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(Daily Mail)   Welcome to the world of 40-year mortgages   (dailymail.co.uk) divider line 92
    More: Asinine, home price, Mark Carney, Niagara Falls FROZE, interest-only loan, mortgages, mortgage payments  
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3221 clicks; posted to Business » on 11 Jan 2014 at 8:22 AM (42 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-01-11 02:11:41 AM  
In a related story, unless you paid cash, you're just renting from a bank.  And if you did pay cash, you're renting from the government.  Ha ha.
 
2014-01-11 08:26:06 AM  
Stop buying what you cannot reasonably afford?
 
2014-01-11 08:44:40 AM  
What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.
 
2014-01-11 08:52:35 AM  

gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.


Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.
 
2014-01-11 09:00:28 AM  

nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.


Excellent plan, I will pass this idea on to my banking overlords on Monday:  Sell them 40 year Mortgage, they pay it for 35 years and then die, we take back the house!
*Snidely Whiplash mustache twist*
 
2014-01-11 09:01:21 AM  
Meh, you can do up to 60 year mortgages in for example Sweden
 
2014-01-11 09:05:20 AM  

UnderwayRightNow: Meh, you can do up to 60 year mortgages in for example Sweden


Meh, you can do unlimited mortgages as long as you have equity. It's called "refinancing".
 
2014-01-11 09:06:21 AM  
Because being in debt for life and paying rent, upkeep, and taxes on a property for the bank is the only way you can find a place to live in the United States.
 
2014-01-11 09:20:10 AM  
I wonder what the percentage of people who actually fully pay off the loan on their first home is.

The recent housing bubble collapse certainly put a wrench into things, but isn't the typical process to buy a starter home, pay on it for 5-10 years, then sell it when you've accumulated some equity and the property value has increased enough to use that as a considerable down payment on your next home, where you'll start out in a better position, then rinse and repeat one or two more times until you're in your final home where you can put down a huge down payment and pay it off fairly quickly?
 
2014-01-11 09:20:52 AM  
Some of us just call that "rent".
 
2014-01-11 09:21:23 AM  

bunner: In a related story, unless you paid cash, you're just renting from a bank.  And if you did pay cash, you're renting from the government.  Ha ha.


We've paid ours off. Now we're just minding it for one of our kids. Which-ever one pisses me off the least. Sucks being mortal.
 
2014-01-11 09:21:30 AM  
They have 99 year mortgages in Japan, IIRC.
 
2014-01-11 09:26:49 AM  
I have no children and will be dead before it's paid off. There will be no one for you to go after by then. Jokes on you!
 
2014-01-11 09:35:56 AM  
Just rent.
Then you won't have to worry about the damn house...and you can go do something.
 
2014-01-11 09:36:41 AM  

TuteTibiImperes: The recent housing bubble collapse certainly put a wrench into things, but isn't the typical process to buy a starter home, pay on it for 5-10 years, then sell it when you've accumulated some equity and the property value has increased enough to use that as a considerable down payment on your next home, where you'll start out in a better position, then rinse and repeat one or two more times until you're in your final home where you can put down a huge down payment and pay it off fairly quickly?


By typical?  All me and my wife's WWII fighting grandparents bought a middle-classish house in the late 40s/early 50s as their first, had kids, then lived in it to death/nursing home.

There's also the issue of leveraging house loans.  My wife and I have the money to pay off our mortgage today (yay, living in the midwest).  Several times over actually.  And I'm not doing so. Autopaying the standard 30-year plan. ??  Look, the mortgage is fixed at 4%  I can (some years, when it's worth itemizing) even get a tax deduction on the interest.  I want to believe that, over the next 30-some years, conservative investing and maxing out tax shelters (IRAs, 401ks and the like) will beat a 4% average return. I could be wrong. But, if you believe that... paying off the mortgage doesn't add up. It's cheap money.  Same way I feel about my student loans.

HotIgneous Intruder: Because being in debt for life and paying rent, upkeep, and taxes on a property for the bank is the only way you can find a place to live in the United States.


I can find you no shortage of sub-$30k bungalows in midwestern small towns.  Being in debt for life is the only way you can find a place to live  where you want to live in the United States.
 
