50-Year Mortgages That Children Can Inherit

reminds me of how 0-interest financing and 72-month loans have pushed vehicle prices ever higher.

I love the F-150 and they’re great trucks but I always felt it’s f*ked up a higher trim can easily cost more than an entry level Porsche

Indeed, for mortgages, it's common to have laws which explicitly allow them to be inherited. Otherwise, a death could be a goldmine for creditors and a crisis for people living in relatives' homes. In most cases, so long as the child continues coming up with mortgage payments on their parent's home, they're safe, even if they might not qualify for that loan on their own.

A 50-year loan has upsides and downsides. One of the major downsides is that even with tiny additional payments, a loan would typically be paid off in less than 50 years. It's not clear why someone would choose to have an eternal loan, when it can be made less than eternal for not much less. Even with a 30 year loan at 5%, early payments are about 1/5 principal and 4/5 interest.

The flip side is that with reasonable inflation, effective payments will still become trivial after a few decades. And interest rates have recently been closer to zero. The calculus is different for a 2.5% interest loan.

Many people from Western countries don't know that the US mortgages mostly top out at 30 years and find that just as peculiar, just as OP's article about the UK is peculiar. Sweden has mortgages that are between 30 and 50 years and their recent law limits them to 105 years as the maximum.

It has nothing to do with more recent housing affordability trends.

It's arbitrary.

Longer mortgage = more debt paid to lender, and another demand driver towards more lack of affordability.

For the lender the benefit is a much larger total amount of interest paid by the borrower over the life of the mortgage.

https://www.calculator.net/mortgage-calculator.html

1) $100,000 mortgage for 30 years at 5% staring July 2022 (with no taxes/insurance/PMI/HOA/other costs [1]) = $93,255.78 total interest paid over life of mortgage

2) Same as #1 except for 50 years = $172,483.26 total interest paid over life of mortgage ($79,227.48 more than #1 above)

For the borrower, the /benefit/ is a lower monthly payment.

Option #1 above -- monthly payment of 536.82

Option #2 above -- monthly payment of 454.14 (82.68 less per month than #1)

[1] leaving out taxes/insurance/etc. is unrealistic, but the question was what was the benefit of 50 vs some other length, omitting these items shows only the difference due to the change in length.

in reality, lenders tend to set higher rates for loans with longer terms. but let's suppose you can get a 5% loan with any term you want. you can see from above calculator that the monthly payment starts to converge to some value when you pick a very long term. for a $100,000 loan at 5%, it looks like that value is ~$416.

once you get close to that value, you're not significantly decreasing the monthly payment anymore. what you are doing is lengthening the period of time where you are paying much more interest than principal each month. with a 1000 year loan at 5%, you would only own 3% of the underlying asset after 30 years. for all intents and purposes, you have created a weirdly structured long-term lease.

I guess this isn't all bad though. if your family manages to hold onto the property for a few generations, they will eventually have an absurdly cheap lease in real terms.