I NEED to know Clark’s thoughts on this 50 year mortgage idea. Seems like pure insanity from my naive POV.
If I could have lunch with anyone, it would be Clark (no fast food though)!
We already know how he feels about 7-year car notes.
I suspect he would feel the same about 8-year car notes and 50-year mortgages.
Personally, I think buying a house in today’s money and paying it off in inflated money is a pretty good deal. And most people should be able to pay it off after 15 or 20 years anyway. They don’t have to hold it for 50 years.
Most US loans do not have prepayment penalties. But it would be critical to be sure you didn’t get locked into a 50 year loan that had them!
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Sorry but the math doesn’t really seem to mathing there. I can’t see how dragging out the loan and paying more in the long run is a pretty good deal.. But again, I am naive.
I don’t think most people would get loans for 50 years just to pay them off in 15. I’m sure the banks would also disallow that because how else are they going to get their piece of the pie from us?
Crazy times.
I just had to laugh at the line “stubborn mortgage rates” in the article. Obviously the author did not have a 12% mortgage when they bought their first house.
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This is only going to be attractive for payment focused buyers. The total amount of interest paid would probably be 5x or 6x the price of the home. The thought of having a mortgage for more than 1/2 of my lifetime sounds ridiculous.
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It’s really much the same as renting, except the mortgage lenders collect the interest and have NO RISK. In fact, they likely sold the mortgage immediately after closing and it was bundled into a mortgage backed security and sold to investors in some ETF, so they were in the game literally for a few days at most.
Foundation, AC, wiring, neighborhood gone bad or bad market and loss of value, flood, windstorm, appliances breaking, etc etc etc… your problem Mr. or Ms. “Owner”, not ours!
Remember the theme of our entire economy since 1980… SOCIALIZE THE LOSSES, PRIVATIZE THE GAINS. Also known as heads I win, tails you lose.
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So true! I would rather be a renter for the rest of my life.
Separately, I wish Clark wasn’t so afraid to discuss politics when this administration seems to be causing such direct economic harm. Is a 50 year mortgage really for the people or the banks? The corruption is blatant at this point.
There is nothing to gain from Clark injecting politics into his advice. We are at the point where 1/2 the country sees glass half-full and the other 1/2 sees half-empty. His advice should be agnostic…
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Plenty of people voluntarily put themselves into these types of mortgages. They continually do cash out refinances back into 30 year mortgages. I have friends who bought a brand new home about 20 years ago. They refinanced about 3 times as rates went down. Today they still owe about 20 more years on their mortgage.
Yes, 50 year mortgages are a terrible idea. It will never happen.
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Yeah I guess you’re right.
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It’s a great idea and is not “the same as renting”.
All you have to do is amortize it with principal reductions from the beginning for a term of 15-20-30 or whatever you like, if you run into financial woes in the future you can pull back to the regular payment and ride that out (let me know if your landlord would let you do that lol).
Even a few extra payments in the first years of it would lop off years on it if you stopped making the extra payments. (compound interest in reverse).
Gone are the days of the 20 year mortgage and the “mortgage burning” party” most of them in the old days had prepayment penalties and people stayed put longer.
I would bet that under 2% of folks today “pay as agreed” for the 30 year mortgage, they either make extra payments, refinance, move etc. In the old days I would bet north of 60% “paid as agreed” for the normal mortgage.
I think the reason many are opposed is that they hate President Trump (and likely themselves) so no matter what he does they are programmed to dislike the idea.
It’s a great idea.
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Boy are you right! I have some good friends one street over. They learned some bad habits from their Father. He always said: “I want to die with all my credit cards maxed out!” Wow!
Both that Dad and my 2 son buddies have this horrible habit of re-fi-ing their mortgage to pay off their debt. They will brag to me like it’s a great thing! I tell them I paid off my mortgage years ago and Haven’t you ever listened to Clark Howard? They say: “Who is he?”
I agree. And paying off a mortgage in future (inflated) money is a good deal if the interest rate is lower than inflation.
The “lower monthly payment” isn’t all that much lower. A loan of 320,000 at 5.9% interest has a payment of $2289. With a 50 year morgage it drops to $2054. A ‘savings’ of $235. Not worth it. That savings would cost over $400,000 over the life of the loan.
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That 235.00 a month could buy a lot of groceries if you ran into financial woes.
You don’t have to keep the loan for 50 years. In fact, an awful lot of people who get mortgages move within five years.
When I used to have a 30-year mortgage, I paid more than the calculated monthly payments, which people with any length mortgage can do, provided the mortgage allows prepayments.
That kind of person probably buys a car based on the monthly payment too. If I’m getting ready to buy a house…and I am looking at the prospect of paying half a million dollars more in interest in order to save $235 on a monthly payment…I’d keep renting and look for a place I could afford a 30 year mortgage.
Nobody would keep a 50 year mortgage, so as I said prior you could amortize it for whatever you choose (15 to 30 years) and if you ran into trouble you could pull back for a while.
I’m watching all the lefty news sites saying how it’s a terrible idea, it’s because they hate President Trump (and America) if the guy with the questionable birth certificate came up with the idea they’d love it, they’d be saying “he’s looking out for the little guy” he’s making it “more affordable” etc.
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At the end of the day, 15, 30, or 50 is a personal choice, and you don’t have to keep a 50 year mortgage for 50 years. You can keep it for 5 years. My problem with these really though is the accumulation of principal is so slow, it’s financially similar to renting, but YOU carry the physical risks and the capital risks… they get offloaded onto you. At least if you rent, you retain a lot of optionality… you can LEAVE CLEANLY according to the terms of your lease.
If you have bad HVAC, foundation, a flood, bad electrical, a fire, or are upside-down… it’s all on you.