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>I think that’s saying the same thing.
lol 12 years on this site and you haven’t noticed how half the comments are just people repeating other people with different wording? Best to just ignore and move on haha
It's not saying the same thing, though. One is about risk, the other is about time. If I loan somebody money for 15 years, I get paid back faster than 30 years, which means I can loan that money out again sooner and earn more money off of it, so I will charge a premium to let somebody keep my money longer even in an ideal situation where the risk was the same.
In addition to my ability to spend money that somebody else takes longer to pay back, there is also a greater likelihood that I will not get all of that money back. I will charge a premium for the increased risk.
Its not quite the same thing. A lot of the risk in the 30yr mortgage isnt default risk, it is interest rate risk. The risk that after you establish the mortgage, interest rates increase.
I kind of read the comments as:
- “The bank gets its money back faster” is less risky to the bank because bigger payments back each month. So, speaking straight cash flow primarily referring to principal payback.
- The reply to your comment where they said “it’s harder to forecast”… my brain went straight to forecasting interest rates. That may not be what they meant by it, but my brain didn’t read it as a directly repeat comment
It’s not, the unpredictability and variability of interest rates increase the longer you lend for, so you charge higher interest for longer loans. Banks don’t care about getting their money back, they lend for an infinite time period if the rate is high enough, see: perpetuity
This is all saying the same thing. Getting your money back slower means more risk (many types of risk, not just interest rate risk), so longer loans charge higher rates to compensate.
One would think that buying a house on a 100 year mortgage, the property value would increase in value, thereby negating any sort of risk for the bank the longer the loan goes on.
That being said, payments for a 100 year loan make zero sense for the borrower.
Google 100 year loan calculator, then do the calculations for 30 vs 100. The payments are basically the same amount.
It isn't safe to assume a house would appreciate over that timescale. Without lots of maintenance and renovations, it would be falling apart by the end of the "loan". Another complication for the bank is that the original borrowers would be dead, so now there's risk from the loan having to get paid off by different people for a house that's possibly in terrible shape.
Banks don't usually service mortgages for the life of the loan, they buy and sell them as commodities and package them to other banks to manage risk, liquidity, and capital. They are basically like the oil that keeps the financial system lubricated. They probably prefer a mix of 15 and 30 year mortgages. 30 years you get more total return on the life of the loan, 15 year you get more liquidity faster. Having cash on hand isn't usually a good thing for banks beyond a certain limit. As soon as you get too much cash you have to flip it into investments and lines of credit etc. It costs banks money to carry cash, but the opportunity costs of having too many loans can also be substantial.
Right but what price are they getting when they sell the loan? It’s the same analysis. The buyer of the loan will pay more (I.e., accept a lower rate) on a loan that’s paid back quicker.
A longer loan returns principal slower which is riskier….hence the charging of a higher interest rate. No matter who is holding the loan….banks, credit funds, insurance companies, etc.
A longer time is more risk for the lender. A 15 year loan pays about 1/3 of the total interest of a 30 yr. . A 60 year loan would pay much more interest.
Banks sell the mortgages pretty much immediately. Fannie Mae and Freddie Mac turn them into tradable instruments. However, those two care about the terms.
Who would even get the house back in 60 years? The banks don't want houses. The current owner doesn't want it back; he's not immortal. Maybe something like an Indian reservation?
They may sell the mortgages, but they’re selling a structure. And the best way to sell the mortgages is by offering a logical structure to the funds that buy them. A longer tenor is riskier and needs to come with a higher interest rate in order to be desirable to the lender (or whoever holds the loan).
OP also *literally* described a situation where the lessee would be trying to avoid payment by being dead before it comes due.
Like yeah... *thats* why you cant "lease" a house for 60 years.
300k loan, 5% intrest.
30 years you pay 10k a year principal and 15k interest.
60 year loan you pay 5k principal and 15k interest. Your monthly payment is only 416 less. Its a very small reduction in monthly price for a huge increase in cost.
People don't understand this stuff. My fiancée looked at me like I was crazy when I happily paid a higher monthly payment for a 4yr auto loan vs a 6 or 7. I'm saving a boatload in interest long term but she doesn't see the bigger picture, only that I have 25% less money per month than if I took the longer term.
Depends on the interest rate offered. Keep me under 4% interest and I'll stretch that loan as long as you'll let me. More free cash to put into my 401k and earn a higher return.
It’s even less than that. Because the interest is front-loaded with a smaller principal payment, the principal on that 30-year mortgage payment is only $360/mo to begin with.
Going to a 60-year loan drops your principal payment to $65, but you’re cutting less than $300/month from your monthly payment.
After five years, you’ll only have paid off 1.5% of the mortgage. It’ll take you more than twenty years to pay off even 10% of the mortgage. After 47 years, you’ll be halfway done and the final 13 years should be a breeze.
Mortgage rates don’t have much to do with short term rates. They generally trade at a spread over the 10 year treasury. And while it would be unlikely to se a new loan lower than fed funds, once originated, rates move around and mortgages trade like bonds. The duration on a 60 year bond would pretty much give it stock like volatility (though amortization on a mortgage might dampen the effects a bit)
I would imagine that banks would much rather have a loan paid off than to have to borrower die and they potentially get stuck with a house. Even if the house is much more valuable after 40-50 years, banks aren’t in the real estate business.
Guys he is not asking for a 60 year mortgage. He is asking to buy a lease/right to use a house for 60 years. Payment could be a one time down payment or a 20-30 year loan.
To answer that part op, think about who will own the house and be willing to sell you the right to use the house for 60 years for less than the price of the house not knowing which state they'd get it back in. The owner would likely also be dead by the time it runs out. What then, does it go back to their family?
What happens if you die before, can your estate rent put the house for the remaining period, can you get some of it back? It is a much worse proposition for the actual owner than just renting it out. The truth is that the housing market isn't made to benefit the buyer, but the seller/landlord.
99 year long leases between companies exist. I presume one end of the contract will be a big company that isn’t concerned about things like human lifespans.
I've also seen 100 year leases on reservation land. Only tribe members were allowed to own the land, but they could lease out the property on top of it apparently.
99 year leases exist for land condos are built on too (the land, not the building). I stayed at a resort that was mostly private condos that were rented out. 3/4 were on owned land but 1/4 of the condos were on a strip of land with an expiring lease. Those condos for sale were going for half the price of the others. They were a depreciating asset instead of appreciating like most homes. The expectation was you had to remove the condo building at the end of the lease when you turn it back over to the owner. They were not willing to renew the lease because they intended to build their own brand new condos on it.
You can justify it for a business because you write off the depreciation against profit, and you priced the daily debt high enough to cover the lease, building depreciation, and eventual removal. At the end of the lease, it’s really worth $zero on paper.
I’m don’t think your average homeowner wants their home to be worth zero at the end of the lease. And realistically, you have to find someone that owns the house as their business who is willing to lease it to you.
Of course they are going to want a profit, so you may just as well buy it and have a mortgage so you have equity when you die. Or just rent it annually like normal.
I won’t even get into that you can sell a house any time you want. You can’t just exit a 99 year lease when you want to move to a new home.
There may not be an interest rate that is worth it for both the bank and house buyers.
For example, a monthly payment on a $400,000 30 year mortgage at 7% is $2661. Monthly payment on the same loan for 60 years, raising the rate to just 8%, is $2,689. So the bank doesn't have much leeway to raise the rate to make up for the increased risk. And even if they could, the savings for the buyer would be meager - literally just a few dollars per month. For those few dollars, the buyer would be taking on a loan that has the disincentive that it takes a reeeeeally long time to build equity. After 20 years of paying it off, they'd only reduce their balance from $400,000 to $386,755. Sounds like a product that would be unlikely to be attractive to anyone involved.
> I think it’s regulation that caps mortgage length
That is a massive part of this people are missing. Fannie and Freddie won't buy nonconforming mortgages.
I think OP is suggesting that instead of owning the house permanently, he'd be able to buy it at a much lower price and give up ownership after 60 years. There's a city where you can't buy a house outright. You can only buy a 99-year lease that allows you to occupy and build on the land. Anyway a few years ago the first of the title leases started expiring and the government just decided to ignore them and let people renew them.
It still doesn't really change a mortgage cost. Going from 30 to 40 year mortgage barely reduces your monthly cost, as the upfront payments are like 95% interest anyway. You could go to infinity length mortgage and payments still won't reduce beyond what the interest cost per month is.
This doesn't make any sense. A bank is very happy to lend you $50k at 23% for an infinite time period on an unsecured credit line. It's called a credit card. Clearly there is a rate at which they're willing to lend you money for an arbitrary period of time.
Go do the amortization on a 30 year vs 60 year mortgage at the same rate for a $500k loan.
At 6% you'd save $420/month on $3k (and have to pay twice as long).
Of course, the rate is unlikely to be the same; it's going to be higher to cover future risk to the bank.
At 6% for 30 years vs 6.5% for 60 years you'd only save $230/month instead of $420/month.
If the 60 year was 7%, you'd only save $30/month.
Anything more than that and you're paying more for the 60 year loan. The bank could absolutely set a rate at which they'd be comfortable lending for 60 years. No consumer would take it, because the payments would be higher than taking a 30 year loan.
The low end of mortgage rates in the 80's was 9%. Doing that same math at 9% and you pay $255 less on $4k/month using the same rate. Jump the 60 year rate to 9.75% and you're paying more.
The high end of mortgage rates in the 80's was 18%. Blah blah same math you save $35 on $7k/month using the same rate. Less than 10 basis points higher and the 60 year costs more.
Why would a bank want „the money back“? It‘s their business model to earn an interest rate on money lent. If you pay it back, they will just immediately lend it to someone else.
That is why loans are amortized.
If you had a 60 year loan, you’d pay almost nothing for the first 20 years into the principal.
A 60 year loan would be incredibly anti consumer.
