Will a 50-Year Mortgage Make Homes More Affordable?

That's exactly what happens when states increase minimum wage levels - rental prices increase until in a matter of months they've absorbed every cent (or more) of the increase.

SPY only ever goes up so this is a great plan!

If rates are 6%, it takes wayyyy longer than 5-10 years to earn more than that on average.

Always goes up is not the usual.

I've heard a few people making this argument, but unless it allows you to pay off your mortgage 20 years early it's still a net loss.

The deltas in monthly payments aren't typically that large.

That's a generous payment estimate. The actual numbers at the current 6.5% are that a $2700 30Y will be a $2450 50Y. It's not a 20% decrease in mortgage payments. It's more like 9%.

And uhhh, there's the small matter of "what you're putting in SPY" being rather offset by the $1M+ extra in payments and interest over the life of the loan.

The only people this benefit, truly, are lenders.

The excess return from investing the difference can be seen as the premium for the extra risk compared to paying down the principle. What makes sense for a person has to be evaluated in that light, and that the utility of money is not linear. I think a lot of people are willing to exchange a little upside to counter possibility of being unable to make their mortgage payments.

> Say a 30Y payment is $1000/mo. A 50Y payment may be $800/mo.

Maybe? At present the 15-year fixed is at 5.57% and the 30-year is at 6.15%. It's impossible to predict what a 50-year mortgage would cost since we don't know what the government will throw at it or what goofily-named government-sponsored enterprises would be created to buy these mortgages, but... more. The tools banks use to measure the risk of a mortgage right now don't even apply if the common situation becomes that the house and the owner are likely to age out into decrepitude during the life of the loan.

If the 50-year becomes a real thing we can use the government to backstop all this and provide financial support when all the obvious things go wrong (at enormous taxpayer expense). Might as well, we provide a lot of stuff to keep the 30-year going, which is definitely not a loan that would exist otherwise. It's unwise to pretend that this is all a perpetual motion machine that's only going to make itself stronger over time if we use it cleverly.

It facilitates offloading overpriced assets to younger bag holders with insufficient buying power due to stagnant wages and lack of economic potential.

So, unfortunately not.

(increasing supply would take targeted capital cost reduction, monopoly busting around new home builders and their land acquisition partners, and rapidly increasing the trades labor supply by hundreds of thousands of workers in the near term without immigration; none of this is likely to happen within the next three years)

If you increase mortgages to 50 years and keep the number of houses too low, houses prices will go up until the monthly payments return to the level of borderline unaffordability.

Another way to think about it. Longer mortgages means more available buyers (for a given price level). More buyers means prices up.

It might work if inflation is high and you make extra payments at the beginning of the loan. So you have 50 years to pay it off doesn’t mean you have to make minimum payments, you could get the principle down at the beginning and then get your repayments redone later in the loan to have something manageable. Inflation and appreciation would eat away at the loans value, you would be paying off a loan from 30 years ago with today’s money, your property taxes would likely be more than your house payment by then.

However, USA’s fixed interest rates, and your ability to refinance to a lower rate, aren’t really sustainable in a 59 year loan (they aren’t sustainable for 30 year loans). A lot of people are going to be locked into the same house for generations because they got a good rate 30-40 years ago. Also, it doesn’t really increase supply, we are going to quickly degrade into a European housing market of interest only loans and renting as a normal way of life.

You don’t have to put down 20% as a first time homebuyer

Homes are lucrative investment vehicles. I’d expect many of these to get gobbled up people and companies looking to make a buck.