Friday, November 14, 2008

BS Detector

The globe and mail article "Real Estate get the Obama boost" is an example of desperation in Toronto.

One quote set of the BS detector

She recently helped one client buy a house listed for $695,000. The client pays about $2,200 a month in mortgage costs but collects $3,000 a month in rent.

"They have someone else paying off their mortgage."

Wow! No consideration of the downpayment used, the other expenses such as taxes, maintenance or vacancy. For $695,000 how did they arrive at the $2200 payment? Here is one scenerio I came up with:

Purchase Price: $695,000
Down payment: $320,000
Mortgage: $375,000
Interest Rate: 5%
Amortization: 25 years
Monthly Payment: $2192.22

Really, any property can have a mortgage less than rent with a large enough down payment.

Update: Mike Fotiou, a Calgary REALTOR, has an excellent post about this article on his blog.

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