There has been a lot of talk about how the current mortgage and housing crisis is going to affect the future of home buying for all Americans who still want a slice of the American dream, but cannot afford the huge monthly sums that are often required of a mortgage that is shorter than the typical, common 30 year loan of today.
The 30 year mortgage is actually fairly new in the grand scheme of things. It was unheard of as early as the twentieth centurty, and in fact even the 15 year mortgage was a longer term than the usual five year term that was common.
In short, it was was a lot harder for people to get into hot water buying homes they really could not afford and risking the home’s price to dive in value back then.
Now, with the popularity and availability of the 30 year mortgage, there are a lot of people who are paying interest over the life of the loan that equals the value of the home, or exceeds the value of the home at the end of the term.
Some argue that the thirty year loan is actually detrimental to the home owner in the end because it ends of costing the customer so many more thousands of dollars if they go full term than it would if it were shortened by half.
However, the good thing is that the longer 30 year home loan term has allowed a lot of people to buy a nicer house than they could afford if they had a shorter loan term. But is that really a good thing, or should people not be buying homes that really exceed the monthly amount they could afford?
It’s a definite argument. One could argue that the mortgage tax deduction and the fact that people were buying larger than they would normally actually helped fuel the economy, but did it really, especially when we saw the whole housing market implode?
But, the mortgage interest tax deduction could be going away in the next few years, or it could severely limited, so is that really helping us out all that much? It’s almost as if that deducation was a consolation prize for being raked over the coals for so many years by out of control mortgage interest rates.