50 year mortgages - your thoughts?

[SuperDad]

Morning all,

I was walking out of the dairy, milk in hand this morning when the following headline caught my attention:

"Banks eye 50-year Home Loans"

The link to the full article is: http://www.nzherald.co.nz/section/st...ectID=10394801

Long story short: Banks are looking at offering 50-year loans to allow so that more people qualify for finance (due to lower monthly servicing costs).

It strikes me that this could well give the housing market a "second wind" in the short-term, as housing once again becomes affordable for first-time buyers.

Another thought relates to the social impact of these loans, with the prospect of intergenerational debt or, at the least, the prospect of debt extending well into one's "retirement" years. Are kiwi's really that mad about home ownership that they would gladly accept these outcomes? (I know, most would probably retire the debt within 50 years, but there would be those who don't.)

Sobering stuff, as I reach for my second coffee of the day.

Paul.

What do others think about these loans?

[essence]

A good thing??

My first thought on this was - "Don't touch it with a barge pole!!", but on mulling it over maybe its not so bad.

PPl who don't qualify for present loans (25/30 years) because of the high repayments, may qualify for the 50 year ones.

A smart person (is that your average joe?) would take the 50 year loan, hold it for two years, as an example, and then refinance a shorter term at a higher payment rate. During that time, it would be hoped that the housing market has increased $-wise, so that they have created equity as well.

This allows them to get into the market, when previously before they couldn't.

Just because they are 50 year loans, doesn't mean that they have to be held that long.

[CRL]

I Have relative in the Netherlands and when they talk about moragages they normal talk about them in life time terms. It is not uncommon for children to take over ownership of properties and morgages from parents. While looking after parents still in the home, not as common as it once was but still happens.

[Josko]

Not much use for a property investor, you might as well use an interest only loan, there is not a lot of difference in repayments between the two.

For a home buyer you would need to be wary of these type o loans as you would be paying twice as much interest in 50 yrs as you do in 30yr. There would be no dent in the principle after 5-10 years so if you are selling or upgrading you would heavily rely on the capital gain in the property, meanwhile the market has moved in the same direction. Exit fees would need to be looked at as well.

[JohnL]

You get such a small reduction in payments, its hard to imagine why you would do it, unless they structure them differently from a standard P&I??

John

[Propoholic]

I agree with ivi and JohnL's comments.

The thing I find attractive is that the term of a product is being extended out to follow what has been available in other countries for many years. It may help the intoduction of longer term fixed rate products? It would be great to see fixed interest rate loans 'fixed' out to 10/15 years (for starters). I know Cairns Lockie have been doing a 10 yr fixed loan, but other than this there hasnt been much choice!

[RonHoyFong]

Countries like Taiwan have beem doing this since WW2 to encourage ownership of property (Capitalism).

Mortgages with lower rates for housing are paid over two generations when properties are past on to the children.

Cheers Ron

[mals69]

?

What is the point of finally paying something off when you are on deaths door ?

On a 20 year loan you pay back in total double of what you have borrowed,i do not want to work out the total repayment on a 50 year loan - would be scary stuff.

[xris]

Countries like Taiwan have beem doing this since WW2 to encourage ownership of property (Capitalism).

Ron

Has Taiwan as a country/state existed since WWII? In fact, does it even exist now?

xris

[McDuck]

Fifty years or Sixteen tones...meh!..same thing.

Sixteen Tons
Merle Travis

Some people say a man is made outta mud
A poor man's made outta muscle and blood
Muscle and blood, skin and bones
A mind that's a-weak and a back that's strong

You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

[4thecat]

Thumps up for the 50 year term , use it but don’t abuse it.

Like someone else said, it’s not much use to a property investor , but it could have an impact on the general property market . As soon as rents and mortgage repayments are on the same level again, I would say people will be opting for home ownership again , rather than renting.

As far as 50year mortgages go, well why not, as long as you can pay it off faster " if you wish " .
If you can do that, ( pay it of in 10,or 15 or 20 years instead of the 50 years it actually would not cost you any more money. In a mater of fact : A 50 year term is much better than a 30 or 25 year mortgage.

Let me explain :
Say you have a 300k mortgage at 7.5% = $ 1,111.00 a fortnight on repayments.
If you had the same over 50 years = $882.00 on repayments, or $229.00 less

Now a wise thing to do, would be to have the 50 year mortgage option , but make the 20 year repayments on it, ( in other words overpay by $229 a fortnight ) which amount to about $6000 a year.
And have this " overpayment on a re-draw facility " so you can take it out if you have too ".
So ,if for instance your circumstances change, ( in between jobs, car packs in, illness, baby on the way ) or anything like that, you could use this overpayment ,and use it to tie you over the difficult times.
Almost like a savings account ( but the Government can’t tax you on it ).
If you don’t need it, well, your mortgage will be paid off in 20 years instead of the 50.
Use it, as a kind of " Insurance Mortgage" setup.

There is nothing wrong with a 10kg chocolate Easter egg, " as long as you don’t take advantage off it !
The question is, can people resist the temptation ?
Like we had several years ago with the revolving mortgage facilities. Banks left right and center where jumping on the bandwagon to offer it to anybody that wanted it. Not , because they wanted people to help pay less on there mortgages. They knew that 95% of the population that had the facility in place would in a mater of fact go backwards with it, dragging there mortgage out even further and further.
Which was a lot cheaper for the banks to do, than trying to find new Customers that wanted a mortgage.

[Gatekeeper]

Inflation would devalue the original mortgage sum over the longer period. As long as you work it properly.

[RonHoyFong]

Has Taiwan as a country/state existed since WWII? In fact, does it even exist now?

xris

WHATEVER!

http://www.gio.gov.tw/

http://en.wikipedia.org/wiki/Taiwan

I was reffering to the long term mortgages which is the heading of this thread, rather than the status of Taiwan's political position.

I would rather leave that issue to the self governing 22.9 million people of Taiwan for themselves to work out.

Cheers Ron

[roseneath_rat]

Most current lenders insist that home loans are fully repaid by normal retirement age (65) anyway. How many home loans are being passed out to 15 year olds these days?

[McDuck]

Reminds me of something a friend told me once…while he was taking me fore a spin in his very expensive (still on credit) sport car.

“Hey, I look at it this way…if I die owing a million dollars…I win!”