Personally, I like 40-year mortgages more than 30s. It would lower your payment amount and increase your cash flow.
It slows your leak of cash into equity.
That’s good, because financial freedom is achieved when money flows the opposite direction – equity into cash flow.
Stated another way:
- Debt-free aspirant: Cash Flow —> Equity
- Financially-free aspirant: Equity —> Cash Flow
Lower payment amounts also reduce one’s DTI for future purchases.
For one class of borrower, lower 40-year payments would make housing more affordable, further driving already-meteoric demand.
From the altruistic perspective, humans need shelter. Housing needs more help on the supply side, not the demand side. This won’t help.
40-year loans allow property prices to rise further because more borrowers can afford lower payments, heightening demand and pushing purchase prices ever higher.
This would actually hurt the wannabe first-time homebuyer in another way.
Because as property prices rise, they must first accrete a proportionally larger down payment lump to ever benefit from that s-t-r-e-t-c-h-e-d amortization and these ultra-low mortgage rates.
There’s a higher bar to clear before the low payment benefit can kick in.
Your tenant often cannot buy a home because they can’t form a down payment. It’s like a target that keeps moving farther away from them.
From the material in the video, you can see precisely why I’m in favor of a 40-year mortgage.
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