Trump proposes 50-year mortgage

rjs330 said:

Its my understanding that most mortgages do not have prepayment penalties. Ive owned four different houses and also had several different re-financing and every one of them had no pre-payment penalty. So is that really a common thing to have one?

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I don't know how common it is, but it's a real thing: ConsumerFinance.gov: prepayment penalty.

rjs330 said:

Or are you just concerned lenders would go to that if they did 50 years?

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Lenders will do it if they can - I wouldn't think that 50 years would be different in that regard except for the extra harm to unsophisticated borrower. I'm not sure what you mead by "just" here?

I think it's a terrible idea.

I don't even like the idea of a 30-year. Those end up raking up an amount of interest that I would consider predatory.

If we even operate on the generous assumption that a 50-year loan would have the same interest rate as a 30 (which is unlikely)

(While I know some people hate AI, I did task it with crunching some numbers to see how much interest people were paying for various mortgage terms for different loan durations.)

For a $250,000 home....



I think it's pretty obvious, the choices people should have are 15 yr and 20 yr.

When you make that jump from a 20 to a 30, that's where the "lower monthly payment" benefit really diminishes, and where the "whoa! that's a lot of total interest" really kicks into full gear.

Getting a payment that's $400 less per month at the expense of paying back an additional 30k over a period of 20 years is an acceptable trade-off.

That jump in interest between a 20 and a 30 is staggering, and the only benefit in that different term length is a $140/month reduction in the monthly payment. -- not worth it at all.


While I'm not a finance guy and not an economist (so there may be things I'm overlooking), I would be all in favor of a stipulation/law that stated that an FDIC lending institution shouldn't be able to offer loan terms that involve the total interest paid exceeding the amount of the actual amount being borrowed.

Whatever happens between two people privately is between them (for instance, if my brother wanted to borrow $100, and I told him "okay, but you gotta pay me back $250 two months from now", that's a different story), but for government-backed institutions, they shouldn't be the business of usury.


Now, there are tips and tricks for getting your home paid off quicker even on a 30-year (that the banks obviously don't want you to know about), but speaking as a person who's happy to say that mine was officially paid off as of August (woo-hoo) while still in my 40's, they're something that should be taught in high school.

probinson said:

You never really "own" your home as it is now.

My annual property taxes are around $2,500. My home is worth nearly $300k. Even if I've paid off my mortgage and I "own" my home outright, If I don't pay my $2,500 in property taxes annually, the government can take it from me. Seems pretty ludicrous that the government would be permitted to take your $300k home for $2.5k in unpaid property taxes. But here we are.

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The bank holds the title deeds to your house until you have paid off the mortgage, so you effectively don't own it until it's paid off. If it's a 50 year mortgage, you're not likely to ever see those deeds. Neither will your kids.

If you don't pay your property taxes then the government (I think it's local government in both the US and Australia) will send you a demand. If you still refuse then they start charging you compound interest on what you owe. That will build up to a significant amount in a short time. Still refusing? Then they'll place a lien on your property so that what you owe will be paid to them upon the sale of said property.

If you really want to play hard ball then they will enforce the sale of the property, take what you owe and, lucky you - you get to keep what's left.

In passing, and I don't want to ruin your day, but my house is worth a lot more than yours and I pay just over half of what you pay in property tax.

durangodawood said:

This president does like using indebtedness as a policy tool.

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It's how he used to make his money. From here: Donald Trump, ‘King of Debt’: 3 Infamous Loans That Helped Build His Empire

'In a 2016 interview, Trump admitted, “I’m the king of debt. I’m great with debt. Nobody knows debt better than me. I’ve made a fortune by using debt, and if things don’t work out I renegotiate the debt. I mean, that’s a smart thing, not a stupid thing.”

In 2005, Trump financed more than $2.5 billion for real estate projects from Deutsche Bank, most notably to fund the construction of Trump Tower in Chicago. After the 2008 financial crisis, Trump failed to sell or lease the majority of the condos or retail space in the building. When the loan came due, initially for $334 million to Deutsche Bank, instead of paying the money he sued the bank. The construction companies that worked on the project wrote off $101 million and $105 million in bad debt, while Trump saw his debt forgiven.

Trump also borrowed $130 million from Fortress Investment Group for the same project, according to TheDailyBeast.com. These loans were also forgiven in a lawsuit.

Trump floated bonds worth $300 million to fund Trump Castle, a New Jersey casino. He missed a $42 million interest payment, according to the Los Angeles Times. But the bond holders agree to forgive more than $200 million in payments over five years, the New York Times reported. The casino ultimately went bankrupt.'

The guy has absolutely no idea how working families manage month to month. And I mean that literally. He has absolutely no idea whatsoever.

probinson said:

Bonus tip: If you get paid bi-weekly, split your mortgage payment in half and pay half every other week. This will results in 26 half payments, or 13 full payments, meaning that you will make one full extra payment toward your principal each year. In my case, it will result in me paying off my 30-year mortgage in 22 years.

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I definitely second that. It's an excellent tip. We did something the same in that we paid ours every 4 weeks instead of every calendar month. Same result. You never really notice the little extra that you're paying but it lowers the length of the mortgage significantly.

Aryeh Jay said:

It's hard to top the internment camps.

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The Presidential term is young.

probinson said:

Bonus tip: If you get paid bi-weekly, split your mortgage payment in half and pay half every other week. This will results in 26 half payments, or 13 full payments, meaning that you will make one full extra payment toward your principal each year. In my case, it will result in me paying off my 30-year mortgage in 22 years.

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Or better yet, pay the minimum on the mortgage and invest the difference. You'll come out ahead in the end.

As things get more expensive the terms of loans rises. For example car loans in the 60's were rarely over 3 years. Now car loans can be up to 8 years. We are a consumer economy, have to keep those consumers consuming!

It is also worth noting that lenders often require mortgage insurance. It does very little for the borrower. It does everything for the lender because they get paid if the borrower defaults.

jacks said:

As things get more expensive the terms of loans rises. For example car loans in the 60's were rarely over 3 years. Now car loans can be up to 8 years. We are a consumer economy, have to keep those consumers consuming!

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This actually comes with advancements and regulations. Home loans used to be 7 years. Car loans 3. But as we advance things get more and more costly. I do think the 30 year mortgage helped create more expensive homes. They were inevitably going to go up in price with air-conditioning, electric everything, fuel standards etc etc.

Hous3s at 50 year loans. Very bad plan.