Party on, Garth!

Though I've never been accused of being on the right wing of the political spectrum, one blogger I always keep an eye on is Canadian MP Garth Turner. The long time columnist and broadcaster's blog is refreshing for the fact that he has thus far managed to avoid censoring himself now that he is a member of the government. (Indeed, he's already landed himself in hot water for some high profile disagreements he's had with the PMO's office.)

Politics aside, on a financial level, Turner has some interesting comments on the looming arrival of the (gasp!) 50-year mortgage to would-be Canadian homeowners like me.

You can read the entry here but the 10-cent version is this: mortgage lenders are only starting to pitch these long-term mortgages because they know that after such an increase is house prices over such a small time frame, owning a home is becomging too expensive for the "average" Canadian family. But the industry depends on a steady supply of new owners, so they pitch these monstrously long mortgages to us to make home ownership seem more feasible, conveniently neglecting to mention that you end up paying way more for the house in the long run.

It's a fascinating read, and refreshing to see in print something I've suspected myself for a long time. I hadn't crunched the numbers myself but Turner argues that under current interest rates, a $300,000 mortgage ends up costing you $580,000 to pay back over the life of a 25-year loan.

I'm in my mid-20s, and I have friends buying condos at the moment. Though the thought of paying down a mortgage to earn equity (as opposed to rent) is very appealing to me, I just don't have the stomach to borrow such a staggering amount of money right now. I know there's a massive marketing machine designed to convince me why it makes sense for me to buy a home as early as possible, but I won't be signing up for one of these ludicrous no-money-down plans. My own benchmark is to try to have a 20% downpayment. Considering a starter condo in a non-hip part of town can cost you upwards of 200K in this city, that means I'm going to need $40,000 before I jump in.

All the more reason to get busy looking for undervalued companies that pay dividends until then, wouldn't you say?