2014-01-11 09:45:20 AM  
At 5 percent interest and initial principal of $100,000, the payment on a 30 year note is $536.83.  For a 40 year note, it's $482.20.  About ten percent less.

Make of that what you will.
 
2014-01-11 09:48:47 AM  

abhorrent1: I have no children and will be dead before it's paid off. There will be no one for you to go after by then. Jokes on you!


They'll just take the house.  Not that you care of course, and you can always haunt it.
 
2014-01-11 09:50:25 AM  

Lee Jackson Beauregard: At 5 percent interest and initial principal of $100,000, the payment on a 30 year note is $536.83.  For a 40 year note, it's $482.20.  About ten percent less.

Make of that what you will.


You'll pay back $193,258.80 on the 30, $231,456.00 on the 40.  Make of that what you will as well.
 
2014-01-11 10:15:13 AM  
if you make payments like it were a 20 year note, great.  provides a little buffer room.

otherwise, enjoy the next to nil equity and the foreclosure notices.

bring 20% to the table and have enough in reserve...otherwise the other facets of home ownership will drive your bank account into the ground.
 
2014-01-11 10:15:25 AM  
Actually long term loans are a good idea if you plan on living there your whole life, and you know, you dont mind paying for the house three times over.

An ARM with a three year bubble, on the other hand, just encourages "flippers".
 
2014-01-11 10:19:12 AM  
30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.
 
2014-01-11 10:41:34 AM  
Amateurs.  Japan has 100 year mortgages.
 
2014-01-11 10:46:10 AM  
A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit. The renter is still renting.

Who comes out ahead in this scenario? The bank.
 
2014-01-11 10:47:07 AM  

Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.


Yeah, because the stock market will always be 7%.

7 is the actual long-term number, but it has the benefit of the decades preceding globalization and the instability that comes with it. I'm a proponent of the 30-year mortgage (with a sizable down payment, assuming rent vs. buy is weighed carefully for your personal situation) but "so I can beat the rate in the stock market" isn't necessarily a concrete plan.
 
2014-01-11 10:47:17 AM  
If only refinance options for shorter terms were available.

/not seeing an issue here
 
2014-01-11 10:51:09 AM  
How is a 40 or 60 year mortgage significantly smaller than a 30 year one? In a 30 year mortgage your initial payments on the principal are a pretty damn small part of your bill for the first 5 year. Given a 40 year would have a slightly higher interest rate than a 30 year (I assume - the principal recovery rate is lower exposing the bank to more risk for a longer time) the difference would be minuscule. Do they make the mortgage interest-only for the first decade on the assumption that in 10 years inflation will have made the principal more affordable or something?
 
2014-01-11 10:58:43 AM  

Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.


While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head. The psychological boost I get from that is worth more than the extra few dollars I'd marginally make in interest each month, so I plan to pay my mortgage off as quickly as possible so that I can spend as many years of my life with that awesome, empowering feeling as possible.
 
2014-01-11 11:00:48 AM  

Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.


Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy.
 
2014-01-11 11:03:39 AM  

Tommy Moo: Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.

While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head. The psychological boost I get from that is worth more than the extra few dollars I'd marginally make in interest each month, so I plan to pay my mortgage off as quickly as possible so that I can spend as many years of my life with that awesome, empowering feeling as possible.


Unless someone puts a judgment lien on your property, or you get divorced and your spouse gets the house, or a natural disaster comes by and washes your house away, or an idiot neighbor burns your house down, or you can't afford to pay property taxes, etc etc etc etc
 
2014-01-11 11:05:23 AM  
FTFA: "Some lenders agree that improved longevity, combined with higher house prices, make extended loans sensible and viable."

Yes of course the lenders say that.  A longer amortization period substantially increases the interest paid over the life of the mortgage.
 
2014-01-11 11:16:14 AM  

Tommy Moo: Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.

Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy.


There is that.  On the same line of thought, most bankruptcy judgements won't touch 401k and IRA assets (which is probably a better feature of those plans than the minor tax advantages for workaday income levels).

 One other bit of magic to consider?  If you have kids, the FAFSA for college loans/scholarships allows you to exclude your primary home equity (and 401k/IRA).  So, the child of an apartment renter with a $50k bank account and a $70k job comes in looking less deserving than the child of someone with a paid-off $500k house, $700k of retirement accounts, and slumming in a $50k job (while the kids are in college).
 
