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brassfarthing

What's Wrong With 50 Year Mortgages?

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Many on here say, with understandable frustration, that prices have to stop rising because people simply can't go on affording to pay what they pay now.

The 50 or the 100 year mortgage is widely derided, but I firmly believe that this is the big new development in the market. If I'm really honest I don't see what's wrong with a 50 year mortgage. It's just a longer time to pay. Yes, you end up paying far more in interest, but you pay far more in interest if you take out a (socially acceptable) 25 year mortgage compared with a 10 year mortgage. A bank loan repayable over 5 years will involve paying more interest than a loan repayable over 2 years. It's how the system works.

Imagine this. You take out a 100 year mortgage, with the repayments being relatively low. As the years go on, you earn more money and start to increase your repayments. If you are sensible and lucky, after 15 years you can pay significantly more than the agreed minimum rate, and the house gets paid off in 20 or 25 years in any case.

Or take the opposite possibility. You lose your job or fall on hard times. The mortgage payments are so low that you can cope anyway, OR the very affordable overpayments you made earlier in the term will tide you over through a payment holiday for a year or two perhaps.

As long as a) the loan is made on the understanding that it can be paid off early with no or low redemption penalty, and B) that anyone taking out such a mortgage must live in the property and not BTL, then I don't see the problem.

I know people will bring up all sorts of objections but think of the main benefit -- that it will allow FTBs to actually afford a decent place, and give them the pleasure of building a home rather than renting and paying off someone else's mortgage for them.

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Many on here say, with understandable frustration, that prices have to stop rising because people simply can't go on affording to pay what they pay now.

The 50 or the 100 year mortgage is widely derided, but I firmly believe that this is the big new development in the market. If I'm really honest I don't see what's wrong with a 50 year mortgage. It's just a longer time to pay. Yes, you end up paying far more in interest, but you pay far more in interest if you take out a (socially acceptable) 25 year mortgage compared with a 10 year mortgage. A bank loan repayable over 5 years will involve paying more interest than a loan repayable over 2 years. It's how the system works.

Imagine this. You take out a 100 year mortgage, with the repayments being relatively low. As the years go on, you earn more money and start to increase your repayments. If you are sensible and lucky, after 15 years you can pay significantly more than the agreed minimum rate, and the house gets paid off in 20 or 25 years in any case.

Or take the opposite possibility. You lose your job or fall on hard times. The mortgage payments are so low that you can cope anyway, OR the very affordable overpayments you made earlier in the term will tide you over through a payment holiday for a year or two perhaps.

As long as a) the loan is made on the understanding that it can be paid off early with no or low redemption penalty, and B) that anyone taking out such a mortgage must live in the property and not BTL, then I don't see the problem.

I know people will bring up all sorts of objections but think of the main benefit -- that it will allow FTBs to actually afford a decent place, and give them the pleasure of building a home rather than renting and paying off someone else's mortgage for them.

You buffoon.

Think about it a bit more.

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You take out a 100 year mortgage, with the repayments being relatively low. As the years go on, you earn more money and start to increase your repayments. If you are sensible and lucky, after 15 years you can pay significantly more than the agreed minimum rate, and the house gets paid off in 20 or 25 years in any case.

Many buyers have already gone one step beyond this and taken out interest only mortgages. When you're talking of capital repayment terms of 100 years really all they are for the first few decades is interest only.

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Many on here say, with understandable frustration, that prices have to stop rising because people simply can't go on affording to pay what they pay now.

The 50 or the 100 year mortgage is widely derided, but I firmly believe that this is the big new development in the market. If I'm really honest I don't see what's wrong with a 50 year mortgage.

Well seeing as the qverage age of a first time buyer is 33 - you'd still be paying it off in your 80's. If you think that this doesnt desrve derision that I am lost for words.

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l'l think about it for him... 50yr 1000yr whatever, repayments are never going to lower than an IO repayment are they..derrr!

Unless you go with negative amortization - the devil's mortgage!

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Many buyers have already gone one step beyond this and taken out interest only mortgages. When you're talking of capital repayment terms of 100 years really all they are for the first few decades is interest only.

I'm totally against IO mortgages. You have to be paying off some of the capital.

It's true that all mortgages start off with a high proportion of interest. So be it. With long term mortgages, it would be the same but more so. Does it matter?

