How to turn your home into a bad investment

by Darren

One quick way I can think of doing it is by taking advantage of the new 50 year mortgages being offered by desperate lenders.

A handful of lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low in the face of record home prices and rising rates.

The real reason is, they can’t afford to buy the house at the current price! In other words, this is for people who are going to buy a house, no matter how ridiculously overpriced it is. I’m assuming part of the mentality must also be that they have no plan on paying off the house before they die, so they want the largest “cash flow” right now.

This thinking can be great if you can flip houses quickly! But for anyone who plans on doing this for a primary home, you have to really be concerned about their financial future. The lenders have been out of control for quite some time.

Now the lenders are bendings over backwards to offer creative loans to get any new business. I’m sure we’ll see more of this as the years continue. It’s bad for the consumer:

With those loans, a borrower might not build any equity and could end up owing more than a home is worth – called negative amortization.

It’s bad enough to have negative amortization on a car loan, but it’s unfathomable on a home loan. What if you want to move? You might become a prisoner to a bad financing deal.