Mortgage advice deja vu

[Razgovory]

I know.  He's totally stealing my shtick! 

[grumbler]

Leave it to grumbler to contribute nothing of substance, and to point out when someone misspeaks.

You would know about contributing nothing of substance, wouldn't you?  The whole post I am mocking was a mass of nothing other than you beating your chest about how you understand people's contracts better than they do, while contributing nothing to the discussion whatever! 

I just cannot resist pricking puffed-up egos when they brag about their smarts right after committing a blunder.  I generally ignore typos and brain farts but have to make exceptions when they offer the opportunity to make a humorous point.

[grumbler]

I know.  He's totally stealing my shtick! 

Sorry, but the opportunity was too tempting to pass up.  I was afraid DG would read what he had written and delete it before you got around to it.

[DGuller]

Leave it to grumbler to contribute nothing of substance, and to point out when someone misspeaks.

You would know about contributing nothing of substance, wouldn't you?  The whole post I am mocking was a mass of nothing other than you beating your chest about how you understand people's contracts better than they do, while contributing nothing to the discussion whatever! 

I just cannot resist pricking puffed-up egos when they brag about their smarts right after committing a blunder.  I generally ignore typos and brain farts but have to make exceptions when they offer the opportunity to make a humorous point.

What kind of blunder did I commit?

[Baron von Schtinkenbutt]

I believe I have shown many times that I do understand the difference, and know exactly how your mortgages work.  In fact, I understand it so well that I also understand what it effectively is, despite what it claims to be.  The point is that this mechanic of "5 year term, much longer amortization" really papers over the true nature of the mortgage, which is variable rate.  As I already said, by your definitions, the mortgage with a term of 1 month and an amortization period of 30 years would be fixed rate mortgage as well by your definition, since you'll just renegotiate it 360 times during the amortization period, but clearly that's ridiculous.

Except it isn't the same thing.  A variable-rate mortgage is still a commitment between the lender and the lendee for a certain period of time.  The relationship doesn't end until the lendee either defaults or pays off the balance of the debt.

In Canada, in theory, at the end of 5 years or whatever term was negotiated, the lender can simply demand full and immediate payment of the balance of the debt.  Your assertion about Canadian mortgages all being the same as US ARMs assumes the renegotiation is just a formality.

[DGuller]

I believe I have shown many times that I do understand the difference, and know exactly how your mortgages work.  In fact, I understand it so well that I also understand what it effectively is, despite what it claims to be.  The point is that this mechanic of "5 year term, much longer amortization" really papers over the true nature of the mortgage, which is variable rate.  As I already said, by your definitions, the mortgage with a term of 1 month and an amortization period of 30 years would be fixed rate mortgage as well by your definition, since you'll just renegotiate it 360 times during the amortization period, but clearly that's ridiculous.

Except it isn't the same thing.  A variable-rate mortgage is still a commitment between the lender and the lendee for a certain period of time.  The relationship doesn't end until the lendee either defaults or pays off the balance of the debt.

In Canada, in theory, at the end of 5 years or whatever term was negotiated, the lender can simply demand full and immediate payment of the balance of the debt.  Your assertion about Canadian mortgages all being the same as US ARMs assumes the renegotiation is just a formality.

Yes, it's a difference, and that makes the Canadian "fixed rate mortgage" more risky than a US ARM mortgage.  You've got a risk that you would be unable to roll over your debt (which will almost always happen precisely when you don't want it to happen), and you've got no cap on interest rate change. 

However, my contention is that it isn't a significant difference, and I think that my assumption that there will be someone out there to offer you a financing deal is reasonable for the vast majority of cases (whether it's the same bank or not doesn't matter).  I'm merely assuming a fairly efficient working of the banking industry, and thus focusing on the analytic differences, to use JR's language.  And the point is, the analytic differences are pretty stark between a true fixed rate mortgage, and what Canadian call a fixed rate mortgage.  The analytic differences between Canadian mortgage and the US ARM are pretty minor by comparison;  the differences are mainly in the mechanics of administration.

[crazy canuck]

  I just understand your mortgages better than you do

Yes, since this was explained to you yesterday you have become a real master.  I can see now why you think you are a master of all subjects.

[grumbler]

And the point is, the analytic differences are pretty stark between a true fixed rate mortgage, and what Canadian call a fixed rate mortgage. 

Ya keep claiming you get it, and yet use language which indicates that you just don't get it.

Canadian fixed rate mortgages are not untrue.  They are simply fixed mortgages wherein the amortization period and load length are not the same.

It is quite true that the analytical differences between the 30-year fixed mortgage and 5-year fixed mortgage are pretty stark.  That shouldn't surprise anyone.

Canadian 5-year fixed rate interest rates have been far less volatile than US 1-year ARMs over the last ten years, though - and arguably less volatile than US 30-year fixed-rate interest.

[DGuller]

  I just understand your mortgages better than you do

Yes, since this was explained to you yesterday you have become a real master.  I can see now why you think you are a master of all subjects.

Don't be childish, I don't think I am a master of all subjects.  However, I will speak up if I think I understand something better than other people do, even if that pits me against a majority.  I'll fight on even without a finance textbook and Wiki on my side, but that helps a lot as well.

