How to Blow your Brains out with Debt – a handy guide

Too good to miss – a handy guide –

Step 1- Borrow the 5% minimum down payment on a credit card or from a family member…….Step 2- Take advantage of the 5% cash-back mortgage offered by almost all of the big banks…….Step 3- Buy the house you want. Make sure it includes granite, stainless steel, and double the space you really need…….Step 4- Once the deal closes, pay back the down payment with the cash the bank gives you as their thanks for signing up for a lifetime of debt servitude. Enjoy your new home (which is actually just a rental as we know that a home without equity is just a rental with debt).

That is Part 1. Part 2 is even more fun. Now that you ‘own’ a house, you can borrow 80% Home Equity Line of Credit (HELOC), just to have it lying around. In fact you probably won’t get out of the bank without them forcing it on you.

And instead of really, you know, working, you can live off the HELOC! And since it is revolving credit, you don’t really have to, you know, make payments or anything, the payments and interest just come off the line of credit so you go deeper in all the time!

Close friends inherited $200k in 2001. Purchased 1st home for $300k. Sold in 2003 for $500k. Bought 600k home… sold in 2008 for $1,250,000. Purchased $1,400,000 home. Windfall! …you’d think! $1,000,000 in equity!

Wrong! …$900k mortgage on the 1.4 property, co-signed by parent…35yr amortization. Why? because he is a self-employed small businessman… she is a stay at home parent, and the missing $500k was used to conspicuously consume… I mean supplement their income to the tune of 70k per year. But wait! recent HAM [hot asian money] invasion indicates that their van westside home is currently worth $1.8+ mil!!! soooo….you guessed it they now have a $900k ish mortgage and $400k heloc! I have never seen such high rolling high spending, low income earners in my life!

The banks don’t care either – these loans are guaranteed by our tax dollars, through the Canadian Mortgage and Housing Corp. courtesy of Mr. Harper who loosened the rules and goosed the economy cause he wants a majority. Video Primer on the CMHC.

I wonder what is going to happen to these people once interest rates go up. Oh, wait, they just went up yesterday.

“Two friends of mine who are both broke bought property last year [2010].
Friend #1 bought a condo for a little under $200,000 in Victoria with a down payment from a credit card and moved in with so little money he couldn’t fix his broken stove for 6 months.

Friend #2 bought a dumpy townhouse for $350,000 in Victoria and once again used the credit cards to do it. He’s worked for the government for a little more than a year and his wife is unemployed. 2 kids, #3 on the way. Maxed out credit cards once again and they can’t afford to fix the fridge. But the bank thinks they can afford to be $350,000 in debt.

Both friends can barely make ends meet with their 5% down, 35 year mortgages at record low interest rates. How on earth will they manage when rates normalize and why do banks think they’ll make their payments on time every month through the year 2045? Both of these people have sketchy job and credit history.
And these are just a couple of examples off the top of my head. If you surveyed Victoria and Vancouver readers in the 25-35 age range I’m sure you’d get swamped with hundreds of similar stories. I have no clue what these people are thinking but I know for a fact they are just scraping by right now and would be devastated with a 1-3% interest rate increase.

Oh, and retirement plan? Ha ha ha ha ha ha! What retirement plan? There’s no money for trivial expenses like retirement. It’s all about the house. Or in these cases it’s all about the condo and townhouse.”

That’s really too bad about the Fridge! Also kinda too bad Canadian taxpayers are subsidizing all this – so nice they can afford their own home tho!

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