I saw it on Punny Money, so it must be true! (He tried to sell me a bridge, too, but I already have one.)
A 130-year fixed-rate mortgage. More than twice as long as the 50-year loans that have come out recently. No one has lived that long, yet, but people are already wagering on it, so some young man might actually live to see this monster paid off. Just imagine: Not only do you not leave a dime to your heirs, but you pass on debt to them! Living beyond your means to the extreme! It's almost like taking equity out of your home to purchase life insurance. (Well … maybe it's not quite that reckless …)
One million dollars borrowed at 8% for 130 years has a payment of $6,666.88 per month. Over the first five years, you pay down $15.68 of the principal, leaving you with a loan balance of $999,984.32. In that same time you've paid close to $400,000 in interest. It takes over a century (101 years, actually) to get the loan balance below $900,000. Should you and your heirs pay off the house, you would have bought the house about ten times.
Fortunately, though, it's likely that inflation will work in your favor on this one. The dollar has lost about 96% of its purchasing power since 1913, and if history repeats itself, the $6,666.88 payment in 93 years will buy what $266 buys today. It's really just pocket change at that point.
Will the house even be around in 100 years? Probably not, if it's new construction. Or most of the materials to repair it will be so expensive after cheap oil is gone
But I digress. Maybe I'll just say for now that 130-year mortgages are probably a bad idea. Reduce your mortgage debt and keep your wallet fat rather than your bank's.
You'll thank me in about 78 years. 😉
Wow, you're a real ray of sunshine this morning… 😉
I don't understand your aversion to debt. Remember, debt is a two way street: of course you have to pay it back (with interest) but you also get to use that money (the house) in the interim. What is rent other than an infinite term mortgage? Corporations issue infinite-lenghted debt all the time (preferred equity).
I understand there are good and bad ways to do everything, but I think your knee-jerk reaction makes you look more simplistic than you are.
The only people who would live long enough would be the Windsors, but they don't need the loan.
I love ya bro, but I still gotta disagree on the "cheap oil is gone" comment — maybe it will be, but life as we know only depends on oil today; tomorrow is another life altogether.
IF oil dries up, the world does not end — that's what we thought in the 70's and look at us today: still using oil, still consuming it at a sick pace, BUT oil is indeed finite. That said, Man will simply continue to use one of his greatest resources: the Mind.
WHEN oil evaporates, Man will simply move on to the next power source — please don't quote anymore from that ridiculous, liberal "resource" called "The Long Emergency" — we already have the means, just not the motivation to move on past oil. Period. When the oil companies cannot make a substantial living off of oil, they'll move on to the next thing (be it hydroelectric-hybrid, some recyclable resource, or [gasp!] nuclear). Leave it lie — inflation is a scary enough problem…
My 2 pennies,
Charlie
Everyone should be averse to debt! If you buy an $8 pizza in college and make minimum payments, that pizza becomes $50! Your grandparents saved up money before they bought something. The US economy is on shaky ground because of debt. Google "Countrywide" and "subprime mortgages". Debt is evil and should be avoided!! "The borrower is slave to the lender." Anyone who can't qualify for a 15-year mortgage or less shouldn't be buying a home.
130yr fixed??? What banking institute has this offer? If this is a joke. Please do not respond.