50 Year Mortgage

[AWD Chaser]

http://money.cnn.com/2006/05/10/news...gage/index.htm

Would you get a 50 year house loan to lower repayments?

[LTDHO]

Be in debt longer and pay more interest?

No thanks.

[Falcon_Phill]

no. 20 years sounds way too long enough for me.

[parawolf]

i'm struggling with the thoughts of paying my house off inside of 7 years let alone the 30 year mortgage that is officially taken out against the property. So much so that I want to nail as much as possible in 3 - 4 years from now - remortgage, rent it out as postively geared investment and buy somewhere else. First house should be paid off as quickly as possible in my opinion - or convertied into a income generating stream (or in my case both).

[gozza]

i don't have a mortage as i don't own a house...but when i do have one i really don't think id like to be paying it off in 50 years.....i would like to pay it off as quick as possible so the length of my mortgage would depend on how much i could repay a week

[Dazza XLT]

I already have a very very handy deposit waiting to be used to purchase a house, and it is currently earning around 15-20%. This alone will cover a fair chunk of any house I buy.
Stuff the 50 year business, thats bloody too long!
I pay $1000 a month in rent, and that could easily cover house re-payments. So i reckon I might just buy a house in the next 6-12 months.

[parawolf]

Originally Posted by Darran

I already have a very very handy deposit waiting to be used to purchase a house, and it is currently earning around 15-20%. This alone will cover a fair chunk of any house I buy.
Stuff the 50 year business, thats bloody too long!
I pay $1000 a month in rent, and that could easily cover house re-payments. So i reckon I might just buy a house in the next 6-12 months.

Man I want to be able to buy a house at those sorta rates that $1k a month easily covers house re-payments. $1k does not even cover the 'minimum' fortnightly amount required.

[Dazza XLT]

I haven't investigated it properly, so thats just a guess. For what I want to borrow, the repayments would be around $1300 p/m working on borrowing $250,000.

[AUIIIXR8]

It would make it easier to get into the market especially for younger people. You'd hardly want to be there for more than 5-10 years though.
House prices are way too high at the moment. It's preventing people from options to potential financial security down the track. I think that if houses and land are going to stay high and the cost of living in general doesn't sort itself then 40-50 year loans are an inevitability for some. However it's likley to drive house prices up again.

[Dazza XLT]

There is nothing decent in Bowen under $250,000 atm, so it makes it a bit hard!

[AUIIIXR8]

I TAKE IT BACK! I just put the details of $300000 loan into a calculator :

The difference between 30 and 40 years was only $30 odd per week! :
The difference between 40 and 50 was similar too! :

Well i suppose it would be okay to get the loan for the 50 year period as long as it was a rainyday thing. If your planning on paying it off quik as for the first few years then go for it. Over 50 years a $300000 dollar loan will end up costing $1.08 Mill to pay off though. The interest is HUGE!

[parawolf]

Originally Posted by AU2XLSV8

I TAKE IT BACK! I just put the details of $300000 loan into a calculator :

The difference between 30 and 40 years was only $30 odd per week! :
The difference between 40 and 50 was similar too! :

Well i suppose it would be okay to get the loan for the 50 year period as long as it was a rainyday thing. If your planning on paying it off quik as for the first few years then go for it. Over 50 years a $300000 dollar loan will end up costing $1.08 Mill to pay off though. The interest is HUGE!

Exactly... a 50 year mortgage is not an option. $60 a week (if I read you correctly) between 30 years and 50 years on the minimum repayment schedule. If you are so tight to the bone that $60 a week means the difference of 20 years, imagine how screwed you will be with an interest rate rise in that period of time.

Just speaking to some of our Japanese workmates sitting next to me... They have "Two Generation" mortgage where the mortgage is handed down Father to Son with an implied inheritance of the primary residence. However it isn't because of interest rates, it is because of capital rates. One guy has a house about 20km out of Toyko (90minutes public transport travel time) and he has a 2 generation mortgage. However interest is in the 1%PA range.

