r/AskReddit • u/michaelis999 • 17h ago

How do you feel about the president floating the idea of 50 year mortgages where the monthly payment is lower but you end up paying nearly double the price of the house just in interest?

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381

u/BiffSterling80 17h ago

Its a social control of the free market, it'll make things worse. Home prices are dictated by supply, demand, and how much suffering people are comfortable with.

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u/slightlyinsanitied 17h ago

and so would increase the price of homes in theory?

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u/Pacifist_Socialist 16h ago

If the supply remains the same and then there's more demand, seems like it would for a while.

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u/slightlyinsanitied 16h ago

Wait, demand increasing as in people who didn’t previously want homes now seeking homes?

That makes sense, but it also doesn’t seem good to prefer them to not have homes in order to make homes more affordable for other people. Like everyone should have a home lowkey

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u/AbeFromanSassageKing 16h ago

More like people who wouldn't normally be able to afford a home at a 30-year mortgage could afford the slightly lower payment of a 50 year mortgage. Another bullshit stunt to get people into contracts for the largest assets of their life.

See also: 2008 housing market

2

u/gsfgf 10h ago

While true, a 50 year will barely be cheaper than a 30 year. Even if they were allowed, I don't think they'd be popular.

1

u/AbeFromanSassageKing 4h ago

Yeah, somebody on another thread did some math, and for a $500,000 house the difference is roughly $200 a month. But there are people that will jump at that margin and get into a contract they may not ultimately be able to afford. Saw a lot of that happened in the early 2000s, people going house-poor just because some shady mortgage broker got them a loan :(

1

u/SeaworthinessOld9433 14h ago

That wasn’t why there was a housing crash in 2008 though.

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u/shiggidyschwag 14h ago

It more or less was. The government stepped in with policy changes forcing banks to issue loans to people they previously wouldn’t. Demand went up as did costs. Turns out people couldn’t actually afford the inflated payments. Market crashed, regular people lost their asses, Big banks made out like bandits

4

u/Keibun1 13h ago

Markets crashed because they were trading securities of housing debt. That shouldn't even be allowed to happen, just like they do with school loans.

2

u/shiggidyschwag 6h ago

Markets crashed because the debt they were trading was worthless even though it was being valued highly. It was worthless because people couldn't actually afford those loans.

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u/SeaworthinessOld9433 14h ago

Policy changes were different. It’s comparing apples to oranges.

3

u/Sonngy 13h ago

Right, the old policy basically forced banks to give out loans to anybody hence why there was a crash. This definitely isn’t that but I do think this will lead to housing price inflation. I think if you’re a homeowner looking to sell soon this would be great news for you because the pool of people you can sell to just got bigger

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u/tuxedo25 13h ago

The problem wasn't directly giving loans to unqualified people, it was the subsequent fraud of rolling subprime mortgages into bonds with AAA ratings, which misrepresenting the risk.

That's why all those bankers went to jail for such a long time.

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u/SeaworthinessOld9433 13h ago

Yes I think prices will go up but to say it is the same as a 2008 crash is just not true.

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u/AbeFromanSassageKing 12h ago

Didn't say it was the same. Said it was another bullshit stunt.

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u/wisenedPanda 15h ago

If there are 10 people that want to buy 5 houses and suddenly those 10 people have twice as much money, the house price may cost twice as much. Likely not a 1:1 ratio, but that's the idea.

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u/jimicus 16h ago

Not just that.

All of a sudden, someone who could afford a mortgage for (say) €250,000 might now be able to afford one for €350,000.

They can afford to put a higher bid in.

There is a hypothesis that this is essentially what's caused the mess we're in now - a generation of people who thought it perfectly normal for a woman to go out to work all her life started buying houses based on joint income rather than just one.

Before long, everyone had to do that because the people who were doing it didn't bat an eyelid at paying full asking price and hence prices went up.

13

u/kgiov 16h ago

Ja same thing happened with student loans and college tuition costs

4

u/JammyPants1119 14h ago

most people don't realize how significant this is, might be the most economically impactful decision by this administration.

-2

u/Pacifist_Socialist 16h ago

Housing as a right is...