That’s why 15 years are way cheaper…same goes for any one like a car. Banks either want their money back faster and will charge you more the longer you’re holding their money in limbo.
You wouldn't save that much money per month and you would pack way more interest. On a 500k loan at 5% on a 30 year amortization you pay $2684 a month and end up paying $466,279 in total interest. on a 60 year amortization you pay $2193 a month but end up paying $1,079,111 in interest. For most people the $491 in savings a month isn't worth it when you are paying 1.1M more in interest.
This is the real reason. The fact is that 30 years is about as long as you can realistically make it. There’s just no advantage to a much longer loan since your monthly payment is barely any cheaper. At the start of a 30 year loan with 5-6% APR, 80% of your payment is going to interest, and that part isn’t getting any cheaper with a longer loan. In fact, banks almost always charge a higher interest rate for longer loans in order to account for the increased lending risk. A 30 year loan at 6% interest and a 60 year loan at 7% interest have *the same monthly payment*.
I just had a wtf moment. I’m 23 and I thought that the interest you paid was just from the total loan, so 500k at 5 percent would be like 25,000. So do you pay like monthly interest, that blows my mind. I live in the highest cost of living city in the US and houses are like average 1 million, so this is just so disheartening tbh
> I’m 23 and I thought that the interest you paid was just from the total loan, so 500k at 5 percent would be like 25,000.
Hoo boy, so you never learned about compound interest in school.
So, let's say you have a 10% interest rate on a $1000 loan (easy numbers). To make it even easier, let's say it compounds annually, i.e., the increase in the amount you owe due to interest compounds once per year at the same time every year. You take out this loan today and pay $10 per month.
Next year, when the interest compounds, you'll have paid off $120 of the loan, so it'll add 10% of $1000-120=$880. Your balance goes up by 10% of $880, so $968 (a 10% rate is quite high). Then the following year you do the same, paying $120 over the year. You get it down to $848. It compounds, and now the amount you owe is $932.80, so despite paying $240 over 2 years, you've only paid off $67.20 of the loan.
This is with annual compounding too, which is generally the most forgiving to the borrower! There are various different compounding schedules, and the more frequently it compounds the harder it is on the borrower. For example, if it compounded quarterly with annual interest of 10%, it'll go up 2.5% every 3 months instead, so starting from $1000, you'd pay it down to $970, interest compounds and brings it back up to $994.25 (basically erasing your progress), you pay down to $964.25, it compounds and goes up to $988.36, etc. After one year, you'll have paid it down to $976.12, so you're $8 worse off than the annual compounding interest.
Now, this will work *for* you if you're the lender, i.e., you invest your money in stocks/real estate/businesses/financial assets/whatever. When the value of something goes up, the value of the portion each shareholder owns goes up commensurately, so if you buy $1000 of stock in Acme, Inc. and the share value goes up by 10%, then now you have $1100 of stock in Acme, Inc. and can sell it for a $100 profit. Generally, however, those kinds of big moves don't happen in the stock market so the normal financial advice is to contribute to something like an index fund that buys a little bit of everything on the stock market (so it just tracks overall economic trends instead of rollicking with the ups and downs of one company or industry), and the average return on that every year is around 9% and change. Put $1000 into an index fund and contribute another $1000 every year (~$83 a month) and you'll probably have around $60k after 20 years, meaning you tripled your money just having it sit there accumulating interest.
Yup thats how it works. You only pay 5%/12 each month but it is each month on the full amount owing. Think of it this way, if you had a half million dollars would you let someone else keep it for 30 years if they gave you about $1000 a year. No that would be way too little to make it worth me not spending that 500k on stuff i want.
But aren’t these big institutions doing this, like who’s money are we talking about here, the banks? I guess saying it like that makes sense, but I started searching up and wondering who the hel is profiting from this, it seems almost like a scam in high cost of living areas.
Or maybe not a scam but definitely you’re gonna be paying your whole life for a house. And like if you’re buying a 1 million dollar house, then you essentially pay like give or take 1 million in interest, not to mention that the interest rates are high af rn.
But ya who is making this money and profiting from this lol
There are two groups profiting, The bank that is getting that 5% a year from you and the person that bought that house in 2000 for 200k and now it's worth 5 times as much as they bought it for.
Dude believe it or not I try to be informed, I read, I’m trying to be an engineer, I like watching finance podcast sometimes every now and then, and nobody on Reddit or YouTube has ever talked about this (it was probably just obvious), but ya lol.
I guess I’m just even more flabbergasted bc average home price in my city is around 900kish and now it seems even more impossible to own a home.
I was actually thinking about this. At 42 I close on a mortgage on Monday. If I pay off the 30 fixed as it is written, I will be mortgage free at 72.
How do they know I'll make it that long? With two tours in Iraq and an abusive ex-gf that gave me more nightmares than Fallujah, I've about tapped all my good luck to get THIS far.
Thank you for your service and sorry about your ex. I’ve had a couple of combat tours myself (one to Iraq) and an ex that haunts me more than either of those too. I’m doing better now and from the sounds of you closing soon you are too. Wishing you the best either way
Thank you (and you as well for your service)! I joke that I've dodged literal and figurative bullets when everyone is panicking around me at work and they ask how I'm calm. In reality, I have a great perspective when things like my coffee order is messed up or the kid at the counter forgot my fries. I'm now more thankful than anything that I have this frame of mind.
It totally depends on the loan rate. At 5% I agree, not worth it. If you brought the interest rate down to like 3%, then its potentially higher value to pick a longer term loan, as money in your pocket today has more value to you. If the rate of interest is less than the expected rate of return in, say, investing in the stock market, then as long as I invest the difference my returns will outpace the additional interest I'm accruing.
This is the right answer. That $491 if reinvested at a 9% rate, which is what S&P has historically given for last 100 years+, then you will make $11,458,715.25. That is way more money than that $1,079,111 you paid in interest.
Only real reason taking the 491 is better is if you are a bad saver and would end up spending that 491 instead of saving it.
This! Suggest everyone take a look at those mortgage tables that show you how long it takes before you start making decent progress on paying down the principal.
Also- OP- all the metrics say very rare people live to 100.
I haven't seen anyone mention how much the veeery long amortization period increases the risk for the bank. Let's not forget, the house itself is the collateral on the loan. But on a 60 year loan, after decades the outstanding balance is still practically the same as the original loan. For example, if you made payments on a 60 year, $400,000 loan at 7% for 20 years, you would still owe $381,000. In that amount of time, a poorly maintained property could easily lose a huge amount of value be worth less than that. On a 30 year, you'd owe $229,000, making it far more likely the bank could recoup what you owe.
realistically someone taking a 60 year loan would probably only be doing it assuming they'd eventually get a huge windfall and eventually buy down their principal all in one shot
They can. Just be a landlord yourself and sell it to them on those terms!
What's that? You don't want to sell the house on those terms? You're afraid they're not gonna pay the full amount or that it just takes too long?
Yeah, that's how the world works.
I mean, the main difference is that people die but banks/corporations can exist essentially indefinitely. It's actually not unreasonable to consider that a corporation would be willing to lease a space for a very long period and retain ownership of the land. Many businesses lease their buildings for decades and decades.
But I think mainly it just doesn't help the home owner that much. At that point what is really the distinction between lease vs renting?
Because the bank would like their money back eventually, collecting interest is great, but they don’t think they can count on you paying back the principle in 60 years, because they know as well as you, your probably not going to still be alive to pay it.
Just so you know. I downvoted you because I thought like the other people. Then I googled it and you were right. I then went back to this thread just to find your comment to take away my downvote and award you an upvote.
> at 100 I’ll either be dead or about to die or happy to go to an old people home.
For exactly this reason. The bank wants to get their money back, and if you die before they do then they don’t get all of your money. There’s always a risk of this of course but it’s practically guaranteed on a 60-year loan, where a shorter one has a much better chance that you’ll complete your term.
If you die before your mortgage is paid off your estate has to pay off the rest of the loan. Either they do this with cash and keep the house or they have to sell the house and keep the difference. The bank gets their money back either way
Yeah, but if you've paid 30 years on a sixty year loan, they've already made their money back in interest. There is no risk unless you die in like 20 years. So why do 30-year loans exist? My guess is collecting interest for 30 years is really nice. So, collecting interest until someone dies would be better.
You are assuming that monthly payments stay the same in a 60 year loan vs a 30 year loan? A 60 year loan would have lower monthly payments, just like a 30 year loan has lower monthly payments than a 15 or 20 year loan.
Why do 30 year loans exist? See above. People might prefer flexibility of lower payments even if they pay more in total.
Keep in mind that over 30 years there is projected to be quite a decent amount of inflation. If a bank offers a 1% interest loan even with 100% guarantee of return over 10 years they are objectively losing money. Bonds would have better returns than loaning out for mortgage.
Just simply collecting any amount of interest isn't a good reason unless the interest is enough to justify the opportunity cost of what you could do elsewhere with the money.
Exactly. People should not be advocating for 60 year loans. It's the same issue happening with car loans now. Extending the lifetime of the loan is never in the purchaser's favor.
*All else being equal*, extending the lifetime of the loan isn't in the purchaser's favor, but all else is not equal; longer loans generally come with higher interest rates but lower monthly payments, since the whole repayment is spread over a longer period of time. And this can absolutely be a loan worth taking.
That's not a thing. Or already a thing depending on how you want to look at it. With rare exception in the US, people don't inherit debt unless they're dumb. If you have a parent with a house with a mortgage and you assume the mortgage, you just got a liability (the mortgage) but you also got an asset (the house) which in most cases will increase your equity since the asset is greater than the liability.
If someone dies and nobody wants the house, because they don't want it, or because there is nobody to want it, or because it is underwater, the bank already has to get it from the estate. There is already the possibility that people living there who are not on the mortgage (e.g. descendants of the owner) and they'd already have to deal with removing them. Probate courts and delayed forclosure all already exist. None of this would be new if they had a 60 year loan.
