OT: 50 year mortgages?

[badgervike]

This makes sense on the surface but dangerous for the young home buyer. if you are an entry level home buyer:

• You probably have to also deal with Mortgage Insurance as they probably have an entry level job and probably other loans to pay off (example school loans).
  
• You will have all your potential income maxed out to afford the house meaning you will be making pretty much interest payments for a long time
  
• You mention refinancing. So you make interest payments to refinance a few years later to realize you never paid the loan (so pretty much you were renting). And if god forbid the house depreciates in value you find yourself owing more than the house is worth.
  

A long term loan is only good for short term use but again a home loan is not something you consider short term given refinancing costs money and anyone rushing to buy a house without a significant down payment runs the risk of throwing away money in mortgage insurance.
In summary, you could rent, save money, pay off other debt and then buy a house on a less than 50 year term and still live to enjoy the house in your later years. 
This is not what an honest person would call helping the young home buyer unless such young buyers had a nice head start (and those are few and far between).

I bought my first house in the Carter years when 30 year interest rates were in the 14% range.  I took the risk and financed with a balloon loan and hoped like hell the interest rates would come down within 5 years.  They did...thankfully..and the home increased in value by 50% in that first 5 years.  This 50 year option would have given me less sleepless nites.

[Rigby]

Exactly.

How this could ever be defended is beyond me, it must be political because it makes zero sense outside in the real financial world of reality. The total of the loan cost goes up 50%. FIFTY PERCENT. You paid $1.2 million on a $400,000 loan. Tony Soprano wishes he had these rates. So save me your partisan rationale because nobody would want their son or daughter to make that deal.

The winners are banks and mortgage lenders, very little equity buildup for home buyers - always follow the money.

[purplefaithful]

Our first home loan rate was 14% back in 1990....

I remember paying down to get to 10%!!

[badgervike]

Exactly.

How this could ever be defended is beyond me, it must be political because it makes zero sense outside in the real financial world of reality. The total of the loan cost goes up 50%. FIFTY PERCENT. You paid $1.2 million on a $400,000 loan. Tony Soprano wishes he had these rates. So save me your partisan rationale because nobody would want their son or daughter to make that deal.

Than let them join the growing ranks of our youth who have resigned themselves to renting their entire lives.  What's the equity earned from 50 years of rent payments? Different people have different requirements and income conditions. This is just one more option...it's certainly not the panacea. If you don't like the terms of a 50 year note...don't get a 50 year note. Not sure why the angst over this...must be political...lol.

[StickierBuns]

Than let them join the growing ranks of our youth who have resigned themselves to renting their entire lives.  What's the equity earned from 50 years of rent payments?

I really can't believe I'm having this discussion with you: you always seemed very intelligent, level headed and although we didn't always see eye to eye, it seemed fine. If you don't know inherently how horrible a financial decision a 50 year loan is, I can't help you get there. Its the absolute worst. I mean, its the coal mine and company store, my friend. God speed.

[badgervike]

I really can't believe I'm having this discussion with you: you always seemed very intelligent, level headed and although we didn't always see eye to eye, it seemed fine. If you don't know inherently how horrible a financial decision a 50 year loan is, I can't help you get there. Its the absolute worst. I mean, its the coal mine and company store, my friend. God speed.

So..you'd rather your kids get a jumbo loan like I did way back when?  That's flat out gambling.  I got lucky.  Home values have increased on average by 4% per year so even though you're effectively paying interest only "rent", you are increasing your equity unlike a renter.  My houses have been the among best investments I've made.  Whether it's a conventional 30 year note or a 50 year note, you're still only paying interest the first 10 years.

Like I said earlier, there are a lot of contributors to the housing crunch.  Time to put the effort there.

[purplefaithful]

Housing affordability for Americans is huge...

I'd like to see time/effort put against making houses more affordable in addition to financing levers.

Thats a tough nut to crack.

[badgervike]

The winners are banks and mortgage lenders, very little equity buildup for home buyers - always follow the money.

Home values increase on average 4 % per year.  Again, how much equity is there when you pay rent?

[mblack]

Exactly.

How this could ever be defended is beyond me, it must be political because it makes zero sense outside in the real financial world of reality. The total of the loan cost goes up 50%. FIFTY PERCENT. You paid $1.2 million on a $400,000 loan. Tony Soprano wishes he had these rates. So save me your partisan rationale because nobody would want their son or daughter to make that deal.

The defense is that:

• You could refinance later
  
• You are not paying rent 
  

All terrible reasons and all based on the fact that the home owner has to keep doing more for it to almost sound plausible. It is a terrible and dangerous idea no matter how it is explained

[badgervike]

The defense is that:

• You could refinance later
  
• You are not paying rent 
  

All terrible reasons and all based on the fact that the home owner has to keep doing more for it to almost sound plausible. It is a terrible and dangerous idea no matter how it is explained

Sigh..that's not at all what I'm saying.  I'm saying that people's situations are different.  You're earning potential at 35 is significantly different than at 25.  The first 10 years of a 30 year mortgage and a 50 year are basically all interest.  If you get a 50 year note...you SHOULD refinance at some point when your financial conditions and interest rates are most favorable.  So after let's say 7-8 years, you're equity has typically increased in the 30-35% range and your payments have been less on that 50 year note than on the 30 year note and you've paid virtually no principal with either.  If you refinance at that point, what's the better deal?  Depends on your circumstances. 

And after 7-8 years of paying rent...your equity is zero.

Here in Madison at least, we have a very limited rental inventory which is keeping rents historically high....about the same as mortgage payments (including utilities /property taxes).