31 thoughts on “A Fifty-Year Mortgage?”

  3. Can additional payments be made on mortgages in the US? Here I can, and have. I effectively turned a 30yr mortgage into a 20yr one by occasionally making extra payments, from overtime, bonuses etc. The main method that worked was maintaining payments at the same level when interest rates dropped. Obviously when they went up I had no choice but over time this worked well.

    1. Yes. My last mortgage was a nominal 30, paid off in under 8.

      There is no sleep aid better than no mortgage. No car loan is a close 2nd.

    2. Yes it can be turned into a 25 or even a 12.5 year mortgage by just pre-paying next month’s principal (25 year) or the next 2 month’s principal (12.5 year). For a 50 year mortgage, next month’s principal will amount to about 25 cents (exaggerating). Gets harder to do that as you go but then your income should be rising accordingly.

      That’s what I did on my house and it was paid off in no time. Haven’t had a mortgage for decades.

    3. The last I looked (several years ago), a number of loan companies would do zero-cost refinancing for a shorter period with a lower rate. I turned my 30 year loan into a 15 year loan and repaid it faster than that.

    1. Yes and there is probably some estate planning that could go into that to shield money from the government, lenders, and spouses of children.

      If you live in a community property state and don’t have a trust yet, go get a lawyer and set one up. This is especially true if your net worth is subject, or close to, and state/federal inheritance tax thresholds. Or if you have kids and you don’t trust their SOs or want to plan for their uncertain future.

  5. You can fix a market imbalance (and thus also the price) either by increasing supply or decreasing demand.

    Increasing the demand for housing by making it appear to be more attractive to purchase a home with these extended terms is moving the right dial in the wrong direction.

    Unless, of course, your goal is the continue to use affordable housing as a wedge issue and also pad the bottom lines of real estate investors and banks.

  6. So glad to be completing our new house with the 100% down and 0 payments for 0 months mortgage. Cheap lot on bad road. Small house I designed. Much sweat equity. Living cheap in meantime.

    To me a 50 year mortgage is nuts as the payment is not significantly different than that of the 30. If you need to go to that extreme to lower your payment, maybe consider buying less house, that you can AFFORD. And if there are no options for affordability where you live, move and let the ersatz rich mow their own yard, fix roof, cook, etc.

    1. When I was just starting out I was told to buy as much house as you could afford even if it meant eating peanut butter sandwiches. This is because your income will rise over time and your mortgage payments would stay the same and the payments would therefore become easier.

      So you have a more valuable asset.

      1. That type of well meaning advice contains a few assumptions that can mess you up.

        It assumes that your job will never have a hiccup that leaves you without a paycheck for a few weeks. If you are maxed out in payments, a few weeks is all it takes to ruin you financially through bad credit or even foreclosure. It assumes that you will have no emergencies like a car repair that has the same effect.

        It assumes you or your spouse never lose a job for any reason. Sears, Toys-R-Us, Montgomery Ward, DeLorean, Ivanpah, etc, etc. 2008.

        It assumes you don’t have any other things you might want to do in the meantime while waiting for that income to rise. Kids, cars, vacations, retirement investing.

        Buy what you can afford when it hits the fan if possible. Invest the extra money in something that leaves it available for emergencies while earning something. (This assumes enough self control).

        I’ve made a lot of mistakes in my life. Many of them were influenced by people that I thought knew what they were talking about. Regarding this particular subject of houses, I know a lot of people that lose their investment and their credit scores a few years back.

          1. At the risk of speaking for John, I think his point is that all the bad stuff happens a lot faster for far smaller reasons if you are already flying at the edge of your financial envelope.

          2. As Dick Eagleson said, It happens much faster when stretched out. I’ve had problems when overextended and I know plenty that had disasters when minor hiccups happened. Unless you have some sort of safety net available, overextending on a house or car is insanity. Finance institutions make bank off of people that lose their houses during a glitch that they can resell for serious profits.

            My position probably doesn’t make sense to one that has never experienced the problems that come with excessive debt.

  7. I remember Bruce Williams telling one of his callers, who was pondering the then-popular five-year car loan, “If you can’t pay off a car in three years, you can’t afford it.” That was before the seven-year loan and leasing became vogue. Respects to the White House, but I don’t know who thinks this is a good idea. Housing prices have to come down, not longer mortgages.

  8. This also replicates the overheated real estate market of 1980s Japan. I guess as a free country, this is something we should allow, but with continued restrictions on construction of housing (such as through zoning), this will allow for significant continued rise in real estate prices without a corresponding rise in real estate value.

    I don’t see the point of encouraging another bubble. The AI bubble is already bad enough.

  9. People posting here may be more affluent than average. My understanding is, 50- and 100-year mortgages are used in Japan and are inheritable. I once had a 30yr mortgage I couldn’t pay off early and got very little equity back after only 10 years. A few years later, I saved up $40k and bought a distressed property from a bank with the idea I’d renovate it. Medical disaster struck so wife and I are still living in it. Rent free roof beats all other rooves.