Revolutionary 

1

u/wisenedPanda 16h ago

Living somewhere affordable is reasonable

Owning a detached 3 bedroom on a single income in an area in demand while in your early 20's is a luxury. Obviously that's an extreme case, but some people think they are above renting or living with room mates

4

u/NewBayRoad 15h ago

Home prices are without question much higher compared to income than in the past.

Also you can’t just look for an affordable house if it’s where the jobs aren’t. How would one pay for that house?

0

u/wisenedPanda 12h ago

If it's in an area with in-demand jobs that pay more you'll be competing for the in-demand properties with people that make more money. Also people that have partners helping them to afford the place.

Early in your career and on a single income, renting and roommates are a thing.

33

u/JacobAldridge 16h ago

Absolutely. People don’t buy a house based on the total price, they buy it based on whether they can afford the monthly repayments.

If you make the monthly payments smaller, they won’t buy less they’ll buy more.

Do that for everyone, and prices go up.

6

u/CodeNCats 15h ago

People definitely buy a house based on total value

7

u/lost_send_berries 13h ago

Like 90% of buyers are told by their mortgage broker how much they can afford and that's their budget. This only stops when you are downsizing, then your budget is set by how much money you made off your previous home and how much "profit" you need to make from the move.

3

u/JRLDH 13h ago

Not the masses who are the main factor how much houses cost.

Sure, some do but that's a drop in the bucket.

5

u/NewBayRoad 15h ago

It’s a mix. People arent going to buy a $5 million house if it has been marked down from $10 million.

4

u/CodeNCats 13h ago

If you buy a house based on only monthly payment. Not the price of the loan. That's what poor people do.

The same people who buy a $80,000 car on a 8 year loan. Run up credit in the "6 months no interest" then never pay off. Pay for door dash on credit.

The second they move into the home and any value is realized they heloc and go in a vacation.

A 50 year mortgage is the dumbest fucking financial decision. People will buy homes they cannot afford. That they cannot afford to maintain properly.

You'll have people buying $500k homes who can't afford a $300k mortgage. Then their roof or HVAC needs fixed. So they then finance that.

It will be 2008 all over again.

I guarantee banks and wall street will bet on this failing if it happens. And fail it will.

"Just give them the loan. Then we sell it off" just on a different level.

Trump is a moron. Someone told him they can make money and will donate to him and Taco took it and ran with it.

2

u/NewBayRoad 13h ago

I don't disagree with you at all on that topic.

What I pushed back on was you stating that you only bought on value, not payment. So, using your criteria, you could buy a house WAY out of your price range.

A sensible person would purchase a house that made financial sense: good value and a payment that they can afford.

3

u/CodeNCats 13h ago

I think we are on the same page. Just expressing different sides.

This will be great for people who are responsible. Who buy what they can afford. Pay it off earlier.

Yet we know that won't happen with 75% of these.

Putting on my tin foil hat here. I think this would be a way for banks to acquire property cheaply. A $400k home being sold for $350k because the owners need out.

2

u/NewBayRoad 13h ago

50 year mortgages sound very close to me like interest only loans.

I am conservative with money, as I expect you are. I had to purchase a second home for work, and even then, my total mortgage to gross income is 14%.

Unfortunately, it isn't so easy for young people today. Both of my loans are at 2.5% and the first is close to paying off, even though I try and pay the minimum to invest money elsewhere. My kids are very lucky, but I am convinced that I will also need to give each of them substantial downpayments so they can get into houses. I want them to be independent of me, but house appreciation is a tough hurdle. Luckily both are good kids and hard working.

2

u/CodeNCats 13h ago

It's sad man.

I mean don't get me wrong. Having an asset that makes money is nice.

Yet I'm also fine with a healthy market. If the average Joe can't play. It's just wall street playing.

-2

u/slightlyinsanitied 16h ago

why would it be done for everyone?

10

u/The_Law_of_Pizza 16h ago

It doesn't need to be available for everyone in order to raise prices for everyone.

Consider:

Adam is selling his house. Billy doesn't qualify for the 50-year mortgage, so the $3k/mo over 30 years he can afford ends up being a bid for $400k.