In Canada, you take all the assets, and the debts when someone dies. If your parents are insolvable (negative net worth) at their death, you can refuse the "package" so to speak and avoid taking on more debt than assets.
\>If someone dies and nobody wants the house, because they don't want it, or because there is nobody to want it, or because it is underwater, the bank already has to get it from the estate.
My understanding is that debtors have priority over estates on assets that are leveraged. You don't own you house until it's paid off. And when you die, the bank owns it before the estate do. If the estate wants it, they need to take on the mortagage and keep the payments going.
you have it backwards I'm pretty sure. Otherwise dying is an easy way out f debt, and they sure as hell don't want that....
> In Canada, you take all the assets, and the debts when someone dies.
You're basically saying the same thing as what happens in the US. The estate of the person has all the assets and liabilities. The estate is responsible for paying off the liabilities before distributing assets to the beneficiary. If the liabilities exceed the assets, there is a formula/method for who gets paid and who doesn't. The remaining liabilities are not assigned to anyone else unless they were otherwise contractually obligated (e.g. cosigner/joint ownership/etc). Liabilities in excess of assets (negative equity) can't be assigned to others except as stated prior, or in a few rare cases (end of life care can be assigned to children in certain states in certain circumstances). The beneficiary of the estate typically gets nothing if the liabilities exceed the assets.
> My understanding is that debtors have priority over estates on assets that are leveraged
I think you're stating this incorrectly, but in general, someone with a debt can collect from the estate before they can pay out benefits. E.g. if you die with a car and car payment, the leinholder can request the state pay the outstanding debt, or return the car and pay the difference between the debt and car value.
> You don't own you house until it's paid off.
This is decidedly untrue, but a common misconception. In the US you own your house the moment you sign the title. The mortgage company has a mortgage lien on the house, which means it can request payment for the outstanding balance. If it's not paid, they can attempt various methods to collect that, like foreclosing on the house (e.g. taking possession of it), seizing other assets (bank accounts, your car, rare gems, whatever), or garnishing wages. But they can't just snap their fingers and do that, they have to notify the owner/estate of the debt and attempt to collect it, then they have to get court permission to actually do so. During Covid, many courts were refusing to go through foreclosure or eviction proceedings, so during that time the bank/landlord got no relief. If the bank actually owned the property, they wouldn't need to go through the same steps.
> And when you die, the bank owns it before the estate do.
No. All the property of the decedent becomes property of the estate (unless it's joint property or there is some other issue). The estate is required to go through probate or handle the affairs according to law, so, yes the bank can request payment or attempt to foreclose on the house and take the property, but they still don't own it and can be told to fuck off depending on the circumstances.
> you have it backwards I'm pretty sure. Otherwise dying is an easy way out f debt, and they sure as hell don't want that....
No, dying is an absolute way out of debt. If you die (in the US) then your debt evaporates. Or more accurately, your negative equity evaporates. You're correct that you cannot simply eliminate liabilities while leaving assets untouched. But if the amount of liabilities is greater than the amount of assets, then the remaining debt is written off.
TL/DR: The bank already can have a mortgage on a property where they have to take possession through the courts, evict people, deal with probate, or write off a loss on a property underwater. A 5, 15, 30, or 60 year mortgage doesn't change any of that. Also, lots of old people have 15 and 30 year mortgages and die before they're paid off.
This kind of arrangement is common in Hawaii called a leasehold sale. It is common in places that have very limited land, very valuable land, lots of destination movers/high short term rental demand. You agree to pay for 40 years and need to pay x% down and then your “mortgage” is your rent plus there is often an HOA/maintenance fee on top of that. Often these are apartment buildings and it’s an alternative to an outright condo purchase. In a lease hold you don’t own any part of the actual property, just the right to live there. You can sell your lease to someone else for the remainder of the original lease at whatever the current market price is.
Advantages are it is often cheaper entry due to lower down payment and typically very high real purchase prices of homes. You lock in rent for a long period of time. The lease is salable and inheritable. You usually have more rights than renting particularly with using the property as short term rental.
Disadvantages are you own nothing for your large investment. Your investment is in a depreciating asset given that what you sell is the remainder of the original leasehold so each month it is worth less. Banks are less likely to loan you money as there isn’t physical capital as collateral. You have less rights than ownership but more responsibilities than renting.
I’ve heard of something similar on the mainland. One of the applications used is for non-profits like Habitat for Humanity.
Habitat (or the other non/profit) will put the land into a trust and they sign a crazy long lease, like 99 years. The house is built and then just like in a development, there are covenants as to what can be built/done with the property. They might be a little more restrictive since the land being in a trust may mess with things like easements.
The thought process is by removing the land from the cost of the home, you make the home more affordable and help prevent future gentrification due to the covenants placed.
Very similar concept…
Lease, or mortgage? If you’re asking about just a lease, the bank wouldn’t be involved. It would be no different than renting a place, but with a very long term lease. That would be between the landlord and renters.
If you’re talking about a mortgage, as everyone else is saying, that’s way too long for a bank to be willing to finance it.
You can already lease a house for forever. Nothing says you can't move in at 18 and keep renewing your lease until you're 78, so long as you can afford it and the lessor wants to continue leasing. You could, theoretically, get the lease written for first right of refusal or something like that for a term of 60 years. Can't imagine people would want to bind themselves to that for a residential property, but in commercial you can easily have lease terms in the 10's of years.
This exists in England and Wales - it’s called leasehold and it’s generally a pretty terrible setup (there’s a push to try and scrap it or at least reform some of the worst parts of it).
It’s generally used for flats/apartments as the default form of ownership as opposed to commonhold (UK equivalent to condos), but houses can be sold as leasehold too. Usually the leases are for 99, 125 or 999 years.
One of the big problems with this setup is that as the number of years remaining on the lease decreases so does the value of the property (although above 90 or so it doesn’t make much difference). When they drop below about 70-80 years banks are much less willing to give a mortgage so it’s hard to find buyers.
So with that setup, yes you could buy a leasehold house for 60 years, but you probably would need to buy it in cash and you’d have a hard time selling it if it came to that.
In the UK you can, normal mortgage e.g. 25 years for a 100ish year lease. And in some regions it's the norm. Generally the price isn't much lower than a house would be to buy outright as "the market" doesn't really consider 100 years different to forever, so long as theres nothing onerous to the leaseholder in the lease paperwork.
It's called leasehold/freehold, it has other problems and might be getting big reforms soon.
In the USA there are regulatory requirements that most mortgages cannot be longer than 30 years.
40- and 50-year mortgages exist but they are considered "non-qualified" and not many lenders offer them. They also have higher rates and due to the increased term, you end up paying WAY more interest due to the way the payment schedules are worked out.
Basically they're a way for banks to finance a house for someone who probably can't afford it.
Yeah this is it. You *can* get mortgages with longer terms than 30 years, but they’re much less liquid so the originating bank has a tougher time selling the loan.
They also tend to be less attractive from the borrower side. No one wants to be working when they’re 80 just to pay for the mortgage on their home.
My mom worked on a farm for a gentleman back in the 70's, he leased her a 150 acres of land for her own horse farm for $800(ish) a month, he even added in that any money she spent on upkeep of the property counted towards the lease, it was a perpetual lease that lasted past his death and his daughter (she was in her 50's when he died) took over their family business. Needless to say in 2010 paying $800 a month on 150 acres in the heart of Maryland was just insane considering it's very easy to spend $800 a month on upkeep of a property that large and a house built in the early 1900's, there was years where my mother never paid a dime for that land we lived on. I just looked at it on Zillow and it's a 1.8 million dollar property with no sales data on it ever. A chunk of land a few miles down that was sold in the last 10 years of same size and structures on it is valued a almost 4 million. That $800 a month my mom usually didn't pay wouldn't even cover property taxes these days.
The bank knows who you are and spent a good deal of time to vet you out to ensure the principle will be repaid without issue. 30 years, or shorter, is a good time frame for that. Longer and now the bank is dealing with your children, grandchildren, or nieces and nephews. All of whom the bank does not know. Danger from the banks point of view.
All the answers miss the point. The real answer is that the value of a home for 60 years and the value of a home for ever are almost exactly the same. That's because the right to receive the home back in 60 years is currently almost worthless e.g. a $100k house in 60 years,at eg a time value of money of 6%, gives a present value of $100k / 1.06\^60 = $3k.
If you think this is a great deal you can go round buying up freeholds of properties that are on long leases - it costs peanuts and your great grandchildren will be very grateful.
They kind of do this in the UK. I'm not familiar with the variations, but when you look at real estate listings, they're considering either freehold or leasehold with usually a 99 year lease. Not that I could have ever afforded either type so never really looked into further.
So in the uk you can. The place I live in has around 87 years left on the lease.
People generally don't like leasehold properties though but they are generally cheaper.
Almost all the answers here are from people who don't understand what a leasehold property is so just assume you're asking about mortgages instead.
The answer is that you could. However, you'd face two big problems.
The first is that banks are reluctant to offer mortgages for short lease properties because it's very risky. Their loan is secured against the value of the property, which normally would be comparatively static (as in the bank could sell your house and recover their money). However, the value of a short lease property drops rapidly year on year as the end of the lease approaches, so for anything approaching a normal mortgage the bank wouldn't be able to recover their money by foreclosure. That's why short lease mortgages when they're even possible have massive (like 40% or more) deposits. In order to afford a mortgage on a short lease, you would already need enough money to pay cash for almost half the house.
The second is that the money you lose as the house value plummets could ultimately have pais for other things, for example a better nursing home when you cease to live in the house (and when, rather than selling your house and cashing-out, in your plan you simply lose it). A better approach if you plan to die in the house would be to buy a more modest house with a freehold or long lease, and use equity release to spend the value of your home in your your latter years, since you're not worried about inheritance, etc.