I also didn't become a real master yesterday, I understood how mortgages work for a long time in general terms.  What I didn't have until a couple of days ago is the specific information about Canadian "fixed rate mortgages".  Once I obtained that information, I was able to use my understanding to almost immediately recognize the nature of such mortgages.

That's the advantage of being the kind of person who tries to understand things rather than know things.  If you have the proper framework in your mind, you can quickly and correctly absorb new information. 

You're welcome to challenge my analytics, but don't take the cheap grumbler way out by trying to mock me for claiming to understand something in lieu of challenging my conclusions.  That's just a type of ad hom, and you can do better than that.

[Barrister]

  I just understand your mortgages better than you do

Yes, since this was explained to you yesterday you have become a real master.  I can see now why you think you are a master of all subjects.

Don't be childish, I don't think I am a master of all subjects.  However, I will speak up if I think I understand something better than other people do, even if that pits me against a majority.  I'll fight on even without a finance textbook and Wiki on my side, but that helps a lot as well.

I also didn't become a real master yesterday, I understood how mortgages work for a long time in general terms.  What I didn't have until a couple of days ago is the specific information about Canadian "fixed rate mortgages".  Once I obtained that information, I was able to use my understanding to almost immediately recognize the nature of such mortgages.

That's the advantage of being the kind of person who tries to understand things rather than know things.  If you have the proper framework in your mind, you can quickly and correctly absorb new information. 

You're welcome to challenge my analytics, but don't take the cheap grumbler way out by trying to mock me for claiming to understand something in lieu of challenging my conclusions.  That's just a type of ad hom, and you can do better than that.

Wow.

You know - some of us Canadians know a thing or two about mortgages as well.  Myself, I've drafted and registered, oh, about 100 mortgages for clients over the years.  Part of my practice is to sit down and actually explain all of the terms to my clients of the mortgage contract.  I've drafted mortgages for all of the major banks, and a few credit unions too.

So you'll forgive me if I call you a jackass for your supposed being able to 'understand" Canadian mortgages after having their terms explained to you a couple days ago.

[crazy canuck]

Once I obtained that information, I was able to use my understanding to almost immediately recognize the nature of such mortgages.

Its just too bad you didnt "almost immediately" use your rather impressive cognitive powers to communicate in some intelligable manner that you did in fact understand.  Now we are just left with your protestations that you understood.

[DGuller]

Ya keep claiming you get it, and yet use language which indicates that you just don't get it.

Canadian fixed rate mortgages are not untrue.  They are simply fixed mortgages wherein the amortization period and load length are not the same.

From the point of view of the homeowner, a series of such 5-year fixed rate mortgages is effectively an ARM that resets every 5 years.  You can claim that you can have a fixed rate mortgage whose term is a fraction of the amortization term, and then just turn the one real mortgage into five such mortgages separately negotiated, but then what you're doing is merely defining away the problem.

It is quite true that the analytical differences between the 30-year fixed mortgage and 5-year fixed mortgage are pretty stark.  That shouldn't surprise anyone.

Actually, there are few analytic difference between those mortgages, except that one is a shorter term instrument than the other, and thus would probably have lower interest.  The real analytic difference is between a fix rate mortgage whose term matches the amortization term, and "fixed rate mortgage" whose term is much shorter than the amortization term.

Canadian 5-year fixed rate interest rates have been far less volatile than US 1-year ARMs over the last ten years, though - and arguably less volatile than US 30-year fixed-rate interest.

You couldn't find anything on the Internet that wasn't a non sequitur?

[DGuller]

Wow.

You know - some of us Canadians know a thing or two about mortgages as well.  Myself, I've drafted and registered, oh, about 100 mortgages for clients over the years.  Part of my practice is to sit down and actually explain all of the terms to my clients of the mortgage contract.  I've drafted mortgages for all of the major banks, and a few credit unions too.

So you'll forgive me if I call you a jackass for your supposed being able to 'understand" Canadian mortgages after having their terms explained to you a couple days ago.

I'm sure all of you understand the terms of your mortgages, that's not in question.  What seems to be an incredibly hard task is getting you to understand the financial implications of those terms.

[DGuller]

Once I obtained that information, I was able to use my understanding to almost immediately recognize the nature of such mortgages.

Its just too bad you didnt "almost immediately" use your rather impressive cognitive powers to communicate in some intelligable manner that you did in fact understand.  Now we are just left with your protestations that you understood.

I did say that what Canadian homeowners had was effectively an ARM, disguised as a series of "fixed rate mortgages".  Can't get much clearer or intelligible than that, I don't think.  It's not my fault if some people choose to not receive the communication.

[crazy canuck]

Once I obtained that information, I was able to use my understanding to almost immediately recognize the nature of such mortgages.

Its just too bad you didnt "almost immediately" use your rather impressive cognitive powers to communicate in some intelligable manner that you did in fact understand.  Now we are just left with your protestations that you understood.

I did say that what Canadian homeowners had was effectively an ARM, disguised as a series of "fixed rate mortgages".  Can't get much clearer or intelligible than that, I don't think.  It's not my fault if some people choose to not receive the communication.

The ironic thing is that you continue to make your orginal mistake - which I wont continue to bother to explain to you -  and so you continue to demonstrate that you dont actually understand despite your statements to the contrary.