0% down mortgages over?

[trent]

Originally Posted by MortgageOpolis

Hello,

As crazy as it may be... 100% financing is available with a bit of a twist.
Some lenders are offering Cash Back mortgages up to 7%, but, the interest rate is higher for this product. The higher rate is how the lender gets compensated for lending you the Cash... you don't make a separate loan payment!
A Cash Back mortgage credits a borrower a percentage of the purchase price at closing which can be used as a down payment for the purcahase provided CMHC mortgage insurance guidelines are met.
Tip: You can withdraw up to $20,000 of your RRSP's tax free for a down payment if you haven't owned a home as a principal residence in the past 5 years. Contact me for more info. on this program.

Take care,

just apply we'll do the rest!

This is interesting, after all the trouble over-leveraging brought to the US and world economies, some people (read banks) never learn. So answer me this what happens if somebody buys a house with 0% down and the price of this house goes down 20% a year from now? I'll tell you what happens, chances are that whoever bough the house with 0% down didn't have any savings (that's why it bought with 0% down). A year later the proud homeowner won't have any equity in his house and his mortgage will be much higher than the house is worth. Chances are that this homeowner will simply default on his mortgage (job loss, no savings, not willing to pay for depreciating asset, etc) and walk away from the house. Now the bank have to foreclose, and sell the house for 10% to 20% less than market price, which is already 20% down. So at the end the bank will take a loss of 30% to 40%.

Does this sound like a good deal for the bank to you?