Sunday, March 29, 2009
Pay at the END of 25 years
This article mentions that rare but crucial fact that all debts added to mortgage loans are only paid off at the END of the term. So you can find out the real price should this charge be paid now as long as you know the real interest rate (as in ignore inflation). If the real interest rate is 1%, then the equivalent you would have to pay the bank now is 28% more. For a real interest rate of 2%, that is 64% more. If you have a mortgage additional borrowing is very very expensive. (!) The banks are a bit sneaky here with charge for mortgage refusals...can you imagine if that catches on. Charging people who ask to buy something !