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09 January 2008

Forty Year Mortgages

Take a few minutes... sit down and do the math...
Suppose you buy a $375,000 house, put down $75,000 and take out a $300,000 mortgage at 5.99 per cent (the lowest current five-year rate).

You'll pay almost $784,000 with a 40-year mortgage, compared with $575,000 on a 25-year mortgage (assuming the rate stays the same).

That's more than $200,000 in extra costs – and for what?
The part that boggles my mind is... you take out a 40 year mortgage at age 25... you don't pay it off until you're ready to retire. That's an awful long time to be lining somebody else's pockets.

And for what?
By extending the payback period, you'll save only $285 in your monthly payments.

You could get the same bang for the buck – about $9 a day – by bringing your own lunch to work or taking public transit instead of your car.
That's really what's dragging society to its knees... it's all about the line of least resistance.

Whatever that ends up costing.

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