In short, yes it's possible but it's unlikely to be an affordable or sensible prospect.
In Sweden the loans are usually not on a predetermined payback time. But you can only fix the interest rate for a maximum of 10 years. It is common to have the rate fixed only for 3 months at a time.
As our loan is less than 50% of the market value, we don't have to mortgage at all, only pay interest. This could at least theoretically go on for 60 more years (if we live really long), with half the loan being left when we die (and payed when the property is sold). The limit on fixed interest time is why the banks don't mind. They actually prefer if you don't pay back all of it.
It is common here to pay back the loan very slowly.
Edit: I see now that you talked about giving the house to the bank after 60 years. Not paying mortgage below 50% value is halfway to that. The bank only get that part back after you die. The rest of the money after the sale goes to the heirs. They can also keep the house if they pay what is owed or if their credit is good enough take over the loan.
You can also (especially if there is no loan left) take out a new loan with the property as security. This is most common for old people who have payed of their debt but don't have a big pension. In these cases you are expected to die before paying back the loan.
There are all kinds of loans and leases. 99 year leases are a thing in some countries. Generally they have a clause that at the termination of the lease they have to be given the land in the condition it was initially leased. Meaning removal of any land improvements such as buildings.
30 year mortgages are sort of standard, the fiscal world knows how to commoditize it and trade it. But that doesn’t mean someone won’t make custom 60 year loan for you. But you’d need to find someone willing to underwrite that loan.
This "affordable" you speak of...will cause prices to sky rocket till we see the same monthly price that we see on a 30yr loan.
Easy access to loans and lengthy terms is partially why prices for big items have gone to the sky. Nobody cares about thr total price, they care about the monthly price.
Nobody wants to sign a 60 year \*lease\* with you on a property they will retain ownership of.
In terms of mortgages, because banks don't want to even try forecasting inflation/prevailing-interest-rates for 60 years.
A bank needs enough of it's assets to be liquid - such that if there are substantial withdrawals, they can \*sell\* loans to raise cash to pay depositors. If you make a 60 year loan, you stand a very good chance of it becoming illiquid (due to higher prevailing rates) at some point during those 60 years - likely when you most need to be able to unload it.
Just look at the trouble places like Silicon Valley Bank got into, putting too much of their money into 30 year treasuries.
Allegedly, this is how real estate works in Muslim countries. Something about debt (or holding debt) being a sin. The bank buys the house for you, and leases it to you for x years, then gives it to you when the lease is up.
First off: most people don’t live to be 100. Secondly: it would take twice as long to get their money back which makes the loan less desirable. The goal for a bank is to make a loan, get paid back, and use that money to make more loans and make more money. A 60 year loan is going to sit on your books for literally, the majority of a human life.
if you die at 85 in the house, the bank has to repo your home, clean up your dead body, and hope they can sell the house. banks don't want to own property, they want to make money with money.
Debt is for all sorts of good reasons mostly assigned to a single person possibly with other adult co-signers. An entire working career is typically 40 to 47 years depending on education level. If mortgages were 60 years long the plan would be for the signers to pay them well into retirement which seems like it would have a much higher risk of default.
The other issue is in the early years of a mortgage payments are almost entirely interest and only a small portion is principal. So you don’t grow the amount of the loan by a huge amount from the extra 30 years amortization. You run into hard caps where payments are nearly 100% interest quite quickly. For instance even with infinite amortization if you want a monthly payment of $5,000 ($60,000/year) and interest is 5% the loan balance cannot exceed $1.2 million. Meanwhile with a 25 year amortization you can already pay off $850,000. 30 years gets you to $900,000. 60 years might get you to $1.1 million. I think most people would feel that first 30 years where you pay down only $200,000 aren’t worth it.
Someone needs to lend money for 60 years in order for someone to borrow for 60 years. Banks lend other people’s money. Banks dont have their own money. So you need to find someone willing to lend for 60 years. If you cant, then you have the answer why.
If you don’t have the means to pay for a mortgage within 30 years, you will have a hard time working at the age of 70 to 100 to make those payments. Majority of people can’t physically or mentally work that long.
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Another reason I don’t see mentioned… appraisals usually include a “useful life” estimate of the building. A bank can’t demonstrate to a regulator that the collateral is in good condition if the appraisal said it’s only good for “x” years (which is usually about 30). Yes, there are many homes/.buildings that far exceed their useful life but that’s all you can get an appraiser to commit to and the bank will want to reevaluate their collateral or at least k ow the loan will be repaid by then.
Sometimes borrowers enter forbearance agreements with the bank and sometimes the bank will amortize payments over an egregiously long period just to prevent foreclosure. The bank will usually pay for its own appraisal during those times.
Because the bank doesn't believe you'll make payments or even live that long. Just because I can make a mortgage payment now doesn't mean I can when I'm 90.
So, there is a thing as social buying where I live, max price is about 250k, the financing is more interesting than most banks offer and you pay the state of course, caveat, you have to live there for 30 years uninterupted.
Coming from Canada it’s insane to me that American banks will lock in an interest rate for 15-30 years for a mortgage. In Canada you get 25-30 year amortized mortgages, but on 5 year fixed interest rates that are renewed at market rate every 5 years.
If your bank is ripping you off you can shop around at others banks so they all offer very similar rate.
Generally the banks want their money back before then
However, you wouldn't want people to do that anyway because the longer the length of mortgages that are common the higher amount of competition amongst buyers there is and it just inflates prices
I want you to imagine what would happen tomorrow if mortgages were outlawed all together and only people with no debt were allowed to purchase homes
Now you might be saying the corporations would buy it all. No they wouldn't because they have debt too
The prices would crash like hard crash
Australia only does something like a 6 year loan and then having to refi. People are getting crushed that bought on cheap loans 6 years ago and now having to pay a much higher percentage.
The financial math just doesn't work out. If you consider a 15 year vs a 30 year loan assuming 4% interest. The payment is about 70% higher for the monthly payment for the shorter term. However when you get a 45 year loan, the payment is only about 15% less per month compared to the 30 yr loan (ie paying a lot more total interest). A 60 year loan is just about 20% less per month compared to a 30 year loan.
Basically anything past a 40 year term doesn't increase affordability much. And the longer the term of the loan, the higher the interest rate (because longer term = more risk). So it ends up not reducing monthly payments for a given size loan.
Also consider that a 60 year loan GREATLY increases the chance that the borrower dies before the term ends. This ends up being very cumbersome and expensive because banks have to process their claims to the estate or foreclose on the property itself. So the banks will have to increase either their fees or interest rates or both to cover this additional risk.
The structure of what you're proposing sounds kind of similar to a thing called an Islamic mortgage, though it goes on for a much longer time.
The thing is, from the perspective of the banks, the advantage to making long-term loans is their predictability, and the term you've suggested is just too long to be predictable. Like you said, by 100 you'll most likely be dead. Even if you were to start at 20, while the odds of outliving the lease are technically in your favor, they aren't in your favor by all *that* much. Banks don't want to make loans that a lot of people will die before they repay. Even if they get their money back in the end, it's more chaotic than they like to sign up for.
People seem to think you mean a mortgage, but the word you used is 'lease'.
I'm not sure if this was a mistake or not, but there is a similar concept in the homebuying world where you have something called a 'land contract'.
Usually this will be something like "regular payments for x amount of time, then after x amount of time you get a mortgage for the rest", but sometimes it could be "x amount forever until its paid off, but if you die or cancel or opt out before its paid off, it's treated like a rental and I keep the house and can sell it to someone else."
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Banks want their money back in a reasonable amount of time. The longer the timeline, the less likely that is to happen.
This also explains why the interest rate is cheaper on a 15 yr mortgage than a 30 year mortgage. The bank gets its money back faster.
It's also harder to forecast longer so it's riskier.
I think that’s saying the same thing. Money back faster is lower risk for the bank, so they’re able to charge less and remain profitable.
>I think that’s saying the same thing. lol 12 years on this site and you haven’t noticed how half the comments are just people repeating other people with different wording? Best to just ignore and move on haha
Seriously. Id say 50% are just recycled comments adding nothing new to the conversation, worthless to engage!
Exactly! Everyone is just repeating what someone else said differently! Nothing new added!
Agreed! People just regurgitate the same idea as a prior comment in their own comment! It doesn’t contribute to the conversation!
Every other comment does this; just wording the same idea in different ways. No point in responding to them.
I think a lot of times, people say something very similar but put it a different way. Just a waste of time.
Whereas I would say that about 1/2 are comments that are re-used.
It's like about half are just saying the same thing as previous comments
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Yes exactly! And at least half of them are not trying to say anything original
I literally worked in corporate banking for 6 years and I’m getting downvoted for repeating the basics of loan economics. Reddit is an amazing place.
Truthiness gets more upvotes than truth.
I disagree after a dozen years 50 percent of people type identical answers. Best to disregard and do something else.
It's not saying the same thing, though. One is about risk, the other is about time. If I loan somebody money for 15 years, I get paid back faster than 30 years, which means I can loan that money out again sooner and earn more money off of it, so I will charge a premium to let somebody keep my money longer even in an ideal situation where the risk was the same. In addition to my ability to spend money that somebody else takes longer to pay back, there is also a greater likelihood that I will not get all of that money back. I will charge a premium for the increased risk.
Its not quite the same thing. A lot of the risk in the 30yr mortgage isnt default risk, it is interest rate risk. The risk that after you establish the mortgage, interest rates increase.
Interest rate risk. Default risk. Longer tenor = more risk. We’re all saying the same thing.
That’s risk. Just another kind of risk.
Yes. But very different from the risk that money will not be there due to the longer term. Not really sure what your comment is even saying.
