Comment on Bank Workers, Rejoice!
peoplebeproblems@midwest.social 1 day ago
So I did the math. A 30 year fixed and a 50 year fixed have a monthly payment difference of $1.
What the absolute fuck.
What?
Some random numbers that are of course VERY variable, but I just ran the calcs with 400k, 5% down, 6% APR for 30 and 50 years
$2648 for 30 years $2369 for 50
Now that is of course not a great deal, presumably you’d also get a little better rate for the longer loan (more points) but it’s not a dollar.
Yeah I compared some numbers and guessed a plausible interest rate for the 50 year based on the 15 vs 30 year interest rates at a couple of real banks near me
50 years at 6% with 5% down on 200k (fairly plausible for a decent home where I live and realistic for a first time home buyer who 50 year mortgages are clearly catering to) is 1k/mo almost exactly
30 years at 5.85% is 1,121/mo 20 years at 5.75% is 1,334/mo 15 years at 5.50% is 1,553/mo
So the difference is pretty small on a realistic first time home buyer’s home, but having been on the edge of approval for a home loan before that $100/month can absolutely be the difference between getting the home now and having to wait another 2-4 years depending on markets. In my case they assumed my insurance would cost more and that actually made all of the difference in my home loan application because that shaved about $100 per month off
One interesting side note, one of the local credit unions I looked at offers different interest rates depending on the value of the loan! For a 30 year fixed loan they offer the following rates:
800k or less: 6% 300k or less: 5.875% 200k or less: 5.875% (presumably they have this bracket for future rate changes) 100k or less: 5.75%
So yeah that’s new! I’ve not seen that before!
So that’s a great picture I think for the difference between the loan durations.
I of course think the real problem is that average people might need a 50 year loan to barely pay for a house these days. But it isn’t “nothing” between the terms, it does help in the super short term
Don’t forget that on top of all of that you have to pay property taxes.
The calc I used for that number put $3k property tax annually amortized, good call
$3k is generous. We’re paying $12k
I just question if the 50 is getting the same rate as the 30. Obviously, all else equal, math is math. Banks see that $300 savings as a potential extra $150 a month.
This raises questions about the opportunity cost of $300/mo. It’s not a huge amount of money, but for some budgets, it might make a car payment or groceries possible. Or, if saved or invested wisely, would it tip things in favor of the 50-year term?
$300/month (at the beginning of the month) invested over 30 years, compounded annually at 6% = $198,290.40
If you kept that going for a full 50 years, the last 20 years of interest really starts to ramp up and gives you a final value of $1,084,402.22
If instead, you ONLY paid the mortgage for 30 years, then invest the full mortgage payment of $2,648 into the investment account for the next 20 years (a total of 50 years out. Same end point) you would have an investment account worth $1,215,042.49
So, even in your scenario it is still a loss to take a 50 year over the 30 year, and the 300$ difference is negligible. If $300 was the difference of someone being able to afford groceries or not for the month, then they should not have qualified for a $2,648/mo mortgage.
With this math I just acquired a 10 year fixed for $1 more per month.
Why would anyone take one out in that case then? You can always overpay and pay it off sooner though.
kameecoding@lemmy.world 1 day ago
Because for the first lot of years you are paying basically 0 principal
boaratio@lemmy.world 1 day ago
I owned my first house for 19 years, which was purchased in the fall of 2006. We sold it for the exact same price as we paid for it, and barely came out ahead. I know it was poor timing, but the idea of leaving a home and using it as part of your retirement income is a lie. The banks are laughing all the way to the bank.
merc@sh.itjust.works 1 day ago
Poor timing? You bought at the absolute peak of something known as The United States Housing Bubble. Your experience is not typical. You’re one of the unlucky people who had the absolute worst timing possible.
The idea of using a home as part of your retirement should be a lie, but unfortunately for the vast majority of people it isn’t. The world would be much better off if people only got what they paid back when they sold their houses. But, the reality is that most people have been absurdly lucky and their homes have been going up faster than all but the best stocks on the stock market. You just happened to be someone who jumped on the ride at exactly the wrong time.
boaratio@lemmy.world 17 hours ago
I don’t disagree with any of your points.
Taldan@lemmy.world 1 day ago
Median home prices peaked at $216,000 in August 2006. The lowest they’ve been in 2025 is $414,000. You had some absolutely atrocious luck. You buy in Detroit or something?
Source: dqydj.com/historical-home-prices/
ElegantBiscuit@lemmy.zip 1 day ago
Not who you responded to but it depends entirely on the location. In the northeast there is decent and consistent appreciation and there has been for decades because it has always been populated. But home appreciation over 20, 30, or 50 years will struggle to beat the S&P500. Factor in property taxes and upkeep and you may just barely keep up with inflation. Just from inflation $216k in 06 would be $358k in 2025. As an asset its primary function is being a store of wealth that happens to be the roof on your head, something you can refinance to borrow money, and something to sell basically to pay for whatever you downgrade to when you enter the stage of preparing for death, whether it’s a condo or a nursing home.
All the money to be made comes from buying in bulk and renting out to people who cannot afford because everyone bought to rent out, while local government restricts supply through zoning because it would lower property values of everyone who only had their house as retirement because wages have not kept up with productivity or inflation and pensions and unions have been gutted.
Furbag@lemmy.world 16 hours ago
You’re right, but he did say the monthly payment was the difference, not the interest payments. That typically doesn’t change throughout the life of the loan. I wonder what the math formula looks like for a 50 year fixed?
technocrit@lemmy.dbzer0.com 13 hours ago
here’s some math: nakedcapitalism.com/…/why-trumps-50-year-mortgage…
Furbag@lemmy.world 10 hours ago
Fantastic read, thanks for sharing. At a realistic interest rate, the savings per month are literally just a few dollars. Unbelievable.
This idea seems like something that someone who understands absolutely nothing about economics and doesn’t care to learn anything beyond initial vibes would latch onto, which is precisely why Donald Trump is pushing it.