If Greece Came to Me for a Mortgage…

November 27, 2011

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!


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.