50 Year Mortgage

[cawacko]

A lot of ideas get floated that never go anywhere, and the 50 year mortgage will be one of them. Still, it’s a terrible idea. The pitch is that it lowers the monthly payment and opens the door for more people to buy a home. In reality it just pushes prices higher because it doesn’t touch the supply problem.

It’s the same issue with rent freezes. These things can sound good at first, but they don’t create more housing and they make the underlying problem worse. It creates less opportunity for (younger) people and makes our economy less dynamic overall.

 

[Jarod]

A lot of ideas get floated that never go anywhere, and the 50 year mortgage will be one of them. Still, it’s a terrible idea. The pitch is that it lowers the monthly payment and opens the door for more people to buy a home. In reality it just pushes prices higher because it doesn’t touch the supply problem.

It’s the same issue with rent freezes. These things can sound good at first, but they don’t create more housing and they make the underlying problem worse. It creates less opportunity for (younger) people and makes our economy less dynamic overall.

Seems to me, prices would go up, because a lot of home prices are based on what people can afford on a monthly basis. It is also one further step towards turning homeownership into something much more like Renting.

I think it’s a bad idea. More money for the banks, less for the middle class.

 

[cawacko]

Seems to me, prices would go up, because a lot of home prices are based on what people can afford on a monthly basis. It is also one further step towards turning homeownership into something much more like Renting.

I think it’s a bad idea. More money for the banks, less for the middle class.

It makes monthly payments lower, which is why it can sound appealing on the surface. But it would take decades to build any real equity, and you end up paying much more in interest over the life of the loan.

And if we don't add additional supply, it means more people competing for the same amount of housing which just drives costs up.

 

[ThatOwlWoman]

Seems to me, prices would go up, because a lot of home prices are based on what people can afford on a monthly basis. It is also one further step towards turning homeownership into something much more like Renting.

I think it’s a bad idea. More money for the banks, less for the middle class.

It's an interesting concept that requires a lot more thought and discussion. Right now ppl are getting 7 year car notes. Depending on how they drive, their vehicle might be nearing its end by the time they own the car free and clear. Then they get another, and never manage to get out of car debt.

The house though might be different, if the home buyer intends to stay put. As they build equity (a lot slower process than with a 15- or 30-year mortgage), and their career advances with higher pay, they can pay extra towards the principle and probably pay it off a lot sooner. Otherwise it IS like rent. If you buy when you're 30, you'll be paying on it till you're 80 unless you can manage to pay it off sooner.

 

[zymurgy]

the idea is worse for the country than it is the consumer

paying rent for 50 years also builds no equity.

The issue is that amortized loans don't exist in a free market - they are subsidized by a nation currently 38 trillion in debt

 

[cawacko]

It's an interesting concept that requires a lot more thought and discussion. Right now ppl are getting 7 year car notes. Depending on how they drive, their vehicle might be nearing its end by the time they own the car free and clear. Then they get another, and never manage to get out of car debt.

The house though might be different, if the home buyer intends to stay put. As they build equity (a lot slower process than with a 15- or 30-year mortgage), and their career advances with higher pay, they can pay extra towards the principle and probably pay it off a lot sooner. Otherwise it IS like rent. If you buy when you're 30, you'll be paying on it till you're 80 unless you can manage to pay it off sooner.

In theory you’re right that people can make extra payments later on if their income rises. In reality that doesn’t happen very often.

The other point people make is that you can refinance. It’s possible of course, but with almost no equity it doesn’t help much. You’re basically starting over with the same big loan balance, and the lender might not even give you a good rate.

 

[T. A. Gardner]

A lot of ideas get floated that never go anywhere, and the 50 year mortgage will be one of them. Still, it’s a terrible idea. The pitch is that it lowers the monthly payment and opens the door for more people to buy a home. In reality it just pushes prices higher because it doesn’t touch the supply problem.

It’s the same issue with rent freezes. These things can sound good at first, but they don’t create more housing and they make the underlying problem worse. It creates less opportunity for (younger) people and makes our economy less dynamic overall.

It is only a terrible idea if you are homesteading with it. That is, you plan on buying and paying off the house you bought. On the other hand, with a lower payment you can get into a house on a smaller budget, then allow the home to accrue some value over time. You then sell that home, at a profit, paying off the 50 year mortgage when you do. You buy a different home with a bigger down and get say, a 40 or 30 year mortgage this time. You allow the home to rise in value, sell it, then buy yet another home. Over say, 20 years, you end up in your 3rd or 4th house with 10 to 15 years left on the mortgage, or maybe, even better, have gained enough equity to outright buy a house for cash and do away with the mortgage altogether.

