50 Year Mortgage

NiftyNiblick said:
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.
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Fair enough. This isn’t a housing think tank board and we’re not going to solve the world’s problems here.

But I will point out the irony again that we actually don’t have laissez faire in housing. It’s the large amount of government regulation that prevents new supply and drives up prices.

In San Francisco, like some other cities I’m sure, we have democratic socialists who don’t believe in market rate housing. They think the government or nonprofits should build all housing. It’s mathematically impossible to scale that to meet demand, but that doesn’t change their position.
 
cawacko said:
Fair enough. This isn’t a housing think tank board and we’re not going to solve the world’s problems here.

But I will point out the irony again that we actually don’t have laissez faire in housing. It’s the large amount of government regulation that prevents new supply and drives up prices.

In San Francisco, like some other cities I’m sure, we have democratic socialists who don’t believe in market rate housing. They think the government or nonprofits should build all housing. It’s mathematically impossible to scale that to meet demand, but that doesn’t change their position.
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Agreed that it's a tough issue to sort out.
 
Damocles said:
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.
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I’m not arguing that home prices never rise. I’m saying you can’t rely on future appreciation to make a 50 year amortization work.

You build so little equity in the first couple of decades that you stay at a high loan-to-value ratio for a long time. That’s the problem. You can only refinance when you have enough equity and the rate environment cooperates. A schedule that pays down principal this slowly makes it much harder for people to get out of the original loan.
 
cawacko said:
I’m not arguing that home prices never rise. I’m saying you can’t rely on future appreciation to make a 50 year amortization work.

You build so little equity in the first couple of decades that you stay at a high loan-to-value ratio for a long time. That’s the problem. You can only refinance when you have enough equity and the rate environment cooperates. A schedule that pays down principal this slowly makes it much harder for people to get out of the original loan.
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You can plan on using an financial tool to build your equity. Whether you refinance with the same principle when you get the raise it would still benefit you. I guarantee you, if you live in it and pay rent you are paying more than a mortgage. If you were not, the person renting it to you is losing money and the whole system would collapse. Start with buying the house, refinance when you get the raise and can afford to, continue to refinance as you get equity, lower the time you are in that debt.

Saying that they "cannot" get refinanced because of sudden price drops when also saying that the problem is prices are too high for them and they will not drop because of <insert problem here> then turning it around and saying <problem inserted before> is now causing the opposite and you should not use this tool because of that is just doomsaying. No matter what they do they run into your doomsday event where they are financially crippled because they used this financial tool that you do not like.

I fully understand that you do not like the 50 year mortgage. But you should not be saying it is bad because it doesn't solve the supply problem which keeps pricing high, then also tell us that the supply problem wont "ALWAYS" do what supply and demand makes happen...

I get that you do not like it, but it is a tool like any other, and it will get some people into homes that are otherwise locked out right now due to the supply issue causing the prices to rise.
 
Damocles said:
You can plan on using an financial tool to build your equity. Whether you refinance with the same principle when you get the raise it would still benefit you. I guarantee you, if you live in it and pay rent you are paying more than a mortgage. If you were not, the person renting it to you is losing money and the whole system would collapse. Start with buying the house, refinance when you get the raise and can afford to, continue to refinance as you get equity, lower the time you are in that debt.
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Exactly. Interest rates vary, income increases, and lifestyle changes all offer opportunities for a homeowner..
 
zymurgy said:
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
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I get that idea but everything you’re describing depends on making more money later, paying extra towards the loan, refinancing at the right time and having a market that keeps rising. That’s a long list of items that have to go right.
 
cawacko said:
I get that idea but everything you’re describing depends on making more money later, paying extra towards the loan, refinancing at the right time and having a market that keeps rising. That’s a long list of items that have to go right.
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again - these are subsidized loans. so in theory a 30 and 50 year loan could have the exact same interest rate if their purpose is to help with ownership


so for easy math - take a 100k loan at 5%

interest for year 1 under a 30 year loan, $4,966.49

interest for year 1 under a 50 year loan, $4,989.55


I feel like we may be turning that molehill into a mountain. Most of my home equity is from value growth, not principal payments
 
NiftyNiblick said:
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.
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Search Assist

The current average age of first-time homebuyers in the United States is 40 years old, which is the highest recorded since tracking began. This increase reflects ongoing challenges in housing affordability and economic conditions. NBC News Fortune

banker bailouts fucked over the future.

