50 Year mortgage, what a deal!!

Radke · 09-20-2006, 10:29 AM

On the way into work today I heard an ad on the radio from one of the local mortgage companies offering a 50 year fixed rate mortgage. Described it as just like a 30 year mortgage, but cheaper because you pay it off over a longer period.

Then they quote a APR of something over 8.0%

I'm not certain what the current going APR for a 30 year fixed rate mortgage is, but I think it's around 6.25-6.5.

Out of morbid curiosity, I went out and grabbed an on line mortgage calculator and put in a loan principal of 200,000. 30 years at 6.5. Payments came out to $1,264 a month.
Same thing, except put in a rate of 8.0 and 50 years. Payment came out to $1,358.

So, for only an additional $94.00 a month, you can pay over 50 years instead of 30.

How can you pass up a deal like that!!

MacFish · 09-20-2006, 10:38 AM

The interest is over $600,000

Something Good · 09-20-2006, 10:38 AM

That's smokin'

MikeN · 09-20-2006, 10:47 AM

I looked into them as well. What a rip-off.

We were hoping to get a lower payment and re-fi on our house so we could buy a small second home where we actually work and cut down the commute.

Payments were not that lower to justify it. We knew we wouldn't keep the second home for 50 years anyway but the #'s were not panning out!

fishboys · 09-20-2006, 10:51 AM

I think I might ask them to sign me up for a 100 year mortgage that I dont have to start paying until after the first 50 years

Hare's Ear · 09-20-2006, 11:22 AM

I once read that even longer mortgages are common in Japan. Kids can inheret the mortgage from their parents!

jvp · 09-20-2006, 11:30 AM

Quote:

I think I might ask them to sign me up for a 100 year mortgage that I dont have to start paying until after the first 50 years

i like that idea i'll be 100 when i start paying

Herring Problem · 09-20-2006, 11:50 AM

L would be dead before I get 1/3 of the way paid off.

RODACTION · 09-20-2006, 11:53 AM

Signs of things to come....WOW !

I can remember way back (I work in auto sales) when 48 month financing came out, people thought "48 MONTHS !!!" it will never get paid off

TheTexan · 09-20-2006, 12:03 PM

I heard 50 year home loans are common a few hundred miles south of here.

jschainsaw · 09-20-2006, 12:06 PM

so do you get a longer benefit on the tax deductions- might work out?

CATCH AND EAT · 09-20-2006, 12:10 PM

Quote:

That's smokin'

smokin' what????

Troutinator · 09-20-2006, 12:51 PM

exactly!!

foxer · 09-20-2006, 02:55 PM

These are probably a necessity down in Socal..Cooming soon to Bend.

fishbait · 09-20-2006, 03:28 PM

Just gotta chime in here.

1. The way some of my Bozo compitors advertise just makes me want to puke, but then they don't care how I feel.

2. APR is not the actual interest rate. It is a calculated rate that is supposed to reflect the cost of borrowing the money. Unfortunately it can be manilipilated and is pretty much worthless till we get the legislation changed.

2. Today 30 yr rates are right around 6.125 +/-. The 40 yr rate is 6.375 +/- and the 30 yr with the first 10 years interest only is just a little bit higher than the 40 yr.

So heres the deal as I see it. If you can afford the 30 yr fixed, that the way to go for most folks. But, if you can not buy a decent house using the 30 yr payment, then a 40 yr loan or 30 yr I/O with a lower payment may get you into a house. 40 yr loan or renter? Next step is some sort or ARM (eyes open). Again, ARM or renter? In some markets you are better off being a home owner with a not so great loan than being a renter, not always but sometimes.

I like the idea of a 100 yr loan where the payments start at year 50. Give my kids something to look forward to as they are sorting through all of Dads old junk after scattering my ashes.

Perhaps I will mention this at the next lender round table

Just_learning · 09-20-2006, 04:02 PM

If there werent people stupid enough to do it, they wouldnt advertise it. Most of the public wouldnt bother getting out a calculator, let alone know how to calculate it. But you know what they say about a fool and his money

fishinpox · 09-20-2006, 04:56 PM

If you listen to those ads they also say really fast at the end, final payment of like 167,000!!

stilly bum · 09-21-2006, 02:34 AM

I've heard a similar radio ad. "You can use the money you save each month for other things, like paying off debt, or put it in savings." Yeah, I'll put it into savingas at 2% while I pay 8% on it. Brilliant.

sinker · 09-21-2006, 04:10 AM

the only advantage I see to these are for people that plan on living in one house for the rest of their lives and are expecting to make mortgage payments for the rest of their lives. 30 years from now I'll be 64, am I gonna live that long?? hard telling. If I was 54 and buying a house I'd be 84 before that 30 years was up, may as well go for the 50 year option and enjoy some of that money in the meantime.

