The Canadian Sub-Prime Mortgage Crisis

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From The Archives: 2008

If you do not have the ability to come up with 5% down on your homestead by October 15th 2008, start looking for junk land instead right now. And if your credit rating is zero or worse, you’d better move even faster.

The Canadian government in it’s infinite wisdom has killed a few options for people buying homes in Canada recently. Basically it’s a forced move by the government to protect Canadian investors from the same fate as their counter-parts in the States that went though (are still going threw) the sub prime mortgage crisis. Even as I write this Indymac has had a rush on the bank, and the FDIC has come in and taken over, only two more large banks in the states are in the way from a total crash. Fannie May protect us, yeah right.

After October 15th 2008, you can no longer get a zero down mortgage in Canada, you can no longer get a 40 term on it either, not that it was a good idea to begin with, and if there is a black mark on your credit rating, forget about being a home owner, WTSHTF.

What you need to do right now is see your home bank first, then immediately goto a mortgage broker. Get a pre-approved mortgage for what ever you can get, then buy anything you can get your hands on. Yes, this is bad advise, but you might not have a choice, time is the killer here. Remember, that if the land title is not “freehold” don’t even think about buying it, your better off in a tent.

The most important things to consider when crisis buying land is, where your source of income is from, where important resources are that you will need, soil, and water.

The are five critical issues when crisis buying land.

1: How fast can you pay off the mortgage.

This is the most important, but does not negate the rest. Your best bet is to take your pre-approved mortgage, and try to under buy as much as you can, shoot for 25% of that mortgage. This means that if you get a pre-approved mortgage for $100,000 you are looking for land that costs about $25,000.

2: Water.

With out a stable safe source of water, don’t even bother thinking about getting off the grid, getting back to the land, etc. You need water for so much more then just growing plants.

3: Soil.

You likely have an idea of what kind of plants you were going to try and grow on your land, the best way to find out if this will work for on this land you’ve found is to ask the neighbors. Don’t just settle for one answer either, talk to every neighbor you can about it, this will also give you an idea of whether or not you want them as neighbors.

4: Your source of income.

This is the hardest requirement to meet in the best of real estate times. It is dependent on not only the local market or your travel time to work, it is also dependent on what you can do. You should have a list of at least ten things you are willing to do for money, and then see if the area will provide employment in all ten areas. If not, maybe you’d better look again.

5: Resources you will need.

Do you need a school nearby? Is homeschooling an option for your family? What about being near not only a hospital, but a children’s hospital. What about raw materials, is there an open rock quarry nearby you’d be allowed to take from? Terracotta clay? Fish, Deer… the list can go on and on. Think this way… if this land is all you are going to end up with, and you can’t sell it in a year to swap for something better, will you be able to survive if WSHTF?

UPDATE: Jan 29, 2011 It`s been awhile since I posted about this subject, mainly because I`ve been busy paying off an old student loan, and raising the remaining money we would need for the down payment on the land come this fall. Since this post first appeared, the Canadian government has changed the rules yet again, it now stands that the max number of years you can take out a mortgage for is 30, however don`t be surprised if that is reduced again to 25 years in the near future. In addition, it is now a requirement to put down 10%, and I have to insert here another future prediction that it is likely to be increased to 20% in the future. One last little note I would like to say is that although the budget needed stands on the current math, I would also expect that in the near future your mortgage maybe limited to 25% of your monthly average gross income, including taxes. – Wolfe

– Wolfe


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