Insane.....50 year mortgage!

[serryjw]

quote........
Those struggling to afford a home may be wondering how long their mortgage payments can be stretched out.

The new answer: a half-century.

A handful of lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low in the face of record home prices and rising rates.

Most big banks already offer 40-year mortgages, which account for about 5% of all home loans, according to LoanPerformance, a real estate data firm. So far, only a few small lenders have rolled out the five-decades-long mortgages.
end quote......
http://www.usatoday.com/printedition/money/20060510/1b__longmortgage10.art.htm

[The Jacobin]

1. Why is this insane?

This allows people another choice in financing their houses. It may be a good choice, it may be a bad choice, but it is definately not an insane choice.

As energy costs and health care costs rise, I expect there will be quite a few people who want to refinance their house to lower the mortgage payment on a monthly basis.

[serryjw]

6. Depends how you view home ownership

The days of 'mortgage burning parties' are gone. The interest on that home is over the top and all you are doing is paying rent to the bank. You will never own your home.You have a 99% probability your home will be 'upside down'. What is the point? You will never build equity.

[The Jacobin]

8. I think most people would say the probability is much lower.

Someone has a quote that said in this context: "Housing inflation is the American national religion."

The short-term history is that real-estate value goes up. Even over 50 years. I expect that the probability of being "upside down" is fairly low in most cases.

[serryjw]

20. You're assuming life does not throw you

a curve. Maybe over 50 years the RE would go up. What about unplanned illnesses? Loss of job? There are all kinds of reasons this is insane. The REASON to have a home is to pay it off by your senior years and have the security/peace of mind it brings. Having equity gives you the opportunity to borrow against it if there is a family emergency. If your debt ratio is always too high, you won't be able to do this.When your kids go to college you won't even be half way through paying on the home.
Americans live on monthly payments. That's why the rich get richer and dems get poorer. Any financial planner will tell you the goal is to pay off the house, not to have a mortgage at 75!

[Paulie]

52. Not all financial planners agree

<b>Never Own Your Home Outright. Instead, Get a Big 30-year Mortgage, and Never Pay It Off — Regardless of Your Age and Income</b>

By Ric Edelman

http://www.ricedelman.com/planning/home/rule21.asp

[serryjw]

53. That has to be the WORSE advise I have ever heard

for 90% of Americans. He is suggesting that you take the 'extra' you would pay toward your mortgage and invest it...Oh yeh, great idea! You lose your job, you or your spouse get sick or you invest in the next ENRON and lose everything. This is so irresponsible I thought it was satire.
Every financial planner will tell you to pay off the home an invest in an IRA BEFORE you do anything else.

[Union Thug]

12. You nailed it - "mortgage burning parties are gone"

The only time new homeowners will every own their home is in that split second between when the house is sold and the old mortgage paid off by the borrowed money of the new home 'owner'.

[triguy46]

31. I paid mine off last friday...

Its a good feeling.

[ProfessorGAC]

43. Beat Us By A Several Months

But, even before payoff, wasn't it a good feeling knowing you owed about a twentieth, or less, of what the house is worth? That's how my wife and i are now. We owe just barely over $10k and the house is easily worth $200k. So, we own $190k of it and the bank only $10k! Nyah! (Actually, i'm on the board of directors of the bank that holds the mortgage, so i can't really stick my tongue out. I can't "dis" the "man". I'm part of "the man".
The Professor

[dysfunctional press]

45. we're doing ours next monday...

too busy this week getting ready for mom's day.

but we're 10 years into a 30-year note, so we're getting out from under it 20 years early...:woohoo:

[Warpy]

24. Those would be good points

if you were planning to stay in that house for 20+ years, because that is how long it'll take you to compensate for the down payment you lost in the bust plus build any equity at all in the house. The only advantage would be the tax shelter, the ability to get a few bucks back from Uncle Sugar every year if you itemize and deduct the mortgage interest.

Remember, for the first third of any mortgage, all you're paying is the interest.

