Professor St Onge looks at 50 year mortgages
https://www.profstonge.com/p/trump-unveils-the-50-year-mortgage
Nice charts showing how homes became unaffordable in 1990 or so (the line drops way down). Looks at how more demand will drive up home prices but that will be after the midterms so it would be okay....
Better fixes at the end like
- reduce regulations
- more deported illegal aliens (reducing demand)
- fix the fed
Okay, that last one is unlikely.
Instead, people go "Oh, I can take out a 50 year mortgage, so instead of borrowing 1 million, I can borrow 1.3 million! it's only a 6000/mo payment!" and then they just run out the clock on a 50 year mortgage. End result is just higher prices period.
Take out a 50 year mortgage at a low rate then pay it off in 15-20, and it's just cheap insurance.
The really great thing for household affordability would be to limit mortgages to the golden ratio of 3 years wages. But nobody would allow that.
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@sj_zero
Yeah - but would you have bought a home with 50% down and a 10 year mortgage as the story describes?
I'm not sure I would have done that.
I would like to know what my parents did in the 1940s (post WWII) to buy the home I grew up in. It costs like 10x - 15x now than it was back then. I'm not sure I could buy it now.
@sj_zero @mhjohnson
Yeah, the financially weak will just use it to buy more expensive homes they already can’t afford.
I’d add to your point would be to refi as rates went down and switch to shorter term loans. That’s what I did. After ten years, rates were dropping and I flipped my 30y to a 15y barely changing the monthly payment. I was doing extra principle payments, but I concluded the rate was so low, the money was much better spent in the S&P500. Still will be paid off before I’m 50.