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  1. #1
    Join Date
    Apr 2006
    Posts
    4,018

    Default 50 year mortgages - your thoughts?

    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?

  2. #2
    Join Date
    May 2004
    Location
    Bay Of Plenty, NZ
    Posts
    3,604

    Default 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.
    Patience is a virtue.

  3. #3
    Join Date
    Apr 2005
    Location
    Otago
    Posts
    18

    Default

    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.

  4. #4
    Join Date
    Dec 2004
    Posts
    2,081

    Default

    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.

  5. #5
    Join Date
    Feb 2004
    Location
    North Waikato
    Posts
    651

    Default

    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

  6. #6
    Join Date
    Apr 2005
    Posts
    787

    Default

    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!
    Last edited by Propoholic; 06-08-2006 at 01:05 PM.

  7. #7
    Join Date
    Feb 2005
    Location
    Auckland
    Posts
    795

    Default

    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

  8. #8
    Join Date
    Apr 2006
    Posts
    367

    Default ?

    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.

  9. #9
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Quote Originally Posted by RonHoyFong
    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

  10. #10
    Join Date
    Apr 2005
    Posts
    2,694

    Wink

    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
    Last edited by McDuck; 06-08-2006 at 08:41 PM.


 

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