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So I just recently found out that 50 year mortgages have been popping up in California, and for awhile now. I had no idea. Then I was stunned to hear that in Sweden, there are 140 year mortgages! And a law was recently passed to move from 140 year, to 105 year!!! HOLY

(For those outside the US, we typically have 15 year and 30 year here).

I can't imagine having a 50, let alone one that's over 100 years. I have a 30 year I am paying off early (adding to the principle each month). I live in a nice area and can't see myself leaving, so might as well, and I don't think it is reasonable to have a mortgage while retired, so the plan is to be mortgage free well before that happens. I am assuming if you have no intention of living in a place for a long time, then there is little reason to try and pay off early, even if you could, so the only benefit I think there is in even buying is to try and build up some equity, gambling on that the market will be up when you go to sell.

I know Cali is expensive, and I am assuming Sweden is too (geez), but I still can't believe looking at a mortgage statement and seeing something like 44 years remaining, or worse, 96 years remaining. I assume the extended time frame is to bring down the monthly costs, but I can only imagine the cost of the interest over that period of time once the loan is paid off.

For the Swedes: I assume there are a lot of homes being passed down to children who pick up the loan from parents thru inheritance when they pass away? I mean, I can't imagine any other hopeful plan in having a loan you will most likely be unable to pay off in your lifetime. For the first 50 years I assume very little of the mortgage payment is going to the principle, so this can't be much different than renting.

Anyone here have one of these, or know someone that does?

When I worked on site I used to listen to KISW out of Seattle, back before the bubble bust in 2008, and I distinctly remember ads for 75 year mortgages.

As the price of land grows ever higher, it makes sense to get into multi-generational mortgages, no? How else would one get a family home anywhere near a nice part of civilisation?

Yeah I guess the multi-generational part is key, meaning you are planning it as a gift to your children one day.

Provided they don't sell it and divide the proceeds between numerous recipients.

There is a lot that can go wrong during the time that a mortgage is still in effect too, so committing to something like a 100 year deal is really rolling the dice.

Multi-generation mortgages have been around in Japan for some time.

We don't have them yet in the UK, but there are some other dodges people are using to sell/buy property; one of these is the accelerating leasehold.

You buy a new build,house, and the land is on a ground rent for say £500 a year, which doubles every X years, for no services.

The builder then sells the lease to a finance company, who extract blood from stone, while you the hapless and naive property "owner" are unable to sell up because only a fool would buy such a liability.

There is also the multi-person mortgage, which creates other kinds of problems.

These things have come about because 70% of the UK's population is financially vulnerable at best.

In 2007 I was looking to buy a house, and my Dad forcefully argued against it stating there was a bubble and to just wait. I thought he was nuts. It wasn't going to be long before I was squeezed out of the market. Then on cue the housing bubble bursts. I bought my home in the bottom of the 'V' during the recession all because of the foresight my dad had.

I realized later that part of the problem was that homes were getting so expensive that it was difficult for average Americans to be able to afford mortgages. Teachers, police offices, firemen, etc. I feel like once home prices shot up beyond the what your average salary could afford, the 'creative' mortgage plans start to appear. But I guess I was more expecting some kind of deal within the 30 year framework, not extending things out so far.

I mean, if we are seeing this in 2017, imagine what 2057 will look like.

Then again, buying now in Cali and Sweden now, assuming you are locking in an interest rate, you have a great hedge against inflation...

A surge in interest rates will quickly price a lot of people out of houses they're already paying for. This is what will bite Trump in the butt, if he destabilizes the economy, even relatively wealthy people will be forced out of their homes by even a 2% rise in interest rates. They're forcing banks to stress test before they approve a mortgage now in Ontario, and that's probably a sign of things to come in the future.

Not expert as I'm not swedish but from what been covered in finnish news not sure Swedish people actually much plan to pay off debt completely. It's more like form of living on a rent almost while banking on value of house not crashing.

Long loans are creeping to Finland as well. Reaction is bit mixed.

Well either way not relevant for me seeing I avoid debt like plague.

 John Prins wrote:
A surge in interest rates will quickly price a lot of people out of houses they're already paying for. This is what will bite Trump in the butt, if he destabilizes the economy, even relatively wealthy people will be forced out of their homes by even a 2% rise in interest rates. They're forcing banks to stress test before they approve a mortgage now in Ontario, and that's probably a sign of things to come in the future.

