If you want to get rich, own real estate. Never rent again because the return on rent is negative 100% every month.
Here's a story why you should never rent if you want to get wealth. Frankly, I'm shocked the guy still has a following given his financial history. It just goes to show that anything can happen in America.
Why I'll Never Rent Again
A financial adviser by the name of Carl Richards wrote a perplexing post called, “How A Financial Pro Lost His House.” To summarize, Carl bought more house than he could afford and decided to strategically stop making his mortgage payments and turn the keys over to the bank when the house lost value. Gee, how unoriginal.
What is original is that Carl proceeded to write a book entitled “The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money” coming out in January, 2012. Hot dog! He's planning on making even more money off the rest of us who already bailed him out. At least he shouldn't call himself a “financial pro”. Maybe he can do the right thing and donate his book's proceeds to charity, or pay back the debt he ran away from! Nahh.
In the securities industry, if you cheat your clients and do the unethical thing, you lose your license. In the financial advisory industry, if you do the same, I guess you get to write for the NY Times, get a book contract, and make more money!
Where Is The Credibility?
What makes Carl's article so polarizing is that he tells us his story is unique, and tries to garner sympathy from readers for having to move back to Utah from Las Vegas. During the 2008 – 2009 financial crisis, thousands of people have lost their homes Carl. You are only unique because you think you're a financial pro and actually make money off of people for financial advice.
He writes, “We love where we live now. Still, there are consequences. We lost our home. It’s not clear when we’ll be in a position to become homeowners again.” You better not dare get a home loan again after making the bank, and ultimately taxpayers foot your bill!
Carl took out a 100% loan, and then took out a home equity line of credit to live an even more extravagant lifestyle. So when he talks about “losing his home”, it's a farce because it was never his to begin with.
Now do you understand what happens when you have no skin in the game and pay no federal taxes? Essentially, Carl lived in a 3,800 square foot McMansion for years for FREE.
It would be one thing if he put down 20-30% following my 30/30/3 home buying rule, and then lost his home. It would be another thing if he put 20% down, lost his home, and kept mum about it. But to put 0% down and lose his home is not losing his home!
Delusional Attitude About Money
Even more perplexing is that he writes how good he's doing now. “As for Cori and me, things are much better now. Moving back to Utah clearly was the right choice. The business is doing well, and we’ve managed to pay down most of our debt. It would be easy to say that we’ve learned our lesson, that we’ll never screw up again.“
In other words, he's back to making more money off people who listen to him for financial advice, even though he was highly irresponsible with his money.
Nowhere in the article does he write how he's looking to pay his bank back for welching on his loan or doing anything to give back to the community. If the Carls of the world did not exist, the financial collapse and the loss of billions in retirement assets might have been prevented. Thanks buddy!
Why Getting Ahead Is So Easy Today
If you are a financial adviser who decides to take out a 100% loan and screw the bank and the taxpaying public, you do not deserve to be a financial adviser anymore. Your credentials should be stripped from you, just like how a convicted insider trader should be forever banned from working in the financial services industry.
After reading this article, why on earth would you ever rent? I sure as hell will never rent again. You can still borrow a ton of money from banks, live it up for years, and if you find yourself not wanting to pay, all you have to do is not pay, especially if you live in a non-recourse state!
The only consequence is a temporary hit to your credit score. But who cares? It comes back in several years. It's not like you're getting thrown in jail or jabbed in the eyes with 10-inch long needles. In fact, the government wants to help you out as much as possible. You can even make $50,000 a year for free from the government if you buy a home and can't afford it!
Carl gets to write for the NY Times, promote his book, and earn money from dishing out money advice again. Isn't America great?
In all seriousness, real estate is one of the best ways to build wealth over the long term. Real estate makes up about 40% of my net worth as I own three properties in San Francisco, one in Lake Tahoe, and another in Honolulu. With over $150,000 in gross rents coming in, real estate gives me the freedom to never work again.
