"Is Mortgage Financing a Loser's Game?"

[Navotifarm]

Here is a very pertinent article from the Time Magazine website:

http://bit.ly/abfBTw

For me, it pertains to ALL lending since for years I have followed the precepts of Carla Emery and others who try to live the frugal life including living within one's means and paying only cash or barter. There is a dreadful penalty for this when one tries to borrow money. With "no credit history, " one is technically a deadbeat and thus incurs vicious interest rates.

How do folks on here deal with this dichotomy? What about Hopeful Lady and her foreclosure dilemma? Where is the decision crux between. Actual equity, current value, balance owed plus all the deadbeat charges you get slammed with, and one's own love for or ties with one's home or land?

My heart goes out to Hopeful Lady on this very large life/death crisis question.

[Deacon Mike]

The link deals with Refinancing specifically. Basically the piece seems to me to be a screed about how people don't understand math.

[Jonaspear]

Refinancing early in a mortgage that results in a rate savings often pays off well, especially if the money saved is added to the new payment as extra principal.

[wy_white_wolf]

Credit is a tool just like any other tool. Use it properly and you will benefit from it. Use it the wrong way and your asking to get hurt.

[mnn2501]

There is nothing inherantly wrong with borrowing money and building a credit score. The problem comes when you carry balances and pay interest.
I charge just about everything on a card that gives me Amazon.com credits. I pay it off every month and every so often get a certificate for $25 worth of books from Amazon.com. I have not paid them a dime of interest or anything else in 6 or 7 years now, but I use them just to keep up my credit score.

[plowjockey]

We just refinanced our home, saving 1.5% on interest and no more $99/mo PMI charge. Feel like a winner here.

Refinancing, like any other financial move, can either be benefitial, or not.

Borrowing money for a home is not the same as borrowing money for groceries.

[Mike in Ohio]

The article is a little superficial even though much of what it says is true.

For example, in the first 5 years of our home mortgage we refinanced 3 times. We rode interest rates down and got lower rates and shorter terms each time so that we were making almost the same monthly payment and shortened the term down from 30 years (it was 28 years left when we did the first refinanace) to 15 years. That is a lot of years of payments we knocked off through this process.

Would it have made sense to do if we were further into the mortgage? Probably not.

By the same token, we don't see any point in making extra monthly payments. We would rather set money aside. At some point I expect we will pay off the mortgage early as a lump sum. I'd rather have extra money available to invest in the farm or other things than to have the house 100% paid off.

If a parcel of land adjacent to our farm becomes available I'd like to be able to have money to put down on it. We aren't interested in cross collateralizing the parcels just to get a down payment.

Borrowing is a tool and like anything else it can be used wisely or it can be used foolishly.

Mike

[geo in mi]

Money lending has been around for a long time, and will continue that way. Trouble is, nobody seems to teach us how to use it properly, and in recent years, not too many people wanted to learn.
We're in a pickle today partially, because we(borrowers and lenders alike) disregarded some time-honored axioms. 1) Pay no more than 25% of your after tax pay for your house and property taxes. 2) Your total indebtedness shouldn't be more than 35% even with a mortage 3) Make a down payment of 20% on your house 4) Have cash savings to cover emergencies 5) Don't gamble your house away 6) Location, location, location 7) Pay your bills on time. 8) Keep your financial committments