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The End of the Bull Market in Real Estate is Near...
05-13-2019, 08:40 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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The End of the Bull Market in Real Estate is Near...
From an e-mail solicitation an agent friend received...
Extra-Extra, Read All About This... Exciting News!
The 40-year mortgage is back
Are your clients struggling to get into the housing market?
Can’t get their dream home because the monthly payment is just a little out of their reach for the short term?
Now they have an option to afford the home they want and have a lower monthly payment!!!
Purchase or Refinance
10 years of interest only payments
Year 11, it converts to principle and interest
Rate is determined upfront
Minimum FICO 600
Minimum Down payment 10%
Self-employed...Don’t show enough income on taxes? It's ok too!!!
More Info Please!
According to National Association of Realtors (NAR)
The average length of time people stay in their home, is 10 yrs.
Why not try and save during that time?
Shades of 2006...
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05-13-2019, 08:52 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Apr 2016
Location: Dutchess County
Posts: 1,599
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Quote:
Originally Posted by Another Reader
Shades of 2006...
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Let the good times roll
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05-13-2019, 09:04 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Nov 2015
Posts: 2,690
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People always say never forget, that is until there's a couple of bucks to be made by forgetting.
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05-14-2019, 05:14 AM
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#4
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gone traveling
Join Date: Jan 2019
Location: NW Ohio
Posts: 1,156
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WOW, 10 years of interest only payments ? That will ruin some young lives, and cause another 2008 style collapse at some point.
Schools need to teach personal finance to prevent scams like this from getting big.
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05-14-2019, 05:24 AM
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#5
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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You can tell it's good by how many exclamation marks they use!!!!!
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05-14-2019, 05:24 AM
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#6
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gone traveling
Join Date: Mar 2015
Posts: 3,508
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Quote:
Originally Posted by ckelly78z
WOW, 10 years of interest only payments ? That will ruin some young lives, and cause another 2008 style collapse at some point.
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40 year mortgages with 10 years of interest only payments aren't going to be the cause of any collapse. It would take a lot more than that.
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05-14-2019, 05:55 AM
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#7
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Full time employment: Posting here.
Join Date: Dec 2014
Posts: 669
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Just saw the movie The Big Short. Have anyone seen some nice Credit Default Swaps recently?
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05-14-2019, 06:59 AM
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#8
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Recycles dryer sheets
Join Date: Dec 2016
Posts: 200
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As soon as I read “10 years of interest only” I shuddered.
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05-14-2019, 07:29 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,304
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Quote:
Originally Posted by Carol1862
As soon as I read “10 years of interest only” I shuddered.
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I agree. Way more damaging than the 40 yr term.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
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05-14-2019, 07:46 AM
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#10
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Recycles dryer sheets
Join Date: Mar 2019
Location: Pearland
Posts: 100
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Quote:
Originally Posted by joeea
40 year mortgages with 10 years of interest only payments aren't going to be the cause of any collapse. It would take a lot more than that.
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True, but it is a sign of a certain mindset that causes people to walk into that kind of financial deal. It is that renewed mindset that makes me think the OP is on the right track.
Let's face it - most people on this forum are wise enough to at least see the financial cliff and try to hang glide from it instead of drop off it.
__________________
Retired 2015. Jesus follower. Author, Husband, Dad, Futurist, Dreamer.
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05-14-2019, 08:13 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Aug 2005
Location: Crownsville
Posts: 3,696
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I never understood the allure of a 40 year mortgage, since in the early years, your payment is mostly interest anyway. It's not going to reduce your overall payment much, versus a 30 year.
For instance, I just refinanced my place to a 30 year fixed at 3.875%. $472,500. Principal and interest is $2221.87/mo.
A 40 year, with everything else being the same, would be $1938.19/mo, a savings of around $284 per month. That seems pretty inconsequential to me.
However, a 40 year, where it's interest-only for the first 10 years, and then it basically goes to a 30 year? Well, with the same terms (3.875%, 472.5K), the interest payment on that is $1525.78. A savings of $696.09/mo.
Now, I wouldn't want to do something like that, because I'd hate the fact I wasn't building equity. But, I could see some people being seduced into that. Especially, if they think real estate prices will rise in the near future, so they'll build equity that way.
However, I have the feeling that a 40-year mortgage, or one of these 10/30 or whatever they call it things, would have a higher interest rate than a straight-up 30 year?
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05-14-2019, 08:58 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jan 2013
Posts: 3,405
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Not likely to be conventional mortgages... Someone is looking to make these and then sell them somewhere. MBS, anyone?
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05-14-2019, 09:16 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,134
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One thing I have learned from consumer information services over the years is that the same scams come and go, seeking new victims every time they return. They may be dressed up in different clothing and with new 50¢ words to describe them, but lipstick on a pig..........
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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05-14-2019, 09:36 AM
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#14
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gone traveling
Join Date: Dec 2018
Posts: 1,196
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+1. / reminds me of the junk mail I get with companies promoting too good to be true agenda.
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05-14-2019, 10:06 AM
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#15
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Full time employment: Posting here.
Join Date: Apr 2011
Location: Castro Valley
Posts: 788
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I can see the 40 year mortgage having an application. The difference between the 30 yr and 40 yr can provide an additional $50K in purchasing power. Here in the SF Bay Area, that could be the difference needed to get your first home. While I hate to 10/40, it could have an application too. It could be the difference maker for some people.
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05-14-2019, 10:14 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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One sign is when a critical mass of buyers define "affordable" in terms of their initial monthly payment, and little else.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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05-14-2019, 10:20 AM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 16,972
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Quote:
Originally Posted by Andre1969
....
For instance, I just refinanced my place to a 30 year fixed at 3.875%. $472,500. Principal and interest is $2221.87/mo.
....
.... I'd hate the fact I wasn't building equity. But, I could see some people being seduced into that. Especially, if they think real estate prices will rise in the near future, so they'll build equity that way.
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Why would you do that if you hate building equity ?
Previously, I've done the opposite, and go for a shorter term, so that the place is paid off faster.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
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05-14-2019, 11:17 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Aug 2005
Location: Crownsville
Posts: 3,696
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Quote:
Originally Posted by Sunset
Why would you do that if you hate building equity ?
Previously, I've done the opposite, and go for a shorter term, so that the place is paid off faster.
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I, personally, just refinanced because I had just bought the place in September of last year, and was at 4.75%. I was only 7 months into the mortgage. This refinance dropped my monthly payment by around $250.
And what I said was was that, in reference to that 10/40 mortgage, I wouldn't like it myself, because of the fact it WOULD NOT build any equity in those first ten years. But, I could see that attraction, for others, who are only focusing on the lower payment.
At 3.875%, I'm not in a huge hurry to get the place paid off. But at the same time, I don't want that big balance hanging over me forever!
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05-14-2019, 12:16 PM
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#19
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Full time employment: Posting here.
Join Date: Oct 2018
Posts: 530
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This is a great loan for the lenders. Much like payday loans, and other legal loan sharks. Notice how a FICO score of only 600 is required. At any level this loan is a bad idea for the borrower.
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05-14-2019, 12:19 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Jun 2010
Location: Palma de Mallorca
Posts: 1,419
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I remember an earlier housing downtown in the UK, when a commentator said (approx) "The problem is that we have a 10-year cycle and people have 8-year memories".
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