I was single when I bought my first home without any other plans, so I got a 15 yr mortgage just so I wouldn't have to think about paying a mortgage into my old age. Best decision I ever made. Trump's idea not only is stupid but I guess he can't do math. The average new buyer is 35 to 40 years old. Who wouldn't want to pay a monthly mortgage until their 90? It's a bad deal for everyone, including the banks, because the average life expectancy of Americans is decreasing, not increasing....but I guess interest would balance it out for the banks if you don't die before 80.
And because of the low supply, it's likely flooding the market with new buyers would increase demand even more. That could cause home prices to increase over and above what ever the savings would be.
I disagree with your model. The 50 year mortgage should be compared to renting. How much equity would they build up in 10 years of renting? Buying a home give you a more stable housing cost. So lets say that They are renting a $1300 month in year 1, and rent increase at just 3% a year which is less than historical rent increases their rent would be $1,747.09 in year 10. So in year 10 alone they are saving about $5,400 a year on direct housing cost. The house also provides stability for their family. It improves stability of the neighborhood, when times are hard they could rent out a room. Yes there are property taxes, and other real expenses, but there are also tax deductions on property taxes. Also since most of the payment is interest as you pointed out, the majority of their housing cost is now a tax deduction.
The math here is eye-opening. Paying for 10 years and only building 6 percent equity beond the down payment is absurd. This proposal would essentialy trap people in homes they cant afford to leave, which defeats the whole purpose of homeownership. Like you said, the real issue is supply not creative financing schemes. We need more housing, not longer debt.
Thanks for laying this out so well. How many ways are there to say "bonkers?"
How about writing about what Airbnb and VRBO has done to supply in states like Michigan. Looks like a huge problem no one talks about.
Roger Parkins
Thanks Jeff
Thank you! Great summary of how horrible this 'idea' of a housing solution this is.
His own family didn't trust him with money, I don't either.
I was single when I bought my first home without any other plans, so I got a 15 yr mortgage just so I wouldn't have to think about paying a mortgage into my old age. Best decision I ever made. Trump's idea not only is stupid but I guess he can't do math. The average new buyer is 35 to 40 years old. Who wouldn't want to pay a monthly mortgage until their 90? It's a bad deal for everyone, including the banks, because the average life expectancy of Americans is decreasing, not increasing....but I guess interest would balance it out for the banks if you don't die before 80.
That’s how money is made ! The investment broker bank
Etc makes money ! You loose!
The only winner is not the buyer! They make your money plus they make a load of in debt! They make a killing in debt’ just do the math and tax laws.
Debt makes them alot more money !
And because of the low supply, it's likely flooding the market with new buyers would increase demand even more. That could cause home prices to increase over and above what ever the savings would be.
Excellent analysis. Hopefully lots of young folks will read this. Maybe distribute it to other "outlets".
Please read and digest. This 50 year mortgage idea is BONKERS!!!
I disagree with your model. The 50 year mortgage should be compared to renting. How much equity would they build up in 10 years of renting? Buying a home give you a more stable housing cost. So lets say that They are renting a $1300 month in year 1, and rent increase at just 3% a year which is less than historical rent increases their rent would be $1,747.09 in year 10. So in year 10 alone they are saving about $5,400 a year on direct housing cost. The house also provides stability for their family. It improves stability of the neighborhood, when times are hard they could rent out a room. Yes there are property taxes, and other real expenses, but there are also tax deductions on property taxes. Also since most of the payment is interest as you pointed out, the majority of their housing cost is now a tax deduction.
The math here is eye-opening. Paying for 10 years and only building 6 percent equity beond the down payment is absurd. This proposal would essentialy trap people in homes they cant afford to leave, which defeats the whole purpose of homeownership. Like you said, the real issue is supply not creative financing schemes. We need more housing, not longer debt.
This is economic policy written by a car dealership Sales Manager.