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I’ve been told since I was in my teens not to rent. That the gold-standard is owning a home. Have you been following home prices internationally? They’re exploding. So more pertinent than ever is the question how poor working-class people are supposed to own homes when jobs refuse to pay more than the bare minimum to survive AND homes are considered mere commodities? Even with crowdsourcing opportunities, one still has to make enough money both to survive AND to pay into the investment. And now in the State health insurance is required by law and is an additional fee on top of taxes, to say nothing of yet additional premiums if you do have to visit the clinic, many of us have even fewer pennies left over at the end of the month. This assumes there are no periodic emergencies (illness, layoffs, deaths in family…) that consume what little is saved.
Also, many financial advisers seem to assume that people are in relationships (married…) so can pool their earnings while saving on sharing housing, food, energy… costs. More and more of us are single so have to shoulder all the growing expenses of life on our own. Yet smaller savings for the downpayment or RE investment.
Oh, and what about the jobs situation, at least in the States? For decades now, jobs have been heading overseas where rights and costs are much more lax/lower. Since the financial collapse of 2008, in the US the jobs that have returned to the market are typically low-pay service positions. More and more people survive in the unstable, unreliable gig economy. That’s not conducive to paying a mortgage or into an investment consistently month after month–let alone qualifying for a mortgage.
The advice to own without addressing all these (and other pertinent) issues seems to me to apply to those who’re lucky enough to earn enough–and stably so–to qualify for a mortgage in the first place.
I have to say, if he was a financial planner at the time or purchase and didn’t bother to run the numbers, then he was a really bad financial planner. I’m self-taught when it comes to finances, and even I knew enough to turn down the max mortgage that I could get approved for. I don’t have much sympathy for folks who make really bad financial decisions – consumers need to educate themselves, and that applies to finances/mortgages as well.
And I have even less sympathy for this guy’s bad decisions since he’s a financial planner who “felt we could afford around $350,000” and yet when it came to buying a $575K home 100% financed PLUS adding a home equity LOC, he “never sat down to figure out what it would take to make this work. I just wanted to believe him. ” GAH! People, he may have learned his lesson, but seriously…if he’s that careless with his own money, I’d hate to see what he advised his clients to do with their money. RUN away from this financial planner!
As a final insult… I know this guy and he uses a ghost writer for his blog, NYT articles and book. He really is laughing all the way to the bank.
I’ve come to realize a couple big bloggers in the personal finance sphere also use ghost writers for most of their content! Pretty amazing. If they can pull it off, why not I guess! Provides business to writers.
Well is credit took a hit and he will be in credit purgatory for quite awhile. He gets to write a book but, unless he’s a best selling author already I doubt he sells a lot of copies.
Tell me more about the RIA business you’re starting. Did you incorporate and get a CFP license or is this not necessary? Maybe you can write a post about it!
This guy Carl is a piece of shit. How can you call yourself a financial adviser and not follow your own advice. As start up RIA this really grinds my gears. All financial advisers should have to disclose their financial information to client prior to opening and account. If they do not have perfect credit it should be explained. If they have any debt it should be explained. so on and so forth. I agree 100% if a financial adviser does not have his financial house in order you should not be allowed to give advice.
But he’s living the American dream and is going to get rich thanks to you!
Also, I’m currently looking into buying a rental property. It just doesn’t make sense in my area. A 1BR for $600-700K is a joke.
AL again. In response, I would say I’m intentionally eschewing the “plush lifestyle.” Living with others is a lot of fun and less stressful on the environment. I’m also able to save 80+ percent of my 250K+ income. It’s a win-win situation that helps me regain my freedom in the short term.
It’s up to you Al. The landlords need renters, and hopefully with your income, you will be a small financial risk.
After college, I no longer wanted to live with roomies. Just a personal choice. More power to you if you can live very humbly.
The people who are buying the 600k 1 bedrooms likely earn more than 250k or are a couple.