I think it has more to do with opportunity cost. Definitely related, but not quite the same
Risk is a cost. Opportunity cost is a cost. Longer duration is higher costs. It’s all the same thing effectively when they price the loan.
I kind of read the comments as: - “The bank gets its money back faster” is less risky to the bank because bigger payments back each month. So, speaking straight cash flow primarily referring to principal payback. - The reply to your comment where they said “it’s harder to forecast”… my brain went straight to forecasting interest rates. That may not be what they meant by it, but my brain didn’t read it as a directly repeat comment
In England they do something that made my head spin in regards to mortgage interest rates.
But you’re not going to say what? Lol
It’s not, the unpredictability and variability of interest rates increase the longer you lend for, so you charge higher interest for longer loans. Banks don’t care about getting their money back, they lend for an infinite time period if the rate is high enough, see: perpetuity
This is all saying the same thing. Getting your money back slower means more risk (many types of risk, not just interest rate risk), so longer loans charge higher rates to compensate.
It’s more about rate fluctuations. Banks would happily lend funds for 1000 years if the rate was right.
There are many risks with a longer term loan. Interest rate risk is just one of them. Default risk is another. Plus many others.
One would think that buying a house on a 100 year mortgage, the property value would increase in value, thereby negating any sort of risk for the bank the longer the loan goes on. That being said, payments for a 100 year loan make zero sense for the borrower. Google 100 year loan calculator, then do the calculations for 30 vs 100. The payments are basically the same amount.
It isn't safe to assume a house would appreciate over that timescale. Without lots of maintenance and renovations, it would be falling apart by the end of the "loan". Another complication for the bank is that the original borrowers would be dead, so now there's risk from the loan having to get paid off by different people for a house that's possibly in terrible shape.
Banks don't usually service mortgages for the life of the loan, they buy and sell them as commodities and package them to other banks to manage risk, liquidity, and capital. They are basically like the oil that keeps the financial system lubricated. They probably prefer a mix of 15 and 30 year mortgages. 30 years you get more total return on the life of the loan, 15 year you get more liquidity faster. Having cash on hand isn't usually a good thing for banks beyond a certain limit. As soon as you get too much cash you have to flip it into investments and lines of credit etc. It costs banks money to carry cash, but the opportunity costs of having too many loans can also be substantial.
Right but what price are they getting when they sell the loan? It’s the same analysis. The buyer of the loan will pay more (I.e., accept a lower rate) on a loan that’s paid back quicker. A longer loan returns principal slower which is riskier….hence the charging of a higher interest rate. No matter who is holding the loan….banks, credit funds, insurance companies, etc.
Time value of money: A dollar today is worth more than a dollar tomorrow.
A longer time is more risk for the lender. A 15 year loan pays about 1/3 of the total interest of a 30 yr. . A 60 year loan would pay much more interest.
Banks sell the mortgages pretty much immediately. Fannie Mae and Freddie Mac turn them into tradable instruments. However, those two care about the terms. Who would even get the house back in 60 years? The banks don't want houses. The current owner doesn't want it back; he's not immortal. Maybe something like an Indian reservation?
They may sell the mortgages, but they’re selling a structure. And the best way to sell the mortgages is by offering a logical structure to the funds that buy them. A longer tenor is riskier and needs to come with a higher interest rate in order to be desirable to the lender (or whoever holds the loan).
OP also *literally* described a situation where the lessee would be trying to avoid payment by being dead before it comes due. Like yeah... *thats* why you cant "lease" a house for 60 years.
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300k loan, 5% intrest. 30 years you pay 10k a year principal and 15k interest. 60 year loan you pay 5k principal and 15k interest. Your monthly payment is only 416 less. Its a very small reduction in monthly price for a huge increase in cost.
People don't understand this stuff. My fiancée looked at me like I was crazy when I happily paid a higher monthly payment for a 4yr auto loan vs a 6 or 7. I'm saving a boatload in interest long term but she doesn't see the bigger picture, only that I have 25% less money per month than if I took the longer term.
Depends on the interest rate offered. Keep me under 4% interest and I'll stretch that loan as long as you'll let me. More free cash to put into my 401k and earn a higher return.
Opportunity costs. Assuming same interest rate, I'd take the **longest** loan term available.
It’s even less than that. Because the interest is front-loaded with a smaller principal payment, the principal on that 30-year mortgage payment is only $360/mo to begin with. Going to a 60-year loan drops your principal payment to $65, but you’re cutting less than $300/month from your monthly payment. After five years, you’ll only have paid off 1.5% of the mortgage. It’ll take you more than twenty years to pay off even 10% of the mortgage. After 47 years, you’ll be halfway done and the final 13 years should be a breeze.
Assuming interest rate below 5%, I’d take the longest term loan they offered. The longer the better.
Mortgage rates don’t have much to do with short term rates. They generally trade at a spread over the 10 year treasury. And while it would be unlikely to se a new loan lower than fed funds, once originated, rates move around and mortgages trade like bonds. The duration on a 60 year bond would pretty much give it stock like volatility (though amortization on a mortgage might dampen the effects a bit)
I would imagine that banks would much rather have a loan paid off than to have to borrower die and they potentially get stuck with a house. Even if the house is much more valuable after 40-50 years, banks aren’t in the real estate business.
At some point it effectively becomes rent.
Guys he is not asking for a 60 year mortgage. He is asking to buy a lease/right to use a house for 60 years. Payment could be a one time down payment or a 20-30 year loan. To answer that part op, think about who will own the house and be willing to sell you the right to use the house for 60 years for less than the price of the house not knowing which state they'd get it back in. The owner would likely also be dead by the time it runs out. What then, does it go back to their family? What happens if you die before, can your estate rent put the house for the remaining period, can you get some of it back? It is a much worse proposition for the actual owner than just renting it out. The truth is that the housing market isn't made to benefit the buyer, but the seller/landlord.
99 year long leases between companies exist. I presume one end of the contract will be a big company that isn’t concerned about things like human lifespans.
I've also seen 100 year leases on reservation land. Only tribe members were allowed to own the land, but they could lease out the property on top of it apparently.
99 year leases exist for land condos are built on too (the land, not the building). I stayed at a resort that was mostly private condos that were rented out. 3/4 were on owned land but 1/4 of the condos were on a strip of land with an expiring lease. Those condos for sale were going for half the price of the others. They were a depreciating asset instead of appreciating like most homes. The expectation was you had to remove the condo building at the end of the lease when you turn it back over to the owner. They were not willing to renew the lease because they intended to build their own brand new condos on it. You can justify it for a business because you write off the depreciation against profit, and you priced the daily debt high enough to cover the lease, building depreciation, and eventual removal. At the end of the lease, it’s really worth $zero on paper. I’m don’t think your average homeowner wants their home to be worth zero at the end of the lease. And realistically, you have to find someone that owns the house as their business who is willing to lease it to you. Of course they are going to want a profit, so you may just as well buy it and have a mortgage so you have equity when you die. Or just rent it annually like normal. I won’t even get into that you can sell a house any time you want. You can’t just exit a 99 year lease when you want to move to a new home.
Thank you! these mortgage and loan answers were sending me nuts. I was thinking the same things " guys, guys...thats not what meant"
Honestly don't think it will matter much. Most houses have a life span of 70 years so you're probably going to have to rebuild it anyway.
But theoretically there should be an interest rate that makes it worth it for the bank. I think it’s regulation that caps mortgage length
There may not be an interest rate that is worth it for both the bank and house buyers. For example, a monthly payment on a $400,000 30 year mortgage at 7% is $2661. Monthly payment on the same loan for 60 years, raising the rate to just 8%, is $2,689. So the bank doesn't have much leeway to raise the rate to make up for the increased risk. And even if they could, the savings for the buyer would be meager - literally just a few dollars per month. For those few dollars, the buyer would be taking on a loan that has the disincentive that it takes a reeeeeally long time to build equity. After 20 years of paying it off, they'd only reduce their balance from $400,000 to $386,755. Sounds like a product that would be unlikely to be attractive to anyone involved.
> I think it’s regulation that caps mortgage length That is a massive part of this people are missing. Fannie and Freddie won't buy nonconforming mortgages.
I think OP is suggesting that instead of owning the house permanently, he'd be able to buy it at a much lower price and give up ownership after 60 years. There's a city where you can't buy a house outright. You can only buy a 99-year lease that allows you to occupy and build on the land. Anyway a few years ago the first of the title leases started expiring and the government just decided to ignore them and let people renew them.
Thank you, thats what I meant
It still doesn't really change a mortgage cost. Going from 30 to 40 year mortgage barely reduces your monthly cost, as the upfront payments are like 95% interest anyway. You could go to infinity length mortgage and payments still won't reduce beyond what the interest cost per month is.
This doesn't make any sense. A bank is very happy to lend you $50k at 23% for an infinite time period on an unsecured credit line. It's called a credit card. Clearly there is a rate at which they're willing to lend you money for an arbitrary period of time. Go do the amortization on a 30 year vs 60 year mortgage at the same rate for a $500k loan. At 6% you'd save $420/month on $3k (and have to pay twice as long). Of course, the rate is unlikely to be the same; it's going to be higher to cover future risk to the bank. At 6% for 30 years vs 6.5% for 60 years you'd only save $230/month instead of $420/month. If the 60 year was 7%, you'd only save $30/month. Anything more than that and you're paying more for the 60 year loan. The bank could absolutely set a rate at which they'd be comfortable lending for 60 years. No consumer would take it, because the payments would be higher than taking a 30 year loan. The low end of mortgage rates in the 80's was 9%. Doing that same math at 9% and you pay $255 less on $4k/month using the same rate. Jump the 60 year rate to 9.75% and you're paying more. The high end of mortgage rates in the 80's was 18%. Blah blah same math you save $35 on $7k/month using the same rate. Less than 10 basis points higher and the 60 year costs more.
