50-year mortgages?

Posted by: Dean Foust on August 25, 2006

There’s an intriguing item that I found on the web site of a Florida newspaper that talks about efforts within the real estate industry to develop a 50-year mortgage (don’t laugh; I seem to recall that in Japan, 50-year mortgages became popular as home prices soared through the stratosphere). Lively debate in the article as to whether 50-yr mortgages will take off, with a lot of skepticism. My hunch is the idea, for better or worse, will take off as a solution to rising inaffordability in many markets (not that I don’t think that home prices won’t also come down in overheated markets). What’s troubling is the point that one critic makes that the buyers of these mortgages could be individuals trying to repair their credit, which is not necessarily the intended audience.

I’m curious what readers of this blog think about the prospect of 50-year mortgages.

Reader Comments

Sean Brunnock

August 25, 2006 5:58 PM

Didn't Japanese banks offer 100 year mortgages?

robert bruyneel

August 25, 2006 8:02 PM

The rise of 50 year mortgages is not unexpected, we have anticipated those since the acceptance of 40 year tied to interest only loans.. if the aggresive position of the lenders continue to search for new ways to attract customers then all legal means to combat the unaffordability of homes is going to be reached. a forty year interest only would have been unheard of ten years ago, now a 40 year is getting as common as a thirty. fremont and other banks are allready widely pushing the program, the fact that fremont is a subprime company that markets to the credit challenged is a age old dilema like gambling...the poor or those who have more to lose will lose more..

CJ in L A CA

August 25, 2006 10:36 PM

In reality, I'm sure most people will not be keeping this mortgage for the full 50 year term. But if they ~do~, I hope they're factoring a monthly mortgage payment into their retirement plans, and I hope Social Security is still around to help them make the payment.

Frank

August 26, 2006 6:10 PM

As far as I'm concerned there's nothing magic or sacred about 30 year terms on mortgages. I believe that mortgages will lengthen in terms of duration as a way of making real estate more affordable. As long as land prices are high in areas where people want most to live and construction costs are high, there is a definite limit to how far prices will drop. Longer term mortgages are coming our way, IMO.

Geoff B

August 26, 2006 10:42 PM

I doubt that a 50 year mortgage could do much to help buyers stretch any more than they already have. Over the past couple of years, no down payment 5/1 ARMS became very popular as buyers stretched beyond the limits of a 30 year fixed to win bidding wars. People seeking something slightly safer often went with a 10 year, interest-only hybrid. Both these loans typically carried a much lower interest rate than a 30 year fixed, and didn't require paying any principle. A 50 year mortgage, on the other hand, would presumably carry a higher interest rate than a 30 year fixed (as opposed to the adjustable short term loans, which carry a lower interest rate). And since principle is such a small amount of a payment in the early years of a long term loan, I doubt the buyer would see much benefit.

Brian

August 27, 2006 12:41 AM

Dean, rather than being part of the solution to the rising unaffordability of homes, the 50-year mortgage will simply contribute to that rising unaffordability. Home prices have risen to such absurb levels in large part because of the widespread availability of the exotic (read "idiotic") mortgages. Negative amortization? Give me a break, lenders.

L.C.

August 28, 2006 3:18 AM

I don't get it, are you surprise with the length of the mortgage, is that it??? Well, my house is a 100 year mortgage since 1986 in Switzerland, which is a quite common practise around here. Therefore I don't understand the article. Lucas.

Brandon W

August 28, 2006 8:56 AM

Hello. I'm relatively new to this blog. I have experience working for a mortgage loan company and as a marketing advisor at a real estate marketing company.

The mortgage industry is as cut-throat as they come. They're also as creative as they come (so was Enron). When they aren't selling loans, they aren't making money, so if there is talk of a 50-year mortgage you can be assured that someone is already preparing to offer them. It will likely start at the seediest end of the industry and work it's way up.

This is merely a band-aid on a larger problem of increasing unaffordability of homes and real estate for the middle and lower class. The long-term result of this will either be a majority of those classes renting from wealthy landlords (are we sliding back toward feudalism?) or those classes will be forced to take on far longer debt terms such as this which only serves to place those classes further under the thumb of bankers. I'm personally betting on the former option winning in the long-run.

Nathan

August 28, 2006 11:55 AM

I am not surprised by 50-year mortgages. As another commenter put it, there's nothing sacred about 30 year terms. If the lenders can manage the 50-year risk then I see nothing 'evil' or predatory about it. Creative financing is nothing but a boon to the average homeowner, especially with as mobile a population as we have, and even more so if you take into lifetime consumption theory.

Affordability really comes down to government policy. The places with the highest housing prices also generally have the highest amount of land regulation. The voters there like their wealthy and relatively unaffordable enclaves.

