Thursday, October 23, 2008
Life of the Grasshopper
-They say that most Americans have done themselves well
-We suppose the subprime loan is the same kind of housing
loan as we have in Japan. But it is completely different.
-It is the same in that they put a mortgage on the house
and take out a loan.
In their case, they can use the loan for other purposes
than to get the house.
As the payment is proceeding and the loan have got
smaller than the mortgage, then they can take out
another loan for another purpose.
-It sounds like a kind of free loan, doesn't it?
-That's not the whole story.
As the housing prices in the US has been rising
for a long time, they can naturally put a larger mortgage
on a same house year by year.
That means that they can draw another loan year by year.
-They must not make payment for such a big loan.
-There is another secret to make the payment possible.
Under the subprime loan they can get rid of payment
of the principal for some years.
On that period they only consider whether they can
pay the interest for the loan.
If yes, then they take out the loan.
-That can't be! No way!