:truestory:
 
cawacko said:
I get that idea but everything you’re describing depends on making more money later, paying extra towards the loan, refinancing at the right time and having a market that keeps rising. That’s a long list of items that have to go right.
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And everything you are saying depends on the opposite. Somehow everyone that gets one of these will be trapped because none of them will ever make more money and equity is a thing of the past. None of this is true.

We can stop making all financial decisions if we go by what could possibly be the worst case scenario... nobody can do anything because even Elon could lose all his money.
 
cawacko said:
I get that idea but everything you’re describing depends on making more money later, paying extra towards the loan, refinancing at the right time and having a market that keeps rising. That’s a long list of items that have to go right.
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And all of that has been going on for years. Most of us have dealt with it and benefited from home ownership regarrdless of the length of the mortgage or interest rates.

At age 25, our first house in a tony part of town was $20,500 with an 8% interest rate and a thirty year mortgage. We sold it 20 years later for $125,000 and moved up from there.
 
zymurgy said:
again - these are subsidized loans. so in theory a 30 and 50 year loan could have the exact same interest rate if their purpose is to help with ownership


so for easy math - take a 100k loan at 5%

interest for year 1 under a 30 year loan, $4,966.49

interest for year 1 under a 50 year loan, $4,989.55


I feel like we may be turning that molehill into a mountain. Most of my home equity is from value growth, not principal payments
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Sure, over 50 years there’s a pretty good chance prices go up some degree unless you’re in a dying area. I’m not arguing that part.

The problem is the massive amount of interest you’re paying to get there. That’s the part that makes the whole thing a bad deal.
 
cawacko said:
Sure, over 50 years there’s a pretty good chance prices go up some degree unless you’re in a dying area. I’m not arguing that part.

The problem is the massive amount of interest you’re paying to get there. That’s the part that makes the whole thing a bad deal.
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you quoted my math - the year one difference in interest is a trivial dollar amount - $23!!!!


so if a bank said your loan to income ratio on a 30 year is too low, you would keep renting over $23?
 
Damocles said:
And everything you are saying depends on the opposite. Somehow everyone that gets one of these will be trapped because none of them will ever make more money and equity is a thing of the past. None of this is true.

We can stop making all financial decisions if we go by what could possibly be the worst case scenario... nobody can do anything because even Elon could lose all his money.
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I’m not talking about worst cases. I’m saying I don’t see a realistic scenario where this actually helps buyers.

For it to “work” the way you’re describing, you’d need the market to run hot enough for long enough to cover how slow the principal pays down. That’s not a common pattern.

What’s an example of the conditions where you think this is a good deal?
 
Lionfish said:
And all of that has been going on for years. Most of us have dealt with it and benefited from home ownership regarrdless of the length of the mortgage or interest rates.

At age 25, our first house in a tony part of town was $20,500 with an 8% interest rate and a thirty year mortgage. We sold it 20 years later for $125,000 and moved up from there.
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I appreciate the example, but here’s the deal. With a 50 year mortgage you pay almost double the interest you would on a 30 year. That’s what makes it a bad deal. On top of that it doesn’t fix housing affordability.
 
zymurgy said:
again - these are subsidized loans. so in theory a 30 and 50 year loan could have the exact same interest rate if their purpose is to help with ownership


so for easy math - take a 100k loan at 5%

interest for year 1 under a 30 year loan, $4,966.49

interest for year 1 under a 50 year loan, $4,989.55


I feel like we may be turning that molehill into a mountain. Most of my home equity is from value growth, not principal payments
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The year one numbers are fine. That isn’t the part anyone is arguing about. The issue is the total interest over the full term and how slow the principal pays down. A 50 year loan costs way more over time. That’s the part that makes it a bad deal, not the first twelve payments.
 
cawacko said:
The year one numbers are fine. That isn’t the part anyone is arguing about. The issue is the total interest over the full term and how slow the principal pays down. A 50 year loan costs way more over time. That’s the part that makes it a bad deal, not the first twelve payments.
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I recall reading that the average length people hold a 30 year mortgage is 7 years. a 30 year loan is really not good either under your exact same concerns
 
cawacko said:
The year one numbers are fine. That isn’t the part anyone is arguing about. The issue is the total interest over the full term and how slow the principal pays down. A 50 year loan costs way more over time. That’s the part that makes it a bad deal, not the first twelve payments.
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it is THAT different from a 30?
 
zymurgy said:
I recall reading that the average length people hold a 30 year mortgage is 7 years. a 30 year loan is really not good either under your exact same concerns
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The loan is a bad deal no matter how long you hold it. If you sell early you barely touch the principal, and if you keep it for decades you pay a ton more interest.
 
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