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50-year mortgages on the table?

MC BumSlap

MC BumSlap

Big Belly Bum Scud
Joined
Jul 8, 2008
Location
Burnistoun
Moto(s)
Faux Bonneville
Name
J
WTF?!


$400k home with 20% down, so you're financing $320k at a rate of lets say 6%. Using some basic numbers from the site I'm using to make these calculations of $1500/yr for home insurance and property taxes of $3k/yr.

On a 30 year mortgage your monthly payment is $2293.56. Over the course of your loan assuming you make no extra payments you will have paid $825,682.20 dollars in total (everything which includes your property taxes and insurance), and of that number $370,682.20 is interest. So you payed $50k more total interest than total principle.

On a 50 year mortgage the payment goes down to $2059.50 with a grand total $1,235,697.20 dollars paid over the term of the loan. $690,697.20 of that is interest alone. You have paid about $370k more in interest than you did in principle. Pair that with the fact that your monthly payment only decreased by about $240.
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A 50-year mortgage only reduces your monthly payment by ~$234, but adds over $320,000 in extra interest compared to a 30-year loan. :crazy:


At bit of AI to check out the math....

Mortgage Assumptions
  • Home Price: $400,000
  • Down Payment (20%): $80,000
  • Loan Amount: $320,000
  • Interest Rate: 6%
  • Insurance: $1,500/year
  • Property Taxes: $3,000/year
  • Monthly Escrow (Insurance + Taxes): $375/month

30-Year Mortgage Breakdown
- Monthly Principal & Interest (P&I):
Using standard amortization formulas, a $320,000 loan at 6% over 30 years gives a monthly P&I of $1,918.56.
- Total Monthly Payment (P&I + Escrow):
$1,918.56 + $375 = $2,293.56 ✅
- Total Paid Over 30 Years:
$2,293.56 × 360 months = $825,681.60 ✅
- Total Interest Paid:
$1,918.56 × 360 = $690,681.60 → subtract principal ($320,000) = $370,681.60 ✅
- Interest vs Principal:
You pay $50,681.60 more in interest than principal.


50-Year Mortgage Breakdown
- Monthly P&I:
$320,000 at 6% over 50 years gives a monthly P&I of $1,684.50
- Total Monthly Payment (P&I + Escrow):
$1,684.50 + $375 = $2,059.50 ✅
- Total Paid Over 50 Years:
$2,059.50 × 600 months = $1,235,700.00 ✅
- Total Interest Paid:
$1,684.50 × 600 = $1,010,700 → subtract principal = $690,700 ✅
- Interest vs Principal:
You pay $370,700 more in interest than principal.




And that's assuming one goes full term on a 50-year loan...which is probably going to be very slim number of people.
 
Yeah. It’s a terrible idea brought to you by people full of them.

Don’t do it kids.


FWIW, my property taxes are more than double that estimate and my home price was $375k
 
Utterly, absolutely stupid to do, if you're a home buyer. The savings doesn't even begin to make up for all of the downsides, it'd be a couple decades before you started building up any kind of equity.
 
Mortgage
Mort: like mortuary. And other words that have to do with death

Gage: a tool for measuring something


Yep. You're going to die just about the same time you've paid off your home

Hopefully these aren't used to finance mobile homes
 
Not a fan on 50 year money, but some may be. The market is offering a product. A few things:

1. Borrowers are already operating in a similar fashion (but worse) w/ cash-out refi's and 2nd lines. I say worse, because they're resetting their amortization schedules with their cash-out refi's and increasing their average rate adding a 2nd line on top of their first mortgage.

2. 50 year money might be the ticket, rates depending..and by rates, I mean mortgage money and inflation. Remember: finance lending is about a purchase in today's dollars, paid for with tomorrow's (deflated value) dollars. If asset value annual increase surpasses interest rate, the debt becomes an asset. in RE this can happen quickly.

stangmx13 said:
Brought to you by the same people as 96 month car loans. And for the same suckers as well.
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Autos (and durable goods) are generally seen as losing value over time. Real estate is the inverse (generally), where borrowers build equity with each payment.
 
I was in the mortgage business for many years - agree that a term over 30 years is stupid.

The real problem is the high price of houses in relation to income. Property taxes and insurance have skyrocketed also but it’s the price of houses that has made 50 year mortgages sound attractive.

50 years ago a house cost 2.5x annual income and now it’s over 6x+ in many areas.
People with regular jobs could afford a house on one income years ago.

Now first time homebuyers in the Bay Area have to gulp hard knowing they’ll be slaves to their house payment for decades.
The alternative is to buy places like Lathrop or Patterson and suffer a hellacious commute.
 
dystopian bullshit that is just a continuation of never owning anything.

certain people will normalize it, banks and hedge funds and ultra wealthy investors will profit, and consumers will have even more debt because they were duped into "saving" $200/month without realizing they're paying for 20 more years.
 
It's pretty rare that standard residential mortgages have rate maintenance clauses in them. A borrower is free to pay off their existing (locked rate) mortgage at any time they chose. In doing so, they lose the interest deduction, have lower liquidity, and lose the inflation advantage...
 
I looked at the interest deduction as too counteract one for the other. I paid income money interest too the Bank and get a deduction from the government / jusposition pay the loan off early and give the Income money to the government and have higher home equity.
My early 80s 30 year loan was at 15% and I paid it off in 15 years. Seem to work, I didn’t notice the inflation devaluation.
 
Escape pod said:
My early 80s 30 year loan was at 15% and I paid it off in 15 years. Seem to work, I didn’t notice the inflation devaluation.
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I had one of those. Ah, the good old days
 
Mike95060 said:
Yeah. It’s a terrible idea brought to you by people full of them.

Don’t do it kids.


FWIW, my property taxes are more than double that estimate and my home price was $375k
Click to expand...
As someone who does this for a living, I can tell you, not necessarily, you need to see what the early exit options look like.

I buy 30 year mortgages all the time with no intention of keeping them for 30 years, often with an exit planned at year 10 or 15.

Once you walk away from the idea of buying a home and just paying a mortgage so you are keeping it to live in forever, products like this as an investment tool start to make more sense.
 
Eldritch said:
As someone who does this for a living, I can tell you, not necessarily, you need to see what the early exit options look like.

I buy 30 year mortgages all the time with no intention of keeping them for 30 years, often with an exit planned at year 10 or 15.

Once you walk away from the idea of buying a home and just paying a mortgage so you are keeping it to live in forever, products like this as an investment tool start to make more sense.
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Pre Divorce, paying down my 30 year early was part of plan.

Post divorce, a buyout and child support changed my plan. :laughing

Running 1.5 households on one income changed things.

Point taken, if you can chip away at the principle alone, the 50 year length isn’t so scary.
 
Mike95060 said:
Pre Divorce, paying down my 30 year early was part of plan.

Post divorce, a buyout and child support changed my plan. :laughing

Running 1.5 households on one income changed things.
Click to expand...

Well, usually it isn't about, "paying down early," with aggressive monthly principal payments, it is more about a planned refi, or cash out sale after however many years are in your proforma.

You use a longer amortization schedule to maximize NOI and to manage your DSCR during the years before the next capital event.
 
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