Subprime Math

Canada is going to have a mortgage meltdown occurring within the next five years. It will be brought down by our own maple syrup flavoured sub-prime mortgage. The nickel down and 35 year to go kind.

Some interesting math based on the notion of "I can afford $2,500.00 per month. How much can I borrow?"

@ 8% with a 25 year amortization = $327,500

@ 8% with a 30 year amortization = $345,000

@ 8% with a 35 year amortization = $356,500

@ 8 % with a 40 year amortization = $364,500


@ 6% with a 25 year amortization = $390,500

@ 6% with a 30 year amortization = $420,000

@ 6% with a 35 year amortization = $442,000

@ 6 % with a 40 year amortization = $458,500


@ 2.75% with a 25 year amortization = $542,000

@ 2.75% with a 30 year amortization = $613,500

@ 2.75% with a 35 year amortization = $675,500

@ 2.75 % with a 40 year amortization = $729,000


The danger of mortgage qualification based on teaser rates is readily apparent in this analysis. Low interest rates combined with allowing long amortization periods is a recipe for disaster.

My solution for solving this potential problem and averting disaster.....

a> Use the bank act to make residential mortgages of terms longer than 25 years illegal.

b> Hold a lottery in the Federal Department of Housing of the committee members that allowed mortgages longer than 25 years in the first place. The winners are sentenced to the mortgage term length they allowed shoveling tar sands.