
Interest-only mortgages rest on the border between Ponzi borrowing and safe borrowing, a purgatory on the edge of the abyss of insolvency. Debts are supposed to be paid off. People forget that simple fact and take on debt as if it is something to be endlessly serviced. Those that embrace the debt-service mentality dance on the edge of the abyss of insolvency. When the amount a borrower pays toward principal on debt is matched by taking on new debt, a borrower is merely treading water. When the amount of new debt exceeds the amount debt paid down, particularly if debt was used to pay debt, the borrower is Ponzi borrowing. There is a point beyond which a borrower cannot pay…[READ MORE]