[snooper2]

27. Unless you pay extra every month

against the principle :)

[Warpy]

34. People who need a 50 year mortgage

are going to be lucky to pay what's on the monthly ticket.

[Ioo]

38. I have to say I think you are WAY OFF on this..

Rates on homes are still very good if you look at the historical data...

In the BULK of the nation home prices, even in a slump are might high and almost NO ONE is "upside down" on a home after they live there 10 years...

Now-a-days you build equity in the value of the HOME, not the value of the LOAN.

[Roland99]

61. Discussion from last week >>>>>>>>>>>

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=364&topic_id=1076246



This is, essentially, a way for mortgage lenders to get people to qualify for interest-only loans who otherwise wouldn't qualify (as it gets the principal payment down lower to meet debt-to-income ratios)

[Matariki]

2. I remember reading about 90 year mortgages in Japan

heard them referred to as "3 generation mortgages"

[Yollam]

16. Never heard of such a thing here...

...they may have existed at the peak of the real estate bubble in the late 80s, but most mortgages here are in the 25~35 year range. And outside of Tokyo-Yokohama, Osaka and Nagoya, housing prices are much more reasonable here than in America's overinflated markets (granted, you get less land here for your money, but you can buy a decent older house in the outskirts of my city, Fukuoka, for $78,000 US, and even less when you get out into the boonies. For people who can telecommute like I do, there are bargains out there. When we were living in San Francisco, the inflated prices were not just in the city, but extended 100 miles in any direction. The closest place with houses anywhere near affordable was Lake County.

[seriousstan]

22. 100 yr leases are not unusual in the US.

Usually a small backwater area where most people just want a place to call their own for the rest of their lives and they will "watch" the land. Usually very inexpensive.

[MissB]

28. Yes, I've seen those around here.

In one of the wilderness areas in Oregon, there are 100 year leases for the lands that sit under some old cabins. It does make sense - you don't have to worry about that particular spot of heaven being ruined by development and yet people can still live there as they have since the late 1800s.

[Historic NY]

3. Borrow now & die later..........

I can see some of these never ever getting paid off......

[Kiouni]

4. considering on a

30 year mortgage you pay as much for the house as you pay in interest this is just nuts. i thought the housing market burt any way.

[The Jacobin]

7. The bubble is definately in trouble.

The market will burst in some local areas, but it hasn't yet in the South.

As to interest v. principal on payments. Most people don't look at it that way. They determine they have some amount of money to spend each month on housing. They may use that money to pay rent in an apartment or use it to pay a mortgage on a house or condo. How much of that mortgage payment isn't really important so long as the total is equal to or less than what they have budgeted for housing.

[Kiouni]

9. but looking

at just a houseing expense is how my generation is farking up their retirement! I had just recently applied for a mortgage to see what kind of loan i would get and the bank wanted me to consolidate some loans to increase my per month dept ratio. the problem was they were 0 intrest military school loans. how often do you get 0 intrest loans?

[serryjw]

17. I strongly suggest you re-think this

You are asking for trouble.. You just don't know it yet.

[Warpy]

5. Well, that works in a go-go real estate market

because eventually you'll be able to convert it to a 15 year fixed rate mortgage as your increased equity makes it look like your mortgage is just a tiny fraction of what the house is worth, attractive to lenders.

However, anything that takes a 20 something BEYOND retirement age to pay off the mortgage in a more rational housing market is bad news. I can see a lot of folks realizing that their savings and the tiny pension they'll get will not be enough to pay off that last 5-10 years they have to go on the mortgage, and we'll see old folks losing their homes just when they need them the most.

If ever there was a sign that the bubble has burst, it's these lunatic mortgage schemes that are popping up to sucker young families into buying high before the whole thing deflates completely.

[Lex]

10. I shudder to think of going into my retirement years with a mortgage

to shoulder.

I refi'd my house to a 15 year fixed when the rates dropped to lowest a few years back. Best move I could've made, I think. I'll have it paid off well before I have to contemplate retiring.

[The Jacobin]

11. We did too.

We will have the thing paid when our oldest turns 14. W00H00!

