50 year mortgages....

[uptik2000]

Sometimes these loans are really intended to be short term ''bandaid'' type loans.

Let's say the bank will not income qualify you on a 30yr term, but you know that in 5yrs your income will be much higher.
structure it as a 50yr term which will give you a lower monthly payment, when your income goes up in 5yrs, refi into a 30yr term or simply start making a 30yr payment.

Investors usually just want the lowest monthly payment too. Sometimes a 50yr term can do this. Not always the best choice, but it's an option.

 

[omniscient]

Quote from wareco:

$500,000 @ 7% for 50 years:

At the end of 30 years, when most traditional mortgages are paid off, the home owner will still owe about $388,000. They will have paid $695,000 in interest during that time as well.

well, i think most people don't buy with the expectation to be in the same house in 30years or even 10years. even if they stayed in the house for 10years and it appreciated 2% per year, they would have over 100k in equity after 10years. even if it did cost them 350k in interest to get that equity. meanwhile, they would have about 200k if they had a 30y note on the house.

the bets that 50y mortgage buyers are:

1. their income will increase / not decrease in the next 5-10 years
2. their home will steadily appreciate for at least 5-10 years
3. interest rates will be no worse in 10 years than they are today

also, if anyone has stats on how often people house-hop (on average) that would be cool. i couldn't seem to google the right terms to come up with anything. well, other than most (about 85%) section 8 recipients receive their vouchers for 10y or less.

btw, for anyone not familiar with Karl's calculator, go to http://www.jeacle.ie/mortgage/ and give it a whirl. good stuff.

 

[traderdon56]

Quote from indahook:

"Nor a borrower or a lender be"

Benjamin Franklin


Although Mr Franklin may have had this wrong. It seems lending is a great business model...

This is not Benny's quote, it's from Shakespeare's Hamlet.

Still true tho....

 

[TheDudeofLife]

lending money for interest is a sin.

 

[indahook]

Quote from traderdon56:

This is not Benny's quote, it's from Shakespeare's Hamlet.

Still true tho....

I stand corrected. Thank you.




LORD POLONIUS:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

 

[monistat7]

Quote from marketsurfer:

do these products make any economic sense for the consumer?

its my understanding that 100 year residential mortgages have existed for some time in japan.

surf

well why not? if you could lock in a fixed rate mortgage when their interest rate has been pratically 0% the past decade.