I suggested the 100 year mortgage last year. Has the time finally arrived?
The 100 year mortgage is a modest proposal to help folks keep their homes out of foreclosure and spur home buying, with no adverse effect. It is based on the dual premise that people will buy (1) if they can afford to make the monthly payments or (2) if the cost to rent is comparable. The 100 year mortgage will provide BOTH incentives. In addition, if lenders converted existing loans to 100, 75 or 50 year terms, folks could manage the payments and keep the home out of nasty foreclosure.
It is a melancholy object to those who walk through this great town or travel in the country, when they see the streets, the roads, crowded with sellers, followed by three, four or six children, all in rags importuning every buyer for an alms with “for sale” signs. (adapted from “A Modest Proposal” by Jonathan Swift, 1729)
Objections center around the fact that the owner will build very little equity and the debt is passed to future generations. This is mostly true, but there are offsetting advantages.
- Firstly, it provides a greater prospect for home ownership. If a person will rent an apartment which builds no equity, why not live in a home with the same consequence, if the payments are the same—-you’ll probably get more square footage (and can paint your walls purple).
- Secondly, building home equity is still in the cards because home appreciation is still possible—–it is never possible for a rental.
- Thirdly, for the substantial number of homeowners who move after 5 to 7 years, the equity effect is virtually the same. (NAR says the average is every 7 years)
- Fourthly, the tax advantages of home ownership still abide
- Fifthly, you can still refinance at any time
- Sixthly, the reality is most people pay a monthly housing cost for most of their life
- Seventhly, real estate transactions are likely to increase.
The bank that offers this product will own the historical claim of being the FIRST (in this country) and get plenty of free advertising—-extensive news coverage and blogorrhea out the wazoo. Even a spot in Wikipedia. You can’t buy that kind of publicity.
An example of the savings— compared to the 30 year 7% mortgage, the 100 year mortgage will save the buyer approximately $81.50 per $100,000 borrowed. On a $625,000 home with 80% financing, that’s a savings of over $400 per month.
What think thee?
Never-ending mortgage launched (aboutproperty.co.uk): Inter-generational mortgages in the UK by Kent Reliance. Apparently, Switzerland, Japan and Ireland have similar mortgage products.
Til Death Do Us Part (Mayfair Consulting)
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