50yr mortgages can become new reality?

[kev374]

In the face of rising prices can 50yr mortgages be pushed by banks to offset rising prices thereby allowing prices to remain at their current levels? Since so many people have bought into foolish financial schemes like Interest Only and NegAm mortgages just so that they can get into homes what’s to say that 50yr mortgages will not become the norm?

This is just a very scary thought that those who are averse to this long of a mortgage will have no other choice but to accept them because they may become the norm.

Opinions?

[4plexowner]

Here are the monthly payments on $400K at 6% fixed:

30 yrs – $2398.20
50 yrs – $2105.62
70 yrs – $2030.77
100 yrs – $2005.04

I was surprised the first time I realized that extending the length of the loan doesn’t really change the fact that homes are unaffordable.

Even so, the Japanese were obtaining 100yr mortgages before their real estate market collapsed.

Imagine what your kids and grandkids will think of you when they are struggling to pay off that shit-box in Clairemont decades after you have passed on!

[Carlsbadliving]

Wow, I’m amazed at the small difference in monthly payments between a 30yr and 50yr fixed. Thinking about the amount of interest you’d pay over a 50 year period just about makes me sick.

[barnaby33]

SoCalMtgGuy covered that pretty well on Another FB

Josh

[PerryChase]

I wonder why so many Americans have mortgages. If the birthrate is just about the replacement rate, over time, there should be little need for new housing, except for new immigrants.

Are houses not passed on from one generation to the next? If that were the case, housing should represent a diminishing share of the economy.

[Anonymous]

PerryChase – Ummmm….people have mortgages because they oftentimes want to move up into a bigger, better home. They have mortgages because they borrow against their equity to send their kids to college, add on to their house, etc. They have mortgages because they buy vacation homes and investment properties.

And no, they don’t always pass a house from one generation to the next.

Are you from around these parts??

[IONEGARM]

The difference in payment is so small due to compounding, and the cost of the loan is extremely high.

I think there is a psychological barrier to a 50 yr mtg.

[lindismith]

Plus, they’re all counting on selling their houses to pay for care when they have to move into old-age homes!

Have you guys seen what it costs to put your parents in one of those?

[sdcellar]

Yeah, I think somebody somewhere explained that an interest only loan is basically amortizing over an infinite period of time and 100 years is surprisingly close to the lowest amount you could pay on a monthly basis.

I ran the numbers for the example and the least you could pay if you wanted to do it over forever is $2000 bucks a month. That’s only a five dollar a month difference between 100 years and forever…

[VCJIM]

Forever sounds like a reasonable time frame for paying off one’s home.

[Doofrat]

Total interest paid on the 30 year is $463,484
Total interest paid on the 50 year is $865,358

The lower payment in the beginning of the 50 year is half of the problem, and the other half is the longer term of the loan. On the 50 year loan, the total interest for the last 20 years of the loan is $210,000, so in this example 50% of the problem is the lower payment alone, the other 50% being the longer term.

This is why those low and option payment loans are so bad.

[Author]

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