Sam,
Here are my reasons for renting. In my town, the median home price is over $1M. I live in a great neighborhood within a mile of my office. I rent a bedroom in a great house for $1200/mo. I have two great roommates and can easily socialize with others, if I want. If I were to buy the cheapest 1 BR in the same neighborhood, I would be paying more interest, taxes, and maintenance than my current rent, even when taking into account the deduction. I would consider buying if prices move significantly.
But meanwhile, you’re living in a rented bedroom while other people are living much more plush lifestyles on your dime.
Unless you’re under 25, I don’t see how living in a rented bedroom is a fun way to live. At least you can save some money.
Thanks for this. The people who stuck with their home loans despite the difficulties are like those CEOs you mentioned: They just did the right thing and didn’t make a big deal about it.
That describes pretty much everyone I know. They look at the thing as, um, a CONTRACT: You sign on the line and then you make your payments, whether housing bubbles burst or not. It’s your home and you stick it out until you can make the final payment. If that means doing without things you want (or even need) due to factors like unemployment, the skyrocketing costs of food and fuel, or taxes that go up-up-up, then that’s what you do.
People like Carl make me tired. “I operated within the legal framework” is NOT the same as saying “I acted ethically/honorably.” I would ask “Is there no shame any more?” but I fear it’s a rhetorical question.
Don’t think there’s any shame any more. Gotta work it since everybody else is. If a Financial Planner works it and can have a free ride and make money due to the free ride, then so should we all because we accept it. If we didn’t, he wouldn’t have any clients.
I would be infuriated if I read his book and it might lead to others thinking that what he did was a smart thing which it wasn’t! We put 20% for our home, bought it in 2005 and now we rent it out and it just covers the mortgage, taxes and insurance. We’re glad we did it and we’re lucky we can rent it out. Ours is a lucky story but I know that there are many others who were not so lucky. If we didn’t have tenants we couldn’t afford the mortgage and the place we are living now and that scares us. But, we continue as we are and hope that things will get better.
Carl thanks you now for not bailing on your home and spending those extra hours finding a tenant and upkeeping! Cheers.
@Little House — I know how you feel. I stood aside from the UK property boom because prices in London were insane. Yet homeowners who over stretched themselves were bailed out by 0.5% interest rates because the Bank of England cannot let risking prices readjust. I know loads of people whose mortgages fell to near nothing.
At least prices have fallen in the US, which will help out prudent people like you in the long term.
Prices haven’t come down yet?
Homeowners win mate. They are living it up with free money! Time to hop on board the money train! :)
I am in the fourth stage of retirement. Unfortunately I’m suffering from CGF(conjusted heart failure). I like to keep working but cannot even keep myself standing! I don’t own a home. any advice or suggestions for my later days? should i be able to buy any home to retire there for until the last day of my life? My ficco score is lower so i can not get mortgage but I have some $30K in savings.should i buy all cash and get my own home? There are some old houses (built in 1900-1930’s) for sale where I live at present. I am on SSD as an income.
This is a tough one. I would frankly not buy if I were you b/c you need that 30K liquid. What are the 1-3rd stages of retirement? Are you able to collect SS?
@Evan I’m sorry I am not impressed with your reasoning or your argument. Nor am I the least bit impressed with your trying to blame a man who lost his home with raising our taxes. It was the inflation of the value of the homes by the banks that got them in trouble. They knew what they were doing. It is possible that this man has learned considerably from this experience, unfortunately, it seems you haven’t. If you plan to live in and retire in your home buy one. It is a buyers market. If you intend to move within 10 to 20 years do not buy a home you will not be able to sell it it is a buyers market. Carl lives in a free country. He can continue to work and make money just like the underhanded CEO’s of banks and big business despite using bailouts for bonuses. Nice try but not buying it:)
Does that mean you don’t agree with my article as well?
Do you rent or own? And if you still rent, why? Carl shows you the way!
Great article. Carl should be de-CFP’d or the equivalent of a lawyer being disbarred. I can’t believe this idiot is making money off of his poor financial decisions, as a financial planner. Are the wealthy of Utah that gullible? Scary, we trust these people; maybe Madoff needs a cellmate… (just sayin’)
Perhaps that’s why he moved? So that he could start a new and take in new unassuming clients. I bet that is correct! Carl is a smart man!
