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(Marketwatch)   Do you have any interest in a 40 year mortgage? Yes, quite a bit   (marketwatch.com) divider line 60
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3535 clicks; posted to Business » on 27 Jul 2012 at 8:16 AM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-07-27 08:24:54 AM  
Because what this country needs is more people buying shiat they can't afford. And another way for someone to live in a house 10 years and still be under it.
 
2012-07-27 08:25:04 AM  
I thought there were 50 year mortgages in California?

Oh yes there are... or were

/had a 15 year mortgage
 
2012-07-27 08:25:33 AM  
Biggest mistake of my 20's : Not Buying the 500 sq ft studio I lived in for 650$/mo over 10 years.

Yes, that's a 10-year mortgage on a condo with a monthly fee of 75$ in ... Boston.
 
2012-07-27 08:36:50 AM  
You better, or else they take your house.
 
2012-07-27 08:57:03 AM  
40 year mortgage is a 'new' idea? Actually I am a little disappointed the guy didn't respond with mentioning that the Japanese have had 100 year mortgages available for a while now.
 
2012-07-27 09:03:37 AM  
No 40 year mortgages without 40 year jobs. You can either have an economy where you burn though employees like tissues, or an economy where people buy houses. Can't have both.

Pick one already.
 
2012-07-27 09:08:24 AM  
The monthly payment should be low enough to allow you to put the payment plus a lot more to pay down the principle up front.

//If your mortgage allows it. YMMV
 
2012-07-27 09:09:31 AM  
Slyly clever bit of wordplay, subby. +1
 
2012-07-27 09:16:21 AM  
Does it matter? I'm just going to knock down some walls, put up some fresh paint and flip it for like twice what I paid for it.

/that's how it works right?
 
2012-07-27 09:16:56 AM  
Well.. seeing as i have a 840 credit rating.. and am white.. and work 70 hours a week and BOA wont give me a refi because i try to be a stand up human... yeah i would be interested in any mortgage that isn't 7%..
 
2012-07-27 09:38:46 AM  
Ahh, nice to see that Americans still haven't learned their lesson. Bodes well for the future.
 
2012-07-27 09:44:31 AM  

LouDobbsAwaaaay: No 40 year mortgages without 40 year jobs. You can either have an economy where you burn though employees like tissues, or an economy where people buy houses. Can't have both.

Pick one already.


Pretty much this. My girlfriend and I have been talking about future plans, and the one worry we have about buying/building a house would be the fact that we'd be tied to one area for decades while we have no idea how stable our jobs will be in the future.

/that, and how do you move to another state and find both housing and jobs at the same time?
 
2012-07-27 09:46:39 AM  
If you need a 40 year mortgage to be able to afford it, you can't afford it.

I did 15, paid off in 7.
 
2012-07-27 09:50:08 AM  
Meh.

My mortgage and student loan balance are both fixed at 4% for the next 25 years. (The student loan's a bit better than that since I can deduct that interest... we don't usually make enough to bother itemizing to catch the mortgage deduction).

I have the cash (invested) to pay both off the mortgage and student loan today.

Why not do that then?

I'm making the conscious bet that I can make 4.01% average over the next 25 years with indexed 'meh' investing. It is a bet. One that history suggests I'm probably on the 'house' side of. But, a bet I could very well be wrong on. However if the broad market economy doesn't do that, we've got much, much larger macroeconomic problems than my piddly retirement concerns.

If I could pull a 40-year-note at 4% or less, I'd strongly consider it.
 
2012-07-27 09:50:11 AM  
Canada recently did away with 35 and 30 year mortgages. The longest you can get now is 25.

If I lived in Vancouver, Toronto or Montreal, I'd be pissed, because that effectively removes a sh*tload of buyers from the market.

40 year mortgages are common in cities where the median house price is north of $500,000.
 
2012-07-27 09:58:39 AM  

Rev.K: 40 year mortgages are common in cities where the median house price is north of $500,000.