My point, Neil, is that 25 years is already a pretty arbitrary term. In some ways it would be historically more logical to have settled on a 40 or 50 year period as that was the perceived length of working life. For some reason we settled on 25 rather than 30 or 35 or 15.

I'm not trying to be a troll here, honestly, but am genuinely suggesting that a 50 or 100 year mortgage is conceptually no different from a 25. The fact that we won't live 100 years isn't significant. The aim would be either to pay it off well within the term, or allow it to be inherited by someone else who, just like inherited assets, can decide to sell it off or continue maintaining it. There's no guarantee that you'll live long enough to pay off a 25 year mortgage.

The main fear is that prices would spin out of control. If prices tripled in a short space of time, any advantage would be lost. So I would like to see such mortgages restricted to FTBs or others who fulfill certain criteria e.g. low income. Definitely no BTL-ers or corporate tax dodgers, for instance.

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Take this series to its limit (no ownership interest after infinite term at productive cost of asset) and you've just reinvented the lease.

If you assume that the purchaser of your debt issues isn't a complete fruitcake (and based on the most recent lending stats there's evidently a whole bunch of these hoovering up essentially junk debt at present, so that's not a given) then you've just reinvented the AST too (the debt issuer/ leasee will periodically want to reset your rate so as not to suffer a crippling loss).

Here's a question for you, it's a two parter - after how many years worth of labour would you like a newly minted graduate to be able to contribute to the tax base? And when would you like them to start reinvesting capital?

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Many on here say, with understandable frustration, that prices have to stop rising because people simply can't go on affording to pay what they pay now.

The 50 or the 100 year mortgage is widely derided, but I firmly believe that this is the big new development in the market. If I'm really honest I don't see what's wrong with a 50 year mortgage. It's just a longer time to pay. Yes, you end up paying far more in interest, but you pay far more in interest if you take out a (socially acceptable) 25 year mortgage compared with a 10 year mortgage. A bank loan repayable over 5 years will involve paying more interest than a loan repayable over 2 years. It's how the system works.

Imagine this. You take out a 100 year mortgage, with the repayments being relatively low. As the years go on, you earn more money and start to increase your repayments. If you are sensible and lucky, after 15 years you can pay significantly more than the agreed minimum rate, and the house gets paid off in 20 or 25 years in any case.

Or take the opposite possibility. You lose your job or fall on hard times. The mortgage payments are so low that you can cope anyway, OR the very affordable overpayments you made earlier in the term will tide you over through a payment holiday for a year or two perhaps.

As long as a) the loan is made on the understanding that it can be paid off early with no or low redemption penalty, and B) that anyone taking out such a mortgage must live in the property and not BTL, then I don't see the problem.

I know people will bring up all sorts of objections but think of the main benefit -- that it will allow FTBs to actually afford a decent place, and give them the pleasure of building a home rather than renting and paying off someone else's mortgage for them.

Because history keeps repeating itself. They were putting forward similar ' innovative' schemes in the last UK bubble and in Japan. Just before they crashed, leaving people proper fcuked. Go post on the C4 houses forum or some other place where they will accept your fairytales.

I take it as a good sign, all these mortgage advisors and estate agents sat around with nothing to do.

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My point, Neil, is that 25 years is already a pretty arbitrary term. In some ways it would be historically more logical to have settled on a 40 or 50 year period as that was the perceived length of working life. For some reason we settled on 25 rather than 30 or 35 or 15.

The main fear is that prices would spin out of control. If prices tripled in a short space of time, any advantage would be lost. So I would like to see such mortgages restricted to FTBs or others who fulfill certain criteria e.g. low income. Definitely no BTL-ers or corporate tax dodgers, for instance.

You're right in the sense that it is arbitrary. But this is starting to sound like Japan, with generation mortgages, and look where that has got the people who did take them out all those 20 yrs ago. The fact is that there is a more or less static economic value to a home, a roof over your head. Historically it works out at around a 25 year mortgage when you compare the benefits of renting/buying.

If you stretch yourself by getting a 100 year mortgage, it makes a fairly small % difference to your monthly outgoing. My mortgage is 900 pcm based on a 20 year mortgage. That same 900 pcm repayment on a 100 year basis would yield me an extra 30-40k to spend on a property. Round here that amount of money buys me a slightly larger second bedroom, compensating for the fact that I am never going to live to see the end of the payments.

