40 year mortgages

[myrdale]

I'll play the other side here for a minute.

There is well-intentioned advice here to only buy what you can afford, right now. And then, there is strategic risk-taking which could be aided by something like a 40 year mortgage, which would let someone finance something of greater value now and in the future. See, that's where I think conservative finance falls on its face. There's no acknowledgement that someone's financial trajectory may change significantly for the positive, or that the loan could be refinanced into something much smaller like a 20 year. Now, to ride out a 40 year mortgage to full term...I can't find a lot of sense in that. A lot of people do this wrong and underestimate their risk and recovery strategies, as evidenced by the mortgage collapse of the mid-late 2000's. But that doesn't mean there should be a blanket rule that "nobody" should ever take a 40 year mortgage.

I fully agree. When I purchased my house, I chose the 30 year mortgage over the 15 year mortgage for the simple fact of having a lower monthly payment, with the full intention of paying it off well ahead of schedule. Having the reduced monthly payment for me was a measure of risk mitigation. If I had lost my job, it would have been easier to maintain the lower payment if my next job didn't match my original salary.

And from that point, I proceeded to make double payments as often as I could. In about 5 years, the mortgage went from $101k to $50k. At that point I refinanced it for another 30 year, and began making quadruple payments (still paying the same amount as I had been per month), and 4 years later it was payed off, 9 years total.

I have not calculated if I would have been better to have done the 15 year mortgage alone, and paid on the same schedule. If I get a chance, I'll look at it.

[disneysteve]

I don't have a good idea of what a maximum percent of your net worth should be tied into luxury items. 10 to 25%?

Dave Ramsey says you shouldn’t have vehicles (cars, RVs, boats, ATVs, etc.) worth more than 50% of your annual income.

[AllyStreelman]

I believe the goal is to make mortgage payments more manageable, which, in HCOL areas, may be helpful to some. Additionally, if payments are lower, it may free up more cash to invest. However, it could also signal someone is taking on too much debt.

[bjl584]

How about 20 year boat and camper loans?
Go to a boat show, in big print they always show the monthly payment based on 240 months. The price is in small print.

I've seen this at RV shows. Campers are financed like houses but they depreciate like cars

[Petunia 100]

I've seen this at RV shows. Campers are financed like houses but they depreciate like cars

The original loan on my 5th wheel was a 15-year loan. A 20-year loan is not uncommon at all, particularly on the more expensive units.

[LivingAlmostLarge]

I just went to a boat show last night and OMG it cost more than my house some of these boats. But I guess if you are going to live on it.