Erm, that was a bit premature since she is only 3 now.

[Warpy]

23. I wanted to refinance

but entered into a short period of penury that prevented it.

I just inherited enough to pay the sucker off, and I did.

Best day of my life. I now have utility bills and that's it for debt.

[susanna]

58. We did the same back in '96 (we bought in '94).

It took about two seconds to decide to do so.

[susanna]

57. I couldn't have said it better myself.

"If ever there was a sign that the bubble has burst, it's these lunatic mortgage schemes that are popping up to sucker young families into buying high before the whole thing deflates completely."

Wow. That sentence alone should be a mandatory disclaimer in today's housing market. :-(

[CoffeeCat]

13. Another way for banks to encourage irresponsibility...

I'm really tired of reading outrageous stuff like this.

If you have to obtain a 50-year-mortgage for a property--then you can't afford that
property.

In most cases, these creative financing solutions enable people to buy more house,
for lower monthly payments. However, when you factor the long-term cost of these
loans, it's just outrageous. These loans make the banks rich and keep people poor.

People who get loans like this will build equity at a horrendously slow rate. It's
like renting!

There are many ways to foolishly finance your cars (10-year loans) and houses (interest only ARMS).
Most people should not finance this way.

This country needs to chill with the materialism. Not everyone can live in a McMansion and drive an Escalade. However, most people think they're entitled--as long as the bank finances these things at lower monthly payments.

Being mortgaged to the eyeballs, financing a couch for 4 years and owing everybody in town is asinine. Everyone is going into debt, trying to keep up with the Joneses. Meanwhile, the Joneses are complete assholes. Society is messed up.

[Kiouni]

14. I Hate those

joneses and their stupid riding lawn mower!

[CoffeeCat]

18. Exactly!

I almost wrote "riding lawn mowers," but I wrote "couch" instead.

What's up with the riding lawn mowers? People with lawns the size of postage stamps are cutting their grass with riding lawn mowers.

What's up with all of the massive landscaping? I love a nice lawn and pretty flowers/bushes, etc. However, people seem obsessed with having the perfectly manicured, lawn that looks like a country club golf course.

People used to be satisfied with a nice lawn. Now everything is hyperlandscaped. In addition to the perfectly placed bushes, hostas, perennials, annuals and flowering trees--ya got yer wood chips and river rock, as well as retaining walls, decks, stone patios, outdoor fireplaces, powered fountains, ponds with lily pads and big goldfish--as well as other "water features" such as waterfalls.

Our yards are like frickin amusement parks!

[ComerPerro]

19. When Jesus comes back, he's gonna look at your lawn

he will want to see chemically treated green grass and excessive landscaping.

And you had better have an Escalade in your garage....

[ProfessorGAC]

46. Define Excessive

Don't want to start a fight, but my wife and i have extensive, (excessive?), landscaping, but we live in a modest cape cod in a small town in NE Illinois. We want the yard to be beautiful because we like looking at it, but i would guess you think it excessive. Perhaps not. What would constitute excessive?

So, it's not a matter of keeping up with the Joneses. We do it for us. If other people get to look at it and like it, so much the better.
The Professor

[susanna]

60. LOL! As a gardener, I'm with you on that...

I have beautiful perennial beds outside my urban home. Not kidney-shaped or fancy dan stuff; just formal, rectangular beds in the front. I showed a picture to a co-worker and she asked me if I would "design" her "landscape."

I told her "I designed my own landscape. You should try it, it is really fun!" She didn't like that much. It wasn't "her thing."

Yeah.

[susanna]

59. What gets me...

...is the complete ignorance on the part of homebuyers on the actual cost of maintaining a property. You think the closing was it? LOL. Welcome to hell. It's the Money Pit on steroids...if not, you got lucky and be thankful. I have a beautifully built, solid older home. But roofs, ductwork, plumbing and the like have cost me 3 - 10K every year I have owned it, depending on the urgent need of the time. Newer McMansion homes, built with a more "disposable" mentality (yes, I think so), will eventually cost much more to maintain, IMHO.