Well maybe that's the problem. Prices wouldn't be so high if so many people weren't allowed to borrow at 30-40 years or interest only. Same goes for college costs.
 
2012-07-27 10:11:36 AM  
All this would do is artificially increase home prices.

Oh wait. That's what they've been trying to do since the bubble burst.
 
2012-07-27 10:15:46 AM  

DrewCurtisJr: Well maybe that's the problem. Prices wouldn't be so high if so many people weren't allowed to borrow at 30-40 years or interest only.


There's a lot more factors at play than simply how long people can amortize their mortgage.

Vancouver and Toronto are the two most expensive real estate cities in Canada due in large part to their strong economies, high wages, and desirable living locations.

This happens in the US too. New York City, Boston, San Francisco, all massively expensive in terms of housing. They are magnitudes above the national average and a typical 20% down 25 year mortgage is just not feasible for a very large number of potential home owners.

The Canadian example is very puzzling. While the US was in the grip of subprime, Canadian mortgages held fairly strong. I saw a recent statistic that only 0.35% of all mortgages in Canada are significantly behind on their payments and at risk of repossession.

Many cities in Canada have high real estate prices and citizens with 30, 35 and even 40 year mortgages, but the market was holding very stably in almost all areas. It appeared that whatever lending criteria most Canadian borrowers were subjected to was quite sufficient at avoiding a subprime crisis like in the US.

So with all that, why hamper markets in high-priced real estate cities by shutting out potential buyers who would have qualified for a 30 or 35 year mortgage?

I don't understand it.
 
2012-07-27 10:19:49 AM  

QFarker: If you need a 40 year mortgage to be able to afford it, you can't afford it.

I did 15, paid off in 7.


Vancouver median home price (2011): $678,000.

15 year mortgage @ 4% = $4602 monthly payment.


Completely unrealistic.
 
2012-07-27 10:28:05 AM  

Rev.K:
Completely unrealistic.


True, but what's the more unrealistic.....the idea that a mortgage should be payable in 15-25 years, or the idea that the median price should be 10x median family income?

Whatever level of mortgage amortization the government allows is going to impact home prices. If some buyers are locked out of the market now, that won't last, because eventually sellers have to sell, and the prices will stabilize and/or shrink.

We bought a place in 2009, and based on sales on my street, house prices are going up far faster than we could have saved while renting. That's not sustainable.
 
2012-07-27 10:29:38 AM  

Rev.K:
This happens in the US too. New York City, Boston, San Francisco, all massively expensive in terms of housing. They are magnitudes above the national average and a typical 20% down 25 year mortgage is just not feasible for a very large number of potential home owners.


This is true, but if events south of the border have taught us anything it's that letting people borrow more money doesn't make it easier to afford a house.
 
2012-07-27 10:43:34 AM  
We bought 2 months ago on a 30 year term with a 3.68% rate. The plan is to pay it off sooner, but we have the 30 years if we need it. And at that rate, I don't plan on us EVER refinancing. Even the mortage guy we used says he'd be shocked to ever hear from us about a refi.
 
2012-07-27 11:03:08 AM  
There I very little difference between a 40 year mortgage and a 100 year mortgage.
 
2012-07-27 11:18:48 AM  

Lawnchair: Meh.

My mortgage and student loan balance are both fixed at 4% for the next 25 years. (The student loan's a bit better than that since I can deduct that interest... we don't usually make enough to bother itemizing to catch the mortgage deduction).

I have the cash (invested) to pay both off the mortgage and student loan today.

Why not do that then?

I'm making the conscious bet that I can make 4.01% average over the next 25 years with indexed 'meh' investing. It is a bet. One that history suggests I'm probably on the 'house' side of. But, a bet I could very well be wrong on. However if the broad market economy doesn't do that, we've got much, much larger macroeconomic problems than my piddly retirement concerns.

