Yeah I compared some numbers and guessed a plausible interest rate for the 50 year based on the 15 vs 30 year interest rates at a couple of real banks near me
50 years at 6% with 5% down on 200k (fairly plausible for a decent home where I live and realistic for a first time home buyer who 50 year mortgages are clearly catering to) is 1k/mo almost exactly
30 years at 5.85% is 1,121/mo
20 years at 5.75% is 1,334/mo
15 years at 5.50% is 1,553/mo
So the difference is pretty small on a realistic first time home buyer’s home, but having been on the edge of approval for a home loan before that $100/month can absolutely be the difference between getting the home now and having to wait another 2-4 years depending on markets. In my case they assumed my insurance would cost more and that actually made all of the difference in my home loan application because that shaved about $100 per month off
One interesting side note, one of the local credit unions I looked at offers different interest rates depending on the value of the loan! For a 30 year fixed loan they offer the following rates:
800k or less: 6%
300k or less: 5.875%
200k or less: 5.875% (the APR is lower for this one so presumably the origination fees are lower)
So that’s a great picture I think for the difference between the loan durations.
I of course think the real problem is that average people might need a 50 year loan to barely pay for a house these days. But it isn’t “nothing” between the terms, it does help in the super short term
I owned my first house for 19 years, which was purchased in the fall of 2006. We sold it for the exact same price as we paid for it, and barely came out ahead. I know it was poor timing, but the idea of leaving a home and using it as part of your retirement income is a lie. The banks are laughing all the way to the bank.
Poor timing? You bought at the absolute peak of something known as The United States Housing Bubble. Your experience is not typical. You’re one of the unlucky people who had the absolute worst timing possible.
The idea of using a home as part of your retirement should be a lie, but unfortunately for the vast majority of people it isn’t. The world would be much better off if people only got what they paid back when they sold their houses. But, the reality is that most people have been absurdly lucky and their homes have been going up faster than all but the best stocks on the stock market. You just happened to be someone who jumped on the ride at exactly the wrong time.
So I did the math. A 30 year fixed and a 50 year fixed have a monthly payment difference of $1.
What the absolute fuck.
What?
Some random numbers that are of course VERY variable, but I just ran the calcs with 400k, 5% down, 6% APR for 30 and 50 years
$2648 for 30 years $2369 for 50
Now that is of course not a great deal, presumably you’d also get a little better rate for the longer loan (more points) but it’s not a dollar.
Edit: wait you’ll get a better rate for the shorter term loan, so this will probably further close the gap. Still not to $1 surely
Yeah I compared some numbers and guessed a plausible interest rate for the 50 year based on the 15 vs 30 year interest rates at a couple of real banks near me
50 years at 6% with 5% down on 200k (fairly plausible for a decent home where I live and realistic for a first time home buyer who 50 year mortgages are clearly catering to) is 1k/mo almost exactly
So the difference is pretty small on a realistic first time home buyer’s home, but having been on the edge of approval for a home loan before that $100/month can absolutely be the difference between getting the home now and having to wait another 2-4 years depending on markets. In my case they assumed my insurance would cost more and that actually made all of the difference in my home loan application because that shaved about $100 per month off
One interesting side note, one of the local credit unions I looked at offers different interest rates depending on the value of the loan! For a 30 year fixed loan they offer the following rates:
So yeah that’s new! I’ve not seen that before!
So that’s a great picture I think for the difference between the loan durations.
I of course think the real problem is that average people might need a 50 year loan to barely pay for a house these days. But it isn’t “nothing” between the terms, it does help in the super short term
Because for the first lot of years you are paying basically 0 principal
I owned my first house for 19 years, which was purchased in the fall of 2006. We sold it for the exact same price as we paid for it, and barely came out ahead. I know it was poor timing, but the idea of leaving a home and using it as part of your retirement income is a lie. The banks are laughing all the way to the bank.
Poor timing? You bought at the absolute peak of something known as The United States Housing Bubble. Your experience is not typical. You’re one of the unlucky people who had the absolute worst timing possible.
The idea of using a home as part of your retirement should be a lie, but unfortunately for the vast majority of people it isn’t. The world would be much better off if people only got what they paid back when they sold their houses. But, the reality is that most people have been absurdly lucky and their homes have been going up faster than all but the best stocks on the stock market. You just happened to be someone who jumped on the ride at exactly the wrong time.