Radke · 09-21-2006, 06:45 AM

but I think you might be missing the point!!

it costs you less each month on a 30 year loan than it would with the 50 year loan because the interest rate is almost 2% higher on the 50 year loan. Under that arrangement, you could afford LESS house on the 50 year than the 30 year loan.

It may not be this way for all 50 year loans, but was for the one they were advertising that morning.

jschainsaw · 09-21-2006, 08:48 AM

Fishbait- I have been talking to a financial planner that says I should refinance all my debt back into a 30 yr. loan. Take the savings + the payments I was making on my debt and put it into an annuity? Should I do that or pay off my house asap- Put it into a 15 or 10 year?

fishbait · 09-21-2006, 08:58 AM

Radke,

I like your thought process and generally think you are right on, but let me offer one last thought.

From what I see with my lenders, most of the 50 yr loans are for what we call non-conforming programs. That is loans for people that do not qualify for the best Fannie Mae rates, so there is a hit to the rate there.

I did not hear the add, but you are right in that when you leave the standard 30 yr fixed rate for a longer term or interest only the actual interest rate typically does increase. Most people do not understand this and lots of lenders do not bother to talk about this.

Second, the APR that you have to quote when you advertise interest rates is not the same as the actual interest rate or what we call the Note rate.

But, good for you for paying attention and taking, what, 3- 4 minutes to actually make the comparison. If many borrowers were as sharp as you lots and lots of people would be making lower house payments.

Sometimes it's tough working in an industry where you know people are not getting the best or even the proper loan. My biggest issue, believe it or not, is with credit unions. I estimate that many people that get 30 yr fixed loans from credit unions end up paying too much each month while at the same time they think they are getting a killer deal. Most credit unions advertise very low closing costs and then offer the customer higher than average interest rates so the borrower pays $20, $35 or $50 more each month.

Ok, no more ranting, gotta go work on a computer.

jvp · 09-21-2006, 09:18 AM

I refinanced about 7 yrs ago and pay 100 mth more than I did before and will be paid off in 8 yrs/15 yr mortgage. So I would pay the same and pay for 35 yrs more with a 50 yr???????????????????????????????????

gotta clap i did something that seems right

fishbait · 09-21-2006, 09:56 AM

jschainsaw,

This is one school of thought, but not the only option. Best is if you could call me sometime and we can discuss your options. Don't care if or where you do your loan, I will still help you. Some things to consider are: your age, how much debt, how long to pay off debt if you do nothing, your retirement savings, how long you plan to be in the house, what your current interest rate is, how your current monthly cash flow affects your lifestyle. You have to be careful if you take consumer debt and finance it for 30 years. There is a chance that the Financial Planner is looking out for your best interest but also could just be trying to generate a comission off the annunity. Please cantact me before you make any commitments and we can discuss your personal situtation and hopefully come up with a plan that is taylored to your personal situtation. I also think we need to get Snug2 involved in the discussion, he is a Financial Planner and I trust him to also give you honest advice and answers. Best to e-mail me at ssalv@mtglender.com or call me at work, 503.292.7999. I will be out this afternoon as I am buying some eggs and will be curing eggs this afternoon. The new Steve says, buy your eggs and release hens to go make babys.

PapaHog · 09-21-2006, 10:27 AM

I like the buy eggs and release hens theory of mortgage brokering.

ryser · 09-21-2006, 11:24 AM

Radke, just some words of caution cause I to have heard the add for the 50 fixed rate mortgage and it is a rip off.

Some of the things that I think most people don't realize and that is the following. The 50yr mortgage add that I heard said the interest rate was at 8.25% apr for 50 yr and then had a residual payment at the end of the loan (50 yr) fo 167,750.00 and that was based on a 200,000.00 loan. I couldn't belive it so when the add came on again I made sure that I listened closly and sure enough the loan had a balloon pmt at the end of 167,750.00.

So word to the wise read everything when getting or refinancing a mortgage be sure you know what it is if you don't get someone to go over it with you so that you don't get to the end of the loan and find out that you have a finale payment of 167,750.00

foxer · 09-21-2006, 12:07 PM

JS, trust Steve. I had the same questions a while ago. Turned out it was better to stay with what I already had. Next house I buy, I will go with Steve.