If I could pull a 40-year-note at 4% or less, I'd strongly consider it.


Most people would be ecstatic if they could find an investment with a guaranteed 4% return. I'm not you, but if I were, I'd put whatever I had left over at the end of every month beyond a standard cushion into those.
 
2012-07-27 11:26:09 AM  

Lawnchair: Meh.

My mortgage and student loan balance are both fixed at 4% for the next 25 years. (The student loan's a bit better than that since I can deduct that interest... we don't usually make enough to bother itemizing to catch the mortgage deduction).

I have the cash (invested) to pay both off the mortgage and student loan today.

Why not do that then?

I'm making the conscious bet that I can make 4.01% average over the next 25 years with indexed 'meh' investing. It is a bet. One that history suggests I'm probably on the 'house' side of. But, a bet I could very well be wrong on. However if the broad market economy doesn't do that, we've got much, much larger macroeconomic problems than my piddly retirement concerns.

If I could pull a 40-year-note at 4% or less, I'd strongly consider it.


I wonder that myself. I just closed on a house last week for a 30 year at 3.5% and was trying to figure out how much extra I'll put towards the principle to pay it off in 15 or 20 years. Then I started wondering if it wouldn't be more beneficial to invest the money in stead. Since the tanking of the market I've been getting pretty consistant returns of 4-5% on my 401k. Seems that it would make more sense to up my 401k investments in stead. Of course that is banking that the market doesn't tank again and lose 40% of my 401k like it did a few years ago...
 
2012-07-27 11:30:13 AM  

YixilTesiphon: Most people would be ecstatic if they could find an investment with a guaranteed 4% return. I'm not you, but if I were, I'd put whatever I had left over at the end of every month beyond a standard cushion into those.


It's not guaranteed, but it's very likely to get at least that by investing in an index fund over a long period.
 
2012-07-27 11:51:18 AM  

thurstonxhowell: YixilTesiphon: Most people would be ecstatic if they could find an investment with a guaranteed 4% return. I'm not you, but if I were, I'd put whatever I had left over at the end of every month beyond a standard cushion into those.

It's not guaranteed, but it's very likely to get at least that by investing in an index fund over a long period.


BigMevy: Of course that is banking that the market doesn't tank again and lose 40% of my 401k like it did a few years ago...

 
2012-07-27 12:12:45 PM  

YixilTesiphon: Most people would be ecstatic if they could find an investment with a guaranteed 4% return. I'm not you, but if I were, I'd put whatever I had left over at the end of every month beyond a standard cushion into those.


I did say it was a bet. But, 4% isn't that much of a risk premium over 2.5-2.6% 30-year-treasuries. You'll find people willing to play the 'there'll be a bigger sucker' game with very liquid 30-year-T-notes right now at that price, but very few investors want to really lock down money for a long-haul at 4% fixed. I tend to be long-term optimistic, because under a long-term-pessimist viewpoint, the future is going to suck no matter how you arrange your money now.

Meanwhile, I have a cash cushion (whereas I couldn't take out a second-mortgage later if I were out of a job and needed cash) and the student loans even have a little bit of a life insurance aspect (if I die tomorrow, my wife isn't obligated to pay them off from our estate).
 
2012-07-27 12:36:29 PM  

Solchie: We bought 2 months ago on a 30 year term with a 3.68% rate. The plan is to pay it off sooner, but we have the 30 years if we need it. And at that rate, I don't plan on us EVER refinancing. Even the mortage guy we used says he'd be shocked to ever hear from us about a refi.


I'm in escrow right now and got 3.5% rate for 30 years fixed (with about 2k from lender for closing costs - I work for a bank and they cover 1.5 point for no cost to me). Only reason I'd refi is if i can qualify for a 15 year payment and get rid of MIP. FHA requires 5 years of MIP for 30 year loans even if LTV goes below 78% while that restriction is not on 15 year loans.
 
