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50 year mortgages - your thoughts?

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  • #16
    Hey Guys i had a meeting with the bank manager yesterday and he mentioned they were doing the 50 year mortgages to make it more affordable for people to get into their own homes. So I think it is a great thing for people, of course if it were me I would pay it off more quickly but that is just me who likes to own everything. I am sure alot will die passing the debt onto thier kids, but i say if it make homeownership affordable for those who currently cant afford it go for it.

    infact might change my two life style properties to one if they allow it currently just paying interest only but they are costing me Orer $4k a month each, HMMMMM worth thinking about think I will ring him back now. You see I hope to pay them off anyway in the next couple of years with my trading but if i can reduce what I have to pay now I beleive that could be an advantage, something to think about anyway???



    • #17
      If it allows me to buy more property in the short term, that works for me. (No particular weighing of the pros and cons here - just superficial judgement based on the concept.)

      Control of more property now for the same dollar gives me more opportunity to use the wonders of multiple streams of capital gain opportunity.

      So 'Praise the Lord and Pass the Ammunition,' as they would say in Texas.


      • #18
        My thoughts

        I just received an article written by the chief economist of Westpac about 50 year loans and in summary he feels that a 50 year loan is probably only good for investors. This is an economist that works for a bank saying this.
        Now here is some interesting things out of his article.

        "Effectively, the first 10-years or so of a 50YrM are not much different to an
        interest-only mortgage . In the first month
        of a 50YrM, 97.7% of the monthly payment represents
        interest. By year 10, a still huge 95.1% of
        the monthly payment is for interest.1 Borrowers can
        already fashion a 50 year mortgage of sorts, if they so
        choose, by going interest-only for a period and then
        rolling into a 30-year mortgage."

        Not much different to an IO loan is correct but that not much actually is $4560 over 10yrs or $38pm extra. As an investor $38pm is still better in my pocket today than in the bank when the CG should far exceed this as I am talking about a $300,000 mortgage at 8%. This economist also states this:

        "A 50YrM is likely to be most suitable, on a long term
        basis, for property investors. Tax deductibility of interest payments on residential investment properties, and a desire by many investors for a high degree of leverage, would make a 50YrM very attractive."

        Again I don't see the attractiveness of the 50 yr over an IO loan for an investor. He states the right reasons for IO not for 50yr loans. What gets me is he is the chief economist for a bank and gives out this information.

        50-year mortgages offer some additional choice and
        flexibility. However, in reality they don’t offer much
        more than what is currently available (i.e., interest-only loans rolled into a 30YrM). The product is likely most suitable for investors. For the average home-owner, 50YrM should be viewed as short-term assistance to enhance affordability. But we would advise changing to a shorter-term mortgage once circumstances permit. Paying down the mortgage as quickly as possible provides a high guaranteed return."

        This was his summary on 50yr mortgages. He may be right in his facts but his thinking that I want a 50 year mortgage as an investor is wrong. Maybe he doesn't need that $38pm but if that covers my insurance per annum and makes my property CF+ then i will stay IO.
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