Rent freezes and controls are a different problem. Here, developers and landlords see less, or no, reason to continue to invest in new rental properties because they will likely lose money over the life of the development. NYC currently has a rule, dating back to DeBlasio, that any apartment building constructed with 100 or more units has to pay the going union wage to the construction workers. This raises the cost by about 5% over non-union workers. Thus, there are lots of new apartment buildings with 99 units in them...

A current landlord losing money on rent control often will simply start selling off the apartment units as condos allowing the person in that unit ownership. The landlord just keeps control of the overall maintenance of the building common areas until they can shift that to an HOA. The landlord makes lots of money, condos aren't rent controlled, and the government gets fucked legally.

 

[cawacko]

It is only a terrible idea if you are homesteading with it. That is, you plan on buying and paying off the house you bought. On the other hand, with a lower payment you can get into a house on a smaller budget, then allow the home to accrue some value over time. You then sell that home, at a profit, paying off the 50 year mortgage when you do. You buy a different home with a bigger down and get say, a 40 or 30 year mortgage this time. You allow the home to rise in value, sell it, then buy yet another home. Over say, 20 years, you end up in your 3rd or 4th house with 10 to 15 years left on the mortgage, or maybe, even better, have gained enough equity to outright buy a house for cash and do away with the mortgage altogether.

Rent freezes and controls are a different problem. Here, developers and landlords see less, or no, reason to continue to invest in new rental properties because they will likely lose money over the life of the development. NYC currently has a rule, dating back to DeBlasio, that any apartment building constructed with 100 or more units has to pay the going union wage to the construction workers. This raises the cost by about 5% over non-union workers. Thus, there are lots of new apartment buildings with 99 units in them...

A current landlord losing money on rent control often will simply start selling off the apartment units as condos allowing the person in that unit ownership. The landlord just keeps control of the overall maintenance of the building common areas until they can shift that to an HOA. The landlord makes lots of money, condos aren't rent controlled, and the government gets fucked legally.

I get the logic behind what you’re describing, but the whole plan depends on prices going up enough to cover how little principal you’re paying on a 50 year loan. If the market slows down or even stays flat, you’re stuck with almost no equity.

 

[zymurgy]

I get the logic behind what you’re describing, but the whole plan depends on prices going up enough to cover how little principal you’re paying on a 50 year loan. If the market slows down or even stays flat, you’re stuck with almost no equity.

just like those priced out of ownership and rent for 50 years?

 

[T. A. Gardner]

I get the logic behind what you’re describing, but the whole plan depends on prices going up enough to cover how little principal you’re paying on a 50 year loan. If the market slows down or even stays flat, you’re stuck with almost no equity.

You have that risk, but even then, it's better than renting where you simply lose your money altogether.

 

[FastLane]

It's an interesting concept that requires a lot more thought and discussion. Right now ppl are getting 7 year car notes. Depending on how they drive, their vehicle might be nearing its end by the time they own the car free and clear. Then they get another, and never manage to get out of car debt.

The house though might be different, if the home buyer intends to stay put. As they build equity (a lot slower process than with a 15- or 30-year mortgage), and their career advances with higher pay, they can pay extra towards the principle and probably pay it off a lot sooner. Otherwise it IS like rent. If you buy when you're 30, you'll be paying on it till you're 80 unless you can manage to pay it off sooner.

And 80 year old people can’t afford to have house notes for a the most part. We need to increase supply and reduce interest rates

 

[cawacko]

just like those priced out of ownership and rent for 50 years?

One option is to build more housing to help bring prices down and to fix the zoning and land use rules that make it hard to build smaller, cheaper starter homes. That is the part that actually changes affordability.

And just as a side note, once you factor in the interest, a 50 year mortgage can easily cost more than renting for a long stretch of time. It is not the bargain people think it is.

 

[zymurgy]

One option is to build more housing to help bring prices down and to fix the zoning and land use rules that make it hard to build smaller, cheaper starter homes. That is the part that actually changes affordability.

And just as a side note, once you factor in the interest, a 50 year mortgage can easily cost more than renting for a long stretch of time. It is not the bargain people think it is.

it is theoretically true that you can park your money into a retirement fund and at the end it has less value.

but the chances are quite remote of this being so.

I believe the same is true of property ownership

 

[archives]

A lot of ideas get floated that never go anywhere, and the 50 year mortgage will be one of them. Still, it’s a terrible idea. The pitch is that it lowers the monthly payment and opens the door for more people to buy a home. In reality it just pushes prices higher because it doesn’t touch the supply problem.

