CanWest Global reported on the Calgary housing market.Oops, that was Canwest stock price. 45 cents.
The story is here somewhere I'm not saavy enough to embed or link it. Go find it.
Reporter:....
...falling prices and lower interest rates are creating a perfect storm for homebuyers. As Vindu Surri reports some lenders are even sweetening the deal to help you cash-in on the cooling economy
Mortgage guy:...
"..Its almost like a free downpayment, where the lender actually supplies the borrower with the downpayment for the mortgage. Interest rates just a slight bit higher maybe 1 point 1 and a half points higher than normal and that downpaymnet is forgivable after 5 years."
ReporterAdding 1 to 1.5 to the rate over 5 years will end up costing 5.0-7.5% (neglecting compunding interest) so assuming the downpayment is 5% it is certainly not free.
The free downpayment is unlike the zero downpaymnet which was eliminated last year.
Also the mortgage broker in the story reminded us of a very important fact
Canada Mortgage and Housing and there are some other mortgage insurance institutions that will protect the lender if someone defaults on their mortgage.
Looks like mortgage originators are able to shift the risks of "innovative" mortgage products. hmmm... sound familiar? Volker had it right (paraphrased) The best innovation in the world of finance was the automatic teller.
4 comments:
There is no "free" downpayment. It is simply a cash back mortgage.
Cash back mortgages are another type of scam, because the bank always offers some cash back but only at a higher rate for the term of the mortgage. It works out to actually paying about 18% interest on the amount that is "free", or "cash back", as the increased rate of 0.75% or thereabouts is taken against the entire outstanding balance of the mortgage, not just the cash back portion.
Only a desperate fool would bite on that scam. Looks like that's who the RE industry is looking for.
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Where I come from it is called a "discount".......the con men who run the REIC will try anything to try and prop up a falling market I guess.
These people should be prosecuted for criminal fraud, jailed and stripped of their wealth. And I am a conservative......I wonder what the lefties think about them ?
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To paraphrase the R/E slogan of the past few years:
Buy now AND be priced out forever... out of selling that is.
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Here is the direct link to the video...
Global Story on the Calgary Housing Market
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