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Show ALL Forums  > British Columbia  > New Mortgages and the Economy in Canada/British Columbia      Mod Threads Home login  
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 Author Thread: New Mortgages and the Economy in Canada/British Columbia
New Mortgages and the Economy in Canada/British Columbia
Posted: 11/7/2008 9:39:06 AM
Lots of talk about the economy as of late. People are nervous to get into mortgages. People using their equity to get into a 2nd mortgage to create capital from rental units . Many rumors circulating that if you use equity to buy into a 2nd mortgage and the value of the second property drops as well as the first property value drops then the goverment can take both your properties even though you are meeting the mortgage payments on both homes. I personally have never heard of this. My understanding is that as long as your meeting your payments on both mortgages you just continue to build equity....

Any one have a clearer understanding of this please feel free to comment or if you know of other reasons not to get into/or to get into 2nd mortgages using your equity in your first home....(first home would be as 2 rental units and 2nd home would be your home with one rental unit)

whats the scoop ? whats your take?
 fishn mishn

Joined: 11/1/2008
Msg: 2
New Mortgages and the Economy in Canada/British Columbia
Posted: 11/7/2008 12:13:28 PM
As a principle in a private C.C. my forte is commercial development in large projects.
The only situation I'm aware of where government can sell property, is for unpaid taxes
at the municipal level. (residential properties as discussed in thread.)
This is a complicated process often involving the courts as well,owner has the right to re-
deem said property after being sold for unpaid taxes,usually 1 year.
As to using 2nd. mortgages as a vehicle to purchase rental properties, I would STRONGLY
ADVISE you seek the opinion of a financial advisor well versed in this market.

Using ones principal residence to purchase equity in rental homes has it's risks , yet can be very rewarding in the long term.
 Phuqd

Joined: 3/23/2008
Msg: 3
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New Mortgages and the Economy in Canada/British Columbia
Posted: 11/7/2008 12:48:34 PM
Common sense says that as long as you are making all of your payments, then their should not be an issue.
As for the government taking property because of decreasing value, I fail to see how the government is involved in the purchase of any home other than to collect the taxes on it.
The only people I can see having a vested interest in the value of a home is the person who owns it and the creditor. Banks like to have secured loans and may be concerned that should you fail to make your payments, that even the sale of the properties would not recoup their losses.
The revenue from rental properties is added to your personal income for tax purposes, and as long as they are continuing to generate revenue you would be meeting your onligations to the bank, as your mortgage and payments are calculated in large part based on your personal income.
Considering though, that the average cost to foreclose a property is $30,000, and the only reason they would foreclose is because you were not making payments, this sounds on par to the rumour that Obama is Muslim.
 Ticketoride

Joined: 6/3/2004
Msg: 4
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New Mortgages and the Economy in Canada/British Columbia
Posted: 11/7/2008 5:45:46 PM
Many rumors circulating that if you use equity to buy into a 2nd mortgage and the value of the second property drops as well as the first property value drops then the goverment can take both your properties even though you are meeting the mortgage payments on both homes.

As for the government taking property because of decreasing value, I fail to see how the government is involved in the purchase of any home other than to collect the taxes on it.

They've just underwritten all default CMHC Debts, and can act like the Banks, although that's highly doubtful. The Purpose of entire Exercise was to prevent People from losing their Homes.

I doubt however they will act any different than the Banks would in respect to any second Property.
 themaven

Joined: 8/22/2005
Msg: 5
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New Mortgages and the Economy in Canada/British Columbia
Posted: 11/7/2008 8:04:35 PM
A financial advisor will certainly assist in your planning of said investment.

The interest on money borrowed to earn investment income is in fact 100% deductible on your income tax as a carrying cost.

I think problems could arise when you go to remortgage after X number of years if the value of your properties is less than the money owed on them. That is when a person will lose their home as you cannot finance more than the value of an asset. With careful planning you should not encounter such a problem.

If you have to extend too far it may not be the time to take that leap.

Good luck!
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