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417

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[–] • 3 pts

Considering the declining value of the dollar, it's probably cheaper to take the 40 year loan, then invest your money in commodities so that when the Dollar does eventually crash you can sell the commodities and pay off the loan in one payment.

[–] • 1 pt

You're not wrong. I'm paying off my house slower than initially planned because money printer go brrr has made my equity investments too attractive to justify ignoring or selling off to pay off the mortgage immediately.

[–] • 1 pt

Get a fixed interest loan and you got yourself a strategy. Nice econ insight.

[–] [deleted] • 0 pt

Dollar crash means deflation spiral or runaway inflation?

[–] • 1 pt

Runaway inflation eventually. If you are invested in commodities before that time the value of them will go up to meet the relative value of the dollar. The Mortgage however will remain at the dollar amount contracted. So you can sell the commodities at the inflated price and pay off the mortgage at the fixed(ish) amount that was originally negotiated.

[–] [deleted] • 1 pt

Oh I see, so the commodity will be more stable than the currency during inflationary period. So the value of the dollar goes down, the value of the commodity stays the same but the dollar value of commodity will go up by approximately the same amount as the inflation.

Wouldn't real estate itself be a good place to put your money too, as defense against inflation?

[–] [deleted] • 2 pts

I was always wary of the 30 year term... If I was a lender I would never lend on a term so long, no matter the borrower or amount. Who knows what will happen in 30 years? We can't even predict major world-changing events in the next 5 years.

The long-term loan is increasingly just a way to get people to buy things they can't afford. People get brainwashed into thinking about monthly payments instead of total cost. The brainwashing part is thinking that is somehow a normal thing to do.

[–] • 1 pt

From a consumer perspective I'm also leery of a 30 year term. I mean, it's one thing if you choose a 30 year term for flexibility and then pay it off early (e.g. in <10 years while earning the delta on higher returning equity investments), but if you need 30 years to pay off a home you shouldn't buy one that expensive.

[–] [deleted] • 1 pt

That’s insane. That means you can’t afford it. I’m seeing 84 month car loans now too.

[–] • 1 pt

Heck, if you need a car loan...you need a cheaper car. Heck, buy two beaters and get liability insurance only. You'll learn to fix your own car and save a fortune.

[–] [deleted] • 1 pt

You speak truth. The cost of your car should be determined by what you can afford in cash, not some 84 month bull.

[–] • 0 pt

Compounding interest is a funny thing over the long-term. A 30-year fixed at 2.5% has you paying $42,244 in interest per $100,000 borrowed. A 40-year fixed at the same rate would have you pay $58,294 in interest ... 38% more! The only benefit you get is reducing your payment by $65 a month per $100,000.

[–] • 0 pt

And if you really need to save $65/month per $100,000...you need to buy a dramatically smaller house, not get a longer mortgage.