2012-07-27 12:39:43 PM  

Lawnchair: YixilTesiphon: Most people would be ecstatic if they could find an investment with a guaranteed 4% return. I'm not you, but if I were, I'd put whatever I had left over at the end of every month beyond a standard cushion into those.

I did say it was a bet. But, 4% isn't that much of a risk premium over 2.5-2.6% 30-year-treasuries. You'll find people willing to play the 'there'll be a bigger sucker' game with very liquid 30-year-T-notes right now at that price, but very few investors want to really lock down money for a long-haul at 4% fixed. I tend to be long-term optimistic, because under a long-term-pessimist viewpoint, the future is going to suck no matter how you arrange your money now.
Meanwhile, I have a cash cushion (whereas I couldn't take out a second-mortgage later if I were out of a job and needed cash) and the student loans even have a little bit of a life insurance aspect (if I die tomorrow, my wife isn't obligated to pay them off from our estate).


That's my point of view as well. If I listened to half my friends, and several acquaintences, I'd be hoarding gold, ammo, and getting a retreat in the mountains lined up with food and guns for the upcoming collapse of modern civilization.

I prefer to think things will turn around, and while all those folks are wondering how they'll fund their retirement, I'll be sitting on a beach somewhere with a Margarita and a young gold digger keeping me happy in hopes of being cut into the will.
 
2012-07-27 01:09:51 PM  

ddam: Solchie: We bought 2 months ago on a 30 year term with a 3.68% rate. The plan is to pay it off sooner, but we have the 30 years if we need it. And at that rate, I don't plan on us EVER refinancing. Even the mortage guy we used says he'd be shocked to ever hear from us about a refi.

I'm in escrow right now and got 3.5% rate for 30 years fixed (with about 2k from lender for closing costs - I work for a bank and they cover 1.5 point for no cost to me). Only reason I'd refi is if i can qualify for a 15 year payment and get rid of MIP. FHA requires 5 years of MIP for 30 year loans even if LTV goes below 78% while that restriction is not on 15 year loans.


30 year fixed rate conventional, and the sellers paid all closing costs. Our mortgage worked out to less per month than we were spending on rent for a very nice house in a better area than we rented in.
 
2012-07-27 01:41:26 PM  
You need to know how to play the math game. The smaller the payments, the more house you get. Don't go too crazy over budget with it, because here is where the math comes in. When you are flush, send in an extra amount on principal. If you get a raise or bonus or some kind of windfall, use that to prepay your principal. If you are tight on money, then drop back to the required payment. I've been prepaying an ARM for years now (got lucky on interest rates dropping) and my mortgage payment is lower than my car payment right now. I could send a check and pay the whole thing off, but it's a good idea to have liquid assets just in case.
 
2012-07-27 01:42:50 PM  

BigMevy: That's my point of view as well. If I listened to half my friends, and several acquaintences, I'd be hoarding gold, ammo, and getting a retreat in the mountains lined up with food and guns for the upcoming collapse of modern civilization.


Yeah. If I end up broke because of this thinking (that inflation will generally be 1.5-3% and I can generally get 1.5-3% risk premium over that), 99.5% of the country will be broke as a joke and we'll be welcoming the Marxist riots.

Besides, in a gold-grits-n-ammo situation, I'm not exactly a warlord by personality. I'd be looted of whatever I had stockpiled before the opening credits of "Mad Max" had rolled off the screen. So, again, might as well be optimistic.
 
2012-07-27 01:52:55 PM  

TheAlgebraist: This is true, but if events south of the border have taught us anything it's that letting people borrow more money doesn't make it easier to afford a house.


It's a balance.

You have to balance the requirements for responsible lending with the desire to keep the market moving.

You could have near-zero mortgage defaults if you required a 50% downpayment and amortized the remainder over no more than 20 years. But that would bring just about every real estate market in Canada and the US to an absolute screeching halt.

