[Finance] 40 year mortgages

Herr Tubthumper said:

There’s an article in today‘s Observer about this topic and it being seen as a “way out” of youngsters not being able to afford their first house. When the link is released I’ll post it.

This type of mortgage originated in the Netherlands a few years ago but is quickly spreading. After much consideration, I took out one of these a few years ago, with a Dutch bank, and will most likely be dead by the time the original term expires. All things considered, a lifetime flexible and totally portable mortgage seems sensible to me. There seems to be concerns with this product though.

What’s the thinking on here ? I spent ages mulling this over so I’m curious what others think.

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Wardy's twin said:

With the huge amounts being required to buy houses I think its a good way to get into the market as you pay less each month (though over more months) , my 25 year mortgage basically became 35 with moves and extensions. What you have to do is understand what you are taking on and the implications, to me its the same issue taking on a 25 year mortgage and not knowing whether the rate will be 2% or 10% in 5 years time or whether you will be earning more or maybe less than you currently do. As far as I am aware you could terminate a 40 year mortgage early if you able to pay more each month later on in your life.

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Triggaaar said:

I took out an interest only mortgage out in 2006, which would have required replaying in 2031, but since I had no way of paying it off, I extended it to - shit I don't even know when, a long time. It means I can be in a property I wouldn't otherwise be able to afford. Not necessarily right for other people, but works for me.

So in answer to your question, simply look at the alternatives and work out what's best for you.

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Triggaaar said:

I took out an interest only mortgage out in 2006, which would have required replaying in 2031, but since I had no way of paying it off, I extended it to - shit I don't even know when, a long time. It means I can be in a property I wouldn't otherwise be able to afford. Not necessarily right for other people, but works for me.

So in answer to your question, simply look at the alternatives and work out what's best for you.

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Herr Tubthumper said:

The concerns raised were the fact the mortgage will ultimately cost more, saddled with bigger debt for longer periods etc. My take is the basic premise of mitigating affordability by allowing larger borrowing has presented problems in the past. But considering all the options, including being puzzled why a bank which will give me a mortgage which not only goes into my retirement but most likely go beyond my actual life, it seemed to make total sense. The trade-off for the duration is the total flexibility it provides, one does need to be disciplined and we plan to pay it back before retirement, but it seemingly allows us lots of options.

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Bakero said:

That's the part that I don't get. I mean, giving somewhere in their 20s a 40-year mortgage makes sense but not to am older person.

A mate of mine over here for a 30-year one when he was mid-40s, which surprised me. I guess the bank think he'll still be good for it in retirement. Presumably, the same in your case and they're expecting a long life

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Herr Tubthumper said:

A friend of mine bought a nice apartment in Hampstead interest only, lived in it for around 15-20 years and sold at a huge profit to buy a nice house in Hampstead Garden Suburbs. This was always his plan and it worked a treat for him.

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dwayne said:

That was a great plan 20/30 years ago. But for the last 10 years you ain't getting much capital appreciation in London deducting inflation !!

Interest only is a mugs game at the moment in England.

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dwayne said:

That was a great plan 20/30 years ago. But for the last 10 years you ain't getting much capital appreciation in London deducting inflation !!

Interest only is a mugs game at the moment in England.

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Bakero said:

That's the part that I don't get. I mean, giving somewhere in their 20s a 40-year mortgage makes sense but not to am older person.

A mate of mine over here for a 30-year one when he was mid-40s, which surprised me. I guess the bank think he'll still be good for it in retirement. Presumably, the same in your case and they're expecting a long life

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Papak said:

This is not new, been around in Japan for 30 years:

https://www.sciencedirect.com/science/article/abs/pii/1061951895900047

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dwayne said:

Interest only is a mugs game at the moment in England.

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Triggaaar said:

That's not true. As one example. if you buy a property to let it out, you can claim tax credit on your mortgage interest payments, and it's not helpful if those payments go down because you have a repayment mortgage.

Another example would be if you can buy the property you want with an interest only mortgage, but couldn't with a repayment mortgage.

Another example is when you're able to invest the money you save in a better way than paying off your mortgage.

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