Jason R

August 28, 2006 11:56 AM

At the risk of sounding uneducated on the matter... do the mortgage payments go to next of kin if the 1st party passes?

JR

Mike N

August 28, 2006 2:59 PM

What I want to know is, when are we going to see the "perpetual mortgage"

ie you pay (interest only) on a property in perpituity. Since no-body pays off their house anymore, I dont see any material difference between this and a 30 year interest only (IO) mortgage, which is available today. Realistically everyone will refi or default within 20 years anyways, and you could set up periodic "checkpoints" to asses a borrowers capacity to continue repaying the loan, with a resulting adjustment in interest rate or amortization schedule.

It would only be a product for good credit borrowers, obviously...

olerush

August 28, 2006 3:37 PM

One of my friends just closed on a 50 year mortgage on her first home last week. I haven't asked her much about the mortgage because she knows that I am a RE bear and I don't want her to feel like I am I'm raining on her parade. I was discussing the issue with my sister and i came to the conclusion that as we become more of a debt burdened society we will become increasingly comfortable with carrying debt throughout our lives. Today, the notion of paying off our debt remains of high importance but I think that will change. Extended payment schedules are not just limited to RE but car payments have also been growing i.e. 84 month loans. I can see fifty/hundred years from now people just carrying debt to their graves without even thinking twice. On the other hand, this could just be the part where things get worse before they get better.

KT

August 28, 2006 5:20 PM

The Japanese 50-year mortgage was long gone as far as I understand because all those banks were either bankrupt or acquired by others. The Japanese 50-year mortgage was called the "two-generation" mortgage which only applied to a father and son(both)working status. Remember a typical Japanese house require a major overhaul in 20 years.

johen

August 29, 2006 8:37 AM


This will be a very short lived fad. The housing market is crashing as I type. It might ensnare a few morons at the bottom of the pyramid scheme. Thats about it.

Even the real estate industry is beginning to admit the obvious:

http://www.realtor.org/Research.nsf/files/Leadership%2520Summit%2520(August%25202006).ppt/%24FILE/Leadership%2520Summit%2520(August%25202006).ppt

The real estate market is crashing, hard! There will be no demand for 50 year (or 100 year) mortgages come this fall.

curtis johnson

September 4, 2006 2:58 AM

I have a 40 year ARM (11th District Cost of Funds Index) on a home that I bought in 1990. So the 40 year mortage is not new by any means. I have every reason to believe that the 50 year mortage is right around the corner. With the price of homes rising much faster than "incomes", 50 year mortages will become very common within the next 4 to 8 years.

rsinex

September 7, 2006 7:13 PM

You can depreciate over 50 years, so why not borrow over the same term? This concerns me because it could become a norm that supports the inaffordability of homes to new entrants in the market.

JR Diaz

September 20, 2006 4:34 AM

We were actual the ones that released the "50 year mortgage" earlier this year and now some other lenders have followed. Like anything else not one product meets the demand of all. Some homeowners need options so they can maintain their payments low. This loan is not for everyone but giving consumers different real estate financing options is always a great thing. In my option this loan is here to stay and in the long term about 5 - 10 years it will be a standard option for homeowner to choose from.

mike b

October 21, 2006 10:19 AM

i am in the process of purchasing my first home,my lender is offering me a 40yr COFI option arm.can anyone please give me feed back on this type of loan.

george

October 29, 2006 3:40 PM

Are there any stipulations or penalties regarding refinancing from a 50yr to a 30yr loan in this extended financing program ? Wouldn't the yearly tax deductions help even though not much if any money would be put on the principal at all?

john aho

December 20, 2006 1:55 PM

heh, I just signed up for a 40 year note myself and the difference between a 30 and a 40 for my interest rate was negligible but my dad always said to get the softest terms possible and prepay towards principal when you can.

John

December 24, 2006 11:29 AM

Take the equity you already HAVE in your house out using a 50 year loan. Since housing prices are going to be going down about 25 to 30% in the next couple of years, it makes since to me to take out as much equity from your home as possible. A 50 year loan can help you do just that! Say you have $200,000 in equity and take it out of your home with this new loan. That money could be put to work for you in a bank or mutual fund or wherever you choose instead of being tied up in your house and just depreciating over the next few years. Sure, your mortgage payment may be a bit higher but that would be clearly offset by the additional interest write off, plus the additional interest earning you could make on the $200,000 equity you're received on the new loan. Seems almost like a "no brainer" decision to me...

Leanese Childress

December 31, 2006 10:39 AM

I am about to purchase a Home and I dont have good credit. The builder is paying up to 6,000 in closing cost and fees the agreement estimated cost are about that much. I only had to pay 500 down thus far, my closing date is set for January 24th. I do have some concerns this will be a 3yr/1yr arm I do understand what that means but they are offering a 50year conventional what will this do to my chances of refinancing in 1 year when I get my score up some. I want to build equity as fast as possible will the 50 yr mortgage have an affect on that?

