Mortgage Rates (1 Viewer)

[The Z Machine]

It has come out that the FHFA is exploring portable mortgages.

That would be a real unlock for the market IMO.

Add in assumable mortgages too!

 

[dutch]

It has come out that the FHFA is exploring portable mortgages.

I'm intrigued by this one but know little about it yet. I see other countries have been using them for some time so there is a history to look into but I was reading that this could upset mortgage bundling of lender's which could influence a push up on interest rates for new loans and I'm not sure how that offers relief for those currently locked out off the market.

 

[dutch]

It has come out that the FHFA is exploring portable mortgages.

That would be a real unlock for the market IMO.

Add in assumable mortgages too!

Am curious as I'm very new to this solution but how would portable mortgages help those currently not in the market? The thought I read it may lead to higher interest rates for new loans which is a counter weight to the inventory opening up.

 

[Chadstroma]

The only way that I can see that it could help FTHBers is that those in current entry level property owners, who like many that bought or refinanced during the extremely low rate environment, are not moving up because they do not want to give up their low interest rates that they currently have on the property. This is a scenario that is very much specific to now as in the past this was not something that really was so drastic when rates typically would stay in a 5-7% range. I appreciate that they are trying to get creative and find ways to help new homeowners but I don't see this being something that makes a real difference to the target consumer (FTHB) and is something that is really only to fix that very out of whack situation that we likely will not see again when so many have 2-3% range loans that they do not want to give up. Doing portable loans now will not fix what already happened and won't be as much of a need moving forward.

 

[matttyl]

It has come out that the FHFA is exploring portable mortgages.

That would be a real unlock for the market IMO.

Add in assumable mortgages too!

Am curious as I'm very new to this solution but how would portable mortgages help those currently not in the market? The thought I read it may lead to higher interest rates for new loans which is a counter weight to the inventory opening up.

Well, I currently own a house and have a historically low interest rate in the mortgage. So low, that I can’t afford to move to a similar or nicer house (not that I really want to) now that housing has roughly doubled in the 12 years since we bought here. But if I could take this loan with me, maybe I’d move which would open up some inventory for a new home buyer.

 

[Sand]

We should be building houses faster than data centers but house builders aren’t building normal houses anymore. Every house now is 3k sqft, has 10’ ceilings and granite tops.

We need a ton of builders like the post WW2 builders similar to Levett & Sons.

Levitt & Sons - Wikipedia

en.wikipedia.org

I assume code wouldn’t allow homes to be built like this but we need more small single family homes - not apartments or condos. (if it were up to me, I would destroy every apartment and condo building in the world but that’s a whole Nother theory/story)

Building smaller is less profitable for builders. Land, labor and material costs are up. Devoting all that to a single family starter home doesn't make sense to most builders.

Now DIY tiny Homes is a cool market I wouldn't mind seeing grow. It's not my style of living, but could make sense to young homeowners.

Give them tax credits/incentives to do so.. I’m for far less government but there are times when - for the good of the nation- it needs a good kick in the pants.

We are expected to spend 6.7 trillion dollars on data centers in the next 4-1/2 years. We just signed an executive order to remove a lot of permits and regulations to get them built.

Now do that for housing.

I'm not totally opposed to the idea, but why promote single family starter homes over multi-family units? They are more expensive and less convenient. If the goal is to put a decent roof over a lower income family, the multifamily units seem to be the best solution.

Multifamily units aren't what's being built. What's being built is single bedroom units. A lot of government regs out there are per unit, not per bedroom, so the perverse incentive is to build non-family units.

 

[Sand]

It has come out that the FHFA is exploring portable mortgages.

I'm intrigued by this one but know little about it yet. I see other countries have been using them for some time so there is a history to look into but I was reading that this could upset mortgage bundling of lender's which could influence a push up on interest rates for new loans and I'm not sure how that offers relief for those currently locked out off the market.

You mean a natural impediment to a repeat of 2006? How terrible.

 

[Chadstroma]

It has come out that the FHFA is exploring portable mortgages.

I'm intrigued by this one but know little about it yet. I see other countries have been using them for some time so there is a history to look into but I was reading that this could upset mortgage bundling of lender's which could influence a push up on interest rates for new loans and I'm not sure how that offers relief for those currently locked out off the market.

You mean a natural impediment to a repeat of 2006? How terrible.

I am not understanding this post.

 

[Sand]

It has come out that the FHFA is exploring portable mortgages.

I'm intrigued by this one but know little about it yet. I see other countries have been using them for some time so there is a history to look into but I was reading that this could upset mortgage bundling of lender's which could influence a push up on interest rates for new loans and I'm not sure how that offers relief for those currently locked out off the market.

You mean a natural impediment to a repeat of 2006? How terrible.

I am not understanding this post.

2006 was caused in large part due to securitization of mortgages (among other instruments). I don't see it a bad thing that we have impediments to the bad behavior that destroyed the RE market, and close to the financial system, for a number of years.

We already have Fannie Mae removing the minimum credit score requirement very recently. That's a tremendously bad idea. I'm sure other bad ideas will follow as memories fade (or are ignored).

Fannie Mae eliminating minimum 620 credit score eligibility requirement

Private mortgage insurance companies still require a minimum 600 or 620 middle credit score for borrowers putting less than 20% down.

www.ocregister.com

 

[Chadstroma]

It has come out that the FHFA is exploring portable mortgages.

