Two Factors In Buying a House
- Thread starter OldTrader
- Start date
I have always been able to find a home that needs a bit of work or is in foreclosure so that I am paying less than market price. I have averaged buying a home every two years for the past 24 years. This has been good to me. I do a little repair in my spare time, After 2:00 pm here in Colorado, and the pay off is good. After u own it for 2 years, No taxes to pay. I have never been able to call a top, but we should be close, maybe a year or two. But it will recover again, it always does.
I have to agree on this one, I'm in university right now, also working for a mortgage company. If a client gets to the point where they cannot pay their mortgage and/or cannot repay their arrears, it goes to a lawyer for lump sum payment demand, followed by foreclosure proceedings if that fails.
Up here in Canada there are two possible scenarios - either it's a high LTV ratio mortgage and any losses the lender faces are recouped from CMHC or Genworth (formerly GE Capital), or it's a lower ratio mortgage (conventional) and losses tend to be fairly unlikely. It's also worth noting that someone with 30% equity in their home is a heck of a lot less likely to walk away from their mortgage than someone with, say, 5% equity.
As for the current state of housing, I regularly see things that amaze me. I would personally rather live in modest condo that has had the mortgage paid off than a really expensive house/condo with a mortgage. There are many people out there right now pulling in 100-150K or more in equity, from selling a property in a hot market, that immediately just turn around and re-invest it into an even more expensive property with the biggest mortgage that they can possibly afford...eventually the cycle has to come crashing down...
Chagi,
I am glad you agree....but this was not an opinion, it was a statemet of fact. I did this! It's just that I got out f banking 25 years ago, but I do not thing they changed that much. I used Paris and Paris law firm when my mortgages exceeded 60 days late, then in the BK afer 30 days I asked for reaffirmation...Things have not changed that much...As soon as I could the house went to sale, if we were not a first mortgage we became the first mortgage (if it made sense) and bought the house at the auction...then sold it.
I remember one time a manager missed going to the auction to buy the house...he got fired!
Michael B.
I am glad you agree....but this was not an opinion, it was a statemet of fact. I did this! It's just that I got out f banking 25 years ago, but I do not thing they changed that much. I used Paris and Paris law firm when my mortgages exceeded 60 days late, then in the BK afer 30 days I asked for reaffirmation...Things have not changed that much...As soon as I could the house went to sale, if we were not a first mortgage we became the first mortgage (if it made sense) and bought the house at the auction...then sold it.
I remember one time a manager missed going to the auction to buy the house...he got fired!
Michael B.
Just wanted to add what I think is an important concept in regards to valuations of assets.
Assets lose value when rates go up, and gain value when rates go down, due to the discount rate effect.
Let's take an example.
A $100K fixed 30 yr mortgage at 6%.
My calculator says, that the monthly payments should be: $598.5
Now, let's suppose rates go up to 7%. You keep paying your old fixed rate of 6% or $598.5 monthly. So, at this higher rate, the present value is reduced to: $90,090.
So, in essence, a 1% increase (reduction) in rates reduces (increases) 10% of the present value of an asset. In this case, real estate.
Like a bond, raising rates has an effect on the value of any asset.
(To be strict, I should have considered the monthly earnings, rents minus expenses, but the results would be very close to the above. The idea is that the benefits derived from the asset are not affected).
This is a pretty broad concept, and explains a part of why assets and commodities go up, when interest rates go down, and vice versa.
Assets lose value when rates go up, and gain value when rates go down, due to the discount rate effect.
Let's take an example.
A $100K fixed 30 yr mortgage at 6%.
My calculator says, that the monthly payments should be: $598.5
Now, let's suppose rates go up to 7%. You keep paying your old fixed rate of 6% or $598.5 monthly. So, at this higher rate, the present value is reduced to: $90,090.
So, in essence, a 1% increase (reduction) in rates reduces (increases) 10% of the present value of an asset. In this case, real estate.
Like a bond, raising rates has an effect on the value of any asset.
(To be strict, I should have considered the monthly earnings, rents minus expenses, but the results would be very close to the above. The idea is that the benefits derived from the asset are not affected).
This is a pretty broad concept, and explains a part of why assets and commodities go up, when interest rates go down, and vice versa.