"It's deja-vu..all over again."
- Yogi Berra
When you're on the wrong side of 40, you possess the luxury of having seen things before. In many cases, it may be the third or fourth time you see them. The recent flurry of "responsible lending posts", here on Active Rain, is no different than the criticism levied at the banking industry in the early 90's.
The virtues of an amortized loan can be extolled like some sage nostalgic advice. The truth is that amortized loans are fantastic...if you are a perpetually poor person. Let me explain what I mean. When I say "poor", I mean undisciplined. This means that you generally can not be trusted with determining your own destiny. It means that you won't establish a side investment account to invest the difference between a fully amortizing and alternate amortization schedule. If this is an apt description of your savings and investment habits, go with a 30 year fixed rate, fully amortizing loan. Better yet, go with a 15 year, fully amortizing loan. Work really hard to accelerate the amortization on your home with bi-weekly payment programs or money merge accounts.
Expect, however, to be perpetually poor in retirement. Oh, you'll have a fully paid off house but you'll be broke. Does that sound doubtful? Ask anyone who's been used their primary residence as their retirement plan (you know who I'm talking about). They've probably rationalized their Depression Economics thinking by selling the homestead and retiring to a more "retirement-friendly locale" (READ: cheaper).
Is that REALLY your dream in life? To pay off an asset you can sell so that you can trade DOWN in retirement? Maybe you can move to a far-off country to live like a king in retirement! Of course, you'll complain that you never see your grandchildren because it costs a small fortune just to visit you.
That's not what the willing wealthy do. The willing wealthy ...READ THE REST AT www.MortgageRatesReport.com
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