Yep, I predict you will start to recognize the idea of these borrowing instruments. This recent death defying walk on the financial cliff was not enough to encourage financial self reliance and self discipline. NAH, expect the next start for another equity bubble to be justified by the attractive monthly stretch marks of lower payments, overlooking of course the eye popping interest on these loans. To paraphrase from Lew Sichelman, a nationally syndicated columnist who has been covering the housing market for more than 40 in a recent column when posed this question.
“a 40-year loan does have some advantages, the main one being that the payment is much easier on the pocketbook. On a $200,000 loan at 4%, the monthly payment over 30 years would be $954.83. But over 40 years, the payment would drop to $835.88, a savings of $118.95 per month.
The main drawback, of course, is that over 40 years, you’d pay a whale of a lot more interest. The total interest outlay on the 30-year loan above is $143,739.01. But over 40 years, the total interest cost jumps to $201,220.03. That’s a difference of $57,481.02, which is a big price to pay for something you probably can’t afford anyway if you need to amortize the payments over four decades so you can handle the monthly payment.
Just as we slowly accepted the auto financed out beyound the 24 or 36 months to the 60 and 72month range to handle the montly payment expect to see these instruments appear as the lenders begin anew with age old slogans of “Security, Gauranty Security, Financial Savings, Retirement Planning. Think of it a $150 car payments, heck $500 a month for the average family home. Roll that puppy out, forever gone is the thought of increase equity for savings into the future. That American trait is gone and the price to pay to kick start the old American Dream machine. It works everytime, we can’t help ourselves.