Gonna be worse in the U.K.

Not only have people mortgaged to the hilt and beyond thanks to a properly broken housing market - but many of the most stretched, and others, have been cancelling their Payment Protection Insurance....

That means when the next recession hit, and the most financially vulnerable start to face redundancy, that’s an awful lot of bums in the breeze, likely leading to mass repossession....

Screw that, Id be pissed if my parents wrapped me up in a home mortgage with out any input on my end. You guys can have it, my house is going to be 100% paid off in 5 years and Im counting the payments

 KingCracker wrote:
Screw that, Id be pissed if my parents wrapped me up in a home mortgage with out any input on my end. You guys can have it, my house is going to be 100% paid off in 5 years and Im counting the payments

You're not going to be tied to it, you'll still be able to sell the house (and most likely walk away with huge equity). It's just allowing them to buy a much bigger house in a much bigger area for you to grow up in.

As housing gets less and less affordable I can see longer mortgages being the norm - I'm 11 years into a 40 year mortgage (I was stretched to the limit to get on the ladder, which was a mistake but I'm on the ladder).

I have a 30 year mortgage, and I would have loved the option of a 40 or 50 year, as it would have given me more buying power for my area. I ended up buying a house in a lower class neighborhood, and will definitely be selling and upgrading when I am finished school and move up in my company.

my $110,00 mortgage with 3% interest= $464+ taxes (about $1k/month)

$200,000 mortgage with 3% interest over 50 years= $494+ taxes (about $950/month)

I don't understand how a 100years loan could work. If the interest rate is >1%, then your debt actually increases over time, it's impossible to ever pay it back.
It would only be possible with interest rates of almost 0, at which point I don't see why the bank would do it.
There must be more to it, it can't be a normal loan.

fresus wrote:
I don't understand how a 100years loan could work. If the interest rate is >1%, then your debt actually increases over time, it's impossible to ever pay it back.
It would only be possible with interest rates of almost 0, at which point I don't see why the bank would do it.
There must be more to it, it can't be a normal loan.

I believe the logic would be that your monthly payment would be low enough you could pay off the principal earlier than that. If not, you'll die and it will simply not be your problem


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In all seriousness, if you take out a large enough life insurance policy, when you die your heirs should have the funds to pay off the loan. Until then, you live in a nicer house for less money.

fresus wrote:
I don't understand how a 100years loan could work. If the interest rate is >1%, then your debt actually increases over time, it's impossible to ever pay it back.
It would only be possible with interest rates of almost 0, at which point I don't see why the bank would do it.
There must be more to it, it can't be a normal loan.

You're probably paying off almost no capital over the first 20-30 years. As long as you can afford the annual interestplus a bit more fir repayments, so it's really no different to any other term except the total repayable will be huge. $100,000 at 1% is $1000/year, or $83/month, ignoring compound interest and so on.
$83.

Assuming a $100,000 mortgage at 1%, it means my payments would be $83 in interest + $333 repayments(15 year) or $83 repayments (100 year).

Thus a 100 year mortgage would probably let you buy a house ar least twice as expensive.

If I could snag a good chunk of land hidden away somewhere for a 100 year mortgage, I totally would do that. Nice low payments, and it would be an investment for my children, or their children.

There is a factor of consequent eligibility; i.e. all of a sudden your children qualify for certain school's catchment area.

I may be mistaken but I believe 'owning' property is part of the naturalisation procedure for citizenship in Sweden. As such taking on a mortgage for 100 years, quitting after 10 and you become a citizen for something else isn't entirely unwise, at least compared to actual rental.

Yeah but djones520, think about how much you would be paying in interest. That is money that is never coming back.

I hate debt. Like tneva82 I avoid it as much as I can. The only debt I have is my mortgage loan. I don't even have a car payment as I paid off my SUV a couple of years ago and are in no hurry to get a new one (I will drive that into the ground). And with the mortgage I pay extra each month to pay it off sooner. Debt is paralyzing. And if you look at your amortization schedule for a 30 year loan, you can see for the first 10 years how little of it goes to paying down the principle. Imagine the first 30 years of a 100 year loan.

Plus homes do degrade. I wouldn't be keen on buying a 50-60 year old home in the US. All the repair and maintenance on that would eat up a lot of cash. Imagine a home that's 130 years old. I am not sure how many would hold their value.