Good article. I read this previous article about Carl, and thought many of the same things. It used to be the risk of default was from those who lost their jobs or some other negative event, not just from those who lost their motivation to pay.
You left out the best part of the story… the ultimate GEM. He replied to a classified article with the word “securities” in it thinking he was applying for a security guard position. It turned out, it was in the “securities” industry. That’s your financial adviser – a guy who thought he was applying for a security guard position.
You can’t make this stuff up!
Now he’s selling books.
Great stuff.
Really? Nice! How can we ever doubt our abilities to be rich and kill it in America?
The last 2 posts have it dead on. Far too many Carls around us who have absolutely NO consequences for their actions. If I had zero consequence for my behavior, I likely would not feel any accountability either.
Carl claims that he thought about his family at some point- I have difficulty accepting that statement. All the rest of Carl’s story indicates that he thought about little more than how he and his family were perceived; that it was all about facades. Even as he ends his tale, there seems little indication of actually having Learned anything more than how to shirk about, as Sam, as describes.
Carl lost little more than loans on paper. He even says that he did not pay any attention to what was in those loan contracts to the lenders. “Hey, if they are willing to lend to me I’ll take it all and then some!” Then took out additional equity loans. The only cash he had in was what he had re-paid to the multitude of loans.
I figure that we hold no one accountable at Carl’s level simply b/c we do not hold those higher accountable. As Sam posted the other day about Congress. When our lawmakers hold themselves out and essentially unaccountable to any rule or law they make, that mindset trickles down to other groups. As long as one group has something that does not apply, there will be another seeking something else. When there is a rule or law, it should apply equally to everyone w/o exception.
If he thought of his family first, he wouldn’t have risked so much financially.
He also writes, “I’m not sure if I’ve learned my lesson.” Ummmmm…… OK.
If financial advice is your profession, then this is a crying shame and a burden on the rest of us.
The same thing that makes this country so great is the same thing that allows the Carls to live his dream life. Double edged sword? No one is held accountable for their bad behavior. It’s easier to just kick the can down the road. It seems there are two types of people. Those who work the system and those who don’t. Nice guys finish last?
Yes, those who get ahead know how to work the system. Nice guys got their work cut out for them!
Sam, your’e making people want to read his book!!!
I’m very annoyed at the Carl’s of the world (including my own neighbors that lived high on the hog for years in huge houses with no down and big mortgags).
I’m annoyed because their actions caused a downturn which caused my holdings to decrease in value.
I’m annoyed because their actions caused the Fed to lower interest rates to zip near zero at a time when I finally have some liqued assets and don’t need to borrow.
I’m annoyed because a whole LOT of people did this – from all walks of life, while I scraped by living below my means – makes me feel like a chump.
Hopefully people will just borrow from the library.
Carl is laughing at you and the rest of us who lived within our means and did the responsible thing.
It must be the period, but this is the third post I’ve read in three days and that finds me in complete disagreement. Not only it goes back to the old, obsolete idea of “rent is dead money”, but it also shows a ton of “US only” thinking about properties. In most of the world, your mortgage is secured by each and every single asset you have, not only the house you bought. Your car, your laptop, your every single cent is a collateral. In some countries, even relatives can be held liable to some extent. Also, the concept of “personal bankruptcy” doesn’t exist in most parts of the world, hence you’ll pay your debts until you die (and it actually makes sense, or else everybody would be borrowing with the intention of defaulting).
So, in complete contrast with what has been written, do *not* take example from US and take reasonable decisions when it’s time to borrow. If you can’t afford it, simply don’t buy it. Rent is *not* dead money.
The generational mortgages of Japan help keep non payers down. In Japanese culture, it is better to commit suicide than not meet your obligations let alone boast about it.