I'm intrigued by this one but know little about it yet. I see other countries have been using them for some time so there is a history to look into but I was reading that this could upset mortgage bundling of lender's which could influence a push up on interest rates for new loans and I'm not sure how that offers relief for those currently locked out off the market.

You mean a natural impediment to a repeat of 2006? How terrible.

I am not understanding this post.

2006 was caused in large part due to securitization of mortgages (among other instruments). I don't see it a bad thing that we have impediments to the bad behavior that destroyed the RE market, and close to the financial system, for a number of years.

We already have Fannie Mae removing the minimum credit score requirement very recently. That's a tremendously bad idea. I'm sure other bad ideas will follow as memories fade (or are ignored).

Fannie Mae eliminating minimum 620 credit score eligibility requirement

Private mortgage insurance companies still require a minimum 600 or 620 middle credit score for borrowers putting less than 20% down.

www.ocregister.com

Please refer to my earlier post on the credit score. It is much ado about nothing.

To get clarification, what is your understanding of the secondary market?

 

[Instinctive]

It has come out that the FHFA is exploring portable mortgages.

That would be a real unlock for the market IMO.

Add in assumable mortgages too!

Am curious as I'm very new to this solution but how would portable mortgages help those currently not in the market? The thought I read it may lead to higher interest rates for new loans which is a counter weight to the inventory opening up.

Well, I currently own a house and have a historically low interest rate in the mortgage. So low, that I can’t afford to move to a similar or nicer house (not that I really want to) now that housing has roughly doubled in the 12 years since we bought here. But if I could take this loan with me, maybe I’d move which would open up some inventory for a new home buyer.

Yeah if I could have taken my mortgage with me, I'd have kept it, sold my house, and gotten a smaller second mortgage on the home I just bought.

Instead, I'm keeping my house and renting it. Because the rent far exceeds the mortgage payment and is therefore worth the headache.

If I could just have had a mortgage that was 40% less dollars at the higher rate, I'd probably have done that.

 

[FarFromHome]

Ive never heard of this portable mortgage thing until this thread. I'm not as smart as some of you on this topic. So. Let's say i have a 30 year mortgage at 3% on a home valued at 500 grand. In this idea I can transfer that old loan? Once my old house sells it basically buys my new house and I'm locked into original loan? How does that work of the home values don't equal? Am I dumb?

 

[dutch]

Ive never heard of this portable mortgage thing until this thread. I'm not as smart as some of you on this topic. So. Let's say i have a 30 year mortgage at 3% on a home valued at 500 grand. In this idea I can transfer that old loan? Once my old house sells it basically buys my new house and I'm locked into original loan? How does that work of the home values don't equal? Am I dumb?

After doing some reading up myself it means you get a top up loan to cover the difference in the mortgages on what you bring over after the sale of your old house. You sell old with 1/2 of the 3% loan paid off you can shift the remainder of your loan over to the new at the same terms including rate. Then you add another loan on top to cover the difference in the new house and the new loan is at the prevailing rate. So lets $150 grand comes over at 3% and another $250,000 is loaned at 6% for the new house. Blend together for your new payment. Still a lot less than the whole $400,00 at 6%.

 

[FarFromHome]

After doing some reading up myself it means you get a top up loan to cover the difference in the mortgages on what you bring over after the sale of your old house. You sell old with 1/2 of the 3% loan paid off you can shift the remainder of your loan over to the new at the same terms including rate. Then you add another loan on top to cover the difference in the new house and the new loan is at the prevailing rate. So lets $150 grand comes over at 3% and another $250,000 is loaned at 6% for the new house. Blend together for your new payment. Still a lot less than the whole $400,00 at 6%.

Much thanks. That's the part I was missing. I was thinking it would be took to find a new home at the same value. Ha ha. You explained it perfectly for me. Thanks.

 

[Chadstroma]

Ive never heard of this portable mortgage thing until this thread. I'm not as smart as some of you on this topic. So. Let's say i have a 30 year mortgage at 3% on a home valued at 500 grand. In this idea I can transfer that old loan? Once my old house sells it basically buys my new house and I'm locked into original loan? How does that work of the home values don't equal? Am I dumb?

I am not expert on it... I believe Australia and Canada... maybe UK do them.

 

[BassNBrew]

Some thoughts on the 50-year mortgage. I'm in the camp of it's not for me, but maybe others are interested. I've signed four 30-year mortgages in my life. The average span was 3-5 years until I sold. I've had my current for almost 4 years with no plans to move and should be paid off early.

The homebuying industry was jolted over the weekend by a President Donald Trump social media post that claimed a 50-year mortgage could be a game-changer for the housing market.

Of course, no other details were announced. Still, the real estate industry’s online community overwhelmingly thought this was a bad idea for house hunters, suggesting the two decades of added borrowing compared with the traditional 30-year mortgage would make modest savings not worth the effort.

Sadly, too many discussions surrounding homebuying challenges lean on assumptions created in a financial era that may never return. Fresh thinking is welcome to me, and I hope new ideas emerge from the debate about how to put financially strapped home seekers in a buying mood.

A top concern from the weekend’s online chatter about a 50-year mortgage is the potential delay in owning a home mortgage-free.

