If Greece Came To Me For A Mortgage…

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For more than 20 years our office has been located on the Danforth, an area of the city best known for it’s Greek cuisine and culture.  Although the Greek influence in the neighbourhood has started to fade in recent years, some old Greek families and businesses hold on to the traditions of a homeland that is now the epicenter of a global economic earthquake whose tremors are being felt the world around.

Events in Europe are unfolding like any great drama with twists and turns in the plot. The story began in Greece and the first twist came when  Greek prime minister Papandreou put forward a referendum on proposed austerity measures. Without skipping a beat the plot thickened in Italy with the resignation of Mr. Bunga Bunga himself Berlusconi. Just this morning I heard of Portugal’s largest union going on strike over austerity measures in that country.

As a mortgage broker I often see things as a question of borrowers and lenders. Countries much like individuals can borrow money and incur debt. Typically we express the total debt of a country as a percentage of national GDP as one way of looking at borrowing levels within the context of a country’s ability to repay their debt. Canada’s Debt to GDP ratio is currently 83%. The United States of America’s ratio is 98% and according the ECB Greece’s debt represents  156% of their GDP. (Wikipedia) To put this into context when applying for a mortgage a bank will approve a maximum loan amount using 44% of a borrower’s gross annual income to cover payments associated with housing(taxes, mortgage, condo fees etc) and all other debts and obligations, such as car loans and credit cards.

Obviously it is ridiculous to compare a country’s sovereign debt with personal debt but it’s interesting to observe that the fall out of spending more than one earns whether its on a national or personal level leads to a crash.  On a personal level living beyond your means for an extended period of time will eventually lead to some form of crisis whether it’s bankruptcy, marital breakup or any other forms of self destruction. In the case of national debt we observe massive demonstrations, riots, strikes and political fallouts which are unproductive and can cause long periods of recession.

So if Greece walked in to my office located on the Danforth (seems like the most logical place for Greece to go shopping for a mortgage) what would I tell her? Obviously she wouldn’t get far with a mortgage application but what advice could be given? In our consumption driven society where credit is so readily available how does one avoid living beyond their means? Perhaps the best remedy is to learn to live in a place of sufficiency. We are so often driven by the need to fill the void of something that is lacking in our lives, more money,  more cars, more clothes, more electronics, more toys, more vacations, more stuff we don’t really need. But if we were to stop to appreciate what we already have, we may discover life provides us with an abundance of what we really need to live within our means.

Here is a little video that I find hilarious regarding the Greek bailout. Enjoy!

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Christopher is a second-generation mortgage broker. Following in his dad’s steps, he helps borrowers demystify mortgage financing. Christopher lives in Toronto and when he is not in the office you’ll find him sailing on Lake Ontario.
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15 Comments Post a comment
  1. Nov 28 2011

    Very Smart – I have never thought of a country in this way – I like it. Thanks for sharing!

  2. Mark
    Nov 28 2011

    Some great points. I do think we’ve gone way overboard with our spending. Wages haven’t kept pace with rising real estate costs. Cost of living is up. Every where we turn we’re taxed, forced to pay user and service fees, keep up with technology and new gadgets. Sure, we can cut some of these things out, but it really takes a focused, disciplined approach and some tough decisions. Living within our means and appreciating what we do have is paramount. Bottom line is credit sucks and we just end up making the bank rich. Live within means.

  3. Nov 28 2011

    Thanks for visiting kiltedbroker!

  4. Nov 28 2011

    Hey Mark… thanks for commenting. It’s tough to keep your head above water sometimes. Credit does suck but it is also entirely necessary in our world and allows to realize some of dreams and affords us our modern lives. Living in “sufficiency” doesn’t necessarily mean that we have to live like a pauper it just means that we need to learn what enough is. Enough is different for every person.

  5. Dec 2 2011

    Fantastic blog Chris!

  6. Dec 2 2011

    Thanks Keith I’ve enjoyed reading yours as well. Great to see that someone is doing it right.