I wouldn’t push the suicide at all, but I also would not be so proud of shouting around that I’m a “strategic defaulter”. That’s the wrong attitude, and, fortunately, not so widespread.
I think I’ll barf now. Carl and many others like him, though not financial advisers or making money from book deals about how to walk away from your home, are screwing the system by walking away from their homes even though they can afford them. They are lemmings!
However, I still rent because, 1.) I was in the process of improving my credit during the housing boom so I didn’t want to take on something I knew I couldn’t afford, 2.) eventually once the house is gone, you gotta’ live somewhere and that will mean renting – so renting is really inevitable, 3.) I wanted to do the right thing and live within my means.
I completely agree that Carl should change occupations and should NOT be allowed to give financial advice to anyone.
At least barfing helps us lose weight! Sorry, just the optimist in me.
As a resident of California, feel free to leverage to the hilt and buy that dream place! Only live once. No consequences or monetary pain are awesome incentives!
On the other side it’s not like banks never break moral rules to save a little money :) Morally bankrupt financial advisers vs banks that are insolvent without a little help from their taxpayer friends… are there even any winners in this? It seems more like all lose until a minimum 20% downpayment is required to buy a home.
Yep, “here you go customer! you can borrow 5X more, and you should!” No doubt.
The winner is Carl Richards as he laughs all the way to the bank.
This guy’s a piece of work. What’s he whining about? Despite being an absolute moron with his personal finances, he’s allowed to work as a “certified” financial advisor.
I wonder if CFA’s are required to at least have a clean personal balance sheet as part of the certification process.
CFA is incredibly strict. Seriously, you do one thing bad and there’s a good chance you are stripped, just like if you have a Series 7.
CFPs…. not so much. Party on!
PK, I understand that much of the land around Vegas is owned by the Federal Government. Sales of Federal Land to developers have kept the proceeds inside the State according to a special law (probably sponsored by Harry Reid :-) ). The funds were used for public projects, which enhanced property values, which drove more development, leading to more Federal land sales….
That’s right. He lost his “MORTGAGE”, which means…. who gives a crap?
If he lost his $200,000 down payment, and showed some remorse, maybe. But he writes “maybe I have learned my lesson.” huh?
Vegas is a sprawl. A gambling city. The boom was inevitable there.
disgusting – but a lot of how much one can take advantage of the weakness in such laws is the lender’s ability / inability to act quickly on the foreclosure process and take possession of the property. in a situation where the lender is just too backed up, a homeowner can stay in the house for an extended period of time w/o making any payments. similarly, a homeowner may be forced out in 6 months or less. still some free living nonetheless.
It is amazing how our system is set up. In a way it’s very positive as it makes failure very difficult! That’s good for all!
Sounds like Carl is an amazing financial planner. He is way smarter than I am to have gotten out of hundreds of thousands in debt without so much as a scratch. Now he has a book and a lot of press in the New York Times! I can barely get anyone to my blog and I am still paying on my debt. I don’t have a book deal, either! Carl must be doing something right!
Carl is smart and he is living the American dream. Hooray!
The CFP designation is a JOKE if you aren’t barred from conducting yourself unethically and prosperit from other’s misfortunes.
It is all in your point of view! I totally agree with you this guy needs to repay the money he walked away from. Doesn’t the bank hit you up with a 1099? What gripes me is he is going to profit off of it. How can he get away with it? Murderers are not allowed to write books and profit from that. I hope no one buys his book!
I probably wouldn’t go to this guy as my financial planner, and I think he made some dumb mistakes during the housing bubble. I very seriously doubt that it never occurred to him that housing was in a bubble and that prices wouldn’t continue to rise. He just didn’t want to acknowledge that so looked the other way.
At the same time, I have a hard time having that much vitriol against him because I happen to agree with one of his justifications for acting the way we did. And that’s that we hold individuals to a higher standard when it comes to debt than we do multi-national corporations who walk away from debt, restructure to be able to declare bankruptcy, and then come back richer than ever, all the time. Think about Donald Trump. How many times has the man declared bankruptcy to clear his debts? He’s just the simplest example to give, but that’s all around us.