First of all, very few borrowers hold a 30-year mortgage for its full term. Refinancing or other early payoffs – often through a sale – end the mortgage. There’s no reason a 50-year loan would act differently. So, why shouldn’t a buyer grab a few years of savings?

Additionally, consider the current state of ridiculously elevated home prices. Barring a sharp decline in values, paying off the mortgage may no longer be a realistic goal for the typical homebuyer.

Plus, one shouldn’t quickly dismiss savings of “just a few hundred bucks” a month. That’s real money to new homeowners who likely spent almost their last penny to close the purchase.

The numbers​

Yes, we have to do some math to show why a 50-year loan is not the worst idea ever.

My trusty spreadsheet examined the costs of a $500,000 mortgage on a 30-year loan at a 6.25% rate, as well as two variations on a 50-year loan: one at the same rate and another scenario with a rate that’s half a point higher, at 6.75%. Some real estate gurus suggest a 50-year loan would carry a significantly higher rate – though I’m not convinced.

The 30-year loan would cost $3,079 a month. At the same rate, a 50-year term would cost $2,725 – saving $374 a month, or an 11% discount. At the higher rate, it’d be $2,913 a month – saving $165 a month, or 5%.

Now with the 30-year loan, if held for those three decades, it’s obviously paid off. But the 50-year deals? $373,000 is still owed at 6.25% after 30 years. It’s $383,000 at 6.75%.

To many folks, that remaining balance is a problem. What is forgotten, however, are the monthly savings generated by the 50-year loan’s lower monthly costs.

At 6.25%, the 50-year-old loan’s $354 a month savings add up to $127,000 over 30 years. That could be $202,000 if invested in a 3% savings account or $698,000 if invested in the stock market, assuming a 10% annual return. These earnings, depending on investment earnings, could help pay down or pay off the mortgage at that point.

This potential nest egg is smaller when eyeballing the 50-year loan with a 6.75% rate. The $165-a-month saved adds up to $60,000 over 30 years, or $94,000 if invested at 10%, or $327,000, assuming 10% annual stock returns.

The dark side​

Look, the 50-year mortgage is no panacea for affordability. It might work for a special kind of thrifty buyer.

Fixing housing affordability takes some unorthodox thinking. A 50-year mortgage, if used wisely, could be one tool in housing’s repair kit.

The big question is what most house hunters do with the potential upfront savings. What if the smaller monthly payments are not being saved?

That cash might be used to spend more on the house. A 50-year loan can give a borrower 13% more buying power vs. a comparably priced 30-year mortgage.

This is a risk associated with any financial incentive to house hunters. These deals may benefit a few buyers, but they are likely also to drive up housing costs for all.https://www.eastbaytimes.com/2025/11/11/trumps-50-year-mortgage-isnt-the-worst-idea-ever/

My take on it is that like all mortgage products, it isn't for everyone but it could be for someone. The people who freak out on it, they focus on 50 years and the interest paid over the entire 50 years. The reality is that whether 15 or 30 or something in between, the vast majority of mortgage loans lifespan is about 7 years.

This is something that they are looking at really for First Time Home Buyers (FTHB) to help entry into the home owning market. No matter what the interest cost of a 50 year mortgage, it is less cost than renting. On a $2000 mortgage payment for a 50 year mortgage over 10 years at 6.5% the interest paid would be $210K with $30K paid towards principal. Add in about $700 for tax/insurance for $84K paid for that same 10 years. If you rented a comparable property for 10 years- using actual rental comps in my area- the lowest would be about $2500 and ranging to $3000 for that price point. Using the lower of comp of $2500 that is a cost of $300K- and that is conservative as rents are very much impacted by inflation and tend to go up without any major change of real estate scene. So, taking the most conservative route- the homeowner is still ahead in pure costs over the renter. This is not taking into account equity added from property appreciation or rents rising over that same period of time- both are not guaranteed but over that period of time, it nearly is. Even though the equity is not as much as it would be with the 30 year, if it was a question of buying or not buying for a FTHB- buying is the better option with the 50 year.

There will be people who demonize it but that is how I see it. Looking at the hard numbers and a specific scenario. Using that same scenario, the difference in payment is about $200. For many of us, that $200 seems like not much of a difference but I can tell you that I have had numerous conversations with aspiring home owners where the $200 difference was the difference of buying or not.

My biggest fear with it would be that it would be over sold. Similar to the Option ARM which for the average person is seen as the pure evil of mortgage products but it was actually a very good product FOR THE RIGHT CONSUMER WHO FULLY UNDERSTOOD IT. The biggest problem with Option ARMs was not being what they were but that they were over sold to people who were not good fits for them and did not understand them at all. I still remember conversations with homeowners ahead of the real estate meltdown of 2008.

It certainly will not be the magic fix to helping FTHBers enter the market but it may help some.

