What do you think of the new Wealth-Builder mortgage that has gotten a lot of press?”
The developers of the Wealth-Builder (WB), Edward Pinto and Stephen Oliner of the American Enterprise Institute view the 30-year mortgage that today dominates the market as badly flawed. Their view is that it takes too long to accumulate significant wealth, and too many bad things can happen in the meantime that jeopardize that goal. The WB would have a term of only 15 years.
Here are some figures that illustrate their point. On October 23, I shopped the market as a potential home buyer with a 740 credit score who could make a 20% down payment on a $250,000 single-family house. The $200,000 loan I needed was available for 30 years at 3.75%, or for 15years at 2.875%. If I took the 30-year loan, after 8 years of making payments, my balance would be down by $33,663, or by only 17%; if I took the 15, my balance would be down by $99,936 or by 48% — almost 3 times as much wealth accumulation.
