Fifty year mortgages? And how is that supposed to help?

Aunt Bea said:

The city that I live in has thousands of homes priced well below the national average that could be purchased and gradually renovated/improved by an ambitious couple looking for a family home.

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When we bought this house it needed plumbing work, a shower replacement, a heat system, carpet, and window dressings, so we got it at a very reduced price. We were willing to do all those things since we would come out better financially than buying a newer home that was picture perfect.

There has been a great big change of attitude since we were young. People our age then would settle for a "starter" home. Seems to me that most of the young ones today want to start out with nothing short of little castles.

^^^^^^^^
What Mack said. Can't even picture young ones starting out in a 10x50 trailer, or a 20x20 older house.

I purchased 3 houses during my working years. The benefit of a mortgage is you lock in a fixed payment. After 3 to 5 years a person usually starts marking more money so that fixed mortgage payment becomes a smaller % of your income. Often times mortgage rates change, sometimes lower. That gives a homeowner the ability to refinance at a new lower fixed interest rate.

I could see the advantage of a 50 year mortgage allowing a new home buyer an opportunity to buy into the housing market due to the lower monthly payment. Perhaps after a few years interest rates may go down which would then allow the homeowner to refinance at a lower interest rate, which would reduce the monthly payment, or refinance into a 30 year mortgage at the lower interest rate, maybe at or near the same monthly payment.

For some, you can maybe finally just be able to afford a payment on a house because of a 50 year mortgage, but if you are prosperous and with a little luck, you will have an opportunity to get into a better mortgage some years down the road. All three houses I purchased I was able to take advantage of refinancing to lower interest rates. I also paid off all three houses many years earlier by paying extra on the principal each month.

squatting dog said:

^^^^^^^^
What Mack said. Can't even picture young ones starting out in a 10x50 trailer, or a 20x20 older house.

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There's a big difference between a starter home and a trailer or tiny house the size of a home smaller than most two car garages. Like my husband and me, our children (and their spouses) rented apartments while saving for first homes they can live in for the duration, if they so desire. Given that all have interest rates in the 3s and 4s, none are entertaining the thought of moving.

Two kids bought cosmetic fixers, the third bought a home that needed updating plus some serious plumbing, electrical and HVAC work, but the price was so good (and the mortgage rate so low) that it behooved him and his wife to endure some inconvenience while they worked all of that out.

The house was owned by family members, so no realtors (or their fees), and it never went on the market. House flippers would have wanted to snap it up, but were not given the opportunity.

At least in this area, house flippers have all but eliminated the possibility of people buying cosmetic fixers or serious fixer uppers. It's pretty sad.

squatting dog said:

^^^^^^^^
What Mack said. Can't even picture young ones starting out in a 10x50 trailer, or a 20x20 older house.

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StarSong said:

There's a big difference between a starter home and a trailer or tiny house the size of a home smaller than most two car garages.

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I see both your points. Our first home was just under 800 square feet, a "post war" home, 2 bedrooms, one so small there was only room to turn around in, and one bath. Interest was double digits when we bought it, and that's all we could afford. We lived there for years. When we sold it, we didn't get much. When we got the house I have now, it was much bigger and we thought we had really moved up, even with the repairs we had to do. Still, it doesn't match what today's buyers want.

My (real) aunt and "uncle" (by marriage to her) lived in a small trailer with one bedroom for years. They could have afforded better, but chose to sock away the dollars. They finally bought a nice house when he was age 64, and he died of a heart attack the following year.

Perspective is everything. For me, living in a hearse (not quite as elegant as this one), then getting married and renting a dumpy apt in NYC, and then moving the wife and 5 puppies to VT all the while living in the 55 chevy wagon until I could find work, I was thrilled to have a small house and then a 10x50 trailer. I knew there would come a time when I'd move up the food chain. Today, nobody thinks they should have to rough it.

I try not to generalize too much about what people are or are not willing to do…but I do know most people are pretty darn ignorant about money, loans, interest rates and just plain life. I really really wish people had to go thru some sort of financial education before they could enter into a loan agreement. This goes for education, cars, credit cards or houses. If they truly understand the implications…then they can make decisions…and live with the consequence.

WhatInThe said:

I think once the details are worked out/presented it might not be as appealing as many want or think it might be.

Should note it is a common sales technique used even when selling a 800 dollar tv set ie focus on the lower monthly payments and not the total cost. Stores try to sign you up for their credit cards using this tact. Car sellers notorious for it.

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I think I saw an as today where you can have your garage door repaired for only $39 a month. How many months? They didn't say. And that was only a garage door.

