RE :”The bad news is that at 31% of income the number of payments exceeds the expected lifetime of the mortgagee! “
Could you spell out the math for us please? Thanks
“Could you spell out the math for us please? Thanks
I think it would be clearer if I rephrased that to say: The bad news is that at 31% of income the number of payments could very well exceed the expected lifetime of the mortgagee!
My original statement was a bit strong as it implied that you could never pay off such a mortgage. The point I was trying to make was that the new regulation is arbitrary and doesn't really address the central problem, you borrowed too much and don't have sufficient cash flow to get out from under the interest and start reducing the principal balance.
If you arbitrarily demand that the "reduced payment" not exceed 31% of income what do you do when the party claims say $500 a week as his income. That would peg his payment at $671.17/month. If he was trying to carry a loan that was demanding $1000/month as originally written and he wasn't too far into the amortization, he wouldn't even be covering the interest. If he made a bit more or his original payment were a bit lower, he might cover the interest and just a smidgen of the principal. That is he would be able to pay it off but certainly not within the original payment schedule.
Basically this plan lets a low income person "rent" a home in which he may or may not be building equity. In fact it's kicking the can down the road because it doesn't help him reduce the principal balance. Unless he somehow starts making double payments, where the second payment applies only against principal, he may very well pay till his dying day and never get to own the house.
Regards,
GtG