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And now for our next trick...the 50 year mortgage
Old 02-17-2006, 09:02 PM   #1
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And now for our next trick...the 50 year mortgage

http://news.yahoo.com/s/ap/20060217/...term_mortgages
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Re: And now for our next trick...the 50 year mortgage
Old 02-17-2006, 10:02 PM   #2
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Re: And now for our next trick...the 50 year mortgage

This will drive housing prices even higher.
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Re: And now for our next trick...the 50 year mortgage
Old 02-17-2006, 10:46 PM   #3
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Re: And now for our next trick...the 50 year mortgage

Doesn't Japan have (or had) a 100 year mortgage?* I guess nobody really owns their home.* Even when you don't have a mortgage, you have to pay rent real estate taxes to your town or city for the rest of your life.
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Re: And now for our next trick...the 50 year mortgage
Old 02-17-2006, 11:08 PM   #4
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Re: And now for our next trick...the 50 year mortgage

Interesting. If the term gets long enough, it's almost like rent but with the option to buy in case the value runs up dramatically.
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Re: And now for our next trick...the 50 year mortgage
Old 02-17-2006, 11:23 PM   #5
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Re: And now for our next trick...the 50 year mortgage

Quote:
Originally Posted by ((^+^)) SG
Interesting.* If the term gets long enough, it's almost like rent but with the option to buy in case the value runs up dramatically.* *
Only if you have no other assets, or if you live in a state that outlaws defiency judgments. Otherwise, you are on the hook for the note.

Ha
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Re: And now for our next trick...the 50 year mortgage
Old 02-17-2006, 11:34 PM   #6
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Re: And now for our next trick...the 50 year mortgage

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Originally Posted by HaHa
Only if you have no other assets, or if you live in a state that outlaws defiency judgments. Otherwise, you are on the hook for the note.

Ha
Ha,

You're a pessimist when I was being an optimist.
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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 11:09 AM   #7
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Re: And now for our next trick...the 50 year mortgage

I'll have to ask him tomorrow when he's here, but my dad said something about mortgages back when he was young, that they were almost always "interest only" and few people had mortgages that paid against the principal. You paid the principal back when you sold the house. Nobody back then could afford a full "normal" mort like we have today.

This is simple capitalism. If houses get too expensive, people stop buying them, so people stop buying mortgages. Hence the mortgage companies have to come up with "affordable" products that allow the trend to continue. The arguments about the 30 year bond seem to be more excuse than actual.
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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 12:02 PM   #8
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Re: And now for our next trick...the 50 year mortgage

Quote:
Originally Posted by (Cute Fuzzy Bunny)
I'll have to ask him tomorrow when he's here, but my dad said something about mortgages back when he was young, that they were almost always "interest only" and few people had mortgages that paid against the principal.
Then by definition, it may not have been a mortgage, since the word mortgage is derived from "to kill" as in killing off a loan. You won't kill off any loan by paying interest only.
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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 12:15 PM   #9
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Re: And now for our next trick...the 50 year mortgage

Then why do they call the current product "interest only mortgages"?

Dont make me call you a noodge again...

From "how stuff works"

History of Mortgages
You may think mortgages have been around for hundreds of years -- after all, how could anyone ever afford to pay for a house outright? It was only in the 1930s, however, that mortgages actually got their start. And, it wasn't banks that forged ahead with this new idea; it was insurance companies. These daring insurance companies did it, not in the interest of making money through fees and interest charges, but in the hopes of gaining ownership of properties if the borrower failed to make the payments on it.

It wasn't until 1934 that mortgages, as they work now, came into being. The Federal Housing Administration (FHA) played a critical role. In order to help pull the country out of its economic depression, the FHA initiated a new type of mortgage aimed at the folks who couldn't get mortgages under the existing programs. At that time, only four in 10 households owned homes. Mortgage loan terms were limited to 50 percent of the property's market value, and the repayment schedule was spread over three to five years and ended with a balloon payment. An 80 percent loan at that time meant your down payment was 80 percent -- not the amount you financed! With loan terms like that, it's no wonder that most Americans were renters.

FHA started a program that lowered the down payment requirements. They set up programs that offered 80 percent loan-to-value (LTV), 90 percent LTV, and higher. This forced commercial banks and lenders to do the same, creating many more opportunities for average Americans to own homes.

The FHA also started the trend of qualifying people for a loan based on their actual ability to pay back the loan, rather than the traditional way of simply "knowing someone."

The FHA lengthened the loan terms. Rather than the traditional five- to seven-year loans, the FHA offered 15-year loans and eventually stretched that out to the 30-year loans we have today.

Another area that the FHA got involved in was the quality of home construction. Rather than simply financing any home, the FHA set quality standards that homes had to meet in order to qualify for the loan. That was a smart move; they wouldn't want the loan outlasting the building! This started another trend that commercial lenders eventually followed.