This is something that they are looking at really for First Time Home Buyers (FTHB) to help entry into the home owning market. No matter what the interest cost of a 50 year mortgage, it is less cost than renting. On a $2000 mortgage payment for a 50 year mortgage over 10 years at 6.5% the interest paid would be $210K with $30K paid towards principal. Add in about $700 for tax/insurance for $84K paid for that same 10 years. If you rented a comparable property for 10 years- using actual rental comps in my area- the lowest would be about $2500 and ranging to $3000 for that price point. Using the lower of comp of $2500 that is a cost of $300K- and that is conservative as rents are very much impacted by inflation and tend to go up without any major change of real estate scene. So, taking the most conservative route- the homeowner is still ahead in pure costs over the renter. This is not taking into account equity added from property appreciation or rents rising over that same period of time- both are not guaranteed but over that period of time, it nearly is. Even though the equity is not as much as it would be with the 30 year, if it was a question of buying or not buying for a FTHB- buying is the better option with the 50 year.

I don't think this is true. Study

"On average, renting a home is cheaper than paying a mortgage in all 50 of the largest U.S. metros in 2025 — with the cost difference between the two growing in 38 metros since last year."

Anecdotally speaking in the Tampa area, rent for a SFH would be far cheaper than the cost of the mortgage, insurance, taxes, and maintenance on the same house.

For example, a house valued at $510K in my hood is being offered as a rental for $2,650/mth. 10% down at 6% interest rate nets you a $3,350/mth payment (includes taxes and insurance). That doesn't include any maintanence costs.

Thanks you @Captain Cranks for debunking the misinformation.

You buy a home to have control over when you leave and what you want to do with it. Beyond that in most markets you are better of renting than buying financially.

 

[Max Power]

I think it's more... Renting is better than buying short term. Buying is better than renting long term. Each situation in between is going to cut differently.

 

[FarFromHome]

I think it's more... Renting is better than buying short term. Buying is better than renting long term. Each situation in between is going to cut differently.

Agreed. It's kinda what makes this 50 year thing interesting. A family rents for 2000 a month and now has the option to buy for 2000 grand a month on a 50. Maybe live there 10 years and the home appreciates 20 grand. Now the 10 years of mortgage payments instead of rent, add the 20 grand appreciation, they now sell and make a little something something. I'm so very fortunate in life where I'll never have to choose this path, but is my logic silly to think it works for some? Cue smart people response:

 

[Sand]

I think it's more... Renting is better than buying short term. Buying is better than renting long term. Each situation in between is going to cut differently.

Agreed. It's kinda what makes this 50 year thing interesting. A family rents for 2000 a month and now has the option to buy for 2000 grand a month on a 50. Maybe live there 10 years and the home appreciates 20 grand. Now the 10 years of mortgage payments instead of rent, add the 20 grand appreciation, they now sell and make a little something something. I'm so very fortunate in life where I'll never have to choose this path, but is my logic silly to think it works for some? Cue smart people response:

Even for medium term owning the 50 year is absolutely horrific. For a 30/50 year loan, 500k house, 5% interest the payments are 2270 and 2684. Only 16% less payment in trade for getting very, very little equity in the early/medium term of the loan (interest is front loaded). For each loan at 10 years the 30 year person gets double the equity at the cost of a +18% payment (61k vs 29k). If you look at percentages at 20% of the loan the 30 year gets 35% of their payment going to principal; the 50 gets 12%. It's a horrid deal with typical human lifespans. This means a large number of folks will die after making a bunch of payments and getting very little equity in their lifetime. Abomination is the word that comes to mind. This pushes renting as the more effective option greatly in most spots. Our new tax structure makes it so that most folks still won't be able to itemize, so not even any tax relief, either.

Portable/assumable is a much better deal for the consumer. If the financial wizards can figure out how to slice and dice mortgages into 18 tranches and grade F- crap into AAA tranches then they can figure out how to make portable mortgages workable inside the structure. (I know mortgages in some cases can be assumed - my parents assumed an 8.75% mortgage in 1980, which was a screaming deal at the time).

 

[FarFromHome]

Even for medium term owning the 50 year is absolutely horrific. For a 30/50 year loan, 500k house, 5% interest the payments are 2270 and 2684.

I just saw that 25% of Americans live check to check. That's a 400 dollar difference per month. If your a family of 5 and paying 2600 a month for rent this idea of only paying 2270 for your first home is gonna pull a bunch of people in. I'm not disagreeing with you entirely, I'm just saying that a big chunk of the American consumers care about today not tomorrow.

 

[Sand]

Even for medium term owning the 50 year is absolutely horrific. For a 30/50 year loan, 500k house, 5% interest the payments are 2270 and 2684.

I just saw that 25% of Americans live check to check. That's a 400 dollar difference per month. If your a family of 5 and paying 2600 a month for rent this idea of only paying 2270 for your first home is gonna pull a bunch of people in. I'm not disagreeing with you entirely, I'm just saying that a big chunk of the American consumers care about today not tomorrow.

True and could be advantageous in some areas. I did ignore insurance, RE taxes, and PMI for simplicity.

As an aside, I always laugh a little at "check to check". CNN did an interview with someone about the shutdown and its effect on SNAP benefits. The interviewee noted that since SNAP wasn't there she had to lay off two eyelash technicians. So, you know, check to check can (and does) include a lot of that stuff.

 

[massraider]

I just saw that 25% of Americans live check to check. That's a 400 dollar difference per month. If your a family of 5 and paying 2600 a month for rent this idea of only paying 2270 for your first home is gonna pull a bunch of people in. I'm not disagreeing with you entirely, I'm just saying that a big chunk of the American consumers care about today not tomorrow

Your question was, does it work for some?, not Will people find this attractive?