But I don't live in Sweden either. I am not sure what is going on there. I am guess the rich own a lot of property, and developers are paying an arm and a leg for property to develop on, and that in turn is raising the value of existing developed properties too. Just sucks.

KTG17 wrote:

Plus homes do degrade. I wouldn't be keen on buying a 50-60 year old home in the US. All the repair and maintenance on that would eat up a lot of cash. Imagine a home that's 130 years old. I am not sure how many would hold their value.

In a lot of the world a 50 year old home *is* a new build. We've got plenty of homes over here older than the US, though they cost a bit more to run (there's usually extra codes on allowed modifications).

You are right though, the interest costs on a 100 year mortgage will be phenomenal. At a 40 year mortgage my total repayment is something like 2.7x what the house cost. 100 year mortgage could easily push that up to 6x or more.

Herzlos wrote:

KTG17 wrote:

Plus homes do degrade. I wouldn't be keen on buying a 50-60 year old home in the US. All the repair and maintenance on that would eat up a lot of cash. Imagine a home that's 130 years old. I am not sure how many would hold their value.

In a lot of the world a 50 year old home *is* a new build. We've got plenty of homes over here older than the US, though they cost a bit more to run (there's usually extra codes on allowed modifications).

You are right though, the interest costs on a 100 year mortgage will be phenomenal. At a 40 year mortgage my total repayment is something like 2.7x what the house cost. 100 year mortgage could easily push that up to 6x or more.

That is a fair point. Even in much of the US, most of the homes on the market are 50+ years old.

KTG17 wrote:
Yeah but djones520, think about how much you would be paying in interest. That is money that is never coming back.

I hate debt. Like tneva82 I avoid it as much as I can. The only debt I have is my mortgage loan. I don't even have a car payment as I paid off my SUV a couple of years ago and are in no hurry to get a new one (I will drive that into the ground). And with the mortgage I pay extra each month to pay it off sooner. Debt is paralyzing. And if you look at your amortization schedule for a 30 year loan, you can see for the first 10 years how little of it goes to paying down the principle. Imagine the first 30 years of a 100 year loan.

Plus homes do degrade. I wouldn't be keen on buying a 50-60 year old home in the US. All the repair and maintenance on that would eat up a lot of cash. Imagine a home that's 130 years old. I am not sure how many would hold their value.

But I don't live in Sweden either. I am not sure what is going on there. I am guess the rich own a lot of property, and developers are paying an arm and a leg for property to develop on, and that in turn is raising the value of existing developed properties too. Just sucks.

The point is that in 100 years, assuming a regular 2% inflation per year, the $100,000 you borrowed in the beginning is worth only about $13,600 in today's dollars, while the property will be worth about $734,000 in tomorrow's dollars. Also you will have had somewhere to live for 100 years.

If you can afford the interest payments, this may be a very good bargain.

It could also potentially be cheaper than rent in certain areas. And you'd not have the uncertainty that comes from being a renter since you technically own the house. Albeit you're getting stiffed in the long run.

Ohhh. As a landlord, buy a house with a 150 year mortgage and then lease it out at market rates. You could easily make a bigger profit then if you had a conventional mortgage on the thing, and it would be an income generator you could pass on to your kids. That extra profit could also be put towards paying off the principle if desired.

Only real issue with a long mortgage like that is if your children move away and/or home prices suffer a huge permanent drop of some kind. Like a collapse of a major local industry or something.

You make some great points, and the last one would really concern me too. Not that I would be around long enough to see a 100 year mortgage till its end, but who is to say the location would be valued enough for the mortgage that was bought decades and decades ago.

I wonder if they went through any major defaults during the Great Recession.

The issue with longer mortgages is that you can spend decades paying your bill, with no equity to show for it. If you need to make costly repairs, you don’t have equity to loan against. If you need to sell, you have no equity to cover any costs. If the market takes even a slight dive, you could be upside down even though you have paid for the past 10 years.

The conventional wisdom is that it’s not worth doing a 30 year mortgage unless you are planning to stay in the home for at least 5 years, and I would go as far as saying that 10 is a good minimum. With longer mortgages it is an even longer period.

So I guess its safe to conclude the Swedes may not move around much.

