Trump proposes 50-Year Mortgage

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ZenMode said:
I don't see anything inherently bad about that. I think I've seen some banks doing 7 year loans on cars and cars depreciate a heck of a lot faster than houses.
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And financing cars for 7 years is exceptionally stupid and leading to soaring rates of default on car notes.
 
lawtig02 said:
I’m still waiting for Trump to put forward an intelligent economic idea.
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We should probably set the bar lower and just ask for an intelligent idea, if we don't want to be disappointed.

This is why I don't believe @Ramrouser is serious when he claims that trump is getting things done. He really isn't.
 
wmheel1287 said:
And financing cars for 7 years is exceptionally stupid and leading to soaring rates of default on car notes.
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They do it to get people into higher priced cars.

But there really isn't a comparison of a $500K loan for 50 years and a $80K loan for 7 years.

My two current cars, I had 72 month financing. The rates were so low, the interest wasn't an issue, I just wanted to low minimum payment in case I had a different need some months.

My wife's car was financed for 72 months and paid off in 36. My car was financed for 72 months and currently on track to pay off in 48, or less.
 
The only time this would even be remotely sensible is a starter home where your only goal is make some equity after a few years from appreciation. For all others, this is a trap that will lead to defaults
 
aGDevil2k said:
The only time this would even be remotely sensible is a starter home where your only goal is make some equity after a few years from appreciation. For all others, this is a trap that will lead to defaults
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There are often many better uses of cash than paying principal (at least the way our system is currently set up).

1. Using cash to pay principal ties up your cash in an illiquid asset. Yes, you could theoretically access that cash through a cash-out refinancing (or worse, home equity loans), but in general, every dollar paid to principal is a dollar that is unavailable to you for other, potentially more important, purposes. If those same dollars were put in the stock market, you could immediately liquidate them and have access to them when needed.

2. Paying principal yields no economic return, other than reduced interest expense on the loan (which is already subsidized by the federal government, depending upon your tax situation). It is very easy to pencil out a greater long term yield by investing cash in the stock market than in principal.

3. The primary reason for a shorter mortgage is forced savings. People are so bad at managing their money that paying higher monthly principal payments forces them to save what they would otherwise blow on Taylor Swift concert tickets or offroad vehicles. Keep in mind that with a 50 year mortgage someone could always pay extra principal each month and effectively make it a 30 year mortgage (albeit at slightly higher interest rates). The 50 year mortgage gives the flexibility to make lower payments if conditions warrant.

In short, there are lots of reasons why it may make sense to take out a 50 year mortgage, and not just when buying the first house.
 
UNCatTech said:
They do it to get people into higher priced cars.

But there really isn't a comparison of a $500K loan for 50 years and a $80K loan for 7 years.

My two current cars, I had 72 month financing. The rates were so low, the interest wasn't an issue, I just wanted to low minimum payment in case I had a different need some months.

My wife's car was financed for 72 months and paid off in 36. My car was financed for 72 months and currently on track to pay off in 48, or less.
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Oh I know why they do it and know it can be used effectively and with great success by those who are knowledgeable. Unfortunately those are NOT the folks who would be mostly using 50 year notes.
 
aGDevil2k said:
The only time this would even be remotely sensible is a starter home where your only goal is make some equity after a few years from appreciation. For all others, this is a trap that will lead to defaults
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I think this is what this mortgage should be used for: to get first time owners a start in the housing industry NOT to get some 48 yr old finance bro into a 2M mansion.
 
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