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I first heard about a "50 year mortgage" in California about 8 years ago. I thought it was a joke about California's high cost of living. With this article, I l

I first heard about a "50 year mortgage" in California about 8 years ago. I thought it was a joke about California's high cost of living. With this article, I looked at Google trends[0] and I'm very surprised to see very high interest in this. What is the benefit of a 50 year mortgage from both sides? Forgive my lack of understanding in this area, but it seems like a debt that will never be paid off, unlikely to mature, or a very, very risky bet someone. https://trends.google.com/trends/explore?date=2014-06-03%202022-07-03&geo=US&q=50%20year%20mortgage https://trends.google.com/trends/explore?date=2014-06-03%202...

yieldcrv 4y ago
A variety of countries have longer dated mortgages than 30 years, and 30 years in the US is arbitrary. Many people from Western countries don't know that the US mortgages mostly top out at 30 years and find that just as peculiar, just as OP's article about the UK is peculiar. Sweden has mortgages that are between 30 and 50 years and their recent law limits them to 105 years as the maximum. It has nothing to do with more recent housing affordability trends. It's arbitrary. Longer mortgage = more debt paid to lender, and another demand driver towards more lack of affordability.
- gedy 4y ago
  > It's arbitrary. It's not that arbitrary when considering human lifespans and working years. (Assuming the intent is to actually pay off the debt).
pwg 4y ago
> What is the benefit of a 50 year mortgage from both sides? For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage. https://www.calculator.net/mortgage-calculator.html https://www.calculator.net/mortgage-calculator.html 1) $100,000 mortgage for 30 years at 5% staring July 2022 (with no taxes/insurance/PMI/HOA/other costs [1]) = $93,255.78 total interest paid over life of mortgage 2) Same as #1 except for 50 years = $172,483.26 total interest paid over life of mortgage ($79,227.48 more than #1 above) For the borrower, the /benefit/ is a lower monthly payment. Option #1 above -- monthly payment of 536.82 Option #2 above -- monthly payment of 454.14 (82.68 less per month than #1) [1] leaving out taxes/insurance/etc. is unrealistic, but the question was what was the benefit of 50 vs some other length, omitting these items shows only the difference due to the change in length.
- gedy 4y ago
  > Option #1 above -- monthly payment of 536.82 > Option #2 above -- monthly payment of 454.14 It's frightening to me how people would be willing to pay that much more in the long term for a relatively small change in monthly payment.
  - leetcrew 4y ago
    it's probably a bad idea for most people, but not for the reason you gave. one way of looking at very long term mortgages is that they are a bet on how long you will actually own the property. keep in mind that, historically, the value of a nominal dollar has halved every ~20 years. if that trend continues, the monthly payment by the end of the mortgage period will be less than a quarter of the initial real value. whether you're a "loser" for paying all that extra interest depends on what happens to the value of the house, what you did with the extra $80/month, etc. it's not inconceivable that a person/family who holds the property for a full 50 years would be better off than if they had structured it as a 30 or 15 year mortgage. the bigger risk is what happens if you don't end up holding onto the property for a full 50 years. it will take a longer time to start building equity vs a 30 year mortgage, and the upfront interest payments are already (imo) a significant problem with 30 year mortgages. it's hard to know for sure you will live in a place long enough to break even on these types of mortgages.
- leetcrew 4y ago
  > For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage. I'm just a layperson, but I don't think this is how lenders typically look at ROI on deployed capital. they can only lend so much. unless they are having trouble finding enough qualified people to lend to, I would expect them to maximize yearly returns on capital rather than absolute returns over the full term of a loan. if the interest rate is the same, wouldn't a 50 year mortgage be strictly worse from this perspective?
  - staticman2 4y ago
    In the U. S. at least many if not most lenders sell the loan after it is made. So their business model isn't about collecting interest every year but collecting a cut of the loan when the loan is bundled into a mortgage backed security when third party investors buy the loan.

yieldcrv 4y ago

A variety of countries have longer dated mortgages than 30 years, and 30 years in the US is arbitrary. Many people from Western countries don't know that the US mortgages mostly top out at 30 years and find that just as peculiar, just as OP's article about the UK is peculiar. Sweden has mortgages that are between 30 and 50 years and their recent law limits them to 105 years as the maximum. It has nothing to do with more recent housing affordability trends. It's arbitrary. Longer mortgage = more debt paid to lender, and another demand driver towards more lack of affordability.

gedy 4y ago
> It's arbitrary. It's not that arbitrary when considering human lifespans and working years. (Assuming the intent is to actually pay off the debt).

pwg 4y ago

> What is the benefit of a 50 year mortgage from both sides? For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage. https://www.calculator.net/mortgage-calculator.html https://www.calculator.net/mortgage-calculator.html 1) $100,000 mortgage for 30 years at 5% staring July 2022 (with no taxes/insurance/PMI/HOA/other costs [1]) = $93,255.78 total interest paid over life of mortgage 2) Same as #1 except for 50 years = $172,483.26 total interest paid over life of mortgage ($79,227.48 more than #1 above) For the borrower, the /benefit/ is a lower monthly payment. Option #1 above -- monthly payment of 536.82 Option #2 above -- monthly payment of 454.14 (82.68 less per month than #1) [1] leaving out taxes/insurance/etc. is unrealistic, but the question was what was the benefit of 50 vs some other length, omitting these items shows only the difference due to the change in length.

gedy 4y ago
> Option #1 above -- monthly payment of 536.82 > Option #2 above -- monthly payment of 454.14 It's frightening to me how people would be willing to pay that much more in the long term for a relatively small change in monthly payment.
- leetcrew 4y ago
  it's probably a bad idea for most people, but not for the reason you gave. one way of looking at very long term mortgages is that they are a bet on how long you will actually own the property. keep in mind that, historically, the value of a nominal dollar has halved every ~20 years. if that trend continues, the monthly payment by the end of the mortgage period will be less than a quarter of the initial real value. whether you're a "loser" for paying all that extra interest depends on what happens to the value of the house, what you did with the extra $80/month, etc. it's not inconceivable that a person/family who holds the property for a full 50 years would be better off than if they had structured it as a 30 or 15 year mortgage. the bigger risk is what happens if you don't end up holding onto the property for a full 50 years. it will take a longer time to start building equity vs a 30 year mortgage, and the upfront interest payments are already (imo) a significant problem with 30 year mortgages. it's hard to know for sure you will live in a place long enough to break even on these types of mortgages.
leetcrew 4y ago
> For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage. I'm just a layperson, but I don't think this is how lenders typically look at ROI on deployed capital. they can only lend so much. unless they are having trouble finding enough qualified people to lend to, I would expect them to maximize yearly returns on capital rather than absolute returns over the full term of a loan. if the interest rate is the same, wouldn't a 50 year mortgage be strictly worse from this perspective?
- staticman2 4y ago
  In the U. S. at least many if not most lenders sell the loan after it is made. So their business model isn't about collecting interest every year but collecting a cut of the loan when the loan is bundled into a mortgage backed security when third party investors buy the loan.