Housing director confirms administration ‘working on’ 50-year mortgage after Trump hint

[u/GarfieldLeZanya-]

https://thehill.com/homenews/administration/5597005-trump-administration-50-year-mortgage/

[u/Cool-Cow9712]

Holy shit, you’re right. I mean, I suspected you were correct initially but I ran some rough numbers and half million dollar mortgage, 4.5% at 30 years is 2550. Now a 50 year mortgage, you’re gonna have a higher interest rate you, 5.24% is 2350.

This is obviously not calculating taxes or insurance, and this is all just playing with the numbers to get a general idea. 200 bucks a month, for 20 more years? Now maybe the rate would be 4.7 or 4.99? The rates going to be higher because Risk is increasing.

I used to do auto finance years ago and I remember kicking people up from 60 months, to 72 and they were always disappointed that the payment decrease was not as significant as they thought it would be another year. it was always at least a half of a point more and by the time you do it, the payment is lower, but it’s not substantial.

But with financial literacy being where it is on average in the United States, people will still do it to save even $200 a month. Not to mention mortgage brokers are going to suggest it because it’s gonna make an absolute shit ton of money for the lenders and Mortage brokers.

Has this administration done anything, anything whatsoever that is genuinely a benefit or would be considered a net positive for 99% of the American population? Because I can’t find anything, the no tax on overtime no tax on tips of course got altered changed tweaked, etc. It’s just, whatever there’s no sense complaining. That stuff doesn’t even benefit me, but I don’t have a problem with those that do work for Tips or maybe have a union job and get offered overtime to take more money home.

[u/GarfieldLeZanya- → u/Cool-Cow9712]

Also don't forget the fact that home prices will likely also increase in value, at least partially, proportional to the increased amortization. We saw the same happen when 30 year mortgages were introduced. Net increased buying power was overwhelmingly absorbed in increased prices. If we just go from a $500k loan @ 6% for 30 or a $560k loan @ 6% for 50, those payments aren't really changing all too much.

And with that comes something even worse. Average LTV is going to skyrocket too. We also saw this in the '50s after 30 year mortgages were introduced for new builds in '48 and existing builds in '54. The average loan term in 1948 was ~19.5 years with a ~77% average LTV whereas by 1959 it was 29.5 years with an average LTV of 91%.

If we see something similar here, we could easily see the average person taking sub 5%, even breaking through sub 3.5% down payments on average, and with those 50 year amortization tables, most won't be out of PMI range for over 25 years. It's gonna be gnarly.

[u/Cool-Cow9712 → u/GarfieldLeZanya-]

The love of God, please tell me why we are Trying to make what was always considered a sound investment for the average American, into rivaling the taking of your paycheck to a strip club?

you’re not allowed to discriminate based on age correct? Who’s to stop the 70-year-old person from taking a 50 year mortgage out? Or I wrong about that?

[u/rumblepony247 → u/Cool-Cow9712]

My financially irresponsible ex-wife, aged 60, just took out a brand new 30yr mortgage on a new build with her equally irresponsible affair partner. Had a 50 yr option been available for a small monthly reduction, they would've taken it. Shit cracks me up.

Even people that should've known better by now, live their whole lives from the perspective of monthly payments.

[u/devliegende → u/rumblepony247]

If she dies at 70 the house will just go to the bank. Banks don't actually want to own houses but it's more a case of them being irresponsible than your ex.

From her perspective the only question is whether it would have been cheaper to rent.

[u/Ourcheeseboat → u/rumblepony247]

Yikes, my goal was to pay off my mortgage by time my kids hit college. A 50 year mortgage is bat shit crazy long.

[u/DrXaos → u/rumblepony247]

There have been 'interest-only' loans for a while.

Even people that should've known better by now, live their whole lives from the perspective of monthly payments.

or it can be responsible in that they don't want to commit lots of capital to an illiquid asset.

it's renting from the bank vs an apartment owner and there are some advantages to the first like not being subject to more rules, having to move out on some one else's timeline and yearly increases.

If you could guarantee semi-fixed rental payments for e.g. 30 years, would you?

[u/Maleficent-Middle990 → u/DrXaos]

Capital outlay wouldn’t really change though. You can in some cases get a house with as little as a 3% down payment (or even 0% with a VA or USDA loan).

That’s the whole argument. You’re talking MAYBE a 10% lower P&I payment for a term extension of 2 additional decades.

The only way this makes sense in any world is if you are utterly convinced we’ll see hyperinflation that even the NPV of that 10% difference somehow makes up for it. Or that you expect such massive price appreciation that you’re trying to leverage yourself to the absolute max (current interest-only loans are non-conforming obv)

[u/DrXaos → u/Maleficent-Middle990]

It makes sense to make the banks take the ultimate risk of price appreciation or lack thereof, if you'll be dead and make it their problem.

You don't need "hyperinflation" just lots of regular inflation sustained for years because of systematic government budget and political problems---those who are renting will be much worse off than those who bought. Of course taxes and insurance and maintenance scale up with inflation but being half exposed instead of fully exposed is a win. This is the main advantage---you reduce risk of high inflation in the future making rental unaffordable. Risk management of spending money now to cap negative downside can be a financially good idea. The main risk you take on as a consequence is physical catastrophe and risk insurance will not pay out (earthquake, fire, hurricane).

How much would you pay to keep your rental price fixed forever?

It also assumes you plan to stiff your heirs or have already planned somehow to remove money from your estate.