7 Year car leases and 50 year mortgages are attractive to some, for the same reason, but that doesn't mean it works.

There may be some people it works for. Someone starting out makes a great choice of property, gets a 50 year mortgage for a place they cannot afford at the moment, their salary increases, they pay their mortgage down, the value of the home increases nicely, and hey, that works. There's going to be examples.

I'm not even sure how common it is that someone can spend the same, or less, on a mortgage, as opposed to rent. I'd like to see the math on that. In a lot of areas, I think renting a house is a LOT cheaper than a mortgage, property taxes, maintenance, etc.

And if there's another big dip, people will be 10 years in with little equity, and upside down on their home.

 

[FarFromHome]

And if there's another big dip, people will be 10 years in with little equity, and upside down on their home.

Good post. This portion got me thinking about the importance of home values increasing. I've always bought resellable 3 bedroom homes in nice neighborhoods. The idea is that it will at a minimum, hold its value. Maybe not all home buyers would think that way. What about the home that doesn't appreciate upwards? It would be brutal for those locked into an upside down mortgage for 50 years. I guess it would be live there forever or short sale the damn thing. Appreciate the conversation.

 

[Sand]

Interesting discussion of the 50 year from an administration Treasury official:

"On Thursday’s broadcast of NewsNation’s “The Hill,” Joseph Lavorgna, Counselor to the Secretary of the Treasury Scott Bessent, stated that the 50-year mortgage proposal didn’t come from the Treasury Department and is “probably not an optimal approach.”

Host Blake Burman asked, “Does the Treasury Department, Joe, believe that a 50-year mortgage is a good idea?”

Lavorgna answered, “The Treasury Department is looking at all sorts of factors. That was one proposal. The feedback has been such that, probably — and it did not come from Treasury — but probably not an optimal approach. But we’re looking at everything we possibly can do, and on the supply side, trying to change the permitting, seeing if you can do things to lower closing costs. Again, interest rates are high, monetary policy is restrictive. That’s the purview of the Fed. But, again, we’re trying to come up with everything possible to help working-class Americans, of which the one big, beautiful bill certainly is a key cornerstone to. And if we can do other things, such as lowering the price of coffee and bananas and all sorts of things that the Secretary mentioned, we’re going to pursue every option we possibly can, every little bit will help.”

 

[brun]

I think it's more... Renting is better than buying short term. Buying is better than renting long term. Each situation in between is going to cut differently.

Agreed. It's kinda what makes this 50 year thing interesting. A family rents for 2000 a month and now has the option to buy for 2000 grand a month on a 50. Maybe live there 10 years and the home appreciates 20 grand. Now the 10 years of mortgage payments instead of rent, add the 20 grand appreciation, they now sell and make a little something something. I'm so very fortunate in life where I'll never have to choose this path, but is my logic silly to think it works for some? Cue smart people response:

Even for medium term owning the 50 year is absolutely horrific. For a 30/50 year loan, 500k house, 5% interest the payments are 2270 and 2684. Only 16% less payment in trade for getting very, very little equity in the early/medium term of the loan (interest is front loaded). For each loan at 10 years the 30 year person gets double the equity at the cost of a +18% payment (61k vs 29k). If you look at percentages at 20% of the loan the 30 year gets 35% of their payment going to principal; the 50 gets 12%. It's a horrid deal with typical human lifespans. This means a large number of folks will die after making a bunch of payments and getting very little equity in their lifetime. Abomination is the word that comes to mind. This pushes renting as the more effective option greatly in most spots. Our new tax structure makes it so that most folks still won't be able to itemize, so not even any tax relief, either.

Portable/assumable is a much better deal for the consumer. If the financial wizards can figure out how to slice and dice mortgages into 18 tranches and grade F- crap into AAA tranches then they can figure out how to make portable mortgages workable inside the structure. (I know mortgages in some cases can be assumed - my parents assumed an 8.75% mortgage in 1980, which was a screaming deal at the time).

Re bolded
I'm no expert but pretty sure the interest rate won't be the same for a 30 v 50 year mortgage.

 

[InDitkaWeTrust]

Even for medium term owning the 50 year is absolutely horrific. For a 30/50 year loan, 500k house, 5% interest the payments are 2270 and 2684.

I just saw that 25% of Americans live check to check. That's a 400 dollar difference per month. If your a family of 5 and paying 2600 a month for rent this idea of only paying 2270 for your first home is gonna pull a bunch of people in. I'm not disagreeing with you entirely, I'm just saying that a big chunk of the American consumers care about today not tomorrow.

By definition, if you're living from check to check, you don't have the minimum 3-5% down for a mortgage regardless of length.

 

[Nugget]

And if there's another big dip, people will be 10 years in with little equity, and upside down on their home.

Good post. This portion got me thinking about the importance of home values increasing. I've always bought resellable 3 bedroom homes in nice neighborhoods. The idea is that it will at a minimum, hold its value. Maybe not all home buyers would think that way. What about the home that doesn't appreciate upwards? It would be brutal for those locked into an upside down mortgage for 50 years. I guess it would be live there forever or short sale the damn thing. Appreciate the conversation.

I bought my first home in Mesa AZ in 2007 for 238k when we moved there for work. Sold 6 years later for 151k.