Babs2u said:

I think I saw an as today where you can have your garage door repaired for only $39 a month. How many months? They didn't say. And that was only a garage door.

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An ad

I saw an analysis on this that indicated a $400,000 mortgage for 50 years would lower monthly payments by approx. $300 and increase interest from $400,000+ on a 30-year mortgage to $800,000+ on a 50-year mortgage. Ridiculous proposal that puts a bandaid on a more serious issue.

What if the government worked to regulate REITs where holding companies are buying up communities and adding to the cost of housing?

Many factors have influenced this unusual housing market, of course. But one that affects the housing shortage in particular is institutional real estate investment. Redfin reports that real estate investors purchased about 44,000 homes in the U.S. during the first quarter of 2024 — that’s close to 19 percent of all U.S. homes sold during that time frame. The share of lower-priced homes bought by investors was even higher at 26.1 percent.

These large investment companies are exacerbating the home inventory shortage by buying up the most affordable properties and renting them out, making it even harder for individuals and families, especially first-time homebuyers, to get themselves onto the housing ladder.

How Real Estate Investors Affect The Housing Shortage | Bankrate

IMHO, it is possible that this may cause a change in family, economic, and societal dynamics as we see them now. More and more young adults may be forced to continue living with parents, perhaps even until the oldsters die and the children inherit the house. The lists of advantages and disadvantages is long. Just something to consider.

seadoug said:

I saw an analysis on this that indicated a $400,000 mortgage for 50 years would lower monthly payments by approx. $300 and increase interest from $400,000+ on a 30-year mortgage to $800,000+ on a 50-year mortgage. Ridiculous proposal that puts a bandaid on a more serious issue.

What if the government worked to regulate REITs where holding companies are buying up communities and adding to the cost of housing?

Many factors have influenced this unusual housing market, of course. But one that affects the housing shortage in particular is institutional real estate investment. Redfin reports that real estate investors purchased about 44,000 homes in the U.S. during the first quarter of 2024 — that’s close to 19 percent of all U.S. homes sold during that time frame. The share of lower-priced homes bought by investors was even higher at 26.1 percent.

These large investment companies are exacerbating the home inventory shortage by buying up the most affordable properties and renting them out, making it even harder for individuals and families, especially first-time homebuyers, to get themselves onto the housing ladder.

How Real Estate Investors Affect The Housing Shortage | Bankrate

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Regulating REITs isn't going to happen because multimillionaires and billionaires make (or heavily influence) the laws, and they're primarily concerned with feathering their own nests. Our country is in a very sorry state.

StarSong said:

Regulating REITs isn't going to happen because multimillionaires and billionaires make (or heavily influence) the laws, and they're primarily concerned with feathering their own nests. Our country is in a very sorry state.

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It comes down to a local issue/response. If people are leaving properties vacant until a sale which could take months perhaps some local ordinances requiring more frequent inspections of vacant property unless purchased by a private owner.

A question would be how long are investment properties sitting and how many do these investors have in their inventory.

Vancouver BC has extra taxes on vacant properties, especially those of foreign owners. Right now I believe it‘s 6% of the value. I don’t know if it has changed anything overall. Maybe it discourages investors who just want to sit on the homes.

An agenda of the 50 year mortgage proponents is to mask some of the prominent causes of residential housing inflation that are financial institutional investors maximizing profits, REITs that shield foreign investments, and excessive immigration. Wealthy and real estate/financial corporations are increasingly desperate to stop restrictive foreign investor laws, quietly with back door political deals. These are the ones getting rich off the rest of us, resulting in housing inflation, homelessness, and a long list of social ills from excessive immigration, both legal and not. Of course, other Western nations are also suffering residential housing inflation due to excessive immigration, often from war zones.

So stop being their fools, believing their constant lies that includes both political parties and their dominant puppet news media. The below report should be read by all USA citizens lest they inconsiderately, selfishly continue to destroy the rest of us. The bottom lists plenty of online references for those that want to understand more. Greedy, selfish, financial institutional investors and REITs are currently trying to push through legislation that would curtail ways they hide foreign investments from public awareness. So they can instead continue to lie about why housing is inflating. "Oh, we need to build more housing." And then only mostly build McMansions or upper class multi-unit rentals with the excuse, its the only way they can make a profit. (As in HUGE profit so they can retire in Palm Beach.)

https://www.fairus.org/issue/housing-affordability-immigration-issue

...Housing acts like any other good subject to inflation. High levels of immigration to the U.S. generate constant demand for housing, which raises prices and maintains them at unnaturally high levels relative to natural increase. In addition, immigration causes a “spillover effect” where citizens fleeing high immigration increase housing demand in surrounding areas. Decreased immigration would allow the housing market to operate more “normally”, without external demand propping up unsustainably high prices...