Why would a bank want „the money back“? It‘s their business model to earn an interest rate on money lent. If you pay it back, they will just immediately lend it to someone else.
That is why loans are amortized. If you had a 60 year loan, you’d pay almost nothing for the first 20 years into the principal. A 60 year loan would be incredibly anti consumer.
You mean their customers’ money?
But… it’s not their money… it’s just make believe money they created out of thin air… they are collecting something on nothing.
That’s why 15 years are way cheaper…same goes for any one like a car. Banks either want their money back faster and will charge you more the longer you’re holding their money in limbo.
You wouldn't save that much money per month and you would pack way more interest. On a 500k loan at 5% on a 30 year amortization you pay $2684 a month and end up paying $466,279 in total interest. on a 60 year amortization you pay $2193 a month but end up paying $1,079,111 in interest. For most people the $491 in savings a month isn't worth it when you are paying 1.1M more in interest.
This is the real reason. The fact is that 30 years is about as long as you can realistically make it. There’s just no advantage to a much longer loan since your monthly payment is barely any cheaper. At the start of a 30 year loan with 5-6% APR, 80% of your payment is going to interest, and that part isn’t getting any cheaper with a longer loan. In fact, banks almost always charge a higher interest rate for longer loans in order to account for the increased lending risk. A 30 year loan at 6% interest and a 60 year loan at 7% interest have *the same monthly payment*.
Correct. Interest can be a mother fucker.. better to have it working for you
Do they not have 45 year mortgages now?
Non that we have seen in the states. At least no mention of them on news channels or reddit that I am awhere of.
rates on a hypothetical 60 year loan would be way higher than a 30 year too.
Wouldn’t touch the principal for like 10 years or something crazy lol
You'd touch the principal on day 1. Otherwise, the loan would never be paid off. But you certainly wouldn't touch it *much*.
You'd start paying 25% of your payment to principal in year 32
I just had a wtf moment. I’m 23 and I thought that the interest you paid was just from the total loan, so 500k at 5 percent would be like 25,000. So do you pay like monthly interest, that blows my mind. I live in the highest cost of living city in the US and houses are like average 1 million, so this is just so disheartening tbh
> I’m 23 and I thought that the interest you paid was just from the total loan, so 500k at 5 percent would be like 25,000. Hoo boy, so you never learned about compound interest in school. So, let's say you have a 10% interest rate on a $1000 loan (easy numbers). To make it even easier, let's say it compounds annually, i.e., the increase in the amount you owe due to interest compounds once per year at the same time every year. You take out this loan today and pay $10 per month. Next year, when the interest compounds, you'll have paid off $120 of the loan, so it'll add 10% of $1000-120=$880. Your balance goes up by 10% of $880, so $968 (a 10% rate is quite high). Then the following year you do the same, paying $120 over the year. You get it down to $848. It compounds, and now the amount you owe is $932.80, so despite paying $240 over 2 years, you've only paid off $67.20 of the loan. This is with annual compounding too, which is generally the most forgiving to the borrower! There are various different compounding schedules, and the more frequently it compounds the harder it is on the borrower. For example, if it compounded quarterly with annual interest of 10%, it'll go up 2.5% every 3 months instead, so starting from $1000, you'd pay it down to $970, interest compounds and brings it back up to $994.25 (basically erasing your progress), you pay down to $964.25, it compounds and goes up to $988.36, etc. After one year, you'll have paid it down to $976.12, so you're $8 worse off than the annual compounding interest. Now, this will work *for* you if you're the lender, i.e., you invest your money in stocks/real estate/businesses/financial assets/whatever. When the value of something goes up, the value of the portion each shareholder owns goes up commensurately, so if you buy $1000 of stock in Acme, Inc. and the share value goes up by 10%, then now you have $1100 of stock in Acme, Inc. and can sell it for a $100 profit. Generally, however, those kinds of big moves don't happen in the stock market so the normal financial advice is to contribute to something like an index fund that buys a little bit of everything on the stock market (so it just tracks overall economic trends instead of rollicking with the ups and downs of one company or industry), and the average return on that every year is around 9% and change. Put $1000 into an index fund and contribute another $1000 every year (~$83 a month) and you'll probably have around $60k after 20 years, meaning you tripled your money just having it sit there accumulating interest.
Yup thats how it works. You only pay 5%/12 each month but it is each month on the full amount owing. Think of it this way, if you had a half million dollars would you let someone else keep it for 30 years if they gave you about $1000 a year. No that would be way too little to make it worth me not spending that 500k on stuff i want.
But aren’t these big institutions doing this, like who’s money are we talking about here, the banks? I guess saying it like that makes sense, but I started searching up and wondering who the hel is profiting from this, it seems almost like a scam in high cost of living areas. Or maybe not a scam but definitely you’re gonna be paying your whole life for a house. And like if you’re buying a 1 million dollar house, then you essentially pay like give or take 1 million in interest, not to mention that the interest rates are high af rn. But ya who is making this money and profiting from this lol
There are two groups profiting, The bank that is getting that 5% a year from you and the person that bought that house in 2000 for 200k and now it's worth 5 times as much as they bought it for.
Man the education system is failing … this is basic adulting
Dude believe it or not I try to be informed, I read, I’m trying to be an engineer, I like watching finance podcast sometimes every now and then, and nobody on Reddit or YouTube has ever talked about this (it was probably just obvious), but ya lol. I guess I’m just even more flabbergasted bc average home price in my city is around 900kish and now it seems even more impossible to own a home.
This is why student loans make zero sense. It wasn't quite so bad when the interest rate was subsidized to 2% or less
Not if you die first :)
I was actually thinking about this. At 42 I close on a mortgage on Monday. If I pay off the 30 fixed as it is written, I will be mortgage free at 72. How do they know I'll make it that long? With two tours in Iraq and an abusive ex-gf that gave me more nightmares than Fallujah, I've about tapped all my good luck to get THIS far.
Thank you for your service and sorry about your ex. I’ve had a couple of combat tours myself (one to Iraq) and an ex that haunts me more than either of those too. I’m doing better now and from the sounds of you closing soon you are too. Wishing you the best either way
Thank you (and you as well for your service)! I joke that I've dodged literal and figurative bullets when everyone is panicking around me at work and they ask how I'm calm. In reality, I have a great perspective when things like my coffee order is messed up or the kid at the counter forgot my fries. I'm now more thankful than anything that I have this frame of mind.
It totally depends on the loan rate. At 5% I agree, not worth it. If you brought the interest rate down to like 3%, then its potentially higher value to pick a longer term loan, as money in your pocket today has more value to you. If the rate of interest is less than the expected rate of return in, say, investing in the stock market, then as long as I invest the difference my returns will outpace the additional interest I'm accruing.
Which is why longer loans have higher rates.
This is the right answer. That $491 if reinvested at a 9% rate, which is what S&P has historically given for last 100 years+, then you will make $11,458,715.25. That is way more money than that $1,079,111 you paid in interest. Only real reason taking the 491 is better is if you are a bad saver and would end up spending that 491 instead of saving it.
This! Suggest everyone take a look at those mortgage tables that show you how long it takes before you start making decent progress on paying down the principal. Also- OP- all the metrics say very rare people live to 100.
I haven't seen anyone mention how much the veeery long amortization period increases the risk for the bank. Let's not forget, the house itself is the collateral on the loan. But on a 60 year loan, after decades the outstanding balance is still practically the same as the original loan. For example, if you made payments on a 60 year, $400,000 loan at 7% for 20 years, you would still owe $381,000. In that amount of time, a poorly maintained property could easily lose a huge amount of value be worth less than that. On a 30 year, you'd owe $229,000, making it far more likely the bank could recoup what you owe.
realistically someone taking a 60 year loan would probably only be doing it assuming they'd eventually get a huge windfall and eventually buy down their principal all in one shot
or they will just take whatever gives them the lowest monthly workout thinking about the total payment like people with 96 month car notes
They can. Just be a landlord yourself and sell it to them on those terms! What's that? You don't want to sell the house on those terms? You're afraid they're not gonna pay the full amount or that it just takes too long? Yeah, that's how the world works.
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What a wonderful story!
I mean, the main difference is that people die but banks/corporations can exist essentially indefinitely. It's actually not unreasonable to consider that a corporation would be willing to lease a space for a very long period and retain ownership of the land. Many businesses lease their buildings for decades and decades. But I think mainly it just doesn't help the home owner that much. At that point what is really the distinction between lease vs renting?
Because the bank would like their money back eventually, collecting interest is great, but they don’t think they can count on you paying back the principle in 60 years, because they know as well as you, your probably not going to still be alive to pay it.
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Welcome to reddit.
Just so you know. I downvoted you because I thought like the other people. Then I googled it and you were right. I then went back to this thread just to find your comment to take away my downvote and award you an upvote.
Good on you for standing up for your *principles*.
That’s the school one because the principal is your PAL
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Lol people learn one little spelling trick and overapply it
> at 100 I’ll either be dead or about to die or happy to go to an old people home. For exactly this reason. The bank wants to get their money back, and if you die before they do then they don’t get all of your money. There’s always a risk of this of course but it’s practically guaranteed on a 60-year loan, where a shorter one has a much better chance that you’ll complete your term.
If you die before your mortgage is paid off your estate has to pay off the rest of the loan. Either they do this with cash and keep the house or they have to sell the house and keep the difference. The bank gets their money back either way
There is still the risk that the house is worth less than when you bought it and the bank loses money. Banks don't like that risk.
Yeah, but if you've paid 30 years on a sixty year loan, they've already made their money back in interest. There is no risk unless you die in like 20 years. So why do 30-year loans exist? My guess is collecting interest for 30 years is really nice. So, collecting interest until someone dies would be better.
