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Old 01-05-2015, 05:21 PM
 
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Quote:
Originally Posted by ncole1 View Post
I would argue that there is usually no moral issue since the house would be sold upon the owner's death to repay the remaining balance of the loan.

The situation where I think there IS a moral issue is putting low or now money down (less than 10-20%) while having a terminal illness and few other assets. In THIS case, the debtor is promising to pay back a debt while being in a position to know that it likely will not be paid in full. This is dishonesty, while the first case is not.


Interesting that one is dishonest and the other isn't when, the agreement is the same between the borrower and lender.
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Old 01-05-2015, 05:26 PM
 
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Quote:
Originally Posted by Lowexpectations View Post
Interesting that one is dishonest and the other isn't when, the agreement is the same between the borrower and lender.
Right. In one case the borrower plans on repaying the loan, in the other, he/she does not.

Just like getting a mortgage when you got the pink slip yesterday and are being laid off is dishonest, while with a job you expect to keep it isn't. The distinction is the same. Yes the contracts may be identical; that does not in any way change the fact that in one case you legitimately expect to keep your word and in the other you don't.
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Old 01-05-2015, 05:37 PM
 
18,786 posts, read 13,534,175 times
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Quote:
Originally Posted by ncole1 View Post
Right. In one case the borrower plans on repaying the loan, in the other, he/she does not.

Just like getting a mortgage when you got the pink slip yesterday and are being laid off is dishonest, while with a job you expect to keep it isn't. The distinction is the same. Yes the contracts may be identical; that does not in any way change the fact that in one case you legitimately expect to keep your word and in the other you don't.


Just because you put 20% down and have a terminal illness doesn't mean you intend to pay it off. I don't see anything dishonest about taking out a loan and paying it as stipulated in the loan agreement
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Old 01-05-2015, 06:16 PM
 
Location: Florida -
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There is nothing immoral about buying a house with a 30-year mortgage, that one will be unlikely to stay in for 30-years and personally pay-off. Isn't that exactly what most people do when they buy a home??

The bank, on the other hand, will ensure that they have sufficient down-payment/equity and a buyer with the ability to make the payments ... to protect their interest in the property.

Now, if one is going into a home purchase with the idea that they will NOT make the payments, with the hope of staying in the home 'free' for 3-4 years, like many foreclosures today, that's another matter.

Otherwise, as the RE market recovers, more and more people will, as they always have, depend on RE appreciation as an investment for asset protection.
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Old 01-05-2015, 07:39 PM
 
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Quote:
Originally Posted by southkakkatlantan View Post
What I mean is, let's say:

You're 58 years old and get a 30 year mortgage as opposed to say a 10 year one although you don't expect to live long enough to pay it off. But your goal is to have more money freed up to travel to see grandkids, explore hobbies during retirement while you're still healthy enough to get out the house and drive on your own, just enjoy life....

In your opinion, is it morally wrong to do this for any reason?

If you think there's nothing wrong with doing the above, then I have a second question for you:

Which choice below is a better move in the hypothetical situation of a person grossing $100k a year (single, no kids, 40 years old, 100K total in retirement funds, with their most important current financial goal being to play the retirement 'catch up' game):

(1) Buying a $300,000 house for a monthly mortgage of $1,500 (term: 30 years)

(2) Buying a $150,000 house with a monthly mortgage of $1,500 (term: 10 years)
No, it's not morally wrong. The bank will just collect the difference if/when you die, so no big deal.

I think there is a range of choices between the 2 options given and I don't necessarily think either one is optimal, but I'd vote for #2. Paying off the house means your costs are cut in retirement. If you are paying a 30 year mortgage on a more expensive house, then that's going to make it both harder to save for retirement AND your expenses in retirement will also be higher, so while #2 may not be an ideal option, #1 is clearly a double whammy.
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Old 01-05-2015, 07:43 PM
 
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Quote:
Originally Posted by southkakkatlantan View Post
Nope, I do not and never have. And constantly struggle with whether I should ever 'aim to do so'.

I don't think it's the right decision to do right now. But perhaps owning from 40-50 would be good (the largest home I can afford with the lowest mortgage possible and a roommate to cover the mortgage). Then sell and buy a small condo on the beach somewhere.

At least, that's what I think today...at 36. That could change at 45...or 39...or tomorrow lol
The main thing, as I always say in posts like these...is to keep your housing costs as low as possible as a % of your income and save/invest the difference.

That means you should avoid the typical 30% of gross income on housing expenses that the banks treat as normal. Keep those housing expenses to 25% or less, ideally 20% or less of your gross income.
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Old 01-05-2015, 08:13 PM
 
Location: Vermont
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A home purchase that you finance includes two connected transactions: a promissory note, in which you promise to repay the principle plus interest according to a set schedule, and a mortgage, which gives the lender (mortgagee, rhymes with Simon Legree) a security interest in the real estate. Most people who buy houses know or anticipate that they will not be there for the full term of the mortgage, but they know that if they decide to move they will have to pay off the note in order to get clear title to sell the house and buy another one. Thus, the bank isn't missing out.

If the homeowner dies before the mortgage is paid off essentially the same thing happens: there is a transfer, either by inheritance or sale by the estate, and the bank gets paid.

Either way, there's no moral problem in getting a loan with a longer term than you expect to own the house.

There are valid questions about how long you should be planning to own a house before it makes better financial sense than renting, but if the hypothetical boils down to whether a person in his thirties who hopes to retire and travel around age 58 should buy a house, I suspect the answer is yes.

The question of whether that person will be able to retire at 58 and will want to do so is another matter entirely.
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Old 01-06-2015, 01:08 PM
 
Location: Liminal Space
1,018 posts, read 1,230,434 times
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Quote:
Originally Posted by southkakkatlantan View Post
Which choice below is a better move in the hypothetical situation of a person grossing $100k a year (single, no kids, 40 years old, 100K total in retirement funds, with their most important current financial goal being to play the retirement 'catch up' game):

(1) Buying a $300,000 house for a monthly mortgage of $1,500 (term: 30 years)

(2) Buying a $150,000 house with a monthly mortgage of $1,500 (term: 10 years)
If you're number 1 goal is to play retirement catch up, you should buy the $150,000 house on a 30 year mortgage to minimize the monthly nut and maximize the amount going into savings.

I don't see the connection between this question and your first question.
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Old 01-06-2015, 01:20 PM
 
12,695 posts, read 9,929,265 times
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Quote:
Originally Posted by Lowexpectations View Post
Just because you put 20% down and have a terminal illness doesn't mean you intend to pay it off.
Ok, fine, but one can reasonably expect the loan to be paid in full when the property is sold.

Quote:
Originally Posted by Lowexpectations View Post
I don't see anything dishonest about taking out a loan and paying it as stipulated in the loan agreement
If the loan agreement does not include life insurance or forgiveness upon death, a low down payment means the borrower reasonably foresees the loan not being paid in full. In that case, it is not paid as stipulated.
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Old 01-06-2015, 01:21 PM
 
4,027 posts, read 2,907,711 times
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Quote:
Originally Posted by southkakkatlantan View Post
You should really try reading the title.
LOFL! Rrrrrrrrrrepped!!!
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