4 ms·

It's funny that it was sold as "affordability". Is it really more affordable to have a mortgage that lasts twice as long? Can we really consider interest only t

It's funny that it was sold as "affordability". Is it really more affordable to have a mortgage that lasts twice as long? Can we really consider interest only to be home ownership? You don't own that home, the banks do, Maverick!

brabel 4y ago
If you invest your money on anything that gives , say, 5% yearly returns on your money, instead of paying off your mortgage, which used to be at less than 2% (but is not getting beyone 4%), you're just better off. Say you start with a 10,000 mortgage, and your payment per year is 500, not including interest. By the end of the year, you'll have a 9,500 mortgage left. If you just invested the 500 and only paid interest on the mortgage (which was common in Sweden until a few years ago), you'll still have a 10,000 mortgage, but you have 525 in your pocket. You could now go and pay off some mortgage, resulting in you having now only 9,475 left (i.e. you're better off)... but why would you do that? Just keep investing that money!
- xyzzy123 4y ago
  Risk, I think. For most people this is a higher risk strategy long term than just "paying the mortgage". Depending on your life stage and overall position it can make sense but it's not for everyone.
  - satvikpendem 4y ago
    It's literally lower risk to invest if your average investment return rate is lower than your mortgage rate. It's likely more of a psychological opposition, where people want to feel more secure with a fully paid off mortgage, even if it does lose them potentially millions in the course of their lifetime.
    - Shaanie 4y ago
      It's impossible to average 5% return risk-free (if mortgage interest is 2% or whatever). Saying "as long as your average return is higher than your mortgage interest then it's lower risk" is a ridiculous statement, the entire reason you're getting a better return is because you're taking on more risk.
  - havblue 4y ago
    A lot of the talk about how great mortgages were has the benefit of hindsight. Yes, if you have steady income, it would have been better to get a larger mortgage a couple years ago when money was cheaper (assuming you bought in an area that appreciates, assuming maintenance isn't crazy, assuming you aren't overly leveraged). You have to make several qualifying statements.

brabel 4y ago

If you invest your money on anything that gives , say, 5% yearly returns on your money, instead of paying off your mortgage, which used to be at less than 2% (but is not getting beyone 4%), you're just better off. Say you start with a 10,000 mortgage, and your payment per year is 500, not including interest. By the end of the year, you'll have a 9,500 mortgage left. If you just invested the 500 and only paid interest on the mortgage (which was common in Sweden until a few years ago), you'll still have a 10,000 mortgage, but you have 525 in your pocket. You could now go and pay off some mortgage, resulting in you having now only 9,475 left (i.e. you're better off)... but why would you do that? Just keep investing that money!

xyzzy123 4y ago
Risk, I think. For most people this is a higher risk strategy long term than just "paying the mortgage". Depending on your life stage and overall position it can make sense but it's not for everyone.
- satvikpendem 4y ago
  It's literally lower risk to invest if your average investment return rate is lower than your mortgage rate. It's likely more of a psychological opposition, where people want to feel more secure with a fully paid off mortgage, even if it does lose them potentially millions in the course of their lifetime.
  - Shaanie 4y ago
    It's impossible to average 5% return risk-free (if mortgage interest is 2% or whatever). Saying "as long as your average return is higher than your mortgage interest then it's lower risk" is a ridiculous statement, the entire reason you're getting a better return is because you're taking on more risk.
- havblue 4y ago
  A lot of the talk about how great mortgages were has the benefit of hindsight. Yes, if you have steady income, it would have been better to get a larger mortgage a couple years ago when money was cheaper (assuming you bought in an area that appreciates, assuming maintenance isn't crazy, assuming you aren't overly leveraged). You have to make several qualifying statements.