50 year mortgages

[Ima saver]

Some banks are offering 50 year mortgages on homes. What do you think?

[debtdude]

Buy a house when I'm 30 and have it paid off when I'm 80?

If I buy a house for a 30 year period, at the end of the 30 years I'm paying 3x the amount of the home. It's a given that mortgages = a lot of money in interest. Figuring that for a 50 year loan...that's too much interest for too long of a payment period.

[Haku]

I think the longer the terms, the more it's a guaranteed long-term loss for those who only pay the minimum or don't manage finances well.

For those who are financially disciplined and are determined to pay it off early, this could be a great opportunity.

Overall though, I think it's a bad idea. Chances are, we will end up paying more money in the end.

[34saving]

Nothing more than a marketing ploy. The banks know that hardly anyone will actually obtain one of these loans and then make their payments for 50 years and own the house. These loans are just designed to make people feel better than they would if they had an interest only loan.

[Ima saver]

I read that it is popular in California, where the medium house is above $550,000. I think it is a bad idea. We just sold a home to a couple in their 70's and they got a mortgage for 20 years. I think you should own your home free and clear when you are that old.

[emptyspaces]

Originally Posted by Ima saver

Some banks are offering 50 year mortgages on homes. What do you think?

bunch of crap. NO ONE keeps their house that long.

how many people do you know who've kept their house in their family 50 yrs?
the only people I know who have are filthy rich and don't have a mortgage!

[BTC]

If anything above the minimum payment is deducted from the principal, it might be a good way to go. I'm assuming the payments would be lower than a comparable 30 year loan.

[cbmeeks]

I guess the appeal to people is that the monthly payments are really low. If you live from paycheck to paycheck then lower payments are better for you.

People who have a good budget and money in the bank would laugh at this.

Hey, I wonder how many people get a 50 year mortgage on a mobile home?

:vomit-smiley-015:

[slimcustomer]

Originally Posted by emptyspaces

NO ONE keeps their house that long.

how many people do you know who've kept their house in their family 50 yrs?

Some people do keep their homes long term. IIRC, my grandmother lives in the house she grew up in. Also, I bought the house I grew up in and I have no plans to move anytime soon.

A 50 year mortgage could be a great idea if utilized as part of a financial plan that maximizes your overall finances. If you invested the difference in monthly payments between a 30 and 50 year mortgage in a tax advantaged account, you could come out ahead. Also, keeping your payments low leaves more cashflow available should other opportunities come up. I missed out on a mispriced beach house opportunity because I opted to refi into a ultra low 15 year rate a number of years ago. I would have been much better off had I refinanced into a 40 year fixed or interest only mortgage. I would have had a second home/rental property in my early 30's instead of having to wait till my mid 40's. Fixed long term low rate mortgages are underappreciated.

[cbmeeks]

Originally Posted by slimcustomer

Some people do keep their homes long term. IIRC, my grandmother lives in the house she grew up in. Also, I bought the house I grew up in and I have no plans to move anytime soon.

A 50 year mortgage could be a great idea if utilized as part of a financial plan that maximizes your overall finances. If you invested the difference in monthly payments between a 30 and 50 year mortgage in a tax advantaged account, you could come out ahead. Also, keeping your payments low leaves more cashflow available should other opportunities come up. I missed out on a mispriced beach house opportunity because I opted to refi into a ultra low 15 year rate a number of years ago. I would have been much better off had I refinanced into a 40 year fixed or interest only mortgage. I would have had a second home/rental property in my early 30's instead of having to wait till my mid 40's. Fixed long term low rate mortgages are underappreciated.

Has anyone actually done the math on the difference between a 50 year and 30 year mortgage? Would you really be saving that much each year?

And an interest only mortgage? Why would anyone do that? You would never own the house! Plus, when I pay my mortgage, most of it goes towards interest anyway....why would I want to give them even more money?

[slimcustomer]

Originally Posted by cbmeeks

Has anyone actually done the math on the difference between a 50 year and 30 year mortgage? Would you really be saving that much each year?

And an interest only mortgage? Why would anyone do that? You would never own the house! Plus, when I pay my mortgage, most of it goes towards interest anyway....why would I want to give them even more money?

The difference in monthly payments is small, but it doesn't change the analysis of how to best use that small amount of money.

Interest only mortgages are becoming more attractive with the growing number of people falling into the alternative minimum tax system as been discussed elsewhere on this site. If having an interest only mortgage allowed you to invest more of your money every month, would you really care if you didn't own your house and you were otherwise filthy, stinking rich ?

Edit: The difference between a 30 and 50 year fixed rate mortgage on a $200,000 loan is roughly between $100-$150 depending on rate differentials.

[sweeps]

In addition to what slim said, some people have very irregular cash flow -- some salesmen, for example, who may get a very large commission check at the end of the year. In that situation, they want to minimize their monthly payment and make it up (and then some) when that chunk of money comes in.

Of course using these mortgages to your advantage takes a fair amount of discipline. That's why they're not for the average person.

[sakigt]

Originally Posted by emptyspaces

bunch of crap. NO ONE keeps their house that long.

how many people do you know who've kept their house in their family 50 yrs?
the only people I know who have are filthy rich and don't have a mortgage!

Agreed. Most people move from starter home to starter home.

I think its ALMOST as bad as buying a car and having payment stretch 72 months.

[BTC]

If anything above the minimum payment is applied to the principal, wouldn't a 50 year mortgage provide an opportunity to pay down the principal faster than a 30 year mortgage assuming your intention is to pay extra every month? Or do mortgage loans not work like that? I need to educate myself as I intend to purchase a home sometime within the next 2 years.

[sweeps]

BTC, you're right. A 50-year mortgage just means it will take 50 years if you only make minimum payments. You could pay off an entire 50-year mortgage in 6 months if you want to. (Just watch out for prepayment penalties that come with some mortgages.)

[cbmeeks]

Originally Posted by slimcustomer

If having an interest only mortgage allowed you to invest more of your money every month, would you really care if you didn't own your house and you were otherwise filthy, stinking rich ?

I can promise you that if I ever become rich I WILL own my house and NOT have a mortgage.

No mortgage payment will help build wealth faster than a few hundred savings per month.

[Crystallas]

forclosure on year 49! OUCH!

I imagine that some of these banks allow you to pay off early without penalty.

[disneysteve]

Originally Posted by Ima saver

Some banks are offering 50 year mortgages on homes. What do you think?

If the only way you can get the house you are looking at is a 50-year mortgage, you can't afford it.