Saturday, September 18, 2010

15 year vs. 30 year mortgage

NPR's marketplace recently had a clip talking about how mortgages used to be 15 or 20 years and the great depression changed it.
The rationale behind this was ofcourse make house affordable, the catch - pay more interest over long term.
With people refinancing or moving this have changed recently but one is likely to end up in some other 30 year mortgage.
Hypothetically if someone buys a house at 35, and then switches to another one at 45 then the0 move could reset the 30 years till 75 past retirement age.

The goal of retirement at typically 70 is be debt free. If that's the case can someone who can afford the mortgage at 45 still be afford when 71? Who's responsbility is it to pay off the mortgage by 70 or retirement age?

One of the answers before the housing collapse would have been that in 10 years someone could have made some money in house price increase and then earn some equity in the next house. With the housing collapse this might make easier for some people who bought their houses way before the collapse and now get a good bargain for their new dream.



jj-momscashblog said...

Hi Tapan, Great post, really makes one have to think. I think at 75 "people" like you mentioned are ready for retirement...I don't see the senior population being able to keep up with the higher mortgage. As it is now we hear of many of the elderly or even the younger age group (55ish)unable to keep their homes not only because of the mortgages but I know in my area our property taxes are hitting some people that have had their homes for many years and passed down from generation to generation and are finding that they are selling off acres of land in order to pay either the mortgages,property taxes, and then now of course health care has forced people to sell their homes and down size. Sorry for the long winded comment. BTW it's good to see you back blogging,we've missed you! jj