  11. I dug up an old amortization spreadsheet that I used back in the day when I had loans. I set up a loan of $500,000 at 6% interest and ran the numbers for a 30 and a 50-year payout. What I found was quite unsettling.

    With a 30-year payout, the monthly principal and interest payment was $2,997.75. With a 50-year payout, the monthly principal and interest payment was $2,632.02, so a savings of $365.73 per month.

    The shocking thing is what happens after 10 years. With the 30-year mortgage, the borrower will have paid $359,720.29 in principal and interest over 10 years. The balance at 10 years is $418,472.62, a reduction of $81,571.38. For a 50-year mortgage, the borrower will have paid $315,842,40 over 10 years. The loan balance will be a shocking $478,366, a reduction of only $21,634.

    If the borrower actually paid off the loan with no extra payments, the total interest after 30 years would be $579,190.95. On the 50-year mortgage, the total interest would be $814,908.57.

  12. Australia has recently allowed 5% down for buying a house. What could possibly go wrong?
    An already overheated trend of price rises has now gone beserk. Our house has appreciated by 25% since February this year. Bananas.
    Not helped by very high levels of immigration much of which ends up in Sydney (Sodom by the Harbor), Melbourne (Gomorrah by the Bay) and Brisbane (Babylon by the River).
    We haven’t had a mortgage or car loan since 1996. Sleep well.
    Don’t get me started on Australian house designs, designed to be complex and expensive to build. Pal worked for a builder ensuring compliance with standards. Seems to be as difficult as certifying a new light aircraft design.

  14. “In this scenario, which is basically almost an interest-only loan, you don’t really own your home; you’re just renting it from the bank.”

    On the other hand, if you pay off your mortgage, but live in a state that taxes property (spoiler alert: all of them), you don’t really own your home, you’re renting it from the state. I think that’s worse.

    1. Quite so. In CA, we have had Prop. 13 in effect for nearly a half-century that caps property taxes at 1% of valuation per year. But valuation rises with average market values. Those, in turn, rise if demand consistently exceeds supply. The politicos have long-since figured out that making housing more and more expensive to build ensures they get their increased tax revenues from homeowners by, in essence, taxing their appreciating equity.

      Making it easier to build and expanding the housing supply would likely bring in even more revenue as well as increase employment, but the lefties who run this state regard anything smacking of the Laffer Curve about as enthusiastically as vampires regard garlic.

    2. My house is paid for. I still have to pay property taxes, but in my case, that’s around $2,000 a year. I still had to pay property taxes when I was paying my mortgage, so your belief that only paying property tax is worse is beyond my understanding.

      Of course, there are other expenses that go with home ownership, such as insurance and maintenance. Those happen regardless of whether the mortgage is paid off or not. I had to spend $18,000 to replace my HVAC a couple months ago, and I repainted the interior this year. It’s a lot easier to afford these expenses when you don’t also have to pay a mortgage.

      Have you ever paid off a car loan? Feels good, doesn’t it? Having no mortgage feels much, much better. I’m at the point of my life where there’s no conceivable reason why I will ever take out another loan. Debt free is the best way to live in retirement.

      1. I didn’t say taxes alone are worse than taxes and a mortgage, just that taxes are bad. Here in CA, Prop. 13 limits reassessment of value to 2% annually with reassessment to market value only kicking in when ownership changes. That moderates the bite for those staying put, but is just one more factor in making housing unaffordable for would-be first-time buyers. Even young people who inherit houses get reassessed to market. The average home price in CA is now $830K so the average tax bite is close to $700 per month for new buyers or inheritors.

      2. The “worse” part is the fact that the state says that you cannot own your own property. It belongs to the state, not to you. That’s worse.

  15. Another thing to think about is housing asset inflation. It’s real, but you can’t count on it. When I bought this place in 2009, it’s tax value was $69K, now it’s $109K and real estate value is around $140K. So technically I’m up $100K. But you can’t count on it. Ever.

    1. I used to hear people say that housing value never decreases. While that may be true in some HCOL places, it’s not true in much of the country. My wife and I bought our first home in Colorado Springs back in 1986. It was a small but well built home about 15 years old. We got it on a 30-year VA loan for $79,000 at 9.5% interest rate. We were ecstatic because just a few years before, mortgage rates were 14% or higher.

      Not too long afterwards, Colorado Springs got hammered economically three times in rapid succession. There suddenly was a glut of available housing which caused the prices to tumble. In 1989, I was coming up for reassignment and our house was valued at $10,000 less than what we owed. We couldn’t afford to sell, and there was no prospect of renting it for anything close to our mortgage payment. I volunteered for a remote assignment to Shemya in the Aleutians with a guaranteed follow on back in the Springs. It worked. By 1993, the local economy had improved, but there were some very lean years.

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