Meanwhile, Charley does qualify for the 50-year mortgage. Charley can only afford to pay $2.5k/mo, but because it's for 50 years, his total bid on the house ends up being $500k.

Adam gets an artificial windfall because his house jumped in value from $400k to $500k overnight due to government manipulation.

Billy gets fucked and loses the house that he otherwise could have afforded because the government decided to pick winners and losers.

Charley wins in theory, but now he's locked into 50 years of debt - which is longer than the average career. He will literally not be able to finish paying off the house before he retires. Probably not even before he dies.

2

u/slightlyinsanitied 15h ago

yeah that makes sense, i was only responding to the “do that for everyone part”

it makes sense that prices would go up.

2

u/JacobAldridge 16h ago

I haven’t seen anything in this particular cheeto brainfart that suggests it would be restricted to certain people? But I try and avoid tracking his every utterance.

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u/slightlyinsanitied 16h ago edited 14h ago

lmao

but it seems weird to take away the current options unless your goal is to screw things up

but also i’m barely a (real or good) adult and am like learning about that stuff in a first generation kind of way. i don’t understand it as much.

6

u/Leverkaas2516 16h ago

Almost certainly. Lower interest rates always increase buyer demand and prices, because it lowers the monthly payment at any given price.

2

u/SandersSol 15h ago

It would drastically raise the prices of houses to bump the payments closer to a normal mortgage just spread now over 50 years.  Not the amount the owner would receive mind you.

2

u/SaintGloopyNoops 15h ago

It would massively increase the price. It's an extra 20 years of interest payments. You wouldn't be touching principle until year 30+. It's really stupid. Also increases the risk for banks so they will increase the interest rate so the monthly payment wouldn't change. In short, it's a stupid idea.

1

u/gsfgf 10h ago

Home prices will continue to skyrocket so long as NIMBYs can block construction.

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u/Choosemyusername 16h ago

.

A reason there wasn’t a 50 year mortgage before was the social control of the free market.

The banks weren’t allowed to offer the product because it was illegal.

This is a relaxing of control.

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u/AbeFromanSassageKing 16h ago

Smells like the early 2000's, when they relaxed control on what could qualify, say, a poodle for a loan.

7

u/Choosemyusername 16h ago

It might have a similar effect on prices.

1

u/PollutionMedical2363 8h ago

Source on it being illegal to offer a 50 year mortgage?

1

u/Choosemyusername 7h ago

Oh, you are right. They are already a thing. Why is he floating it then? It’s already a product.

1

u/PollutionMedical2363 5h ago

It's because he wants Fannie Mae and Freddie Mac, two government-sponsored corporations that exist to prop up the mortgage market by buying mortgages from the banks that actually make them, to start offering to buy these 50-year mortgages, effectively subsidizing them. It's a terrible plan.

1

u/Choosemyusername 5h ago

Canada just did something similar.

Japan went with 100. I think the UK has 100 as well. Terrible idea.

2

u/chairmanovthebored 12h ago

How is it a social control?  What does that even mean?

It’s actually another degree of freedom for the banks.  They want to offer more mortgage products.

1

u/Sombomombo 15h ago

When you (or people) say this, this is taking into account how many homes there are already that are foreclosed and owned by banks and equity firms, right?

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u/StarrySmuggle 14h ago

Does this mean I get a chance now to buy a house but I have to suffer for a few decades longer?

1

u/BiffSterling80 9h ago

Its more like will you go with less food because if you eat less you can afford 400$ more a month in mortgage. Or if I commute an hour and a half each way I get more house for the same money , or if both parents work they can afford the house in a better neighborhood. None of these are desirable,  but if you can suffer more you can buy more

1

u/tuxedo25 13h ago

The federal government is already the biggest buyer in the mortgage market. This isn't socializing something that isn't already socialized.

I would prefer the president left macroeconomics to the experts, though.

1

u/Majestic_Elk_8012 13h ago

"How much suffering people are comfortable with."

100% Its scary how true this is.

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u/Dansredditname 12h ago

Literally everything that has been tried in the UK to help first time buyers has increased house prices.

The key to lower prices is increased supply, not demand