Halls of Shrewd'm / US Policy
No. of Recommendations: 7
Tidbit that has been reported recently, the average first time home buyer is now about 38 years old. Add a 50 year mortgage, and you are talking debt for life.
As noted before, the auto industry has been using the same device: financing for ever longer periods, to enable more people to buy more expensive, more profitable, vehicles.
Here's another page from the automaker's playbook "lease pull ahead" and "financing rollovers" to add the amount you still owe on your old car, to what you owe on your new car, to keep the tin moving off the lot.
Another tidbit, Pulte is a major builder of garish, overpriced, mcmansions.
Pulte Cites ‘Portable Mortgages’ After 50-Year Idea Panned
(Bloomberg) -- Bill Pulte, the Federal Housing Finance Agency director, said the administration is “actively evaluating portable mortgages” just days after President Donald Trump’s call for 50-year mortgages fell flat with industry and consumers.https://finance.yahoo.com/news/pulte-cites-portabl...I have posted the data before: the "supply side economic miracle" since the 80s, has been built on the drawdown of savings and the accumulation of debt.
Steve
No. of Recommendations: 3
I can't quite decide what I think about the 50 year mortgage. I've long pounded the drum that a sub 4% mortgage was the financial deal of a lifetime. The debt is fixed-rate, non-callable, very long term, and tax advantaged. And at sub-4% it is roughly equal to the historical inflation rate. Which means you are borrowing the money for free. Currently bonds pay higher interest than my mortgages, which means the banks are paying me (not really, but kind of). And thanks to inflation, my payments are effectively getting smaller each year. By the time the mortgages are done my payments will be more than cut in half in real terms.
So if 30 is good, is 50 better? I don't think so. It doesn't lower your payments by much. And 50 years is way longer than most people will own a house, so you wind up paying way more in interest.
The portable mortgage is kind of interesting idea, but I have no idea how it could work. At closing, the bank gives the seller a check. If you buy a new house, the bank needs to cut another check. Presumably, you could sell your house, the bank keeps that money, and cuts a new check the seller. But that seems like a lot of karate.
No. of Recommendations: 5
With the unlikeliness of the mortgagee living in the same house that length of time, coupled with the interest-forward bias of payments, it is little different than renting the property - but now having the responsibility for maintenance, insurance, etc., etc.
Jeff
No. of Recommendations: 2
With the unlikeliness of the mortgagee living in the same house that length of time, coupled with the interest-forward bias of payments, it is little different than renting the property
A lot of people don't understand that. It's all about the payment. When I worked at Radio Shack, we were told to not talk about the price, but only the payment, using RS' in house financing. If they didn't like the monthly payment, break it down to a weekly amount. If they still didn't like that, break it down to a daily amount. It was the same amount they would end up paying, but just keep breaking it down until you hit a level the customer saw as trivial. It's like some charity that insists the big pile of cash they are asking you for is "only thirty seven cents a day".
The news reported that financing for 50, instead of 30, would result in the mortagee paying about 86% more interest.
I bet it happens. And the 30 year mortgage will be as forgotten as 3 year car financing is now. Because the sellers can keep escalating prices, and profit margins, the way they have with cars, and the buyer doesn't notice, because he has been trained to look at the size of the payments, not the actual price, let alone how much he's paying in interest.
Steve...debt averse.
No. of Recommendations: 0
People do not have these mortgages yet and some scuttlebutt is this is a trial ballon the bankers do not want.
There were 40-year mortgages after the Great Depression.
The other way of seeing it, the payments are small and will seem very small against inflation.
The mortgage is a call option on the property. If 40 years from now the property is worth 5 or 6 times more, your heirs can sell it.
My nephews and niece would be my heirs.
No. of Recommendations: 2
The other way of seeing it, the payments are small and will seem very small against inflation.
Nope. The size and price of houses will increase, so the monthly on a 50 year, will be the same as it is on a 30 year now, because the monthly a buyer qualifies for is the controlling factor. But the builder makes more money, by selling bigger, more expensive, houses. We have already seen that play out with cars. iirc, last month, the average transaction price on a new car cracked $50,000.
It's no mystery that the 50 year is endorsed by the the current head of the Federal Housing Finance Agency, Bill Pulte, a member of the mcmansion building Pulte family. He knows what will best line his pockets.
Steve...looking around nervously, Nomex longjohns at the ready.
No. of Recommendations: 0
"It's no mystery that the 50 year is endorsed by the the current head of the Federal Housing Finance Agency, Bill Pulte, a member of the mcmansion building Pulte family. He knows what will best line his pockets."
The housing market feels as bubbly as the stock market. Sure am glad I purchased
at the end of the GFC. Personally, am not thrilled with the escalation of home prices. Costs more to insure them, maintain them, and pay more in property taxes.
Builders, Realtors, and local Townships ( taxing authorities ) are benefiting hugely from the rise in home prices. Really don't see how people making 100k a year are willing to buy at $400,000 or $500,000. That's $100k before all deductions, sure doesn't feel like that can supports a $400,000 mortgage.
I think Pulte has run those numbers, and he is probably getting anxious about
the burden of the monthly payment on the beleaguered, and lo and behold, the 50 year mortgage gonna solve all problems.
I'll have to check in on Dave Ramsey, hear his take on the 50 year mortgage,lol,
should be good for a few laughs.
No. of Recommendations: 1
Steve,
I am not talking about buying now. I am talking about using the mortgage when rates are low and the housing market has gone bust.
No. of Recommendations: 0
I am not talking about buying now. I am talking about using the mortgage when rates are low and the housing market has gone bust.
I'm talking about the average person being snared by the house salesman: "you could finance this grubby little place, for 30 years, or you can get this shinny, new, Pulte mcmansion for the same payment per month (by financing for fifty years)"
Steve