2014-01-11 11:22:25 AM  

Tommy Moo: Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.

While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head. The psychological boost I get from that is worth more than the extra few dollars I'd marginally make in interest each month, so I plan to pay my mortgage off as quickly as possible so that I can spend as many years of my life with that awesome, empowering feeling as possible.


try not paying your property taxes.
 
2014-01-11 11:29:35 AM  

Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.


The 30 year mortgage is a guaranteed 4.5%. The stock market is not.
 
2014-01-11 11:34:56 AM  
I don't know about the UK, but the Aussie market seems to follow them closely. You can't get a fixed long term loan for a house.  You can get 5 years fixed for about 2% higher than the current rate but that would be insane unless you thought the rates were going way up.  Right now a fixed rate is about 4.5% and a 3 year fixed is about 5.5% with the minimum home price above 1/4 mil, it makes no sense to do fixed.  I would love a 25 or 30 year fixed but they just aren't offered.
 
2014-01-11 11:38:56 AM  

nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.


I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)
 
2014-01-11 11:43:42 AM  

cannibalparrot: nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.

I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)


Well,  that'llteach me to multi-task.
 
2014-01-11 11:55:21 AM  
cannibalparrot:
I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

Only if the estate (if there even is one) has any interest in it.  If anyone tells you that you are responsible for a dead relative's debt they are lying to you and violating the law to boot.

That is, of course, unless the estate or surviving family wants to keep the land.  The bank has every right to seize it's collateral otherwise of course.
 
2014-01-11 11:56:44 AM  

cannibalparrot: nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.

I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)


I thought the mortgage covered the structure, not the physical land.
 
2014-01-11 11:57:21 AM  

Tommy Moo: Chagrin: 30 year mortgage is ~4.5%
Stock market is ~7-9%.

You should be taking the longest loan period you can and paying it off as slowly as possible.

Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy.


Depends. Federal level could apply a 125k cap no matter state laws.
 
2014-01-11 11:59:54 AM  

nekom: cannibalparrot:
I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

Only if the estate (if there even is one) has any interest in it.  If anyone tells you that you are responsible for a dead relative's debt they are lying to you and violating the law to boot.

That is, of course, unless the estate or surviving family wants to keep the land.  The bank has every right to seize it's collateral otherwise of course.


Yeah, I saw that in your post after I posted.  Again...that'llteach me to multi-task.

Snarcoleptic_Hoosier: cannibalparrot: nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.

I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)

I thought the mortgage covered the structure, not the physical land.


It covers whatever the text of the mortgage documents says it covers, which in almost every instance includes the land and everything on/attached to it.
 
2014-01-11 12:11:06 PM  

Prophet of Loss: A renter and a buyers start out ...

39 years later, the buyers defaults, loses everything put into the house and has ruined credit.


Unless I'm mistaken, the proceeds from the foreclosure go to pay off the remaining balance and whatever taxes and fees are due.  The buyer would keep the remaining money.  If he is 39 years into a 40 year mortgage, he's going to have a decent chunk of change.
 
2014-01-11 12:13:34 PM  

TuteTibiImperes: I wonder what the percentage of people who actually fully pay off the loan on their first home is.

The recent housing bubble collapse certainly put a wrench into things, but isn't the typical process to buy a starter home, pay on it for 5-10 years, then sell it when you've accumulated some equity and the property value has increased enough to use that as a considerable down payment on your next home, where you'll start out in a better position, then rinse and repeat one or two more times until you're in your final home where you can put down a huge down payment and pay it off fairly quickly?


Well, the first house I purchased was for cash back in 1980, but it was a crap shack that I bought out of an FHA foreclosure. It was a decent house but not exactly in a great neighborhood, so when I got married we bought a house with 20% down so we didn't need private mortgage insurance.  Ten years later with our third child on the way we moved from the 2 bedroom starter home to a 5 bedroom house this time putting about 25% down.  We have just over 13 years left on the mortgage.

So yeah, I see your scenario as a typical one.  The two things we did that a lot of people who get in over their head don't do are that we committed to 20% down and we got the mortgage based on being able to make the payments on a single income if one of us ever lost a job.
 