On the other side of the coin, no-credit check, no-downpayment, 40 year mortgages with attractive ARMs are sure to have sales going through the roof, at least in the short term...but we all know how that works out a few years down the road.

It's about getting the right mix.
 
2012-07-27 02:34:30 PM  

Rev.K: QFarker: If you need a 40 year mortgage to be able to afford it, you can't afford it.
I did 15, paid off in 7.

Vancouver median home price (2011): $678,000.
15 year mortgage @ 4% = $4602 monthly payment.
Completely unrealistic.


Or you move a ~hundred miles south, and live near one of the transit lines to Seattle.

Bought a nice house on 1/4 acre with a shop for $135,000 ($100,000 loan)
15-year mortgage @ 3.1% = $836 a month. 2/3rds of which go towards principal on day one.
Amazingly realistic.
 
2012-07-27 02:43:42 PM  
Refi'd my (4 year old) 30 down to 20. with the new rate, we pay the same but dropped off 6 years of payments. Not many people in the NYC area can buy-in with less than a 30 on a first home.
 
2012-07-27 05:09:35 PM  

Icetech3: Well.. seeing as i have a 840 credit rating.. and am white.. and work 70 hours a week and BOA wont give me a refi because i try to be a stand up human... yeah i would be interested in any mortgage that isn't 7%..


My score was 788 and they were bending over backwards for me. I ended up going with a local mortgage broker though because she gave me a better deal that BOA couldn't match. 3.125% over 15 years and I think about $2.5K in closing costs. BOA was willing to match the rate but the closing costs were $1.5K more (which is retarded since they're the bank that owns the mortgage).

You should shop around for some mortgage brokers in your area.

/hopefully I'll have it paid off in at least 5 years
 
2012-07-27 10:06:00 PM  
b>Rev.K: This happens in the US too. New York City, Boston, San Francisco, all massively expensive in terms of housing. They are magnitudes above the national average and a typical 20% down 25 year mortgage is just not feasible for a very large number of potential home owners.

Bingo, for lots of people, the term or payment is not the blocker. Hell, with the rates today, I'd pay far less in a monthly mortgage payment than I pay in rent today. The thing that makes home buying prohibitive is the down payment. If I wanted to buy a $500,000 "starter" house (yea, welcome to the SF Bay area), I'd have to come up with $100,000 cash. WTF has that kind of coin just laying around?

So, people just rent forever.
 
2012-07-28 12:49:26 AM  
We bought 3 years ago and have been throwing an additional $400 or more a month (over half the payment) at the principal - 30 year 5%fixed is already over 20% paid off. With >1% rates on savings I don't see how this is a bad idea. With the market as uncertain as it is, we can only bear to have about 20% of our savings in it.
 
2012-07-28 09:25:29 AM  

Lawnchair: Meh.

My mortgage and student loan balance are both fixed at 4% for the next 25 years. (The student loan's a bit better than that since I can deduct that interest... we don't usually make enough to bother itemizing to catch the mortgage deduction).

I have the cash (invested) to pay both off the mortgage and student loan today.

Why not do that then?

I'm making the conscious bet that I can make 4.01% average over the next 25 years with indexed 'meh' investing. It is a bet. One that history suggests I'm probably on the 'house' side of. But, a bet I could very well be wrong on. However if the broad market economy doesn't do that, we've got much, much larger macroeconomic problems than my piddly retirement concerns.

If I could pull a 40-year-note at 4% or less, I'd strongly consider it.


If you had no student loans and your house was paid for, would you take out a loan for school and mortgage the house to play the market? That is essentially what you're doing. It isn't as simple as saying that your debt is at 3% and you can make 4% on investing since having debt involves risk. Inflation is 2-4% each year to begin with.

I've never met a single person that ever said, "gee, I really wish I hadn't paid my house/Car/Loans off early. I really miss that monthly payment"
 
2012-07-28 09:58:43 AM  

Rev.K: If I lived in Vancouver, Toronto or Montreal, I'd be pissed, because that effectively removes a sh*tload of buyers from the market.