The question in my mind is, why are wages not keeping up with the cost of housing? If we have to start expanding mortgage time frames, why are wages stagnating while real estate costs are not?

KTG17 wrote:
So I guess its safe to conclude the Swedes may not move around much.

Maybe. Size of the country and job/career opportunities within a geographic area could possibly be a factor.


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Also:

Not sure about Sweden, but in Germany many of the houses that are owned by people are multi-family homes. The owners will live in one apartment, and one or two apartments will be rented out. So even with longer mortgages (don’t know how they are structured in Germany) you could be building up equity quicker by having other people pay down your loan via rent.

 Easy E wrote:
The question in my mind is, why are wages not keeping up with the cost of housing? If we have to start expanding mortgage time frames, why are wages stagnating while real estate costs are not?

Well its already happening here in Cali since they implemented 50 year mortgages. I know a guy in the San Fran area making $160k a year and says he and his family are just getting by.

Hard to believe.

 Easy E wrote:
The question in my mind is, why are wages not keeping up with the cost of housing? If we have to start expanding mortgage time frames, why are wages stagnating while real estate costs are not?

Part of it I think is the changing culture of what a house is. It's not just a place to live anymore. It's an investment. People, investors, and companies now buy houses and real estate with the expectation that their value will rise over time and can be sold for a profit/inherited at a higher value/house worth more stuff. Thus the price of homes began to rise and stays high.

Prior to the mid-20th century at least in the US home ownership was not viewed this way.

As the price of land grows ever higher, it makes sense to get into multi-generational mortgages, no?

I would never ever do that. In today's world you'll basically never own anything (it's like paying rent) and for your kids it's probably worthless since they won't be able to use it. When my parents die, I can only sell the house off, it's in the sticks where my wife and I can't find work (same with her parents' house) since she's a specialist that only a few companies in the country need, and it's much too big to rent out anyone (people built big here in the 80s). Same with her family home.

I'm aiming for 25 years for a 300-grand-ish mortgage so my kids get something they can sell off later. If it takes much longer than that I'd basically just throw away money.

So even with longer mortgages (don’t know how they are structured in Germany

Slightly simplified:
Since the law was changed a while ago to protect people from falling too deep into debt no bank will give you a mortgage anymore if it takes you longer to pay off than your projected active work life (i.e. if you can't pay it off until you're 67, you're not getting money, period).
They will also not factor in what the house is worth because that is subject to change and they don't want the trouble.
Usually mortgages here run between 10 and 40 years, most people take 30. If you need to go for a 40-year option, you're probably not rich enough to buy or build, really.

The example you used with people renting out a part of the house works for some, but as I said, nowadays it's much harder to get money for a house that is big enough for several apartments as a private citizen.

That said: the home ownership quota in Germany is very low in the European context, we're a nation of have-nots and tenants and are on average among the poorer people in the EU when it comes to privately owned funds and real estate. The state may be quite rich, the average Joe is not. The OECD ranked their members a few years ago; we made it in the 18th spot of the Euro zone of 19. The average German household owns stuff worth about 60.000 Euros, the average French household owns stuff worth 120.000, for example. However, roughly half the German households own nothing at all.
To be fair, much of our money flows into the state and the pension entitlement (roughly 20% of every month's salary plus somewhat more in taxes, I get to keep about half of my gross salary), so we kind of own "future money" (remember the future pigs in one of the Discworld novels?), but to be honest, I'd rather keep that for myself and invest it instead of relying on the state to honor its promises in about 40 years. Also, our pension level is quite crappy for what we pay for it; the average Austrian pensionist gets about 50% more per month than the average German pensionist, they get 14 payouts a year vs. our 12, on top of it they pay less for it and get to benefit from it 2 years earlier. That's German management for you.

I wonder if its similar in Sweden then. If you have so much pay going to the state and are only keeping half of a paycheck, then of course there is less money for mortgages. Could be part of the reason they are extended so far out: to make the monthly payment affordable.

And I agree with you, I prefer my money coming to me so I can invest it in stocks and bonds versus going to the state to manage. But not everyone knows how to manage their money and are bound to lose it investing in bitcoin or something.

I don't even trust the US government to not pull from those coffers to pay for other things either.

Do you think some of that 'future' money is going to all those refugees? I doubt they will ever leave. That's got to put some strain on things.