4 ms·

Thirty year mortgages have always been a bad deal. No different now.

by datavirtue 3y ago

syndicatedjelly 3y ago
They were sitting at 2-4% for about a decade in the US. Pretty great deal if you ask me
- lizardking 3y ago
  Can confirm, was a good deal
edmundsauto 3y ago
Can you elaborate? Compared to 15 year, or renting, or paying cash?
reducesuffering 3y ago
How is a 30y mortgage of 2.5% from two years ago a bad deal, when rates are now at 7%? That is mid six figures of $ savings.
- chubbyFIREthrwy 3y ago
  This. Even if you could buy the house outright for cash, it still would have made sense to get one of those mortgages, base on that (reasonable even at the time) expectation that risk free rates would swamp that value soon enough, and, no surprise, here we are! I was pondering that tradeoff myself two years ago, having retired early from crypto. The only issue is, to get the 2.5% you had to show Fannie Mae-acceptable regular income. Which is still possible: the FIRE people have a system for putting your money in a trust that pays it right back to you[1], then waiting two months to establish a history, and then you dissolve the trust once the mortgage is finalized and you've closed and moved in. I would have done that myself except that it would involve putting a big delay on my search. Early comment about it: https://news.ycombinator.com/item?id=31000286 https://news.ycombinator.com/item?id=31000286 [1] https://old.reddit.com/r/fatFIRE/comments/ojs18l/obtaining_a_mortgage_using_a_grantor_trust/ https://old.reddit.com/r/fatFIRE/comments/ojs18l/obtaining_a...
pxx 3y ago
The 30 year fixed mortgage is a product that gets massive implicit government subsidies. It is a terrible deal for the American taxpayer. Note that this product can simply not be available in other countries. Are you trying to claim it's a bad deal for the mortgagor? That is a claim that's going to require quite a lot of evidence.
- i_am_programmer 3y ago
  That's wrong, long term exist rates exist all over Europe. France has very popular 20 year fixed mortgages at great low rates, 30 years are not uncommon. Before recent inflation causing rate hikes, you could access interest rates between 1% - 3% for these types of deals
  - tomekf 3y ago
    Can confirm. I have 30 year fixed at 1.2% here in Spain
  - pxx 3y ago
    I fixed the wording to be more clear about what I meant. These are also often subsidized products. Long-term fixed rate is still a relative rarity globally, especially in the US style where there are no prepayment penalties. France is a notable exception, as specified in https://business.sdsu.edu/research/_files/_realestate/international-comparison-mortgage.pdf https://business.sdsu.edu/research/_files/_realestate/intern... , but still doesn't have the prepayment-penalty-free nature (though prepayment penalty amounts are capped by law).
  - hsjqllzlfkf 3y ago
    Just to double check, are you sure those 30 year are fixed?
  - J_cst 3y ago
    I have a 25y mortgage at 1.28 fixed. I accessed it less than 3 years ago. Italy

Thirty year mortgages have always been a bad deal. No different now.

syndicatedjelly 3y ago

They were sitting at 2-4% for about a decade in the US. Pretty great deal if you ask me

lizardking 3y ago
Can confirm, was a good deal

edmundsauto 3y ago

Can you elaborate? Compared to 15 year, or renting, or paying cash?

reducesuffering 3y ago

How is a 30y mortgage of 2.5% from two years ago a bad deal, when rates are now at 7%? That is mid six figures of $ savings.

chubbyFIREthrwy 3y ago
This. Even if you could buy the house outright for cash, it still would have made sense to get one of those mortgages, base on that (reasonable even at the time) expectation that risk free rates would swamp that value soon enough, and, no surprise, here we are! I was pondering that tradeoff myself two years ago, having retired early from crypto. The only issue is, to get the 2.5% you had to show Fannie Mae-acceptable regular income. Which is still possible: the FIRE people have a system for putting your money in a trust that pays it right back to you[1], then waiting two months to establish a history, and then you dissolve the trust once the mortgage is finalized and you've closed and moved in. I would have done that myself except that it would involve putting a big delay on my search. Early comment about it: https://news.ycombinator.com/item?id=31000286 https://news.ycombinator.com/item?id=31000286 [1] https://old.reddit.com/r/fatFIRE/comments/ojs18l/obtaining_a_mortgage_using_a_grantor_trust/ https://old.reddit.com/r/fatFIRE/comments/ojs18l/obtaining_a...

pxx 3y ago

The 30 year fixed mortgage is a product that gets massive implicit government subsidies. It is a terrible deal for the American taxpayer. Note that this product can simply not be available in other countries. Are you trying to claim it's a bad deal for the mortgagor? That is a claim that's going to require quite a lot of evidence.

i_am_programmer 3y ago
That's wrong, long term exist rates exist all over Europe. France has very popular 20 year fixed mortgages at great low rates, 30 years are not uncommon. Before recent inflation causing rate hikes, you could access interest rates between 1% - 3% for these types of deals
- tomekf 3y ago
  Can confirm. I have 30 year fixed at 1.2% here in Spain
- pxx 3y ago
  I fixed the wording to be more clear about what I meant. These are also often subsidized products. Long-term fixed rate is still a relative rarity globally, especially in the US style where there are no prepayment penalties. France is a notable exception, as specified in https://business.sdsu.edu/research/_files/_realestate/international-comparison-mortgage.pdf https://business.sdsu.edu/research/_files/_realestate/intern... , but still doesn't have the prepayment-penalty-free nature (though prepayment penalty amounts are capped by law).
- hsjqllzlfkf 3y ago
  Just to double check, are you sure those 30 year are fixed?
- J_cst 3y ago
  I have a 25y mortgage at 1.28 fixed. I accessed it less than 3 years ago. Italy