My tax dollars went to bail out banks. Some of that went to this guy. Sure, that annoys me, but not nearly so much as the fact that some of my tax money went to give bonuses to the CEOs and other corporate officers of financial institutions that were BAD at their job. They needed federal bail out money, and yet somehow, there were still deserving of bonuses? That makes me madder than all the individuals who got in the housing market over their heads.
I agree that it is SHOCKING that financial institutions who would have gone UNDER paid many senior officials millions of dollars a year in 2008 and 2009. But, at least all the big CEOs denied a bonus those years, and none of the other guys who got millions of bucks then went to write a BOOK about how to make millions! They kept quiet.
That’s the difference. They aren’t putting it in the public’s face how great they are.
My friend still rents a condo because he cannot afford to get a house. He runs his own business that just barely started to pick up. Hopefully, one day he will be able to get a house. It is his dream. As far as Carl goes… he used the system to his advantage. Why anyone would listen to him is shocking to me.
Carl has got huevos! He’s taking advantage of the system and making money off unsavvy people. Whythe heck would anyone listen to this financial planner is beyond me. Maybe I should get a CFP…
If you decide to get a CFP, let me know and I may join you!
I still rent a house. I dont have the cash saved up for a down payment, and I’ve got other things I’d rather do with my money at this point in my life. It does bother me that I’m paying for other peoples mortgages – if they would have done the responsible thing like me and waited to buy a home or didnt take equity out of the home to go on vacations, they would be totally fine. Unfortunately, not many people did that. I applaud people who bought in the trough of the market, sold during the huge run up and made 3x their money, and have now swooped back in and bought after the prices took a huge dump.
Thanks to all the stupid people like this author, that small group was able to make a nice sum of money – I plan on being in that group next time this happens.
As for whether or not I should listen to him – probably I wouldnt. He’s not talking about debt, he’s talking about investing, which is dumb because it is clear he couldnt even manage his debt.
Only a few people made out like that. For most regular people, even if they sold at the peak, they brought another place.
Jeff, that’s the point. You don’t need cash to buy a nice place! Borrow huge, live it up, and only when they send the brigade in do you hand over te keys! The Washington Post might even give you a staff writer job after!
I rent because taking out a loan for a home right now doesn’t make sense financially. I have way too much debt right now for more debt to be a consideration. So first I pay for my debt, then I buy a house. Until I have some kind of a cushion in my monthly expenses, buying a home would make me just as ridiculous as our friend Carl.
But that’s the point, you DON’T have to pay it back! Carl owed hundreds of thousands of dollars on his home, decided not to pay, and is now doing great. Why live like a pauper when you can live like a Queen on someone else’s dime and get away with it?
I think maybe I’m missing the point here. How is he living at all on someone else’s dime? He took out a mortgage and made payments on it, until he didn’t anymore. Now he’s paying to live somewhere else.
I mean, it’s not like he took out a loan and didn’t pay it while he was living there, right? The contract of a mortgage is that the bank lends you an amount of money to purchase a house, and the deal is that you make payments on the mortgage until A) You stop making payments, and the bank takes your house back or B) You have paid off the mortgage in full. The bank took a risk on Carl’s ability/willingness to pay back the loan, and it turned out to be a crappy investment.
He broke a contract, yes. But hardly the fraud of the century. Unless I am, actually, missing something?
You missing the point is why America is so great! People finding it OK that a CFP/Financial Adviser – who is supposed to be held to a higher standard – to welch on his debt obligations, continue to make money from people in the financial advisory field, and profit from a book makes me bullish about our economy and ability for all of us to make lots of money!
Who said this was the fraud of the century? I didn’t.
PS he didn’t pay his mortgage for months before he decided to hand over the keys.
Well Sam the problem is that Carl ruined it for all the rest of us. Now lending standards are incredibly strict. I had a hard enough time getting a car loan a couple of years ago. Also on the ethical side, I’m very uncomfortable borrowing money that I’m not reasonably certain I can repay.
