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You need to have six months of buffer to have a low risk of disaster. Nevertheless, the vast majority of people purchasing their first homes in Canada and the

You need to have six months of buffer to have a low risk of disaster. Nevertheless, the vast majority of people purchasing their first homes in Canada and the US do not have six months of buffer. No bank has ever denied my application for a mortgage for not having six months of mortgage and tax payments in a savings account. My government backs certain kinds of loans for first-time buyers, and it does not require this buffer. So while I agree with what you're saying in a logical sense, in a practical social sense, you are asking the vast majority of people who buy their first home to pass on buying a home, in the face of all social evidence that seems to contradict your advice. It's good advice of a sort, but recognize that this is not accepted wisdom. It's highly conservative and contrarian. Which is smart, but if you want people to embrace it, you'll need to wrap it in a lot of justification and other mechanisms for explaining why they should zig while all around them, people are zagging. (FWIW, My very first real estate purchase was a loft condo where I actually had cash for the entire thing, but took out a small mortgage to kick-start my credit rating. It was paid off in two years. From that point on, I have not had six months buffer in cash, but I have had more than the nose-bleed minimums in equity, and that's another kind of risk management. So I do empathize with your message, but I suggest it needs a lot of selling to get people to adopt it in the face of a trillion-dollar industry convincing people otherwise.)

bunderbunder 8y ago
This maybe speaks to OP's point. I don't want to weigh in on whether they overextended themselves or not. 2008-2009 were rough years, and financial situations that didn't work out during that period would probably have been fine any other time. Also, let's cut some slack and presume that they were doing the best they could with a difficult set of circumstances. With that out of the way, I think it bears mentioning that, while it isn't illegal to encourage people to overextend themselves, that's what everyone related to the housing industry seems to be doing. Realtors don't want you to be conservative with your money because they earn a percentage of how much you spend. Bankers don't (or didn't) because they don't (or didn't) give a rat what your chances of covering the mortgage are -- they just needed you to be able to make payments long enough for them to sell the loan to Fannie or Freddie or whoever. There are all sorts of do-gooders who have decided that homeownership is not a mark of prosperity, it's actually the path to it, and consequently have (or had) a tendency to get a bit too cheerleader-y. Even other homeowners, the victims of the housing boondoggle if ever there were any, are a part of it, because thinking of your house as an investment goes hand-in-hand with believing that of course home prices should be taking a one-way trip to the moon. (Tangentially, that last aspect has me starting to suspect that the house and condo market is something of a Ponzi scheme that we are collectively pulling on ourselves.) I don't know where I'm going with this, so I guess I'll throw one last thought out: The contrast does seem pretty stark to me. The rich are getting justice, and everyone else gets victim blaming.
- gwbas1c 8y ago
  > Tangentially, that last aspect has me starting to suspect that the house and condo market is something of a Ponzi scheme that we are collectively pulling on ourselves In some markets, yes. I sometimes suspect that NIMBYism is an unconscious way to prop up the ponzi scheme.

bunderbunder 8y ago

This maybe speaks to OP's point. I don't want to weigh in on whether they overextended themselves or not. 2008-2009 were rough years, and financial situations that didn't work out during that period would probably have been fine any other time. Also, let's cut some slack and presume that they were doing the best they could with a difficult set of circumstances. With that out of the way, I think it bears mentioning that, while it isn't illegal to encourage people to overextend themselves, that's what everyone related to the housing industry seems to be doing. Realtors don't want you to be conservative with your money because they earn a percentage of how much you spend. Bankers don't (or didn't) because they don't (or didn't) give a rat what your chances of covering the mortgage are -- they just needed you to be able to make payments long enough for them to sell the loan to Fannie or Freddie or whoever. There are all sorts of do-gooders who have decided that homeownership is not a mark of prosperity, it's actually the path to it, and consequently have (or had) a tendency to get a bit too cheerleader-y. Even other homeowners, the victims of the housing boondoggle if ever there were any, are a part of it, because thinking of your house as an investment goes hand-in-hand with believing that of course home prices should be taking a one-way trip to the moon. (Tangentially, that last aspect has me starting to suspect that the house and condo market is something of a Ponzi scheme that we are collectively pulling on ourselves.) I don't know where I'm going with this, so I guess I'll throw one last thought out: The contrast does seem pretty stark to me. The rich are getting justice, and everyone else gets victim blaming.

gwbas1c 8y ago
> Tangentially, that last aspect has me starting to suspect that the house and condo market is something of a Ponzi scheme that we are collectively pulling on ourselves In some markets, yes. I sometimes suspect that NIMBYism is an unconscious way to prop up the ponzi scheme.