  7. Michelle
    Dec 2 2011

    You’re absolutely right Chris we’re living in a consumption driven society. Point taken! I’m going to have to cut down on my Santa list this year….

  8. Dave
    Dec 2 2011

    Insightful example of overspending at macro level. Point taken and great analogy. You’re correct, many households have the same challenge but at a much smaller level. A lot of us have to reign in our reliance on credit, live within our means, and cut excess fat.

  9. Dec 3 2011

    Great post Chris Love the macro comparison to the average family. You may find a recent book that was recently launched of interest as well as it has a similiar approach Check out Crushing Debt by David Trahair,CA Video interview of David on Global TV is at http://bit.ly/thlOAe Fyi we have created a unique financial fitness quiz that many have provided great feedback on that have helped consumers focus on improving their finances at http://bit.ly/uisar1

  10. James
    Dec 4 2011

    I don’t quite understand the need that most people have to live beyond their means. Maybe it is because so many people are raised and conditioned to conform to society. Consequently, women feel pressure to get married and / or have children by a certain age and men feel pressure to own a home by a certain age or feel compelled to buy a certain make of car in order to keep up with the Jones. I have been living pretty modestly the past 10 years and while I have sacrificed certain luxuries, I have zero debt. I don’t even have a car because I work from home and if I were to buy a car, I would end up using it only a hand full of times per week. The rest of the time, I’d be paying car and insurance payments to have the car sit in my front yard. It’s actually cheaper for me to order a taxi when I go somewhere than to pay a car’s monthly expenses.

  11. Lawrence
    Dec 5 2011

    I think you have some really good points in your article, most people don’t think of states like they are people with credit problems. I for one never thought of my state or government having money problems, it just seems weird. Yet our executives and our representatives in the government and city or state boards are not doing without. The little guy is expected to live within their means but the uppity ups do not they still have the best of everything and they are still traveling etc. why are we expected or forced to sacrifice when they don’t have to, we live in such double standards anymore it is ridiculous.

  12. Louise
    Dec 10 2011

    I sure wish the United States congressional committees, who convened with those corrupt CEO’s, would not have bailed out their companies simply because they abused their position and their knowledge of legal loop holes to circumvent the law and deployed deceptive practices to steal massive amounts of money without any concern for the consequences it would have on many home owners and the real estate industry. I think I laugh harder when I see parodies like this video, just to vent my frustration and mock such selfish, entitled people. But we shouldn’t rush to judgment either because that could be a form of hypocrisy. I mean each of us should be honest with ourselves and ask the question, would I take advantage for my own financial gain if I were in a position to do so?

  13. Donna
    Dec 10 2011

    I wonder if there is any value in purchasing a home or land in Greece, now or in the near or distant future. How is the real estate market there as a result of their financial chaos? Can an investor prospect and buy property low in the hopes of one day selling it for profit? Or is it better for investors to just stay away from risking their money in anything located within Greece? I imagine the situation is so volatile and ever changing, that prospectors are simply waiting to see the outcome.

  14. Tyra
    Dec 12 2011

    It just astounds me that the land of the free and home of the brave is going broke but it is no wonder if we are other countries are as well. I think you have some really good points in your article though because most people don’t think of states like they are people with credit problems. I for one never thought of my state or government having money problems, it just seems weird. Yet our executives and our representatives in the government and city or state boards are not being cut out of jobs, we just continue to pay huge over head and continue to dig the hole we are in bigger and bigger. How much money could a country save if the cut bake on some of the people they think they need to help run it? The people that actually work for a living are expected to live within their means and we cut their jobs but no body else is expected to why is that?

  15. Johnny
    Dec 13 2011

    It is easy to judge those who do things in the pursuit of excesses to satisfy their greed. But I wonder if anyone who is quick to judge might not do the same if they had the power to abuse. Only if we are completely hones with ourselves can we know the answer to that question.. Most people are only as virtuous as their opportunities. Ben Franklin gave us the secret to wealth. He said that the road to wealth lies in augmenting our means or diminishing our wants. Either will do. But the quickest way to wealth is to do both at the same time. I think that is a sound philosophy to live by.

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