The rise of the 40 year mortgage

PasturesNew

... 40 .... 50 ... then 75 .... 100 ... oh the joy of finally paying off your great-grandmother's mortgage 150 years after she died.

danothy

PasturesNew wrote: »

... 40 .... 50 ... then 75 .... 100 ... oh the joy of finally paying off your great-grandmother's mortgage 150 years after she died.

So you get to buy her whole house but only have to pay a quarter of the mortgage that's had three generations of inflation reduced its real cost?

wotsthat

I'm hoping I'll have been mortgaged for 44 years by the time I've paid it off with the last 12 years payments being paid out of tax free income.

I've extended my mortgage to retirement so I can divert capital to a pension that gives a 40% return on day one and 25% of the eventual pot will be free of income tax.

It seems so silly paying off debt with interest rates so low. If the sums ever go the other way I'll just pay off a large chunk of mortgage and dramatically reduce the term.

Generali

zagubov wrote: »

I visited West Germany near the end of the 80s. Same population size that the UK has now.

It had endless forests and agricultural land, spacious cities with good public transport and homes with more floorspace than the UK and far better cultural and recreational facilities. A vast train network and a motorway network that went everywhere.

All this in a land that had a million acres of military land and factories that stretched for miles and had absorbed 20% of the population of the then East Germany as well as vast numbers of guest workers from Yugoslavia and Turkey.

If the UK thinks it's overcrowded, it needs to organise itself better.

The UK isn't overcrowded.

wotsthat

PasturesNew wrote: »

... 40 .... 50 ... then 75 .... 100 ... oh the joy of finally paying off your great-grandmother's mortgage 150 years after she died.

My great grandparents purchased a house after my great grandfather's return from WW1 in 1922. It can't have cost more than £80.

Generali

To some extent with people living and working longer, longer mortgages make sense.

It would be an interesting experiment to see what would have happened to someone if in 1975 they had taken out a 40 year mortgage and put the savings into a S&P/FTSE tracker. For a higher-rate payer putting the money into a pension they may well have done better than a mortgage payer.

Mistermeaner

Do you have excel?

Generali

Mistermeaner wrote: »

Do you have excel?

I do but I use Bloomberg Terminal not Bloomberg anywhere so I'm not going in to work to get the data set!

chris_m

Generali wrote: »

so I'm not going in to work to get the data set!

Just make the numbers up - isn't that what most economists do?
:rotfl:

wotsthat

Generali wrote: »

It would be an interesting experiment to see what would have happened to someone if in 1975 they had taken out a 40 year mortgage and put the savings into a S&P/FTSE tracker. For a higher-rate payer putting the money into a pension they may well have done better than a mortgage payer.

If they'd invested the payment difference between a 25 & 40 year mortgage in the FTSE between 1975 and 2000 they'd be massively up as long as they sold their investments and paid off the mortgage at the end of 1999! Otherwise they'd just be up.

Having to pay off debt with earned income at 1970's and 1980's tax rates must have been soul destroying.