Thursday, November 20, 2008

Loans

This blog might have to be called Random Musings of a Demented Mind!

I had a long discussion with a Canadian from the eastern side today and he does not think Canada is in for a money crunch. He said our lending policies are tougher etc etc. Where has he been the past few years?? Granted he is only 25 and has not really paid attention to housing prices, etc etc for very long. But still..... I remember not too many years ago, it was pretty strict that you could only get 2.5 times your earnings for a mortgage. I was always told I could not get a loan or mortgage if the payments were more than 30% of my monthly income. Yadda Yadda. But have you looked around lately? People that are making 100,000 a year are buying homes for over 400,000. When you take off all their deductions, they might come out with 5 grand a month and are paying mortgages over 2000. Okay so that is pretty close to 30% but it's still over, and then they are also getting approved for new car loans, 'don't pay til 2010' furniture, boats, and campers... How is all of this getting approved? Omg... I see it happening everywhere. If a couple makes a lot of money together, that is different. But I am seeing it in single-income families. Why is this happening if Canada has stricter lending policies?

I have repeatedly been pre-approved for higher credit cards and a 12,500 line of credit. That is HALF my highest ever yearly income. Sure I could pay it off for many years with a small payment, but I would be paying back a heck of a lot more than 12 grand. My credit card limits keep getting pushed up when I pay things off even though I requested them not to go higher than 2 thousand. If I was not careful and thinking of the future, I could have maxed out 2 $5000 cards by now. Then what? How would I make those minimum payments let alone anything higher to actually pay OFF the debt, on top of daily living expenses and rent? So I think Canada had lost it's way in the lending business while we weren't looking and I fear we are not far behind the US. People here are already starting to lose their homes but it's not quite making the headlines yet. I know two in town here that have lost their homes this summer due to not being able to make payments. They didn't lose their jobs or anything major like that, they just got too far in debt and put off payments here there and everywhere and got neck-deep in shit. It's their own fault in my opinion. Just because the bank says you can have it doesn't mean you have to take it! Whatever happened to working for what you want??? Saving?

Anyway I digress a bit - my point is, people have been cowed into thinking things are fine and dandy. This guy said our banks are doing well. Are we sure? What will happen if more and more people can't make their payments? House prices are dropping so they can't even make much on a foreclosure sale - not what they are owed by a long shot. So are the banks going to be okay after that??

What disgusted me was hearing a lot of radio and tv ads where local real estate agents were calling out for buyers to Hurry In and get their last chance at a Zero Down mortgage, or Last Chance for a 40 year one - because Canada decided to nix those perks once it saw what was happening south of the border. Why would agents by hyping up people to buy something they cannot afford? I found that utterly revolting. They wanted to get in fast to make their commission on grossly inflated home prices before their little enterprise was torn apart. Not all of them are like that, a few are actually honest, like my friend's dad. He is the only person I will ever go to when I am ready to buy a home or a lot to build on. But is it already too late for Canada? Did too many people get mortgages they cannot afford, along with loans for other luxuries they wanted but did not need? I certainly hope things will be okay, but I only need to look at the mail I get begging me to take out a line of credit or a new credit card when I am not even working right now (Maternity Leave) - and made BELOW POVERTY LEVEL beforehand. When I see those begging letters, I know that Canada does NOT have strict lending policies anymore.

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These are my views and opinions. If you don't agree or think I am sadly misguided, that is your view. Feel free to share your thoughts but I also reserve my right to moderate content (IE foul language, excessive flaming, etc).

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