I actually think that should be a part of the equation for giving money for a home: can the buyers afford the actual upkeep? Of course, the bank doesn't care, but wow - the stories I have heard re: maintaining a residence properly. "Money, money, money."

[Yollam]

15. Coming soon: The 10 year car loan

Gotta have that New SUV with the DVD player... :eyes:

[MissB]

26. And didn't car loans used to be

3 years?

[jerry611]

37. Rarely 3 years anymore...

As the price of automobiles rise, banks find out that they can sell more cars if they spread the payments out over 4, 5, or 6 years.

[Left Is Write]

49. It's never a good idea to have a car loan that outlasts the warranty.

[ProfessorGAC]

48. They're Already Here

There have been banks offering those probably as far back at 2001. We don't at the bank on whose board i sit. We max out at 72months, but there are several major banks that offer 96, and 120 months loans.

That seems an awfully long term for a vehicle. It will start needing major replacement work (belts, hoses, struts, shocks, break rotors, etc) before the thing is even paid off.
The Professor

[Wheres The Beef]

21. Not so insane

Since mortgage interest is one of the few tax deductions left to the average guy, and most people only live in a home for 3 to 5 years, if a 50 year loan or interest only loan makes more house affordable then why not? If you can't take advantage of the tax break then you probably don't qualify for the mortgage anyway. The other great break is if you live in your home for 2 years, $250,000, ($500,000 for married filing jointly), of gain is tax free. Worried about going into retirement with a mortgage payment? Why not use the rules and build you way into a free and clear home and some tax free cash? What happens when the market crashes? You still have a roof over your head, a tax deduction and long term the market will always gain. Try that with stocks or gold. Ya can't eat or live in either one of them!

[MadHound]

41. Sorry, but I'd rather have my home paid off

And not get the tax deductions, rather than be saddled with a never ending mortage and getting a pittance back on tax credit:shrug:

Call me a Luddite if you want, but I believe these new financing scheme are a sucker's bet. If a person can't afford a standard twenty-thirty year mortage at a fixed rate, then they should either look for a different house, or wait until they're making more money. A fifty year mortage is just substituting one landlord for another.

It's just a sucker's bet in my opinion.

[Wheres The Beef]

51. Don't be sorry

That is absolutely your choice. And it's not without merit for many people. But for many others, including me, The choice between having the tax system help me pay for my housing, and flat out sending the government a large check, I'll take the mortgage. You are smart to analyze your own financial situation and do what's best for you, as you most likely have.

It's not a one size fits all world, and you have to do what makes sense for you.

[MissB]

25. I see mortgage offers all the time around here.

I never used to get them, but when we sold our old house and bought a new one, we suddenly started getting more and more of those refinance offers.

I shredded one yesterday that offered a 40-year 1% ARM. That sucks in so many ways. :rofl:

[robcon]

30. Why is is a 40 or 50 year mortgage a problem?

People can borrow however they like. Some, like me and my sister (my brother paid off his mortgage before moving to a bigger house and getting a new mortgage) have paid off their mortgages. Since the average stay in a house is only 8 years, very few others do.

What does it matter if the mortgage is paid off? People should be free to choose whatever they want to do.

[TX-RAT]

33. I agree.

People should be free to choose whatever they want to do.



I just don't want to hear them bitch later, when they realize how insane a 50 yr mortgages is. It's all just bait folks, and if you bite, it's your fault.

[robcon]

42. Could you define the insanity.

How is it that 30 year mortgages which are, on average, paid off in 8 years (by sale of the house) are more or less insane than 50 year mortgages, which will also be paid off, on average, in 8 years?

[TX-RAT]

47. paid off in 8 years (by sale of the house)

Thats definitely not the case in this area, it's been dead around here for years. I'm speaking more for those who by their house and live in it until it's paid off, as i did.

[Left Is Write]

50. I'm not sure it's insanity, necessarily, but the person who sells his home

eight years into a 30-year mortgage is likely to have a bigger payout (and thus downpayment for another house) than the person who sells his house eight years into a 50-year mortgage (barring having dipped into equity for other purposes, of course).

