages and many just walked away. $1100 was ok when times were good but no way in hell could they swing that now $1700 a month payment much less the original one.

Anyways, for many years most people here in the US got fixed rate mortgages. The Variable Interest Rate mortgages just became extremely popular in the 2000's when they were giving bartenders 3 and 4 mortgages/properties. Watch "The Big Short" and "Wall Street : Miney Never Sleeps." I liked the part in The Big Short were Steve Carell's character went down to Florida to see the housing market at the ground level and he later goes to a strip club and is asking her questions about her loan and she says something about "I'm talking about my other properties..." and he's like "you have more than one?" and she's like "I've got four" and just the look on his face. He knows we're in for an economic disaster.

[–] LilyDaleLady 8 years ago

The film and EVERYONE HERE is missing the big point.

What happened in most of the USA from about 2001 to 2008?

The value of homes escalated to insane degrees -- a HUGE bubble.

If you wanted a home, suddenly the price had TRIPLED or more.

It also affected rents, so no point in saying "just rent instead". If a rental costs $2000 a month and a mortgage is $1700 a month and you get equity and your own home -- you will buy.

Banks made it easy for this to go on, because they had loose lending standards. The government colludes by insisting banks loan money freely, even in distressed areas.

If you wanted a $100K starter home in 2006 -- good luck. My own home had escalated in value to the point that I could not have afforded to buy it! Drab little houses were going for $250K.

And nobody could see there was an end in sight. In fact the pundits and "smart money" all said "they aren't making more real estate! prices will KEEP GOING UP AND UP!" and many folks believed this. Yes, even banks with all those smart MBAs. So they kept lending.

THis made it very easy to get in over your head. If the ONLY way to buy the CHEAPEST HOUSE is to get an ARM and a phony low teaser rate -- it is very tempting to do this. "Everyone said" you could refinance after 3 years, and then flip the house! for a huge profit! so many people did this.

Then the market crashed.

Here is the scary sad part: TODAY in July 2016 when I am writing this, ANOTHER almost identical bubble is forming. Prices in FLORIDA have gone up about 70% in only 18 months.

Do you think it will turn out differently this time?

[–] slidell333 8 years ago

My brother lives in Melbourne Florida. He bought a house, a brand new one, in 2001 for like $130k..he could have sold that same house for over $400k around 2005...in fact, his good friend and neighbor did. Anyways, now it's probably worth a tad more than what he bought it for in 2001. I'd have to ask him or my dad to give you an exact price/story. He still lives there..knowing him I'm sure he paid it off by now.

The thing was, sure you could sell it for a killing back ten years ago, but to buy anything else you were paying your butt off for the new property. So you made out in that one property but that next house you paid $550 for is now worth half that....or worse. My brother is smart I guess. He knew it was all too good to be true.

I don't see how more people didn't see the "bubble." It's just not plausible for houses to rise in value before you've finished signing the closing paperwork..which literally banks were doing, giving people loans for more than 100% of the value of the home.

I live in Louisiana and prices are really stagnant, even in the rich parts of New Orleans (especially there in fact...good deals in the Quarter). I'll prob. ask my dad tomorrow what is going on in Florida with home values. I believe you, I'm just interested in where and if it has risen in my brother's area.

It always turns out the same....we never learn.

[–] LilyDaleLady 8 years ago

It is ABSOLUTELY going on in most of Florida. I know this, because we have family there, and hoped to retire there in a few years. Our dreams are swiftly evaporating, as prices have nearly doubled in about 2 years. Homes that were $79,000 in 2013 were bought, a few cosmetic upgrades and boom, they are flipped for $200,000. It's scary.

The 2001-2008 bubble took much longer to "balloon". Again, I know this because I was there. In 2001, my husband took a job in Orlando and we moved there from Ohio. Prices were escalating just then. A year earlier, the house we bought had languished on sale with no buyer at $125,000 -- in 2000 -- it was built in 1987 for $125,000! So in 13 years, the house had not increased one nickel in value. (It was a typical middle class ranch house, stucco over block construction, in an ordinary suburb.) But from 2000 to 2001, when we purchased it, it suddenly increased in price by $30K. Indeed, everyone -- even our loan officer -- told us "it's a miracle you got this house at this price". We just lucked out. Most similar homes were about $180,000 but we bought for $157,000 (it did need work).

We sold it in 24 months (hubby got laid off) for $186,000 and it sold in ONE DAY. That was a miracle and we were SO lucky. It was then late 2003.

We stayed in touch with neighbors, so we knew that prices on the street skyrocketed between 2003 and 2007 to about $360,000 and up.

The man who bought our 4 bedroom, 3 bath house -- a single man! -- eventually filed for foreclosure and the house was sold at sheriff's auction in 2011 for $150,000. RIght back to 2001 prices.

Today, I'd guess it is worth about $225,000 and rising rapidly. DO THE MATH. They are headed swiftly to another big bubble!

That's just my experience, of course. And unless it crashes darn soon, we won't be able to retire there at all -- prices will be far too high.

[–] al666940-3 8 years ago

"I had one at 3.0% for the entire term"

I would sell my daughter for such a deal. Best I got was 2.19% for only 2 years, so have to negotiate again after 2 years, and brace myself for changed market conditions..

[–] marx686 8 years ago

I did a refinance in June at 4.2% for 30 years. Ill never pay it off, but my monthly is less than renting.
Those Canadian rules are awful!