Nov 10 • General discussion
What are your thoughts on the 50 year mortgage?
The biggest “concerns” that are being voiced is that with a 50 year mortgage is that you may die before it is paid off and you will end up paying thousands more in interest over the life of that loan. While both of those facts are true, they don’t tell the whole story.
Back in the 30s FDR introduced the first long term mortgage with the 30 year loan.
These same concerns were raised, yet the 30 year loan has been the staple for most home buyers. Here are some of the upsides…
1. Affordability: Monthly payments will be lower. In fact on a $500K loan at 6%, payments would be ~$400/month lower.
2. Most people sell their homes long before loan maturity. At one point, people moved on average every 7-10 years.
3. Equity buildup: Even with a 30 year loan, the mortgage balance decreases very little in the first half of the loan due to the process of amortization. The real equity comes from property value appreciation.
This in my professional opinion will be a real option for many people currently priced out of the housing market due to payment affordability.
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What are your thoughts on the 50 year mortgage?
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