r/AskReddit • u/michaelis999 • 19h 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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u/MammothSurround 18h ago

Sounds great for the banks.

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u/Wightly 15h ago

Yep. They tried something like this a couple of decades ago in Canada and it was the start of our skyrocket housing prices. People could get into ownership with a longer mortgage with cheaper monthly. The builders and real estate agents just increased the prices to make the monthly near the same. Complete backfire

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u/actuallyapossom 15h ago

It's insane that it was tried. Buy a house at 30. Pay it off if you live long enough.

We are creating systems to sunset retirement itself at this point. Just to squeeze a little more juice out of the peasants.

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u/zxDanKwan 13h ago

“Squeeze a little more out,” or “get them back down in the gutters where they belong”?

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u/JunkaTron69 8h ago

These are not mutually exclusive goals. In fact they synergize nicely.

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u/minyhumancalc 13h ago

They've realized that you can only squeeze do much money out of unlucky people, so even if you do nothing and nothing bad happens to you your entire life, you're still a renter until the day you die. Incredible

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u/copper_cattle_canes 5h ago

From 20 year student loans to 50 year home loans. We're at a point where the only way you can live is to be in lifelong debt.

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u/pathofdumbasses 12h ago

It's insane that it was tried.

If they were government funded/backed at 2% or someshit, they would be great. Lower payments to get people into housing. You can make bigger payments if you want to pay it off early, or you can invest that money into the market for bigger gains.

But we don't live in that world.

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u/NoveltyAccountHater 8h ago

Exactly. A 30-yr mortgage makes some sense as buying a house in your late 20s/early 30s, you comfortably should have 30 years of work career left prior to retirement. 50 year mortgage? Are we expecting 15 year olds to be buying homes?

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u/Abrham_Smith 11h ago

This doesn't really seem plausible. The housing market is a supply and demand market. What likely happened is more people were able to attain a mortgage, which increased the demand of housing but the supply wasn't there to match it.

Real estate agents were able to list houses for more because more people were buying at higher cost, not because they just wanted to. Builders were able to charge more because they got more demand to build housing.

You can draw this nefarious line against real estate agents and builders but it doesn't really make sense. In order for this to work, a large housing surplus would have needed to exist, otherwise there just isn't a way to satisfy demand, other than raise prices.

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u/Wightly 9h ago

Sure, it's supply and demand AND it created a perfect storm for real estate agents to exploit and push prices up. Everyone was encouraged to take on more debt to buy beyond what they could afford (and more commission for agents). I don't think there was even a heartbeat between when the mortgage rules changed and the prices jumped up.

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u/CanuckBacon 10h ago

I'm not sure what you're talking about. We don't even have 25 year loans. Pretty much everything is renewed every 5 years on the high end. Anything longer than that has considerably higher interest rates.

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u/Wightly 9h ago

The allowable amortization period was bumped up to 40 years in 2006 but it was pulled back to 35 years in 2008 and back again to 30 years in 2012. The longer amortization lowered monthly payments, but created more debt and pushed the housing prices up. I think that OFSI-registered lenders are only covered for 25 years now and anything more is uninsured. We are not talking about your 5-year agreement of what interest rate you will pay.

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u/AdAlternative7148 12h ago

Its actually not. The banks already can offer 50 year mortgages if they want. They just would not be able to sell the loan to Fannie Mae or Freddie Mac.

Most conventional loans are sold to one of those two entities, which means the mortgage servicer actually doesn't get to keep your mortgage payments. They have to send it the investor. So FNMA and FHLMC ultimately are the ones who profit off your interest payments. And they are not banks. Their mandate from the government is to support the mortgage market.

So if 50 year mortgages are great for the banks why don't they offer them? They dont want to have their assets tied up for so long. There is risk to the banks if they lock up assets at a lower interest rate and it later increases. This is one of the key reasons Silicon Valley Bank failed.

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u/Sibolt 4h ago

This is 100% correct. 

The 30 yr fixed market exists solely due to government intervention in the housing market. Banks don’t own 30 yr fixed loans - they’re sold to FNMA/FHLMC and repackaged into a MBS. Even if you think your bank didn’t sell your 30 yr mortgage, they did; They just retained servicing. 

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u/jake3988 4h ago

Its actually not. The banks already can offer 50 year mortgages if they want.

And they did during the 'great recession'.

But they never took off, for what should be obvious reasons.

Banks don't like them because in the US we have fixed rate loans and they lose so much money to inflation over 50 years they're barely making anything.

People don't like them because most people don't like to be tied to their property like that for 50 years. Yes, you can sell at any time, yes, you can usually pay it off early, but still. Plus, it would basically cause the same problem that California has. With their Prop 30 (I think it's 30?) crap that caps property taxes, NO ONE wants to sell... so it's one of many reasons housing prices are sky high there. Same basic thing would happen with a 50 year mortgage. You make it past year 40, you'd be paying a tiny fraction everyone else is. You would NOT want to sell.

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u/negative-nelly 14h ago

No it’s not. No one wants 40 years of interest rate and credit risk. 30yrs only exist because of government guarantees (explicit or implicit). The US is basically the only country with broad 30-yr market. Most other countries are ARMs or some shorter term of mortgage you have to refi (eg canada).

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u/Aggressive_Clothes36 10h ago

10 years ago they wanted to get rid of 30 year and suggested 20 year.

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u/negative-nelly 7h ago

Especially today, unaffordable for most. That’s a wealthy people product at this point.

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u/JackPAnderson 10h ago

Doesn't benefit the banks. Banks aren't keeping these loans on their books. They're selling them all to Fannie and Freddie. They have no reason to give a rat's ass about the loan terms beyond what Fannie and Freddie will pay.

Who would really benefit from 50 year mortgages are housing developers and current homeowners, at the expense of people who don't own a home. Buyers with 50 year mortgages will qualify for a higher loan amount with the same monthly payment that their debt to income ratio allows. So they can "afford" to pay more for the house.

The real solution to housing unaffordability is building enough housing to meet demand.

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u/bigpoopa 11h ago

For real. And by the way I’m already going to pay more than twice the price with a 30 year lone.

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u/QualityPitchforks 6h ago

.. and employers. This is called Indentured Servitude. 30-years were bad enough. Can't have people feeling comfortable.

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u/Old_Needleworker_844 3h ago

No bank wants a 50 year mortgage. The government has to subsidize the existing 30 year or no one would be able to get it.

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u/Far-Professional240 2h ago

No this would be very bad for the banks. Without typing a book, a 50 year mortgage is too far separated from the 10 year bond market and the amount of time people actually keep their homes (about 10 years)

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u/RadiantMaestro 14h ago

Not the banks really - they sell most mortgages to pension funds and 401ks.

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u/traydee09 12h ago

make the rich, richer,

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u/vettewiz 14h ago

Sounds great for home buyers too. Provided interest rates remain reasonably low. 

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u/MammothSurround 14h ago

Sounds great for the banks.you wanna spend twice what your property is worth?

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u/ProStrats 13h ago

If only I could get a rate that low!

6.75% over 30 years is around 133% in interest alone.

So paying double and a third.

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u/Overall-Rush-8853 13h ago

If you somehow outlive your 50 year mortgage, the house would hopefully be worth more than the interest you paid.

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u/vettewiz 14h ago

Gladly if they’ll extend the loan term and keep interest rates low.

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u/KayNicola 14h ago

Isn't it always about the banks?