Rumors are circling that the FHA will implement a new, ultra-low interest rate refinancing program to help cash-strapped borrowers. This plan has an unintended consequence that would devastate the housing market for years to come.Borrowers will have a HUGE incentive NOT to move in the future. It’s as if the government was going to pay a portion of your mortgage in return for you NOT moving for a decade or two. This is insane.
Simple Math
For example, let’s assume a $200,000 home with 20% down and a loan of $160,000. Now, let’s assume a 3.5% interest rate about 1% below today’s rates.The borrower would have principal and interest payments of $718.Fast forward 5 years.Pretend that homeowner wants to move to a different house that costs $200,000. Let’s again assume 20% down.At a reasonable 6% interest rate, the borrower would pay $959 a month. That’s an extra $241 each month in interest!
Read More at: Why a Government-Sponsored, Low-Interest-Rate Refinance Program Would Kill The Housing Market for a Decade.