2nd house purchased in 2014 - ex wife got it in the divorce in 2018.

Currently on my third, purchased 18 months ago. Closing costs, carpet, paint, replaced deck so far. Paid cash - I look at the opportunity cost of leaving that money in the market and I'd be up ~20%. Financially, buying has not made sense for me.

 

[-OZ-]

We should be building houses faster than data centers but house builders aren’t building normal houses anymore. Every house now is 3k sqft, has 10’ ceilings and granite tops.

We need a ton of builders like the post WW2 builders similar to Levett & Sons.

Levitt & Sons - Wikipedia

en.wikipedia.org

I assume code wouldn’t allow homes to be built like this but we need more small single family homes - not apartments or condos. (if it were up to me, I would destroy every apartment and condo building in the world but that’s a whole Nother theory/story)

Building smaller is less profitable for builders. Land, labor and material costs are up. Devoting all that to a single family starter home doesn't make sense to most builders.

Now DIY tiny Homes is a cool market I wouldn't mind seeing grow. It's not my style of living, but could make sense to young homeowners.

Give them tax credits/incentives to do so.. I’m for far less government but there are times when - for the good of the nation- it needs a good kick in the pants.

We are expected to spend 6.7 trillion dollars on data centers in the next 4-1/2 years. We just signed an executive order to remove a lot of permits and regulations to get them built.

Now do that for housing.

I'm not totally opposed to the idea, but why promote single family starter homes over multi-family units? They are more expensive and less convenient. If the goal is to put a decent roof over a lower income family, the multifamily units seem to be the best solution.

Multifamily units aren't what's being built. What's being built is single bedroom units. A lot of government regs out there are per unit, not per bedroom, so the perverse incentive is to build non-family units.

That really depends on location. There have been more apartments and townhomes built here in the last few years than single family homes. 4,600 new apartments in our town this past year. Population 65,000 - so these apartments are a significant increase.

 

[FarFromHome]

I bought my first home in Mesa AZ in 2007 for 238k when we moved there for work. Sold 6 years later for 151k.

Yuck man.

 

[Instinctive]

And if there's another big dip, people will be 10 years in with little equity, and upside down on their home.

Good post. This portion got me thinking about the importance of home values increasing. I've always bought resellable 3 bedroom homes in nice neighborhoods. The idea is that it will at a minimum, hold its value. Maybe not all home buyers would think that way. What about the home that doesn't appreciate upwards? It would be brutal for those locked into an upside down mortgage for 50 years. I guess it would be live there forever or short sale the damn thing. Appreciate the conversation.

I bought my first home in Mesa AZ in 2007 for 238k when we moved there for work. Sold 6 years later for 151k.

2nd house purchased in 2014 - ex wife got it in the divorce in 2018.

Currently on my third, purchased 18 months ago. Closing costs, carpet, paint, replaced deck so far. Paid cash - I look at the opportunity cost of leaving that money in the market and I'd be up ~20%. Financially, buying has not made sense for me.

Well. Not made sense and got unlucky are not the same thing.

 

[-OZ-]

I'm not even sure how common it is that someone can spend the same, or less, on a mortgage, as opposed to rent. I'd like to see the math on that. In a lot of areas, I think renting a house is a LOT cheaper than a mortgage, property taxes, maintenance, etc.

If this were true over the long term there wouldn’t be landlords. There’s more risk in owning of course.
Our county has a 50% reduction in property taxes for owner occupied homes. (Meaning not rentals)

 

[FarFromHome]

By definition, if you're living from check to check, you don't have the minimum 3-5% down for a mortgage regardless of length.

Not true. It's the beauty of being an American. We have credit cards at 20%. We are never broke!!!!! Ha ha

 

[BassNBrew]

By definition, if you're living from check to check, you don't have the minimum 3-5% down for a mortgage regardless of length.

Not true. It's the beauty of being an American. We have credit cards at 20%. We are never broke!!!!! Ha ha

You mean 33%

 

[massraider]

If this were true over the long term there wouldn’t be landlords

I didn't say over the long haul. And I'm not even asserting it's true everywhere. And I am not suggesting it'll be cheaper to rent forever.

five minutes on Zillow, looking in my area (Atlantic County, NJ), and one can easily rent a 3 bedroom house for about the same monthly mortgage payment as someone who bought a $400,000 home, put 10% down, and has $4500/yr in property tax/insurance--just horsing around on mortgage calculators here.

Now, that's just the same monthly mortgage payment. Let's not forget the $40,000 the owner had to put down, that the renter could invest over the next 30 years, plus whatever savings the renter has because they aren't paying anything for maintenance. If a couple only is going to have one child, it gets even cheaper.

I assume this is true in many other areas of the country.

 

[-OZ-]

If this were true over the long term there wouldn’t be landlords

I didn't say over the long haul. And I'm not even asserting it's true everywhere. And I am not suggesting it'll be cheaper to rent forever.

five minutes on Zillow, looking in my area (Atlantic County, NJ), and one can easily rent a 3 bedroom house for about the same monthly mortgage payment as someone who bought a $400,000 home, put 10% down, and has $4500/yr in property tax/insurance--just horsing around on mortgage calculators here.