[robcon]

55. Yes, of course.

That person, in effect, financed the difference in the two balances.

Where's the insanity?

[Left Is Write]

56. You'll have to ask the people who called it insane.

[Jacobin]

29. Here's an example of what you would pay with a $100,000 mortgage

Principal borrowed: $100000.00
Monthly Payments: 12 Total Payments: 600 (50 times 12)
Annual interest rate: 6.00% Periodic interest rate: 0.5000%
Regular Payment amount: $526.40 Final Balloon Payment: $0.00

The following results are estimates which do not account for values being rounded to the nearest cent. See the amortization schedule for more accurate values.
Total Repaid: $315840.00
Total Interest Paid: $215840.00
Interest as percentage of Principal: 215.840%

[robcon]

32. Thanks for the info, Jacobin...

but few if any 50 year mortgages will be paid off except by the sale of the house. It's a good way to finance if you don't intend to live there long.

[DaveJ]

36. Oh ya it's still better than renting

I guess....

[DaveJ]

35. Not everyone can have a home, that's for the most fortunate

Nothing to worry about. Our homes and land is owned by foreign interests who own the banks. No problem here. :grr:

[jerry611]

39. Depends on the situation...

I bought a house several years ago at a very, very low adjustable. Last year the ARM was up for re-finance and instead I opted to sell the property. I made a profit of $120,000 and put it as a down payment on a different house. I now have a 15-year mortgage, a bigger house, and the mortgage payment is half of what it was.

If I knew a property will appreciate by $100,000. It doesn't matter what kind of mortgage you sign...you are going to make money in the end.

You got to know how to play the market. You have to be a smart. That's the only way you win.

[serryjw]

54. The ARM was UP

and what happens when you can't re-finance.,out of work, credit lousy due to illness or loss of job. Everyone is assuming life deals you and equal shake..it doesn't.I bought my condo 6 months BEFORE I was DX with Stage 3 Breast Cancer. I'm still of the old school. I have no idea why someone needs to change houses every 5 years. You buy your 3 bedroom home and raise your kids in it. You may want to trade down to a smaller home after the kids are gone.

[Wheres The Beef]

63. I'd get a new financial planner

"Every financial planner will tell you to pay off the home an invest in an IRA BEFORE you do anything else"

If I went to a financial planner who told everybody the same thing I would quit going to her.
As you can see just from this thread everybody is different. Most people don't have the same goals, income, potential, tolerance for risk or even needs. Thats what makes this country great. You have the freedom to do things the way you want, and don't worry about what "everybody else thinks" You do whats comfortable for you, and I'll do my thing.

BTW. My mother was diagnosed stage three breast cancer when she was 50. She made it to 75, but the cigarettes got her.
Good Luck

[serryjw]

64. No doubt

IMHO, this is not the time for middle America to take risks with the most basic things like housing. While I was fundraising for the DNC talked to thousands of seniors that where living on SS and maybe a small pension. The ONLY reason why they were OK was their homes where paid for.
Look at the stats. Most retire with little more than SS, the dollar is in crisis and the next 20 years will bring challenges that no one has seen since the great depression. You feel comfortable with the risk...go for it!
I hope it all works out well

[anarch]

40. will any bank give me a 10,000 year mortgage?

Cause I really want to live in one of those $10,000,000 houses in Potomac, MD, and I figure that's the only way. Hell, I'll go as high as $250 a month...whaddaya think?

[HamdenRice]

44. It makes perfect sense: It's not about "paying off" the mortgage

It's about lowering the monthly payments and counting on the appreciation in the value of the house. This made perfect sense, back during the housing boom, for a person who is buying a house he has no intention of staying in for long. The interest dominanted mortgage payment is like tax deductible rent. After a few years, the value of the house is greater than the principle amount of the loan. You sell to the next guy, pocket your profit and buy a bigger house. After two or three of these flips, you can settle into a regular mortgage.

[susanna]

62. Maybe I am old fashioned, but that is semi-sad. n/t