If you *owned* in those areas, more like. If you're looking to buy, it's mixed benefits.

40 year mortgages are common in cities where the median house price is north of $500,000.

And the only reason they can go for those prices is due to such loans, but as the guy mentioned, it's only 'saving' you 12% of your monthly payment, or $60/month per $100k borrowed @4%, at a cost of having to pay for 1/3rd(33%) longer. You're darn close to an 'interest only' loan at that point.

QFarker: If you need a 40 year mortgage to be able to afford it, you can't afford it.

I did 15, paid off in 7.


With the interest rate I'm paying, especially when you consider that my interest is deductible, it's not worth it for me to make extra payments - extra money is going into investments instead.

If I sold all that off and put it towards the house, I'd have like a year of payments left. As a bonus, if I became unemployed I'd have quite a while before I had to worry about not being able to make living expenses.
 
2012-07-28 10:30:02 AM  

BigMevy: Since the tanking of the market I've been getting pretty consistant returns of 4-5% on my 401k.


Isn't "since the tanking of the market" probably not the best measure to use, since it involves a "bounce-back" recovery that probably exhibits a faster growth rate than normal?

Serious question.
 
2012-07-28 10:39:27 AM  

Yankees Team Gynecologist: BigMevy: Since the tanking of the market I've been getting pretty consistant returns of 4-5% on my 401k.

Isn't "since the tanking of the market" probably not the best measure to use, since it involves a "bounce-back" recovery that probably exhibits a faster growth rate than normal?

Serious question.


Historically 5% is around the average expected for diversified, fairly conservative investment portfolios.
 
2012-07-28 10:43:39 AM  

Yankees Team Gynecologist: BigMevy: Since the tanking of the market I've been getting pretty consistant returns of 4-5% on my 401k.

Isn't "since the tanking of the market" probably not the best measure to use, since it involves a "bounce-back" recovery that probably exhibits a faster growth rate than normal?

Serious question.


Good point, and you may be right. I'm not positive what my return numbers and dates are, I'd have to know when for certain the recovery period started. I had to transfer my 401k from one company to another around that time, so that's what I was going by.
 
2012-07-28 10:51:19 AM  

Firethorn: With the interest rate I'm paying, especially when you consider that my interest is deductible, it's not worth it for me to make extra payments - extra money is going into investments instead.


If you already owned your house outright, would you take out a mortgage against it just to make investments?

Rates are low, but by design they're still usually higher than what you could safely get elsewhere over the same term (safely being the key word). Otherwise the bank wouldn't do it. Obviously you should accumulate a healthy savings cushion, and it makes sense to invest in personal things, like tuition or starting your dream business, before you pay down early. But for everyone who claims to get a better return elsewhere, there are probably two who don't.
 
2012-07-28 10:56:41 AM  

Firethorn: Historically 5% is around the average expected for diversified, fairly conservative investment portfolios.


I see that, but we're kind of in a time where historical returns may not mean much, especially 1996-present.

That said, a lot of the hesitation is probably from being overly cautious and seeing decades of continued solid growth as at best a coin-toss, when in fact it's probably better than that. Major valuable developments like computers and the internet did create real growth over the last 30 years (bubbles aside), and things like that will probably continue.

BigMevy: Good point, and you may be right. I'm not positive what my return numbers and dates are, I'd have to know when for certain the recovery period started. I had to transfer my 401k from one company to another around that time, so that's what I was going by.


Yeah, I didn't mean to nitpick your point, I asked because I was doing the same thing the other day (measuring returns on shiat I bought shortly after the crash), but then it occurred to me that maybe that won't be typical going forward.
 