Now, that's just the same monthly mortgage payment. Let's not forget the $40,000 the owner had to put down, that the renter could invest over the next 30 years, plus whatever savings the renter has because they aren't paying anything for maintenance. If a couple only is going to have one child, it gets even cheaper.

I assume this is true in many other areas of the country.

You say you’re not looking at the long term, then mention the next 30 years.

If you’re not considering the long term, you’re ignoring the biggest benefit of buying. The inflation protection, except taxes, insurance, maintenance, upgrades, etc is significant.

I’ll agree that in many places renting is cheaper if you’re just looking at today’s prices and not assuming rent increases in the future.

 

[massraider]

You say you’re not looking at the long term, then mention the next 30 years.

If you’re not considering the long term, you’re ignoring the biggest benefit of buying. The inflation protection, except taxes, insurance, maintenance, upgrades, etc is significant.

I’ll agree that in many places renting is cheaper if you’re just looking at today’s prices and not assuming rent increases in the future.

I mention the next 30 years in terms of the down payment a person would be able to invest elsewhere, I didn't mention 30 years in that forever and ever it'll be cheaper month to month to rent, and landlords are going to cease to exist. Not the same thing. I don't care, change the 30 years to 5 years or 10 years, I mentioned that the new homeowner has 40 grand to invest they would not have otherwise.

I 100% agree that owning property is great inflation protection, and I believe real estate is as great a long term investment as there is. If we ever get into a hyper-inflation situation especially, owing assets like that will be huge wins. But there's other assets one can hold that are also hedges against inflation. $40k in gold 10 years ago is $131k now, and that's without one shoveled driveway, broken water heater, or property tax.

I’ll agree that in many places renting is cheaper if you’re just looking at today’s prices and not assuming rent increases in the future.

We agree, then. Renting is cheaper, in many places. That's what I think.

I think rent will continue to go up, and it can still be cheaper to rent. Rent doesn't go up by itself, as cost to maintain a home stays the same. All costs of a homeowner go up, unless you are assuming Home Depot is going to drop all their prices sometime soon.

I believe there are many reasons contributing to what we are seeing with home prices. Private equity buying up property just for fun, short term rentals taking homes (and apartments) off the markets for residents. I think the interest rate argument is a little bit overblown.

 

[Sand]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

 

[-OZ-]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

What rate do they assume here? Is that assuming a down payment?
Rate matters even here. At my minimum payments, we get half paid off in 16 years but at today’s prevailing rates (6.3) it looks like 21 years.
Fwiw we have “owned half the house” since about 6 years into the 30 year mortgage with increased value.

 

[Max Power]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

 

[Nugget]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Most people don't have 50 working years as an adult. Maybe you can pass the debt down to your children?

Japan and the 100 year Mortgage - Link (1995)

A recent innovation in the Japanese real estate industry to promote home ownership is the creation of a 100-year mortgage term. The home, encumbered by the mortgage, becomes an ancestral property and is passed on from grandparent to grandchild in a multigenerational fashion. We analyze the implications of this innovative practice, contrast it with the conventional 30-year mortgage popular in Western nations and explore its unique benefits and limitations within the Japanese economic and cultural framework. Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes

 

[Max Power]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Most people don't have 50 working years as an adult. Maybe you can pass the debt down to your children?

Japan and the 100 year Mortgage - Link (1995)

A recent innovation in the Japanese real estate industry to promote home ownership is the creation of a 100-year mortgage term. The home, encumbered by the mortgage, becomes an ancestral property and is passed on from grandparent to grandchild in a multigenerational fashion. We analyze the implications of this innovative practice, contrast it with the conventional 30-year mortgage popular in Western nations and explore its unique benefits and limitations within the Japanese economic and cultural framework. Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes

Passing an asset along to the kids as well. Real estate is a good option to create generational wealth.

 

[Sand]

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Chad is the expert here and for a number of folks he's right, I'm sure. IMO, the issue with using the 50 as a bridge is that the folks choosing this are the ones that are stretching anyway. These are the same folks that chose interest only loans, 125% LTV cash out refis, etc. (Narrator: those did not turn out well). The risk profile of who would choose these I would think would be sky high.

But I'm just a guy spewing on the net, so probably trust Chad's thinking.

 

[Joe Schmo]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Most people don't have 50 working years as an adult. Maybe you can pass the debt down to your children?

Japan and the 100 year Mortgage - Link (1995)

A recent innovation in the Japanese real estate industry to promote home ownership is the creation of a 100-year mortgage term. The home, encumbered by the mortgage, becomes an ancestral property and is passed on from grandparent to grandchild in a multigenerational fashion. We analyze the implications of this innovative practice, contrast it with the conventional 30-year mortgage popular in Western nations and explore its unique benefits and limitations within the Japanese economic and cultural framework. Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes

Passing an asset along to the kids as well. Real estate is a good option to create generational wealth.

Ahh, but this exacerbates the issue of fthb'ers breaking into the system. One the the issues today is old folks aging in place and not allowing the inventory to be available; with the passing down of real estate that amplifies the strain.

From your link:
"Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes"

 

[Max Power]

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Chad is the expert here and for a number of folks he's right, I'm sure. IMO, the issue with using the 50 as a bridge is that the folks choosing this are the ones that are stretching anyway. These are the same folks that chose interest only loans, 125% LTV cash out refis, etc. (Narrator: those did not turn out well). The risk profile of who would choose these I would think would be sky high.

