A new twist on the Carrying a Mortgage debate

[Finance Dave]

Quote:

Originally Posted by samclem I sure don't know, but: 1) I can't believe they'll go down from my present 5% mortgage. That's the lowest they've been in decades. 2) They got that low because a bunch of cash was pumped into the MBS market. Folks are a lot less willing to put their money into these now. 3) Unless the government pumps a bunch of bailout money into the system (making it available use for commercial paper loans), businesses will need to find a place to get their money. That source could very well be--banks. If banks have greater demand for their pool of available lending cash, I'd guess they'll charge more for it. And, if they can charge more for it--maybe they'd be willing to sweeten the deal for me to give them a wad of cash and pay off my low-rate mortgage. But, these are the speculations of a rank amateur.

thanks for the response. I think rates will go up, but I won't make it a premise of my investment strategy. But the other thing that could happen is this....

Let's say the American people realize "en mass" that they have been borrowing and spending too much. Maybe many of us buy smaller homes, less expensive cars, and start increasing savings. If that happens, the banks will need to incentivize people to borrow...and would do so by lowering rates.

Could happen...who knows.

[Finance Dave]

Quote:

Originally Posted by brewer12345 I personally think that they do not give a flying donut about 15 year mortgage rates. Most of these borrowers are very solid credits and the loans amortize rapidly enought that these loans are essntially never a problem. What the gummint really cares about is 30 year mortgage rates because that is where all the juice is for the great mass of borrowers. The 30 year borrower is more stretached and consequently relatively small changes in rates and monthly payments make a much bigger difference on the margin. Having said that, the 15 is almost always priced at less than the 30, so a side benefit of a reduction in 30 year rates could be a knock-down of 15 year rates. I somehow doubt I will ever do better than the 4.99% rate on my 15 year (now down to 10) note, but you can bet that I would jump on it if the opportunity arose.

Agree. We have a 15 year loan, and only 5 more years until paid off.

I wonder (believe me, I do not want this to happen) why the mortgate industry has not come out with 40 year loans to get people into bigger houses. It's no different than the 96 month auto loans. I am a car enthusiast and shake my head when I meet people at car shows that tell me how they bought their car (remember, these are "show" cars, not everyday necessity cars) on an 8 year loan.

[laurence]

I've seen 40 year loans all over the place. But they don't get a lot of traction since they only reduce the payment by a tiny amount % wise.

[cute fuzzy bunny]

There have been plenty of 40 year loans available.

I posted some years ago about a 40 year adjustable rate interest only product specifically designed to get people with small incomes into homes they couldnt otherwise afford.