Tis true, thanks to Carl and those who’ve broken their contracts, lending RATES have risen to account for non performing loans.
They really should have regulations that would strip his title. Nothing can really stop him from writing a book but continuing to offer financial advice to people is a joke.
What’s a joke is people PAYING him for financial advice, when there are thousands of good financial planners who aren’t unethical and trying to maximize their profits, instead of their client’s profits.
It takes guts for Carl to try and continue to profit from his clients with his new book.
Maybe he’s doing better now b/c he’s making money teaching people how to scam the system?
He’s laughing all the way to the bank.
Seems like nobody is out of anything. The bank still owns the house and its not like the bank didn’t know what it was getting into when it made the loan.
Also, how did the tax payers end up covering they guy’s bill? If taxpayers are covering anything then they are covering the bank’s loss.
If it costs more to lend money due to an increase in non performing loans, anybody who is looking to get a loan from that bank will have to pay more to cover his losses. NPLs are embedded in a bank’s price offering, and share price. If a bank gets crushed by too many NPLs, the craters, investors and clients suffer, banks need taxpayer bailout money.
Make sense?
The bank is making an investment. If they are not good at making investments then they probably are not the place to do business with and you can choose another. You can also choose to not get a loan. The bank is offering a product. If that product is not good enough nobody is forcing you to buy it.
Now taxpayer bank bailouts, that’s an entire different thing. That is the government handing money out it in its control which makes it the government’s fault.
Sigh, do you really not see how things are interconnected? Will banks need bailouts if their tier 1 capital ratio wasn’t under siege? Come on Billy, how is another client supposed to know Carl is going to welch until they are impacted?
Billy, are you Carl’s friend or cousin? Finding it shocking you don’t understand that banks raise prices to cover their losses, and everything is intertwined.
The government funneled our taxpayers to bailout the banks. Were you not alive in 2008-2009? Do you not know that the housing downturn instigated this?
Of course I see how they are interconnected. Anyway, how is a client supposed to know just about anything until they are impacted?
Does Carl not paying change the terms of any prior contracts? No. So Carl not paying only effects future contracts. The bank will of course take their bad investment into Carl into account for future contracts. People entering into those future contracts can take the deal or not.
Banks never “need” bailouts.
None of the policy items you listed really apply to me because I’m Canadian, but to answer your question, I rent because I can’t afford not to. I live in one of the most expensive cities in the world (Toronto) where is literally IS cheaper over the longer term to rent. A typical one-bedroom apartment might cost $1000 inclusive. A mortgage payment for the same one-bedroom condo might be around $1200 or $1500, depending on the location assuming a decent down payment, PLUS utilities, insurance, maintenance and probably about $400 or $500 a month in condo fees.
I do hate the idea that I’m paying my landlord’s mortgage instead of my own, but I’m just not in a place where it’d make financial sense to buy a home.
The question is, can Canada go after your assets if you default on your home? And if not, why not get the biggest loan possible, live it up, extract equity from the house, and turn over the keys when you no longer want to pay? You can then tell people how great you’re doing like Carl!
Haha, I actually don’t know (but I’m almost positive the lender can’t go after my other assets were I to foreclose), but the fact still remains that I’d still have to pay the $2000+ each month WHILE I’m living there, whether I can walk away from the mortgage or not!
Besides, if I did that, I’d better be prepared to rent for a VERY long time afterwards, since defaulting on a mortgage would absolutely destroy my credit, and Canada’s requirements for a mortgage are much stricter than they are in the States.
Sam,
I thought the same thing when I read this! I feel like it would be like reading a “How to Invest to make a ton of money” by Jon Corzine.
Despite Jon causing MF Global to go bankrupt and 1000+ people lose their jobs, ab least Corzine amassed a $500 million + fortune over several decades beforehand!
Jon isn’t going to write a book on how to get rich, or ever be in the public spotlight again. Not this guy. Amazing.