Second Mortgage Refinance

January 2, 2007 9:32 AM

I think the big downside to a 50 year Mortgage Loan is that homeowners' children will inherit the debts and mortgages, rather than children/grandchildren inheriting a house that is paid off.

Natalie

January 25, 2007 12:34 PM

What about 50-year mortgages for folks in their 60s with no children and plan to be in the home maybe 5-10 years?

Michael

January 26, 2007 3:06 PM

I think the upside to this type of loan is more leverage for investors to purchase multiple properties and provide housing. The monthly payment will be significantly less and more than likely investors will refinance or change programs before the length of the term anyway

Easy MD - Ambien

February 23, 2007 11:22 AM

I think 50 year mortgages help people out in times of bad economy like right now. I have a 40 year mortgage and still cant afford it. 50 year mortgages will help out alot

JC

April 3, 2007 4:47 PM

hi agree with the person that wrote a 50 yr would help a lot it would help us out rite now as we are losing our home of 19 yrs. so i am all for it our payments are choking me and that's working 7 days a week but at this crucial moment no one touch us we're not bad people just bad refi decisions they are going to put the moves on my family soon is it very scary and stressful you bet after 19 yrs i am feeling like worthless

todd

April 11, 2007 8:15 AM

Why not do the 50 year loan and then at age 62 to the reverse mortgage and you will get the best of both worlds?

Ciro'

May 2, 2007 11:48 AM

A 50+ mortgage at regulated rates (by factoring income) can help many American families from losing their homes throughout our nation.

In fact, both Houses of Representative should pass & mandate by law that the banking/mortgage industry automatically put those on Arm negative amortization loans (who are on the verge of forclosure)into(according to income etc) 50 or more year fixed loans.

We have enough homeless families in our society.

stillinstateofshock

October 1, 2007 6:44 PM

Playing games with mortgages is how the housing market became unaffordable in the first place. I believe a 50 year mortgage will only add to the current problem.

When the interest rates dropped, instead of buying a more expensive house, I lowered both my payments and time by switching to a 15 year fixed mortage at 4.75%. My house will be fully paid off in 2 years--my 2 rental houses were paid off long ago.

No, I don't agree that everyone necessarily needs to buy a house--or that they should. I think an awful lot of people were "conned" into buying houses they couldn't afford, and didn't really NEED--on the false pretext that they had to buy NOW before the prices rose even further.

What's wrong with renting for a while? Right now, rent around here is about 1/2 a house payment, so why buy?

bryan

November 19, 2007 10:49 AM

stick to shorter term mortage @ payment of( 30%no) more of total monthly gross income. this will put you in price range of home to buy. example total net income per month at $ 2,400.00 total mortage no more than $800.00 may have to settle for less check on bank foreclosures,auctions,older home with good potential fix up as you go.but at the times we have now everything is getting expensive!!

jr w/jc

February 14, 2008 6:29 PM

Right now with the feds cutting rates and still trying to come up with solutions to stimulate the economy, along with the situation at hand, this might be the greatest time ever to bring out the 100 year loan. With a sunomi of foreclosures effecting the economy, we must get serious about moving on trying to stop this disaster from destoying our economy. Even if its for a limited time(2008)loan option, I think it will save thousand of families from losing homes and the country from going into a recession. Of course, this isn't for everyone, especially for the self-righteous who might, by luck be in a perfect financial situation, no matter what it took to get there. They yet have to realize that the economy effects them as well. So, what I want to know is if this is a possibility and we still refuse to help our neighbors in times of trouble, than what kind of a nation are we.

K.Rea

February 29, 2008 12:05 AM

Right on, Jr W/Jc.
What the US needs right now is longer term loans in order to bring down payments, which in turn will keep people in the houses long enough until the gluttony of houses on the market returns to normal. Then they can sell there house and buy something more affordable.
I cannot believe I havent heard one person on CNBC mention this as a solution.

Mustafa Musa

May 29, 2008 6:09 PM

Could you please name some companies that are offering 50yr mortgages.

Dana

January 17, 2009 12:46 PM

I'm with Mustafa! Where the heck are these companies at?! I would love a 40 or 50 year mortgage. My husband and I are 30ish with two infants. He works very hard so I can stay home and still doesn't make enough to 'afford' a decent home for us. My father is 60. He can get a 30 year mortgage. We are 30 so why can't we get a *60* year and a decent home in a decent neighborhood?! Makes sense to me.

Fran

March 9, 2009 10:32 AM

WHERE ARE THIS FIFTY YEAR MORTAGES,NO ONE WANTS TO GIVE THEM
TELL ME WHO THEY ARE.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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