The 50 Year Mortgage!
When I first heard the President talk about the 50 year mortgage I was dead against the idea.
I had in my mind a young couple heading into a mortgage brokers office, and coming out with estimated closing costs two-three hundred dollars lower than a thirty year mortgage. It seemed like a complete scam to me. I figured it would allow banks to take advantage of the first time buyers who are paying rent and still believe in the American Dream.
I am starting to rethink my initial judgement.
Here are some of my thoughts:
- A fifty year mortgage for say 400k will lower payments by 2-300 per month. If the intention of the buyer is to move in a couple of years, this could help them afford a home they otherwise would not qualify for.
- If you keep a home short term (say three years), you will barely make a dent in a 30 or 50 year mortgage, so it will make little difference in terms of equity.
- If buyers are looking for a home (especially first time buyers) it will be more important than ever to hire a quality Realtor an Mortgage Agent to give advice based on the needs of the specific client.
- Can the 50 year mortgage be abused by awful mortgage agents to line pockets instead of doing what is right for the buyer? When wasn't that the case? If someone is intent on screwing over a buyer, they can do it no matter what the products that are available. I remember a specific mortgage broker who was putting first time buyers in adjustable rate mortgages when they could get a fixed rate at under 3%.
- My guess is they will offer convertible loans that will allow the buyer (within a specific period of time - like 3 or 5 years) to convert the loan into a 15 or 30 year mortgage at whatever the current rate is.
In the end, the President is correct...it is just a tool. If buyers use the tool properly (like the current FHA 3 year 3-2-1 buydown) they can get the house they want and get their little slice of the American Dream!
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