Is a 52 year mortgage such a bad idea

Bestthingsinlifearefree

A 52 year mortgage is bonkers. The fact that anyone is seriously suggesting it shows how bonkers the market is.

The problem is house prices are to expensive. By finding new creative ways to lend money e.g over longer terms, just keeps house prices going even higher.

The solution is not for 50 year mortgages or getting a joint mortgage with four friends or getting your parents to lend you the deposit etc etc.

The solution is for first time buyers to refuse to pay ridiculous prices and just see what they can buy with a 25 year capital and interest repayment mortgage on 3.5 times their salary.

The result in most cases they cannot afford anything, thus if they refuse to buy, prices will have to come down.

nrsql

Think you're all missing the point.
I very much doubt that you can predict we are going to enter a period of wage deflation or house price deflation (although I think that more likely)

I'm not suggesting anyone spends more than they could afford - and I think that should be based on more than a 25yr mortgage repayment monthly payments - anyone who is close to there budget on that is in a high risk situation whichever product they use.

What I am suggesting is that you shouldn't neglect the possibility of low start payments. You are taking a risk - but then with current 25 yr mortgages you are also risking that this is the best use of your money. Just because it is an accepted thing to do doesn't mean it is not a risk - why not pick 10yr or 5 yr?

I agree that at the moment people should think carefuilly whether house prices give value for money but that is a different question - connected to but not the same as how to finance the purchase, a common confusion and not helped by products that are advertised as "helping" the situation.

Note that you shouldn't just consider the inflation in average wages - this is the wages that the individual receives - it should increase relative to the average into middle age at least.

hornetgirl

I should think that by the time the 52 years are up you'd have lost the will to live It would be easier to just rent.

nrsql

Sell up and live at Will's place.

pollyanna24

I chose to take out a 35 year mortgage instead of a 25 year mortgage simply so I had the lower payments. I make overpayments to make it as near a 25 year mortgage as I can, but I like the security of being able to make the choice (also the idea of a mortgage over a £1K a month scared me!)

I know I have to be strict to keep myself making overpayments, but at least I know that if there are a couple of "tight" months, I can retreat back to my (relatively) easy to pay 35 year mortgage.

Xbigman

Don't think of it in terms of inflation but compare positions. If you have a 25 year mortgage you pay a small amount more for 25 years but then you are clear. If on a 52 year mortgage you pay a bit less, but after the first year you are paying more interest. After 25 years you still have 27 years interest to pay.

Look at it from another point of view. I'm an absolutist with money so I've worked out how much I will earn for the rest of my working life and what I will spend it on (Not to the penny, just in general. I am sane, really:D ).
The percentage of someones lifetime income that they will pay out is higher with a 52 year mortgage, and that is a big factor if you plan to pump serious money into a pension at some point.

Lastly. Mortgages are not normally stable. How many people buy the perfect house first time and live in it for 52 years? If you want any flexibility over the course of your life, and have the option of moving up the property ladder, you really do need to actually pay some of that mortgage back.
Regards



X

nrsql

Using the total amount you earn over your lifetime will be very misleading - as is just considering the amount outstanding on a mortgage.

£1 today could be a lot more valuable than a £1 in 25 years - ok you will have 17 years to go but if there has been high inflation or you have been successful at increasing your wages then the payments will be comparatively small.
You will have left yourself with more disposable money early in the term when it was worth more at the expense of cheap money later in the term - could easily mean paying less in value terms over the term of the mortgage.

Of course if there is deflation or your earnings don't increase you will not benefit but will probably be in trouble ayway.

The best option is probably an interest only mortgage making overpayments when you feel comfortable.