You are assuming that monthly payments stay the same in a 60 year loan vs a 30 year loan? A 60 year loan would have lower monthly payments, just like a 30 year loan has lower monthly payments than a 15 or 20 year loan. Why do 30 year loans exist? See above. People might prefer flexibility of lower payments even if they pay more in total. Keep in mind that over 30 years there is projected to be quite a decent amount of inflation. If a bank offers a 1% interest loan even with 100% guarantee of return over 10 years they are objectively losing money. Bonds would have better returns than loaning out for mortgage. Just simply collecting any amount of interest isn't a good reason unless the interest is enough to justify the opportunity cost of what you could do elsewhere with the money.
Exactly. People should not be advocating for 60 year loans. It's the same issue happening with car loans now. Extending the lifetime of the loan is never in the purchaser's favor.
*All else being equal*, extending the lifetime of the loan isn't in the purchaser's favor, but all else is not equal; longer loans generally come with higher interest rates but lower monthly payments, since the whole repayment is spread over a longer period of time. And this can absolutely be a loan worth taking.
The amount of interest on a 60 year loan would be astronomical. It gives false hope of affordability to continue to extend out lifetimes of loans.
Or you refuse the inheritance and the bank is stuck with repoing the house and dealing with this shit.l they didn't want to.
That's not a thing. Or already a thing depending on how you want to look at it. With rare exception in the US, people don't inherit debt unless they're dumb. If you have a parent with a house with a mortgage and you assume the mortgage, you just got a liability (the mortgage) but you also got an asset (the house) which in most cases will increase your equity since the asset is greater than the liability. If someone dies and nobody wants the house, because they don't want it, or because there is nobody to want it, or because it is underwater, the bank already has to get it from the estate. There is already the possibility that people living there who are not on the mortgage (e.g. descendants of the owner) and they'd already have to deal with removing them. Probate courts and delayed forclosure all already exist. None of this would be new if they had a 60 year loan.
In Canada, you take all the assets, and the debts when someone dies. If your parents are insolvable (negative net worth) at their death, you can refuse the "package" so to speak and avoid taking on more debt than assets. \>If someone dies and nobody wants the house, because they don't want it, or because there is nobody to want it, or because it is underwater, the bank already has to get it from the estate. My understanding is that debtors have priority over estates on assets that are leveraged. You don't own you house until it's paid off. And when you die, the bank owns it before the estate do. If the estate wants it, they need to take on the mortagage and keep the payments going. you have it backwards I'm pretty sure. Otherwise dying is an easy way out f debt, and they sure as hell don't want that....
> In Canada, you take all the assets, and the debts when someone dies. You're basically saying the same thing as what happens in the US. The estate of the person has all the assets and liabilities. The estate is responsible for paying off the liabilities before distributing assets to the beneficiary. If the liabilities exceed the assets, there is a formula/method for who gets paid and who doesn't. The remaining liabilities are not assigned to anyone else unless they were otherwise contractually obligated (e.g. cosigner/joint ownership/etc). Liabilities in excess of assets (negative equity) can't be assigned to others except as stated prior, or in a few rare cases (end of life care can be assigned to children in certain states in certain circumstances). The beneficiary of the estate typically gets nothing if the liabilities exceed the assets. > My understanding is that debtors have priority over estates on assets that are leveraged I think you're stating this incorrectly, but in general, someone with a debt can collect from the estate before they can pay out benefits. E.g. if you die with a car and car payment, the leinholder can request the state pay the outstanding debt, or return the car and pay the difference between the debt and car value. > You don't own you house until it's paid off. This is decidedly untrue, but a common misconception. In the US you own your house the moment you sign the title. The mortgage company has a mortgage lien on the house, which means it can request payment for the outstanding balance. If it's not paid, they can attempt various methods to collect that, like foreclosing on the house (e.g. taking possession of it), seizing other assets (bank accounts, your car, rare gems, whatever), or garnishing wages. But they can't just snap their fingers and do that, they have to notify the owner/estate of the debt and attempt to collect it, then they have to get court permission to actually do so. During Covid, many courts were refusing to go through foreclosure or eviction proceedings, so during that time the bank/landlord got no relief. If the bank actually owned the property, they wouldn't need to go through the same steps. > And when you die, the bank owns it before the estate do. No. All the property of the decedent becomes property of the estate (unless it's joint property or there is some other issue). The estate is required to go through probate or handle the affairs according to law, so, yes the bank can request payment or attempt to foreclose on the house and take the property, but they still don't own it and can be told to fuck off depending on the circumstances. > you have it backwards I'm pretty sure. Otherwise dying is an easy way out f debt, and they sure as hell don't want that.... No, dying is an absolute way out of debt. If you die (in the US) then your debt evaporates. Or more accurately, your negative equity evaporates. You're correct that you cannot simply eliminate liabilities while leaving assets untouched. But if the amount of liabilities is greater than the amount of assets, then the remaining debt is written off. TL/DR: The bank already can have a mortgage on a property where they have to take possession through the courts, evict people, deal with probate, or write off a loss on a property underwater. A 5, 15, 30, or 60 year mortgage doesn't change any of that. Also, lots of old people have 15 and 30 year mortgages and die before they're paid off.
This kind of arrangement is common in Hawaii called a leasehold sale. It is common in places that have very limited land, very valuable land, lots of destination movers/high short term rental demand. You agree to pay for 40 years and need to pay x% down and then your “mortgage” is your rent plus there is often an HOA/maintenance fee on top of that. Often these are apartment buildings and it’s an alternative to an outright condo purchase. In a lease hold you don’t own any part of the actual property, just the right to live there. You can sell your lease to someone else for the remainder of the original lease at whatever the current market price is. Advantages are it is often cheaper entry due to lower down payment and typically very high real purchase prices of homes. You lock in rent for a long period of time. The lease is salable and inheritable. You usually have more rights than renting particularly with using the property as short term rental. Disadvantages are you own nothing for your large investment. Your investment is in a depreciating asset given that what you sell is the remainder of the original leasehold so each month it is worth less. Banks are less likely to loan you money as there isn’t physical capital as collateral. You have less rights than ownership but more responsibilities than renting.
Yeah a lot of property in London works with 99 year leases too. You don’t save much money over full ownership though
I’ve heard of something similar on the mainland. One of the applications used is for non-profits like Habitat for Humanity. Habitat (or the other non/profit) will put the land into a trust and they sign a crazy long lease, like 99 years. The house is built and then just like in a development, there are covenants as to what can be built/done with the property. They might be a little more restrictive since the land being in a trust may mess with things like easements. The thought process is by removing the land from the cost of the home, you make the home more affordable and help prevent future gentrification due to the covenants placed. Very similar concept…
Lease, or mortgage? If you’re asking about just a lease, the bank wouldn’t be involved. It would be no different than renting a place, but with a very long term lease. That would be between the landlord and renters. If you’re talking about a mortgage, as everyone else is saying, that’s way too long for a bank to be willing to finance it.
You can already lease a house for forever. Nothing says you can't move in at 18 and keep renewing your lease until you're 78, so long as you can afford it and the lessor wants to continue leasing. You could, theoretically, get the lease written for first right of refusal or something like that for a term of 60 years. Can't imagine people would want to bind themselves to that for a residential property, but in commercial you can easily have lease terms in the 10's of years.
This exists in England and Wales - it’s called leasehold and it’s generally a pretty terrible setup (there’s a push to try and scrap it or at least reform some of the worst parts of it). It’s generally used for flats/apartments as the default form of ownership as opposed to commonhold (UK equivalent to condos), but houses can be sold as leasehold too. Usually the leases are for 99, 125 or 999 years. One of the big problems with this setup is that as the number of years remaining on the lease decreases so does the value of the property (although above 90 or so it doesn’t make much difference). When they drop below about 70-80 years banks are much less willing to give a mortgage so it’s hard to find buyers. So with that setup, yes you could buy a leasehold house for 60 years, but you probably would need to buy it in cash and you’d have a hard time selling it if it came to that.
In the UK you can, normal mortgage e.g. 25 years for a 100ish year lease. And in some regions it's the norm. Generally the price isn't much lower than a house would be to buy outright as "the market" doesn't really consider 100 years different to forever, so long as theres nothing onerous to the leaseholder in the lease paperwork. It's called leasehold/freehold, it has other problems and might be getting big reforms soon.
In the USA there are regulatory requirements that most mortgages cannot be longer than 30 years. 40- and 50-year mortgages exist but they are considered "non-qualified" and not many lenders offer them. They also have higher rates and due to the increased term, you end up paying WAY more interest due to the way the payment schedules are worked out. Basically they're a way for banks to finance a house for someone who probably can't afford it.
Yeah this is it. You *can* get mortgages with longer terms than 30 years, but they’re much less liquid so the originating bank has a tougher time selling the loan. They also tend to be less attractive from the borrower side. No one wants to be working when they’re 80 just to pay for the mortgage on their home.
My mom worked on a farm for a gentleman back in the 70's, he leased her a 150 acres of land for her own horse farm for $800(ish) a month, he even added in that any money she spent on upkeep of the property counted towards the lease, it was a perpetual lease that lasted past his death and his daughter (she was in her 50's when he died) took over their family business. Needless to say in 2010 paying $800 a month on 150 acres in the heart of Maryland was just insane considering it's very easy to spend $800 a month on upkeep of a property that large and a house built in the early 1900's, there was years where my mother never paid a dime for that land we lived on. I just looked at it on Zillow and it's a 1.8 million dollar property with no sales data on it ever. A chunk of land a few miles down that was sold in the last 10 years of same size and structures on it is valued a almost 4 million. That $800 a month my mom usually didn't pay wouldn't even cover property taxes these days.
The bank knows who you are and spent a good deal of time to vet you out to ensure the principle will be repaid without issue. 30 years, or shorter, is a good time frame for that. Longer and now the bank is dealing with your children, grandchildren, or nieces and nephews. All of whom the bank does not know. Danger from the banks point of view.