If people are that desperate to buy, when renting is cheaper than the interest only, it shows how far into bubble thinking we are.

Edited by bearwithaconscience

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If you're going to take out a 50 year mortgage, you may as well rent and save and buy in the dips with a NORMAL 25 year mortgage!

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I thought you'd left, BrassFarthing....

Fair point, Ianbe. I kept away for a coup[le of weeks but made the mistake of peeping again yesterday, and well, you know how it is. I guess I just changed my mind. Slightly embarrassing, but not illegal.

Perhaps you should come clean about your motives for posting on this forum. I bet you sell mortgages.

LOL! No, I don't sell mortgages.

My motives? Good question. The forum has always entertained me as a reader, though I started posting only a few weeks ago. I understand the frustrations of some here, but I also feel exasperated by the sense of paralysis and the high-decibel whinging. There are plenty of ways of affording property but few of them seem acceptable here. Every single year of HPI that I've been aware of (since the early 70s), people have complained that the previous generation had it easy regarding property. Some of the most bitter anti-HPI stuff I heard was during the boom of the 80s and the late 90s. The fact was that people could still have bought property outside London and the SE for very low prices even then -- if only they'd been bold enough to do it. The current generation is also probably staring at great opportunities if only they knew where to look. Hindsight, and all that. I don't know the answers either.

Anyway, I still don't see what's wrong with longer term mortgages with more affordable payments.

If you're going to take out a 50 year mortgage, you may as well rent and save and buy in the dips with a NORMAL 25 year mortgage!

You could be right. What you suggest makes sense as long as 1) you don't mind paying someone else's mortgage rather than your own for a while, 2) you are able and self-disciplined enough to save and 3) you are confident that the dips will be deep enough to let you in.

If you can fulfill all of those, fair enough.

Edited by brassfarthing

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Many on here say, with understandable frustration, that prices have to stop rising because people simply can't go on affording to pay what they pay now.

The 50 or the 100 year mortgage is widely derided, but I firmly believe that this is the big new development in the market. If I'm really honest I don't see what's wrong with a 50 year mortgage. It's just a longer time to pay. Yes, you end up paying far more in interest, but you pay far more in interest if you take out a (socially acceptable) 25 year mortgage compared with a 10 year mortgage. A bank loan repayable over 5 years will involve paying more interest than a loan repayable over 2 years. It's how the system works.

Imagine this. You take out a 100 year mortgage, with the repayments being relatively low. As the years go on, you earn more money and start to increase your repayments. If you are sensible and lucky, after 15 years you can pay significantly more than the agreed minimum rate, and the house gets paid off in 20 or 25 years in any case.

Or take the opposite possibility. You lose your job or fall on hard times. The mortgage payments are so low that you can cope anyway, OR the very affordable overpayments you made earlier in the term will tide you over through a payment holiday for a year or two perhaps.

As long as a) the loan is made on the understanding that it can be paid off early with no or low redemption penalty, and B) that anyone taking out such a mortgage must live in the property and not BTL, then I don't see the problem.

I know people will bring up all sorts of objections but think of the main benefit -- that it will allow FTBs to actually afford a decent place, and give them the pleasure of building a home rather than renting and paying off someone else's mortgage for them.

Well I rest my case really. The most compliant, stupid, accepting, supine, docile, idiotic generation in the history of the world - if they all think like you.

I have to tell you something you don't seem to grasp. I used to build houses for a living. Here is a synopsis of what is involved.

One afternoon you set the house out - i.e. mark out where the house will go. This takes a couple of hours.

Next morning you grab a machine and dig out the footings. This requires a small digger and a dumper to take the spoil away. And three blokes. One to drive the machine, one to drive the dumper and one to guide the digger driver and jump down in the foundations and 'bottom up' with a shovel. You get the building inspector to inspect them and, in the afternoon, you get a couple of loads of ready-mix and concrete the footings.

Next day a 2 and 1 brickie gang lay the blockwork to take you to the underside of the ground floor.

Next day the groundworkers jump back in and lay any drains and poke them out though the blockwork ready to connect later. They also lay ducts if required to get water, phone and electricity into where they are needed.

Then place pre-stressed beams across the blockwork and infil the gaps with concrete blocks. 3 days in and the ground floor is on.