2014-01-11 12:16:56 PM  

gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.



PMI kicks in and pays whatever is left, if anything, after the property has been foreclosed upon and sold.  It's for the benefit of the lender, not the borrower.
 
2014-01-11 01:06:59 PM  

Lance Russell's Nose: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.


PMI kicks in and pays whatever is left, if anything, after the property has been foreclosed upon and sold.  It's for the benefit of the lender, not the borrower.


I don't know what type of insurance you have dealt with but the insurance I have dealt with required proof of death, notarized and the mortgage was paid off and the spouses kept the house.No foreclosing, no sale.
 
2014-01-11 01:17:06 PM  

gremlin1: Lance Russell's Nose: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.


PMI kicks in and pays whatever is left, if anything, after the property has been foreclosed upon and sold.  It's for the benefit of the lender, not the borrower.

I don't know what type of insurance you have dealt with but the insurance I have dealt with required proof of death, notarized and the mortgage was paid off and the spouses kept the house.No foreclosing, no sale.


He's talking about mortgage insurance, which is to protect the lender in cases where the borrower doesn't pay back the loan.  You're talking about life insurance, which gives you money for being dead.
 
2014-01-11 01:18:19 PM  

Heraclitus: Actually long term loans are a good idea if you plan on living there your whole life, and you know, you dont mind paying for the house three times over.

An ARM with a three year bubble, on the other hand, just encourages "flippers".




If you are in the hyper-inflation camp, the longer term fixed interest rate loans are perfect.
 
2014-01-11 01:20:34 PM  

Intrepid00: Tommy Moo: Chagrin: 30 year mortgage is ~4.5% Stock market is ~7-9%. You should be taking the longest loan period you can and paying it off as slowly as possible. Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy. Depends. Federal level could apply a 125k cap no matter state laws.

Texas

allows you to keep your house after bankruptcy, no matter how much it's worth.
 
2014-01-11 01:24:23 PM  

Tommy Moo: While that is technically the best thing to do if you are a robot, there is value to some people in having an ironclad guarantee that, no matter what, hell or high water, injury or disability, no one can EVER take the roof from over my head.


As long as if by "hell" you don't mean "fire burns the house down", and if by "high water" you don't mean "water knocks the house down", and by "injury or disability" you don't  mean "costly medical bills and lifelong care requirements that drive you bankrupt", then your ironclad guarantee is quite valuable.

Well, you might have to worry a bit about wind. And snow. And taxes. And eminent domain. But other than those nine or ten things, you really can stay in the house for all eternity, or at least until the Sun turns into a red dwarf star.
 
2014-01-11 01:40:38 PM  

TedCruz'sCrazyDad: Intrepid00: Tommy Moo: Chagrin: 30 year mortgage is ~4.5% Stock market is ~7-9%. You should be taking the longest loan period you can and paying it off as slowly as possible. Addendum: Not to mention the fact that in many states, people can sue you to take any cash or investments you have, but it's a lot harder to take someone's house. In some states you can even keep your primary house through bankruptcy. Depends. Federal level could apply a 125k cap no matter state laws.

Texasallows you to keep your house after bankruptcy, no matter how much it's worth.


Not true, 1st Texas limits the land size and 2nd federal law would limit the value of the house under certain conditions.
 
2014-01-11 02:04:24 PM  

Snarcoleptic_Hoosier: cannibalparrot: nekom: gremlin1: What happened to mortgage insurance? If you are disabled it picks up the payment or if you die it pays off the mortgage.That way you would not be passing on the debt to your children.

Debt dies with the debtor.  You don't pass down debt to your children.  Unless of course they want the collateral, then they would have to arrange to make payments on it, but they are under no obligation to do so.

I'm pretty sure that's false in most, if not all, states.  The mortgage encumbers the land, so while a person's surviving family doesn't HAVE to pay the debt, they do to get the land clear of the mortgage.

/IANAL(Y)

I thought the mortgage covered the structure, not the physical land.


So, if I take out a mortgage on a house with 200 acres of land, then I can sell 100 of those acres and it has no effect on the original deal?

/serious question
 
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