Wednesday, January 04, 2006

John Murcell & the 50 or 60 Year Loan

The desperation of the Bubble Cheerleaders is growing. Some of them have drunken the Kool Aid, others bubble cheerleaders are professional liars ( David Lereah ) .

Many rich and powerful people have benefited tremendously from the housing bubble. Some of them want it to continue at unreasonable costs. As reported by Inman News, 01/04/05:

Just as folks are getting used to the idea of 40-year mortgages, securities issuers are upping the ante, talking about possible amortization schedules of 50 years, according to industry professionals.

"It's a good idea for consumers," said John Marcell, president of the California Association of Mortgage Brokers. "There's nothing wrong with a 50- or 60-year
mortgage."

Nothing wrong? Even if you are 25 years old and take out a 50 year loan you will finish paying off the loan at age 75. The other major problem is the monthly savings on 50 year or 60 year loan compared to a 40 year loan is negligible.

300,000 Mortgage Loan, 6.5% Interest, Fixed,

Monthly Payments
1756 = 40 year
1691 = 50 year
1658 = 60 year
(Source: Bankrate Mortgage Calculator)

So if one decides to takes out a 60 loan they would save less then $100 a month over a 40 year loan ( 6.5% fixed rate).

John Marcell is a bubble cheerleader and a professional liar. Clearly, there is something wrong with a 50 or 60 year loan. Challenge these 'experts.'

13 comments:

  1. This is nutty. Reminds me of the publicity stunt in Japan 10-15 years ago, when 100-year mortgages were "introduced."

    What I think will and should happen is that people will begin offering no more than the house price that will result in the same mortgage payment, at the now-higher interest rate.

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  2. You can't take anyone seriously who has a vested interest. They will make TONS of cash from a 50 yr mortgage, that's why they like it!

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  3. I wonder if these real estate cheerleaders have BSE infected brains.

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  4. The real estate cheerleaders have their best friends and allies in; Alan Greenspan- soon to be Ben Bernanke, John Snow, and GW Bush- hardly the people I would trust with my future. The republican party-once known as the political party of fiscal smarts has become the party of debt deficits and fire and brimstone religous fanatacism- a horrible mix.

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  5. Who is going to buy the other side of a 60 year mortgage?

    I wouldn't make a 60-year dollar denominated loan to ANYONE.

    This is making me think it might not be such a bad idea to take one if offered, at a low enough (and fixed) rate with no pre-payment penalty.

    But while realtors may want this product, what bank would actually offer it?

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  6. Most people don't understand that. Plus the loan will start with a 1% teaser that will really confuse them.

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  7. My only issue with the 50 year, is that you never get any priniciple paid down. I am in the first year of an Interest Only loan, and hate it. Each month, same debt staring at me and a payment due.

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  8. Well, I suppose it depends on who you know...

    High-end business class use 100-year mortgages all the time.

    The reasoning is at the age of 40+, who will outlive a 40 year mortgage. Basically it works as some sort of kick back; a low interest amount forever to a fellow ceo at the club.

    I actually know someone who benefited from some forward thinking. His family sold some land for 1.1 million. They weren't rich but really didn't need all that money and really didn't want to see the land go eminent domain. So to save the tax they invested it in a 100 year 1 million dollar mortgage at 2% and a nephew built his dream home. The monthly pymt was roughly same as a 300k mtg at 6.5%!

    Its not like the family doesn't know where the money is, so no pmi, and they only had to pay tax on the 1800 they rcv monthy, the homeowner gets deductible interest w/no prey pymt penalty. The only thing they didn't count on was 3 times the property tax value :)

    There's always a way.

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  9. I believe a 60-year Mortgage is a great idea for those low-scored borrowers that cannot get approved for an interest-only loan. The difference between a 60-year and an interest only is $33.

    So if you have bad credit, low credit scores, fixed income you can now get a payment that is almost equivalent to an interest only without the higher credit scores.

    Don't get me wrong any loan past 30 years is not a good loan, but if you are trying to qualify for a home as a first time homebuyer or on a fixed income this loan is the best deal since "sliced bread."

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  10. I believe the 60 year mortgage is ideal for people who want to pay to make mortgage companies wealthier and build absolutely no equity. Not to mention no net worth for retirement and spend the rest of their days working, that is until they cannot stand anymore.

    Rate and payment are an illusion designed to keep you trapped in a world of slavery. So are credit cards. So many people brag at their barbeques about their low rate and theri small payment. However, they did not realize how much their rate and payment were going to go up and are now renting an apartment. Will you ever own your home or are you renting. If low rates are so important to people, look into their wallet and pull out the 24%, the 17%, the 29%
    credit card out of their wallet. So is rate so important to you? Some of them owe a few thousand but will not be out of debt for 200 years. The true key is how much am i going to pay over the extent of the loan and for how long will it take and you will never get taken advantage of again.

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  11. I find all of the above comments interesting. The true purpose for a long term mortgage -- of any length -- is the guarantee that the payment will not go up. Sure the banks understand that you will only keep your loan for probably 2-5 years. The longer the term, the smaller the payment. Obviously the longer the term, the lower amount of equity paid down as well. But for those who want that guarantee -- more power to them.

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  12. I don't know about all of you, but why would you all give up "Probably" the biggest tax-deduction that you will ever have? My father paid off his home 2 years 3 years ago. Right after I moved out of his house, and my sisters came of age where he was not getting a tax break for them. The following year he ended up paying taxes instead of getting a refund like he had for the last 15 years. So I suggested for him to take out a Mortgage (Which he did) and he got just about all of the interest that he paid BACK, and sisn't owe anything. So why pay off your mortgage, when you can make your money work for you. We got him and introductory rate that started at 1.9% or something, with a Cap that doesn't allow it to go up more than 0.5% every 6 months. We paid off his car loans & credit-cards, so now he is paying less every month; and the cash that he did pull out we put into a CD (Recently renewed it into a high-paying CD)-which he does claim the interest on that as income. He is still making a profit off the CD and the amount he is receiveing on the CD now will exceed the amount of interest on his mortgage for the next 3 years with the maximum amounts that the rate can raise. So if he could get a 50, 60 or 100 year loan; the lower his onthly payments are each month the better.

    Who cares about "RATE", when it all comes down to it all anyone cares about it "PAYMENT".

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  13. do anyone know a lender doing a 60 year loan?

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