Another issue not addressed in the link is how financial institutional investors and REITs own significant numbers of vacant residential homes that are then used for high monthly rentals or left vacant as long investments.

https://jpia.princeton.edu/news/rise-institutional-investors-us-rental-housing-market

...The creation of the rental housing asset class offers an instructive way to understand the extreme and spatially uneven form of capitalism known as financialization. Defined as “the increasing dominance of financial actors, markets, practices, measurements and narratives, at various scales, resulting in a structural transformation of economies, firms, states and households” , financialization expresses the leading trend in capitalist development and housing has always been one of its clearest and most salient manifestations. By desperately attempting to stabilize distressed markets after the 2008 mortgage collapse, the U.S. regulatory and business environment solidified a crisis-prone relationship between finance, rental housing, and working-class tenants. This has made rental housing less available, more expensive, eroded tenant protections, and reproduced broader social inequalities...

"I don’t like 50-year mortgages as the solution to the housing affordability crisis, It will ultimately reward the banks, mortgage lenders and home builders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!"
Marjorie Taylor Green.

I never thought that woman could ever say anything that I agreed with. But there it is.

I still can't get over the 5-7 year car loan. This tact is also used by car companies all the time. Usually near the end of the commercial one will the per month cost with total cost in fine print. Cell phone companies also do it pushing the per month cost with some actually disturbed I want to pay off the device at once.

Very few stay in a neighborhood let alone one house anymore in part most have trouble getting 30 years of employment with the same company. As noted up thread except for some that know how to take advantage of it including extra payments, refinancing etc I don't see this benefiting many.

Too many variables for one solution to make housing more affordable or available.

Anything designed to help the buyer may hurt the seller and anything done to help the seller may hurt the buyer, best to leave it alone and let the market, supply and demand, sort it out.

Trade said:

"I don’t like 50-year mortgages as the solution to the housing affordability crisis, It will ultimately reward the banks, mortgage lenders and home builders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!"
Marjorie Taylor Green.

I never thought that woman could ever say anything that I agreed with. But there it is.

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While it would suck to be in debt for life due to a 50 year mortgage, it would suck even more to be a renter and be at the mercy of a landlord where you could have your rent raised every year. At least people would have some stability with a 50 year mortgage. And if the housing market collapses and they're underwater in their mortgage, they can always file for bankruptcy. At least until that time, they'd be in control of their housing situation.

The average home price in many intermediate size cities these days is over $500,000, and that's often just for a little ranch house in the suburbs. If you put $50k down and get a 30 year loan, if you include property taxes and insurance, your monthly payments are going to be over $3,000. To make that payment, you're going to need an annual salary of about $100,000. The average blue collar worker doesn't make anywhere near that amount, nor do many professionals.

Many young people today don't think they're ever going to be able to buy a home. With a 50 year mortgage, they might be able to. And so what if they never pay it off. A lot of people never pay off their homes.

So for me, MTG is wrong again.

5 and 10 year ARMs, even with their challenges, have caps and would be my choice instead of a 50 year mortgage. I understand they have been making a comeback.

RambleTamble said:

And so what if they never pay it off. A lot of people never pay off their homes.

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True. Like I said in post #23 the average person keeps a mortgage for about 7 years before they either sell or re-finance. And with a 50 year mortgage they will pay a helluva lot more interest in those 7 years than they would with a 30 or 15 year mortgage. Not to mention the longer the mortgage term, the higher the interest rate.

At the present time the average interest rate on a 15 year mortgage is 5.49%, while the average rate on a 30 year mortgage is 6.24%.

Mortgage Rates

If 50 year mortages were available it is likely that the rates would be even higher.

Therefore my opinion is that a 50 year mortgage is a very poor choice for anyone. However I would be willing to reccomend that option to someone I didn't like.

Trade said:

Therefore my opinion is that a 50 year mortgage is a very poor choice for anyone. However I would be willing to reccomend that option to someone I didn't like.

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What about for people who can't afford to buy with a 15 or 30 year mortgage but would be able to buy with a 50 year mortgage? What would you recommend for them?

RambleTamble said:

What about for people who can't afford to buy with a 15 or 30 year mortgage but would be able to buy with a 50 year mortgage? What would you recommend for them?

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That's like asking people way back when if they'd rather starve or owe their souls to the company store. The better option is to take some classes or otherwise improve their skills (and employment value) so they can earn more. That's how most of us climbed the ladder.