4/2 gang of brickies next. On a small house they'll put a lift up in a day i.e. they'll build the brickwork and blockwork up to 4'6 or thereabouts in a day - two at the most.

Then the scaffold goes up - I day.

Brickies again - another day or two to take the brickwork and blockwork to joist level.

Couple of chippies then for a day to put the joists on while the scaffolders put another lift on the scaffold.

Over the course of the next week the brickies take the brickwork up to plate - this is the timber that sits on the inner skin of blockwork for the roof trusses to sit on.

Give the brickwork a couple of days to dry and harden ... then a lorry rolls up with the roof trusses. You might go mad and get a crane in to put the trusses up. Depending on the complexity of the roof - let's allow 3 to 5 days for a couple of chippies to place the trusses, fix the wind bracing and a platform for the cold water tank, the gable ladders etc.

Brickies might have to up again then and build the gables, chimneys etc, another 3 days say, with maybe an extra lift on scaffold needed (often done by the brickies' labourers - just to keep things running smoothly)

Then the roofers - usually a couple of 20 year old kids. Tiles are dropped on the scaffold by a forklift and off they go. Felt and batten in a day and lay the tiles and bed the ridges, valleys, verges etc. 2 blokes for a week will cover most roofs.

Now the building is weathertight.

First fix for electrician (day for one bloke usually), plumber (day for plumber and a mate - 2 for a bigger house) and carpenter (couple of days for 2 guys - more if it's traditional floorboards) - plus fit the staircase.

Tacker (to put the plasterboard on the ceilings and any partitions - again couple of days for 2 blokes and some sheets of dirt cheap plasterboard.

Plastering - depends if two coat or plasterboard on dabs ... but allow a couple of guys for a week and you won't be far out.

Plumber back in for half a day to carcase the ground floor - floor screed to follow (2 guys half a day) then, as soon as the screed has hardened, it's kitchen fitting and second fix for electrician, plumber and carpenter.

Painters - couple of guys for a week - tart up the outside, connect drainage and services - and the job is done.

On the sites I used to work on we built 4 bed detached houses on a 12 week program.

So, a pile of cheap material like bricks, concrete, timber, plasterboard and roof tiles all roughly assembled into the shape of a house in 12 weeks by an assortment of unskilled, semi-skilled and skilled labour and, and this is the best bit ....

You are stupid enough to be prepared to pay a mortgage for 50 years just so you can afford that?

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Personally I think 25 years is too long, maximum I would go is 15 years, or go for IO and big lump sum repayments of principle. But will probably end up buying (or rather, building) with cash.

As others have pointed out, over first 5 years of a 50-100 year mortgage it is almost equivalent to an I/O. So why kid yourself?

Incidently, I think IO do make sense, especially for peeps with large bonus/ commision component to their income. I know friends who took them, then paid off in 5-7 years

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but am genuinely suggesting that a 50 or 100 year mortgage is conceptually no different from a 25. The fact that we won't live 100 years isn't significant.

Surely as you increase the term on a repayment mortgage it gets conceptually less & less like a repayment mortgage and conceptually more & more like an interest only mortgage? I suppose it may be comforting to think that someday the capital will be paid off, but as this point is likely to be some years after my death, why would I care?

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The equivalent of a 50 year mortgage already exists. It is called rent.

Edited by dog

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Well I rest my case really. The most compliant, stupid, accepting, supine, docile, idiotic generation in the history of the world - if they all think like you.

I have to tell you something you don't seem to grasp. I used to build houses for a living. Here is a synopsis of what is involved.

One afternoon you set the house out - i.e. mark out where the house will go. This takes a couple of hours.

Next morning you grab a machine and dig out the footings. This requires a small digger and a dumper to take the spoil away. And three blokes. One to drive the machine, one to drive the dumper and one to guide the digger driver and jump down in the foundations and 'bottom up' with a shovel. You get the building inspector to inspect them and, in the afternoon, you get a couple of loads of ready-mix and concrete the footings.

Next day a 2 and 1 brickie gang lay the blockwork to take you to the underside of the ground floor.

Next day the groundworkers jump back in and lay any drains and poke them out though the blockwork ready to connect later. They also lay ducts if required to get water, phone and electricity into where they are needed.