2012-07-28 12:13:13 PM  
presuming most people who have the potential to buy a house are college educated
have to take out a loan (meaning somewhere between 50-100k loan out)
and have to be mobile and switch careers a few times (presume switch careers 5 times, work life being between ages 20-65, on average they might move once every nine years)

where will the people in this market be able to buy a house by?
 
2012-07-28 01:49:54 PM  
That's what we need, another housing bubble. Screw you WSJ.
 
2012-07-28 03:10:17 PM  
I recently bought a house. I had to go FHA because the loaning agencies told me that despite having a mortgage on a home for over a decade my refinance of said mortgage last year reset the clock on what the brokers were referring to as "long term credit history". Therefore, they said I only really had about a year of meaningful credit history. Also I had a 20 dollar claim against me by a clinic I went to two years ago who told me, despite my telling them I was pretty sure I did have a copay for the appointment that I owed them nothing. Never once missed a payment on the mortgage I'd held.

2.85% with FHA.
5.5% with conventional prior to buying down points. I told them that's pretty farked up, since one of the brokers, who I'd used for my refinance on my home, had given me under 4% on the refinance. Apparently my credit was better then because I had long term credit. Plus I make a lot more now than I did then and had documentation that my old home was being rented out for more than expenses.

680 credit rating. I know that's not the highest of all time, but I had more trouble getting this loan than I did my first loan back when I was waiting tables fresh out of high school and as far as the bank knew I was paying just over 2 weeks of my pay to cover the monthly payment at the time (rented out a room off the books :P ). Yes, I'm a slacker and I need to start playing around with credit cards. And, I suppose, pay off that 20 bucks - which I really don't want to on principle, but apparently my credit rating will be unable to go up as long as the debt is on there, and can only go down (so say these brokers).

Meanwhile chase is sitting on my buddy's home which is going through shortsale. In some of the documents they sent him it shows they would accept 72,xxx for the home. Someone offered 73k over a year ago and they passed. The real estate agent turned the heat off during the winter and the pipes froze.

Good job lenders. Don't give people loans they easily qualify for (my mortgage + homeowners insurance + taxes comes to a weeks wages on this home, and that's with a 15 year), and then turn around and fark everyone else over. This is what we bailed them out for, apparently.

Meanwhile I get to be told by idiots who suck the cock of of the wealthy that wall street and the banking industry make all the right moves because if they didn't then the glorious leader free market would replace them with someone who would.

Strange times. I really hope government oversight of credit ratings at least changes bullshiat like me having a tiny ass claim held against me that I don't even know about. I can afford to pay for unlimited access to my credit reports, but I just farking hate paying those scumbags for such things. I guess I'm cutting off my nose to spite my face on this one. :/
 
2012-07-28 03:45:20 PM  

o5iiawah: If you had no student loans and your house was paid for, would you take out a loan for school and mortgage the house to play the market? That is essentially what you're doing. It isn't as simple as saying that your debt is at 3% and you can make 4% on investing since having debt involves risk. Inflation is 2-4% each year to begin with.


Yes. Yes I would. If I could get 4% or less and 30-year-repayment-table? Yes. I'd pull brokerage margin loans and back up the truck on long investments at that kind of offer. As would Warren Buffett or Mitt Romney (both of whom invest with lots of leverage when it makes sense). I'm not buying 'more house than I need' to increase my debt load or taking out additional schooling (you're still overspending in those cases), but yes. I even took some cash out on refinancing (getting back to 80% LTV) and invested it. As I said, I'm a (very mildly) betting man, and I'm betting on optimism long-term.

And, keeping debt (living on margin) IS betting ON inflation. Inflation suits my plan better than the 'pay off the house and student loans now' plan. I'm betting that my $636 a month mortgage+interest payment will be paid back in the future with inflated (worth less) money. In 20 years, it might be a quarter of regional average rent, not half. "Get out of all debt first" is betting on deflation. Which is possible. But, every capitalist wants growth, and so inflation has been the policy of the Fed for the last 80 years. I'm on the house side of that bet.
 
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