when you rent a home, the cost has profits baked in - and often will also have interest from the loan baked in. you aren't escaping this by renting, it is just hidden in the equation
50 Year Mortgage
- Thread starter cawacko
- Start date
cawacko
Well-known member
Landlords can only charge what the market allows. I’ve owned property and the renter doesn’t care what my loan amount is or what I’m paying in taxes. They pay market rent, nothing more.
A 50 year mortgage is different because you’re taking on the debt directly, and the interest bill is huge.
the market will allow profits after interest is added, we have history to see this is so. I did not say landlords will use a 50 year mortgage - that is likely for primary homes, not investments
signalmankenneth
Verified User
cawacko
Well-known member
A landlord charges whatever the market will bear. If my loan costs more than the rent I can get, that’s my problem not the renter’s. The renter still only pays market rent.
With a 50 year mortgage you are the one taking on the debt, and the amount of interest you end up paying is enormous. That’s the difference.
you fail to understand that a 50 year loan is government subsidized. the interest rate is not a market rate
NiftyNiblick
1960s Chick Magnet
The HUD Act of 1970 was very successful in getting young people into their first homes.
cawacko
Well-known member
Genuine question. What’s your overall view on how housing should work? I’m trying to understand the philosophy behind what you’re saying.
my overall view is that capitalism fundamentally is about saving capital, not borrowing capital. Debt didn't make much sense under true capitalism, but that isn't what we live under today
the world now floats on consumerism. Debt is the engine for the economy today.
cawacko
Well-known member
Refinancing only works if you have enough equity and the rates move in your favor. That’s not guaranteed.
With a 50 year mortgage you build equity so slowly that a lot of people wouldn’t even qualify for a refi. It’s not a button you can just push whenever you feel like it.
T. A. Gardner
Serial Thread Killer
If you look at it, this is a better deal than an 'interest only' mortgage and those were being offered in the late 80's and into the 90's before the bubble burst. People were taking those mortgages for the exact reasons I outlined. They knew the market was rising--or at least had the expectation it was--and knew that they would be selling off the property within a few years at a higher price than it was bought at taking the equity earned to roll over into a new home.
So, for many people, a 50-year mortgage may look very attractive. It doesn't mean it has to become the industry standard.
I'd also say it's far better than either a 'rent-to-own' where you risk losing your entire investment as you are not an owner until things are paid off, or the newest fad, developers building whole subdivisions of 'starter' homes that are leased or rented rather than sold off. All that does is let renters let what amounts to a bigger apartment.
cawacko
Well-known member
That was more than fifty years ago. The housing market back then was a completely different world. You can’t just copy what they did in 1970 and expect it to work the same way now. I’m asking what a planned approach would look like today with the problems we have today.
If the supply doesn't increase you will have an increase in equity whether or not your mortgage is creating it. You can't say you have one problem that this doesn't resolve, then say it doesn't exist when you start talking about refinancing. Even if you refinance with the same principle into a 30 year you will be reducing your rate and your payments will likely land close enough that your raise will more than cover it. While some few may have issues, like getting fired, they will have those issues regardless.
The 50 year would only be for the first time buyer, and those people should be aiming at reducing the term as quickly as possible.
cawacko
Well-known member
I understand your frustration about debt, but I’m asking specifically about housing. What would your approach look like in terms of actually building more homes or making them more affordable?
if I was a young person and was struggling to find terms on a 30 year loan, I would pursue a 50 year loan and avoid renting as soon as possible, knowing as my income grows, I can pay down quicker and refinance many times.
obviously removing regulations is the best way to drive down home costs
NiftyNiblick
1960s Chick Magnet
I'm a retired union rep.
Asking a PhD in Economics will yield a more detailed answer for you.
I just don't find the results of laissez faire to be sociologically acceptable anymore.
cawacko
Well-known member
A lack of supply doesn’t guarantee appreciation. We’ve seen plenty of stretches where values flatten or fall.
Even with a raise you still need equity and the right rate environment to refinance. A 50 year mortgage builds equity so slowly that a lot of people would sit at a high LTV for years. Better credit and more income don’t change that.
Stretches. This again is borrowing a trouble and applying it on both sides.
It is a problem because property values won't drop, but then you say that property values might drop locking them in. You need to pick one effect. You do not get to say it is a problem in every way. Simply stretching time doesn't change the Real Property values over that some period of time.
In reality, some short stretches may lock anyone into a mortgage that becomes underwater, or changes like divorces or job loss. This doesn't change what we are talking about in any real way.
If you get a 50 year mortgage, in that 50 years I guarantee, unless you take hammers to the walls and try to fill the rooms with water with your hose or otherwise destroy your property, or if you ignore any and all upkeep, you will have an increase in equity. Some short stretches of level or negative pricing notwithstanding.
This is a bit like saying you shouldn't buy stock because some small stretches you will have a paper loss even though overall you will average 11% on your investment.
T. A. Gardner
Serial Thread Killer
In the 1970's homes generally cost well under $100,000. They were simpler to build, and builders faced far less regulatory compliance. Much of the cost of a home today is government.
Today, nearly 25% of the cost of a home is government regulation, permitting, and compliance.
Builders Tally Cost of Regulations for New Homes
Back to News Center Regulations accounted for nearly a quarter (23.8%) of the average cost of a new home ($394,300), according to the National Association of Home Builders (NAHB). The figures are based on data from 2021, the latest available information. In a more recent study, the 2024 Cost of...
www.nwrealtor.com
That amounts to just shy of $94,000. That is just paperwork and government doing government. It adds little or no value to the house.
NAHB Chairman's Message: Regulations Add $93,870 to a New Home’s Price
How overregulation is exacerbating the nation’s housing affordability crisis
www.probuilder.com
That is a massive shift in costs from the 70's.