But I'm just a guy spewing on the net, so probably trust Chad's thinking.

I'm right there with you. There are a lot of people making terrible financial decisions just because banks or credit card companies say they can. I don't think the average American consumer is financially savvy.

I'm not a fan of the 50 year mortgage proposal, but I also have a soft spot for the people who are working low pay jobs that want to start family or set down roots somewhere. Low earners have little path to home ownership currently and this could be an option. In most situations I'd side with owning over renting, but I can acknowledge it doesn't make financial sense for everyone.

I'd like to see more lower income earners become home owners, but I'm not a fan of tax dollars subsidizing that. I also believe its a very difficult challenge to make homes "more affordable".

 

[Max Power]

Another interesting tidbit I saw about 50 year mortgages. With a 15 year loan a borrower achieves 50% equity in the house at year 8. 30 year it's year 18. 50 year it's year 36. 36 years before you own half the house. That's crazy.

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Most people don't have 50 working years as an adult. Maybe you can pass the debt down to your children?

Japan and the 100 year Mortgage - Link (1995)

A recent innovation in the Japanese real estate industry to promote home ownership is the creation of a 100-year mortgage term. The home, encumbered by the mortgage, becomes an ancestral property and is passed on from grandparent to grandchild in a multigenerational fashion. We analyze the implications of this innovative practice, contrast it with the conventional 30-year mortgage popular in Western nations and explore its unique benefits and limitations within the Japanese economic and cultural framework. Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes

Passing an asset along to the kids as well. Real estate is a good option to create generational wealth.

Ahh, but this exacerbates the issue of fthb'ers breaking into the system. One the the issues today is old folks aging in place and not allowing the inventory to be available; with the passing down of real estate that amplifies the strain.

From your link:
"Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes"

Assuming its the parents passing that pushed the home to their children, at that point either the children move in and now they own the property or they sell it and its on the market. I'd also guess the older generations have more expensive homes, so they might not be in the FTHB price range. There is the potential this doesn't help with the inventory issue, but the point was more to highlight how home ownership can have generational impacts.

 

[Captain Cranks]

I liked Chad's take on the 50 year mortgage. It's a tool to get your foot in the door and refinance when you're more financially stable. Anyone actually paying 50 years on that mortgage is crazy.

Chad is the expert here and for a number of folks he's right, I'm sure. IMO, the issue with using the 50 as a bridge is that the folks choosing this are the ones that are stretching anyway. These are the same folks that chose interest only loans, 125% LTV cash out refis, etc. (Narrator: those did not turn out well). The risk profile of who would choose these I would think would be sky high.

But I'm just a guy spewing on the net, so probably trust Chad's thinking.

I'm right there with you. There are a lot of people making terrible financial decisions just because banks or credit card companies say they can. I don't think the average American consumer is financially savvy.

I'm not a fan of the 50 year mortgage proposal, but I also have a soft spot for the people who are working low pay jobs that want to start family or set down roots somewhere. Low earners have little path to home ownership currently and this could be an option. In most situations I'd side with owning over renting, but I can acknowledge it doesn't make financial sense for everyone.

I'd like to see more lower income earners become home owners, but I'm not a fan of tax dollars subsidizing that. I also believe its a very difficult challenge to make homes "more affordable".

A great solution to that is lower home prices which can be done by letting the market continue to retrace on its own without government intervention.

 

[ChiefD]

A great solution to that is lower home prices which can be done by letting the market continue to retrace on its own without government intervention.

I don't even see how this is possible today.

The first house I bought with my wife was about 1050 square feet. 3 BR, 2 BA. The rooms where small but it was fine. We paid $155,000 for it 22 years ago.

No builder is ever going to take that on again. There is no money to be made there. They can't even build it for that now.

 

[RCon]

A great solution to that is lower home prices which can be done by letting the market continue to retrace on its own without government intervention.

I don't even see how this is possible today.

The first house I bought with my wife was about 1050 square feet. 3 BR, 2 BA. The rooms where small but it was fine. We paid $155,000 for it 22 years ago.

No builder is ever going to take that on again. There is no money to be made there. They can't even build it for that now.

$155K at 3% inflation for 22 years = ~$288K now

In the right location, with the right zoning, I would think builders could do $300K homes.

 

[Captain Cranks]

A great solution to that is lower home prices which can be done by letting the market continue to retrace on its own without government intervention.

I don't even see how this is possible today.

The first house I bought with my wife was about 1050 square feet. 3 BR, 2 BA. The rooms where small but it was fine. We paid $155,000 for it 22 years ago.

No builder is ever going to take that on again. There is no money to be made there. They can't even build it for that now.

It's happening in a lot of areas as we speak. The government just needs to sit back and let it take place.

Check out the "Home Value Growth" graph for your area here

Depending on your area, you're likely to see exceptional value growth in 2021 and 2022 similar to the 2008 housing bubble. What made housing more affordable again? Lower prices in the years that followed.

 

[fruity pebbles]

I just don’t see any benefit. A foot in the door or any other way. It would be one thing if the payment was noticeably cheaper but it’s not. Factoring in the higher interest rate and higher pmi, you’re talking $100 a month or so on the average house. If things are that tight that $100 a month makes the difference between buying a house or not then it’s financial suicide to buy anyways.