It is only in recent history that the concept of mortgage has been brought up in Japan too. Only a few decades ago you used to have to pay cash, in full to buy a house. As a result most property was owned my corporations.

[Smoke Pursuit]

I would if i was doing it tough, then id refinance it later...

[XRchic]

With a minimum mortgage repayment of $2200 per month on a $350K loan, interest rates going up, fuel prices, two big cars, 3 kids and massive child care fees and some unexpected financial issues.... at the moment, yes, I would refinance to a 50 year loan to reduce payments... but only temporarily. If that is what it took to save having to sell the house then I would do it. 50 years is a bad option, no doubt, but it is better than selling it and buying another house later, with all the stamp duty etc and costs with it all.

I would definitely refinance in a few years when our incomes increased, or other unexpected financial issues resolved themselves! No way would I take 50 actual years to pay it off.

Jac

[parawolf]

Originally Posted by XRchic

...some unexpected financial issues.... at the moment, yes, I would refinance to a 50 year loan to reduce payments... but only temporarily. If that is what it took to save having to sell the house then I would do it. 50 years is a bad option, no doubt, but it is better than selling it and buying another house later, with all the stamp duty etc and costs with it all.

As shown above the diff on $300k between 30years and 50years was $60 a week. If that is enough to get over your financial issues then thats great, but why not take it a step further and really save yourself some dollars in the short term and switch to a interest only account - depending on your rates, offset, etc you could go from paying $2200 a month to $1700 a month. $500 a month, or ~$120 a week. If it is only short term it could ease the stress far better than switching to a 50 year loan.

Just a thought - I am by no means qualified to give financial councilling and I don't think anyone over a message board forum would be either regardless of their real life job.

[XRchic]

Originally Posted by parawolf

As shown above the diff on $300k between 30years and 50years was $60 a week. If that is enough to get over your financial issues then thats great, but why not take it a step further and really save yourself some dollars in the short term and switch to a interest only account - depending on your rates, offset, etc you could go from paying $2200 a month to $1700 a month. $500 a month, or ~$120 a week. If it is only short term it could ease the stress far better than switching to a 50 year loan.

Just a thought - I am by no means qualified to give financial councilling and I don't think anyone over a message board forum would be either regardless of their real life job.

No mate, your are correct, that seems like a much better option. The 50 year loan seems like a waste of time from what you say. Just goes to show, people should always check ALL the options before making a decision...

We arent at that point, but I can see that if we arent careful, we might be! Mortgages suck... but then, so does rent!

[4.9 EF Futura]

Originally Posted by parawolf

Just a thought - I am by no means qualified to give financial councilling and I don't think anyone over a message board forum would be either regardless of their real life job.

Lol. Unless AFF has an Australian Financial Services Licence and we are Authorised Representatives I dont see ASIC granting such a licence. But I digress....

There are some amazing innovative mortgage instruments getting around at the moment.

Im sure you're familiar with the concept of reverse mortgages... you're old, retired, have paid off the house... the bank will lend against the house... no interest payments... but the bank sells the house once you "pass on" - and that's how they make their money. A lot of people have reeled back in disgust when ive told them about these - but... let's say your significant other has passed away, you have no children/next of kin... i think its a good option. Will let you really enjoy the later days of your life.

And a new one that should be hitting the market soon, an American innovation (suprise, suprise) known as a shared equity loan.

Basically, the bank lends you 80% of the value of the house - just like any other mortgage. 80% is an important figure as it alleviates the need for mortgage insurance which you would all be aware is very expensive.

A third party (another bank) comes to the table with the remaining 20%. They lend this to you interest free. However, when the day comes to sell up - they get their 20% back.... plus 40% of the capital gain realised on the property.

An amazing idea IMO which will allow a lot more people to buy a home. I dont think anyone here is offering it *yet* but its got the potential to revolutionise the mortgage markget IMO.

[charles_wif_xf]

For a loan of lets say $350K, the total repaid after 25 years is in the order of $800,000. After 50, she went past $1 million. Think about that one.

