Life doesn’t always go the way I want either.
Oy, I often feel like I am spending most of my spare time chasing my tail.
Yesterday, I spent two hours trying to fix a clunky key on this new keyboard I bought online.
Today I ran around and struggled with the packaging materials and my years-old scotch tape to pack it all up and go to Fed Ex to mail it back. Well, my local Fed Ex rep was closed. So I ended up at the post office and you know what a long frustrating and painful experience that is.
But I can deal. So life doesn’t always go by my expectations? I can be flexible. And if there are no fixed-rate 30-year mortgages available when I buy a home, I’ll deal with that too.
Most countries don’t have 30-year fixed rate mortgages so I don’t see why the United States has to have such.
My dentist sent me a postcard six weeks ago to remind me of my bi-annual check-up. I just haven’t gotten around to it yet. I’m pinching my pennies. My haircuts are down to twice a year. I’ve borrowed money from family to finance my trip back to school.
I’m dealing with tough economic times.
There are three key characteristics of the now-typical loan that merit discussion: (1) its long-term nature; (2) the fixed interest rate; and (3) the full amortization.
(1) Thirty years is a long-term loan. In contrast, commercial mortgage loans have terms between three and ten years. As a result, commercial borrowers are forced to refinance on a more frequent basis than residential borrowers. With a longer-term loan, homeowners are currently freed from refinancing risk (what if no lender is willing to lend money secured by my house), interest rate risk (what if interest rates have gone up since I last refinanced), and closing costs associated with each new loan.
(2) The typical prime residential mortgage is at a fixed interest rate. This mitigates a major risk for the borrower – that interest rates will rise and make payments unaffordable. Conversely, lenders don’t like fixed-interest rate loans because it forces them to internalize the interest rate risk, which they must mitigate with other financial products. Without government intervention, lenders have significant incentives to switch to floating rate mortgage loans, which shifts the interest rate risk back to borrowers.