Then place pre-stressed beams across the blockwork and infil the gaps with concrete blocks. 3 days in and the ground floor is on.

4/2 gang of brickies next. On a small house they'll put a lift up in a day i.e. they'll build the brickwork and blockwork up to 4'6 or thereabouts in a day - two at the most.

Then the scaffold goes up - I day.

Brickies again - another day or two to take the brickwork and blockwork to joist level.

Couple of chippies then for a day to put the joists on while the scaffolders put another lift on the scaffold.

Over the course of the next week the brickies take the brickwork up to plate - this is the timber that sits on the inner skin of blockwork for the roof trusses to sit on.

Give the brickwork a couple of days to dry and harden ... then a lorry rolls up with the roof trusses. You might go mad and get a crane in to put the trusses up. Depending on the complexity of the roof - let's allow 3 to 5 days for a couple of chippies to place the trusses, fix the wind bracing and a platform for the cold water tank, the gable ladders etc.

Brickies might have to up again then and build the gables, chimneys etc, another 3 days say, with maybe an extra lift on scaffold needed (often done by the brickies' labourers - just to keep things running smoothly)

Then the roofers - usually a couple of 20 year old kids. Tiles are dropped on the scaffold by a forklift and off they go. Felt and batten in a day and lay the tiles and bed the ridges, valleys, verges etc. 2 blokes for a week will cover most roofs.

Now the building is weathertight.

First fix for electrician (day for one bloke usually), plumber (day for plumber and a mate - 2 for a bigger house) and carpenter (couple of days for 2 guys - more if it's traditional floorboards) - plus fit the staircase.

Tacker (to put the plasterboard on the ceilings and any partitions - again couple of days for 2 blokes and some sheets of dirt cheap plasterboard.

Plastering - depends if two coat or plasterboard on dabs ... but allow a couple of guys for a week and you won't be far out.

Plumber back in for half a day to carcase the ground floor - floor screed to follow (2 guys half a day) then, as soon as the screed has hardened, it's kitchen fitting and second fix for electrician, plumber and carpenter.

Painters - couple of guys for a week - tart up the outside, connect drainage and services - and the job is done.

On the sites I used to work on we built 4 bed detached houses on a 12 week program.

So, a pile of cheap material like bricks, concrete, timber, plasterboard and roof tiles all roughly assembled into the shape of a house in 12 weeks by an assortment of unskilled, semi-skilled and skilled labour and, and this is the best bit ....

You are stupid enough to be prepared to pay a mortgage for 50 years just so you can afford that?

Sorry, I lost the will to live halfway through your interesting description.

I did however, notice your final sentence. Good tactic.

If you think it's stupid to take out a 50 year mortgage, then my advice would be: DON'T DO IT.

It shouldn't be illegal to say "No thank you, I would prefer a shorter term mortgage. What else can you offer me?"

However, it should also not be illegal to consider a 40 or a 50 or a 100 year mortgage if you want it. Don't talk to me about stupidity. There are people out there who put good money on England to win the World Cup.

Personally, I think that 25 years is an overlong term for many. Last time I bought a house we took out a 12 year mortgage. Many people would have gone for 20 or 25 years for whatever reason, even if they could afford to pay more. It's arbitrary.

Learn, or get advice, and go for what's right for you, but at least give people options.

Edited by brassfarthing

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Good choice of name.

I think I'd prefer an "Ignorant" name than display my ignorance in the manner you did with your lunatic suppositions.

If only the forum would let me call you a **** then we'd all know what I really think of you!

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If a first home purchase was the only one they needed, then yes, a case for a 45 year term (average working life(ish)) could be made.

Of course, the first home is not the last one for most of us (the bulls are always telling us we have to work our way up from some rat infested crack den), so it is important to build capital. The only way to build capital over the next few decades will be by PAYING DOWN DEBT.

Therefore an IO mortgage (or 50 year mortgage - there's little difference in practise) is NOT AN OPTION.

If anything during periods of low inflation (and low interest rates) shorter than average terms should be considered.

Good idea !! why not go for 100 year mortgage then we can let the Granchildren pay of my house ! and more profit for the honest banking system who are the pillars of our society. I am GOING TO BE SICK!!!

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What's the difference between a 50 year mortgage and renting: Average age of FTB 30-something: average lifespan 70-something. Unlikely to pay it off before you die.

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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