arthur wrote:money flow is there, it just will go to a differant destination.
If the cash flow is there, why are you considering a 40-year amortization that requires default insurance on the full amount of the mortgage?
Off the top of my head, the only prudent candidate I could see for a 40-year am would be someone with little cash flow now but very strong prospects for the near future. For example, a newly graduated medical doctor or in-demand engineer whose income and net debt position are likely to improve substantially over the coming years, providing flex to pay down the loan.
Mortgage = $100,000
Rate = 6%
Payment = Monthly
With the standard 25-year amortization:
Monthly payment = $639.81
1st year cost = $7,677.72
Principal repaid = $1,799.70
Interest claimed 77% of 1st year cost
With 40-year am ignoring cost of default insurance:
Monthly payment = $545.09
1st year cost = $6,541.08
Principal repaid = $631.68
Interest claimed 90% of 1st year cost