Outlaw 40 Year Mortgages

I think Jim Flaherty (The Canadian Minister of Finance) must have read the article I posted on May 13, 2008.

An article in The Province reported today “Finance Minister Jim Flaherty recently suggested it might be wise to outlaw 40-year mortgages”.

The article also sites that " David Bach rightly advises people to quit throwing their money away on rent and instead build up equity in a house. But the plan fails when interest-only or 40-year mortgages mean payments go to banks and not to pay down principal and thus build equity. " More

For non Canadian readers: Keep in mind while reading this article that interest on home mortgages in Canada is not tax deductible and capital gains on a principle residence is tax exempt.

So, in Canada it is paramount to pay the least amount of interest and maximize equity in the principle residence.

The lending institutions are creating a new generation of Canadian home owners. To the institutions, this new generation sole purpose in life is to pay rent disguised in the form of interest paid on longer than life sentence mortgages where principles are paid back very slowly.

Jim Flaherty got it right , this kind of practice should be outlawed.