<p>Istoomuch – keep in mind that everyone’s situation is different. I live in California, where my home has almost tripled in value over the past 16 years since I purchased it. Even assuming a more moderate rate of appreciation over the next 15 years, the fact that my equity increases at a significantly higher rate than my payout is an important factor in planning. That is, I am probably better off to borrow to invest in California real estate than to put cash in bonds or CD’s. Bottom line - no matter what I have paid on my mortgage over the past 16 years - it probably is no where near what the house is now worth. </p>
<p>You are right that mortgage financing can be viewed as a game, but wrong to say that the ball is entirely in the hands of the banks. </p>
<p>I would be in a lot worse position financially than I am now, were it not for the fact that I could borrow in order to buy property that has appreciated in value. I think interest rates were still in the double digits when I purchased my house in 1988 – but I had an adjustable mortgage where the interest rate went DOWN every 6 months …great for me, not so great for the bank. Because my payments were going down and my equity was going up, I was able to qualify for a 2nd,also an adjustable, which I used to buy out my husband when we divorced. Because of the declining interest, my son’s college was more affordable than expected – in fact, I didn’t have to borrow as expected, because when my son went off to college my monthly payments ultimately went down about $300. Now I realize that I had Alan Greenspan to thank, not the banks … in fact, the banks seemed to be rather disgusted with the whole thing, as they kept selling off my mortgage to different banks. </p>
<p>I’m refinancing now because I know that my days of winning the adjustable rate game are over … and here’s the thing: the deal I struck with the bank with the ARM is that if the rates went down, they had to give me the benefit of declining rates – there is no way legally that they could pull out of the deal – but if the rates started to go up … I did have the ability to pull out, by refinancing on whatever terms I could get in a highly competitive market. So I really don’t think anyone needs to feel sorry for me for being at the mercy of these evil lending institutions. Obviously, if rates go up over the next several years… I’m sitting pretty, having locked in my rates now… and if rates were to go down significantly again, I can always refi once more. </p>
<p>I have learned that it helps to have really good credit – so life is not so good for those who get in over their heads. If anyone has a lot of power over the consumer, it is the credit reporting agencies who can really make life miserable if there is misinformation in their files. I honestly had a rough time of it at first because of my ex’s miserably bad credit … but fortunately I am clear of that now.</p>