It’s the same issue with rent freezes. These things can sound good at first, but they don’t create more housing and they make the underlying problem worse. It creates less opportunity for (younger) people and makes our economy less dynamic overall.

Only the informed mortgagor would benefit from a fifty year mortgage, most buyers, especially new home buyers, aren’t such, many don’t even know what an amortization table is and how it apples. So, it’s not a good idea, but neither are most mistakes only understood with experience

And rent control, which everybody has opinions on, but only those who live in or have lived in America’s leading metro areas actually experience, is a revolving door, causes and effects change nearly daily. It is a quagmire

Meanwhile, the lure of the Old Rose Bowl, the attraction, watching two styles of football clash, is vanishing:

Former Pac-12 schools make strides in adjusting to Big Ten's run-heavy style

When the Big Ten added former Pac-12 schools Oregon, Washington, UCLA and Southern California to the conference last fall, there was a belief those programs would...

www.whas11.com

Even read an article recently that USC is considering becoming an independent, attempting to transform itself into the Notre Dame of the west

 

[cawacko]

You have that risk, but even then, it's better than renting where you simply lose your money altogether.

I hear what you're saying, but that’s not a strategy that works for most people. A 50 year loan only looks good if everything lines up perfectly, and real life rarely does. People move, jobs change, families change and most buyers don’t stay in one place long enough to make a loan like that pay off. It isn’t a scalable way to help people get into homes.

 

[cawacko]

Only the informed mortgagor would benefit from a fifty year mortgage, most buyers, especially new home buyers, aren’t such, many don’t even know what an amortization table is and how it apples. So, it’s not a good idea, but neither are most mistakes only understood with experience

And rent control, which everybody has opinions on, but only those who live in or have lived in America’s leading metro areas actually experience, is a revolving door, causes and effects change nearly daily. It is a quagmire

Meanwhile, the lure of the Old Rose Bowl, the attraction, watching two styles of football clash, is vanishing:

Former Pac-12 schools make strides in adjusting to Big Ten's run-heavy style

When the Big Ten added former Pac-12 schools Oregon, Washington, UCLA and Southern California to the conference last fall, there was a belief those programs would...

www.whas11.com

Even read an article recently that USC is considering becoming an independent, attempting to transform itself into the Notre Dame of the west

Even the most informed buyers don’t really get much out of a 50 year mortgage. There just isn’t much upside to it once you look at how it actually works.

Rent control helps the people who already have it, but it raises costs for everyone else and distorts the market.

 

[cawacko]

Only the informed mortgagor would benefit from a fifty year mortgage, most buyers, especially new home buyers, aren’t such, many don’t even know what an amortization table is and how it apples. So, it’s not a good idea, but neither are most mistakes only understood with experience

And rent control, which everybody has opinions on, but only those who live in or have lived in America’s leading metro areas actually experience, is a revolving door, causes and effects change nearly daily. It is a quagmire

Meanwhile, the lure of the Old Rose Bowl, the attraction, watching two styles of football clash, is vanishing:

Former Pac-12 schools make strides in adjusting to Big Ten's run-heavy style

When the Big Ten added former Pac-12 schools Oregon, Washington, UCLA and Southern California to the conference last fall, there was a belief those programs would...

www.whas11.com

Even read an article recently that USC is considering becoming an independent, attempting to transform itself into the Notre Dame of the west

Don’t get me started on this proposed private equity deal for the conference. It’s a deal with the devil.

The analogy people bring up is Chicago under the Daley administration when the city signed that seventy five year parking meter deal. They took about a billion dollars up front to plug budget holes and now they’re getting crushed long term.

Same idea here. The people pushing this don’t care about the long term ramifications.

 

[NiftyNiblick]

These issues are why I think laissez faire capitalism is an antiquated concept.

Times have gotten much more complicated, and economies have to be planned and managed
to avoid the shitshow we're experiencing now.

 

[cawacko]

These issues are why I think laissez faire capitalism is an antiquated concept.

Times have gotten much more complicated, and economies have to be planned and managed
to avoid the shitshow we're experiencing now.

The irony is if we had a more laissez faire approach to housing, we probably wouldn’t be in the mess we’re in now as we've basically froze supply for years in relation to demand.

How do you see a more planned economy handling housing any better?

 

[cawacko]

it is theoretically true that you can park your money into a retirement fund and at the end it has less value.

but the chances are quite remote of this being so.

I believe the same is true of property ownership

Look at the amount of interest you end up paying on a 50 year mortgage. That’s the difference. That’s why this kind of loan doesn’t make financial sense, even if prices rise over time.