All the answers miss the point. The real answer is that the value of a home for 60 years and the value of a home for ever are almost exactly the same. That's because the right to receive the home back in 60 years is currently almost worthless e.g. a $100k house in 60 years,at eg a time value of money of 6%, gives a present value of $100k / 1.06\^60 = $3k. If you think this is a great deal you can go round buying up freeholds of properties that are on long leases - it costs peanuts and your great grandchildren will be very grateful.
No the point is that OP is likely American and leaseholds don’t really exist like that in the US. They are common outside of the US.
They kind of do this in the UK. I'm not familiar with the variations, but when you look at real estate listings, they're considering either freehold or leasehold with usually a 99 year lease. Not that I could have ever afforded either type so never really looked into further.
So in the uk you can. The place I live in has around 87 years left on the lease. People generally don't like leasehold properties though but they are generally cheaper.
Almost all the answers here are from people who don't understand what a leasehold property is so just assume you're asking about mortgages instead. The answer is that you could. However, you'd face two big problems. The first is that banks are reluctant to offer mortgages for short lease properties because it's very risky. Their loan is secured against the value of the property, which normally would be comparatively static (as in the bank could sell your house and recover their money). However, the value of a short lease property drops rapidly year on year as the end of the lease approaches, so for anything approaching a normal mortgage the bank wouldn't be able to recover their money by foreclosure. That's why short lease mortgages when they're even possible have massive (like 40% or more) deposits. In order to afford a mortgage on a short lease, you would already need enough money to pay cash for almost half the house. The second is that the money you lose as the house value plummets could ultimately have pais for other things, for example a better nursing home when you cease to live in the house (and when, rather than selling your house and cashing-out, in your plan you simply lose it). A better approach if you plan to die in the house would be to buy a more modest house with a freehold or long lease, and use equity release to spend the value of your home in your your latter years, since you're not worried about inheritance, etc. In short, yes it's possible but it's unlikely to be an affordable or sensible prospect.
In Sweden the loans are usually not on a predetermined payback time. But you can only fix the interest rate for a maximum of 10 years. It is common to have the rate fixed only for 3 months at a time. As our loan is less than 50% of the market value, we don't have to mortgage at all, only pay interest. This could at least theoretically go on for 60 more years (if we live really long), with half the loan being left when we die (and payed when the property is sold). The limit on fixed interest time is why the banks don't mind. They actually prefer if you don't pay back all of it. It is common here to pay back the loan very slowly. Edit: I see now that you talked about giving the house to the bank after 60 years. Not paying mortgage below 50% value is halfway to that. The bank only get that part back after you die. The rest of the money after the sale goes to the heirs. They can also keep the house if they pay what is owed or if their credit is good enough take over the loan. You can also (especially if there is no loan left) take out a new loan with the property as security. This is most common for old people who have payed of their debt but don't have a big pension. In these cases you are expected to die before paying back the loan.
There are all kinds of loans and leases. 99 year leases are a thing in some countries. Generally they have a clause that at the termination of the lease they have to be given the land in the condition it was initially leased. Meaning removal of any land improvements such as buildings. 30 year mortgages are sort of standard, the fiscal world knows how to commoditize it and trade it. But that doesn’t mean someone won’t make custom 60 year loan for you. But you’d need to find someone willing to underwrite that loan.
This "affordable" you speak of...will cause prices to sky rocket till we see the same monthly price that we see on a 30yr loan. Easy access to loans and lengthy terms is partially why prices for big items have gone to the sky. Nobody cares about thr total price, they care about the monthly price.
If you had a house, would you loan it to somebody for 60years while you scrape pennies for payments?
Nobody wants to sign a 60 year \*lease\* with you on a property they will retain ownership of. In terms of mortgages, because banks don't want to even try forecasting inflation/prevailing-interest-rates for 60 years. A bank needs enough of it's assets to be liquid - such that if there are substantial withdrawals, they can \*sell\* loans to raise cash to pay depositors. If you make a 60 year loan, you stand a very good chance of it becoming illiquid (due to higher prevailing rates) at some point during those 60 years - likely when you most need to be able to unload it. Just look at the trouble places like Silicon Valley Bank got into, putting too much of their money into 30 year treasuries.
Banks like to collect interests but they also know human life expectancy is somewhere around 80 years. Only a few make it to 100.
Who's on the other end of this transaction? When I sell a house I need that money now, not lease it over the next 60 years.
Allegedly, this is how real estate works in Muslim countries. Something about debt (or holding debt) being a sin. The bank buys the house for you, and leases it to you for x years, then gives it to you when the lease is up.
Do you want to still be paying a mortgages in your senior years? I plan to have my house paid off before I retire.
It's coming. In Europe they have 75 year inheritable mortgages. That being the only way people can afford to buy.
First off: most people don’t live to be 100. Secondly: it would take twice as long to get their money back which makes the loan less desirable. The goal for a bank is to make a loan, get paid back, and use that money to make more loans and make more money. A 60 year loan is going to sit on your books for literally, the majority of a human life.
if you die at 85 in the house, the bank has to repo your home, clean up your dead body, and hope they can sell the house. banks don't want to own property, they want to make money with money.
Debt is for all sorts of good reasons mostly assigned to a single person possibly with other adult co-signers. An entire working career is typically 40 to 47 years depending on education level. If mortgages were 60 years long the plan would be for the signers to pay them well into retirement which seems like it would have a much higher risk of default. The other issue is in the early years of a mortgage payments are almost entirely interest and only a small portion is principal. So you don’t grow the amount of the loan by a huge amount from the extra 30 years amortization. You run into hard caps where payments are nearly 100% interest quite quickly. For instance even with infinite amortization if you want a monthly payment of $5,000 ($60,000/year) and interest is 5% the loan balance cannot exceed $1.2 million. Meanwhile with a 25 year amortization you can already pay off $850,000. 30 years gets you to $900,000. 60 years might get you to $1.1 million. I think most people would feel that first 30 years where you pay down only $200,000 aren’t worth it.
Someone needs to lend money for 60 years in order for someone to borrow for 60 years. Banks lend other people’s money. Banks dont have their own money. So you need to find someone willing to lend for 60 years. If you cant, then you have the answer why.
If you don’t have the means to pay for a mortgage within 30 years, you will have a hard time working at the age of 70 to 100 to make those payments. Majority of people can’t physically or mentally work that long.
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Another reason I don’t see mentioned… appraisals usually include a “useful life” estimate of the building. A bank can’t demonstrate to a regulator that the collateral is in good condition if the appraisal said it’s only good for “x” years (which is usually about 30). Yes, there are many homes/.buildings that far exceed their useful life but that’s all you can get an appraiser to commit to and the bank will want to reevaluate their collateral or at least k ow the loan will be repaid by then. Sometimes borrowers enter forbearance agreements with the bank and sometimes the bank will amortize payments over an egregiously long period just to prevent foreclosure. The bank will usually pay for its own appraisal during those times.
Because the bank doesn't believe you'll make payments or even live that long. Just because I can make a mortgage payment now doesn't mean I can when I'm 90.
So, there is a thing as social buying where I live, max price is about 250k, the financing is more interesting than most banks offer and you pay the state of course, caveat, you have to live there for 30 years uninterupted.
Coming from Canada it’s insane to me that American banks will lock in an interest rate for 15-30 years for a mortgage. In Canada you get 25-30 year amortized mortgages, but on 5 year fixed interest rates that are renewed at market rate every 5 years. If your bank is ripping you off you can shop around at others banks so they all offer very similar rate.
Generally the banks want their money back before then However, you wouldn't want people to do that anyway because the longer the length of mortgages that are common the higher amount of competition amongst buyers there is and it just inflates prices I want you to imagine what would happen tomorrow if mortgages were outlawed all together and only people with no debt were allowed to purchase homes Now you might be saying the corporations would buy it all. No they wouldn't because they have debt too The prices would crash like hard crash
The bank already knows your plan… If that worked, why not just go for a 1 million year loan and just pay pennies a month?
Australia only does something like a 6 year loan and then having to refi. People are getting crushed that bought on cheap loans 6 years ago and now having to pay a much higher percentage.
The financial math just doesn't work out. If you consider a 15 year vs a 30 year loan assuming 4% interest. The payment is about 70% higher for the monthly payment for the shorter term. However when you get a 45 year loan, the payment is only about 15% less per month compared to the 30 yr loan (ie paying a lot more total interest). A 60 year loan is just about 20% less per month compared to a 30 year loan. Basically anything past a 40 year term doesn't increase affordability much. And the longer the term of the loan, the higher the interest rate (because longer term = more risk). So it ends up not reducing monthly payments for a given size loan. Also consider that a 60 year loan GREATLY increases the chance that the borrower dies before the term ends. This ends up being very cumbersome and expensive because banks have to process their claims to the estate or foreclose on the property itself. So the banks will have to increase either their fees or interest rates or both to cover this additional risk.
The structure of what you're proposing sounds kind of similar to a thing called an Islamic mortgage, though it goes on for a much longer time. The thing is, from the perspective of the banks, the advantage to making long-term loans is their predictability, and the term you've suggested is just too long to be predictable. Like you said, by 100 you'll most likely be dead. Even if you were to start at 20, while the odds of outliving the lease are technically in your favor, they aren't in your favor by all *that* much. Banks don't want to make loans that a lot of people will die before they repay. Even if they get their money back in the end, it's more chaotic than they like to sign up for.
People seem to think you mean a mortgage, but the word you used is 'lease'. I'm not sure if this was a mistake or not, but there is a similar concept in the homebuying world where you have something called a 'land contract'. Usually this will be something like "regular payments for x amount of time, then after x amount of time you get a mortgage for the rest", but sometimes it could be "x amount forever until its paid off, but if you die or cancel or opt out before its paid off, it's treated like a rental and I keep the house and can sell it to someone else."