Before FHA, traditional mortgages were interest-only payments that ended with a balloon payment that amounted to the entire principal of the loan. That was one reason why foreclosures were so common. FHA established the amortization of loans, which meant that people got to pay an incremental amount of the loan's principal amount with each interest payment, reducing the loan gradually over the loan term until it was completely paid off.
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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 12:25 PM   #10
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Re: And now for our next trick...the 50 year mortgage

Quote:
Originally Posted by (Cute Fuzzy Bunny)
I'll have to ask him tomorrow when he's here, but my dad said something about mortgages back when he was young, that they were almost always "interest only" and few people had mortgages that paid against the principal.* You paid the principal back when you sold the house.* Nobody back then could afford a full "normal" mort like we have today.



Be that as it may, we have had an unprecidented increase in property values in the last 7 years or so, as we all know. *Coming at a time when the overall inflation rate has been
relatively tame, is a little disconcerting.

If you believe, (I do), that inflation will p/up going forward, the combination of higher inflation, and "creative financing" to keep the
property values from totally de-railing, will continue to make real estate a pretty good addition to a young persons game-plan.

Of course that opinion is from an old country boy that may, or may not be full of s--t.





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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 12:26 PM   #11
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Re: And now for our next trick...the 50 year mortgage

Quote:
Originally Posted by (Cute Fuzzy Bunny)
Then why do they call the current product "interest only mortgages"?
Chickpeas are neither chicks, nor peas.

Rice paper is not made with rice.

Titmouse.....well you get the picture.

I'm just saying a true mortgage is one that pays off principal and interest. *I consider money that is borrowed with interest-only payments an "Interest Only Loan," not a true mortgage.

Maybe I'm being too picky.
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Re: And now for our next trick...the 50 year mortgage
Old 02-18-2006, 12:36 PM   #12
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Re: And now for our next trick...the 50 year mortgage

Definitions:

"A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan. "

" 1. A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
2. A contract or deed specifying the terms of a mortgage.
3. The claim of a mortgagee upon mortgaged property."

The latter being used by most of the dictionary web sites I looked at.

Forensically: The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, “dead,” and gage, “pledge.” It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt “is taken from him for ever, and so dead to him upon condition. And if he doth pay the money, then the pledge is dead as to the [mortgagee].” This etymology, as understood by 17th-century attorneys, of the Old French term morgage, which we adopted, may well be correct. The term has been in English much longer than the 17th century, being first recorded in Middle English with the form morgage and the figurative sense “pledge” in a work written before 1393.


Seems to have more to do with a pledge than principal.

And you're a noodge!
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Re: And now for our next trick...the 50 year mortgage
Old 02-19-2006, 06:37 AM   #13
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Re: And now for our next trick...the 50 year mortgage

Quote:
Doesn't Japan have (or had) a 100 year mortgage?
Not any more, that was a bubble-era thing. Max these days is 35 years.

Bpp
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Re: And now for our next trick...the 50 year mortgage
Old 02-19-2006, 09:57 AM   #14
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Re: And now for our next trick...the 50 year mortgage

An interesting point is that these lengthier terms really don't change the P&I all that much ... though I suppose even a little bit helps if you're really on the edge.

Examples of P&I payments, based upon various years of amortization:

Assumptions:
$200K principal
6.5% rate
  • 30 years:* * $1,264
  • 50 years:* * $1,127
  • 100 years:* $1,085

I think the current best deal out there remains the 30 year, fixed rate, interest-only loan. Your option to amortize or not in the first 10 years, then amortizes over the remaining 20. Rate is fixed at signing, never adjusts, no prepayment penalty. Very flexible. As long as you're disciplined, and not buying to the hilt, this is very handy.
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Re: And now for our next trick...the 50 year mortgage
Old 02-19-2006, 04:30 PM   #15
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Re: And now for our next trick...the 50 year mortgage

Quote:
An interesting point is that these lengthier terms really don't change the P&I all that much ... though I suppose even a little bit helps if you're really on the edge.

Examples of P&I payments, based upon various years of amortization:

Assumptions:
$200K principal
6.5% rate


30 years: $1,264
50 years: $1,127
100 years: $1,085
Yep. Now if you run that same scenario with interest rates and you triple the rate from say 6% to 18% then the PI on 100k goes from $599 to $1507. Interest rates are where you make (or keep) your money when it comes to mortgages.
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Re: And now for our next trick...the 50 year mortgage
Old 02-19-2006, 05:38 PM   #16
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Re: And now for our next trick...the 50 year mortgage

Quote:
Originally Posted by Charles
An interesting point is that these lengthier terms really don't change the P&I all that much ... though I suppose even a little bit helps if you're really on the edge.
Examples of P&I payments, based upon various years of amortization:
Assumptions:
$200K principal
6.5% rate
  • 30 years: $1,264
  • 50 years: $1,127
  • 100 years: $1,085
True, if you're on the edge, every bit helps...but don't forget that a 100 year mortgage will, all other things equal, carry a higher interest rate. Bumping the rate from 6.5% for a 30-year to 7.0% on a 100-year jacks up the monthly payment to $1,167, which makes it even closer to the 30-year option.

As you mentioned, a 30-year fixed with the first 10 on interest-only and no pre-payment penalty would be the ideal for the fiscally prudent.
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