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My husband has a theory I found to be very realistic and if it worked would solve many of the problems associated with the numerous foreclosures.
His thought came from a visit we had in Bermuda ( of all places ). Most families live in one home their entire life. The homes are passed down from generation to generation via mortgages of fifty years in duration.
Why can't the banks offer 40 or 50 year mortgages to the homeowners in threat of foreclosure? This would certainly help out these people immediately, and allow them to stay in their homes. It will not cost the American people anything, and surely will open up the housing market. Homes will start to have improved market value as these vacant homes will no long be available and inventories will be adjusted accordingly.
OP - a very valid point. In Japan, before their meltdown, banks were starting to offer 60-yr mortgages. You are right - we/anks do not have to take a hit on market vs purchased values either since the re-finance can be done on the amount owed.
The only problem is that most American move on an average of every 3-5 years.
Why, I don't know. But the family roots and stay-in-one-place mentality isn't widely practiced today.
50 year mortgages would lower the payments though but if people will move in less than 5 years then banks ususally try to sell you an ARM or a balloon type of loan.
Regardless of the maturity of the note (and 40-year mortgages are available), cash has to move at the point of settlement from the buyer to the seller in the amount of the purchase price. Fees, taxes, and charges apply on top of that. For nearly everyone, this involves credit, and credit is what there isn't any of floating around at the moment. In the longer run, large scale reorganization of troubled mortgage notes into different mortgage notes will be an option. This is done all the time for foreign government borrowers who run into debt service difficulties, for instance. But some source of a rather substantial amount of credit will have to become available from someplace first.
HappyTexan - granted we move a lot, a refi may give families some breathing room, however undeserved it may be.
Saganista - I agree the liquidity crisis is acute. Once (dont know when) the bailout money starts to trickle down, some families may be able to refi with a longer term.
The problem with extended mortgages comes from the fact that not many people work into their 70's and 80's, while that may be inevitable in the future, the reality is legally you can't borrow money based on the presumption that a child can or will take over a mortgage.
If fact any parent willing to place their child in this position should be charged with abuse. It's one thing to want to pass on an inheritance, but to impose a debt onto a child's future is repugnant. Fortunately, the law agrees with me, since the child isn't responsible as an adult, the child can't take on such adult responsibilities. Either responsible parents live within their means and buys a house they can afford within their lifetime, or perhaps they shouldn't have children. If my parents had tried to pull this crap at 18 I would have said okay if this is my house, you'll start living by my rules. Not such a bad idea really; the parties I would have thrown.
1. This would take away the incentive of the house one day being mine. Might as well rent; it'd keep more money in my pocket and reduce my stress.
2. Today's homes are not built to last centuries like they used to. While I believe my house (built in 2005) is as good as any other, I don't believe it'll be very nice in 20 years. Simply due to a decline in the materials and craftsmanship that goes into our homes.
3. With the changing political climate in our country, many of us who moved into areas that we loved, find ourselves as the years go by, living in areas we can't stand to live in.
[quote=mcmastersteve;5857527]The problem with extended mortgages comes from the fact that not many people work into their 70's and 80's, while that may be inevitable in the future, the reality is legally you can't borrow money based on the presumption that a child can or will take over a mortgage.
I think you missed my point. I was not even considering the angle of inheritance but more the financial aspect that amortized out to 50 years would make the payments more affordable and would be an option to foreclosure. I realize that most Americans don't pass their homes to their children to live in. My assumption is that in five or ten years when this crisis is over, the home can be refinanced with more favorable terms or sold . If the market stays where it is now no one will be moving every five years.
Also, at age 60 many have a 30 year mortgage. What is the difference with someone 30 or 40 having a 50 year mortgage ?
My husband has a theory I found to be very realistic and if it worked would solve many of the problems associated with the numerous foreclosures.
His thought came from a visit we had in Bermuda ( of all places ). Most families live in one home their entire life. The homes are passed down from generation to generation via mortgages of fifty years in duration.
Why can't the banks offer 40 or 50 year mortgages to the homeowners in threat of foreclosure? This would certainly help out these people immediately, and allow them to stay in their homes. It will not cost the American people anything, and surely will open up the housing market. Homes will start to have improved market value as these vacant homes will no long be available and inventories will be adjusted accordingly.
they wont do it, because it is to rational of an idea.
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