[4.9 EF Futura]

And another thing that comes to mind...

If you're 30 and go in for a 30 year loan - you're gonna be 60 by the time you pay it off (Assuming no prepayments). That's all good.

If you're 30 and go in for a 50 year loan - you're going to retire 15 years before its paid off. I wouldnt think it appropriate to lend to someone who isnt going to be able to demonstrate an income stream for the last 15 years of the term of the loan.

[Scott]

When I turn 60, I'll do it.

[Mechan1k]

Originally Posted by Darran

I haven't investigated it properly, so thats just a guess. For what I want to borrow, the repayments would be around $1300 p/m working on borrowing $250,000.

That's what I am paying off at the moment myself .... I have borrowed the same as well. I was lucky to have just under 50% deposit on my place as well ... so i am hoping to have it paid off as quickly as I can.

Man if you had a 50 year loan ... you'd be spending all of your Super just to get the loan paid off ... and you'd have nothing left after pension as well .... You might even be dead before it's all paid off ... no thanks.

[kyro_02]

i wouldn't go for a 50 year mortgage when i get a house .. there is no gurantee i be alive in the 50 years ... if you get mortgage at 50 years of age then it will be paid off when you're 100 not nice lol

[BPXR6T]

No freaking way! The interest would be a nightmare...

[Mechan1k]

And nearly all the interest is taken out first before anything gets paid off the house anyway ... it'd cost you so much more with a 50 year mortgage than just having higher monthly repayments.

[AWD Chaser]

A mortgauge for $350,000 for 8% over 50 years is $2377 per month or $548 per week....

The same mortgauge but for 30 years is $2568 per month or $592 per week... so for an extra $45 per week, you'll cut 20 years off your mortgauge (in this circumstance)

[parawolf]

Originally Posted by 4.9 EF Futura

Lol. Unless AFF has an Australian Financial Services Licence and we are Authorised Representatives I dont see ASIC granting such a licence. But I digress....

The reason I said what I said is because I work at a financial growth and wealth protection company. However I am not a financial adviser - it is therefore default behaviour for me to state what I did. It also re-affirms the fact that advice off an internet forum should be taken with a massive grain of salt.

[4.9 EF Futura]

Originally Posted by parawolf

The reason I said what I said is because I work at a financial growth and wealth protection company. However I am not a financial adviser - it is therefore default behaviour for me to state what I did. It also re-affirms the fact that advice off an internet forum should be taken with a massive grain of salt.

Absolutely. I make light of the situation but the fact remains that even trained professionals are restricted in the advice which they can provide depending on the nature of their australian financial services licence. As a regulator myself i support the need for such caution to be taken.

[Yummy Mummy]

Originally Posted by Darran

I haven't investigated it properly, so thats just a guess. For what I want to borrow, the repayments would be around $1300 p/m working on borrowing $250,000.

Standard variable rate has just increased to 7.57% or 7.07% for $250k plus. I wouldn't be concerned about interest rate increases though. As of July 1 with the new tax cuts, 98% of Australian's will more than offset the interest rate rises by paying less tax anyway. $250k will cost you $1473 per month in interest alone at 7.07%.

I agree with parawolf though, I am a mortgage manager and qualified financial advisor however I don't think my accreditation extends to advice on a public forum.

I wouldn't take out a 50 year loan though, if you really want to reduce the payments, switch to interest only with a 100% offset account so you can make unlimited additional repayments anyway.

[ebxr8240]

That would mean I'm 102 when its all paid up!!!
Not too sure house prices are going up the next 2 or 3 years???
Imo its better to have tennant pay the mortgage....

[phat_stak_tipa]

Originally Posted by parawolf

i'm struggling with the thoughts of paying my house off inside of 7 years let alone the 30 year mortgage that is officially taken out against the property. So much so that I want to nail as much as possible in 3 - 4 years from now - remortgage, rent it out as postively geared investment and buy somewhere else. First house should be paid off as quickly as possible in my opinion - or convertied into a income generating stream (or in my case both).

its easy if u got alot of coin laying around i would presume