Get ready for 100 year mortgages

[shutthe]

Friend has come back from Japan where 100 year mortgages are pretty normal. Since finding out about this, a Dutch friend says loads of his friends have them and they were normal in the Netherlands.

Before he was kicked out, Boris was looking at introducing them.

Would you take one out? They work by giving massive reductions in monthly payments, but you never own your property, and you leave your kids either debt or have instructions to sell on probate on open market.

I can't see how the UK won't adopt this type of lending given so many developed nations with housing crisis ( Japan, Netherlands) have too.

She said it was 'normal' , not that it was the standard, I was just bowled over such a thing EXISTS. That's when she said Boris was thinking of introducing it. Not surprised he kept that quiet, I think the English, home is castle thinking really hard to get the head around a 100 year mortgage term.

OTOH if you have a 100 year mortgage and the house that you 'own' needs repairs then you have to pay for them yourself.
If you're renting then the landlord has to get things fixed.

When you look at this graph from the FT, it scares the shit out of me.

Lots of people losing their homes. The numbers on the sides are in millions....

www.ft.com/content/ac5e987b-1931-478d-8f1a-f4e0751c7760

If you buy a house in 2015 for 200K with a 100 year mortgage and sell it in 2025 for 280K , you put 80K in your pocket, plus your original deposit.

Having a landlord to do house repairs as a reason for not buying a property is complete and utter nuts!

Until you pay off your mortgage, 25 years, or 100 years, you don't 'own' it.

I thought a 25 year mortgage was bad!? 🤣

Yep. Very scary.

However, remember there is plenty of cash available yet to be sucked into the gaping maw of the housing market. It's just a matter of coming up with the necessary financial innovation.

Let's not stop at the bank of Mum and Dad. We're overlooking the bank of Granny and Grandad which is an untapped reserve. I think we should also be able to lease everything we own and stake that against a mortgage and also pledge our kids future earnings.

I didn't say it was a reason not to buy a property. But there are benefits to renting.
If I'm never going to fully own the property because I'll be dead before the mortgage is paid off then I might as well stick with renting. Not that I can get a mortgage anyway.

100-year mortgages are crazy. They will lead to increased house prices and later mass defaults.
This si trying to boost the economy through a crazy scheme.

I agree. If you can get someone who will rent to you long term, it would be a better option.

There are always going to be pros and cons to any scenario. I would think in countries where having multiple generations living in the same home a 100 year mortgage seems more logical. In these countries they also don't rely so heavily on care homes so houses don't need selling to pay for an older persons care. To really work in the UK would take a huge cultural shift.

True if homes have to be sold to pay for care then what is the point?

I'm lucky that I've been in my current house 13 years, no plans to move. LL has no plans to ask me to. And I'm allowed to decorate however I want.

I appreciate this is very unusual though.

If I Had to move every couple of years I might think a 100 year mortgage was a good idea !

100 year mortgages would make house prices explode upwards... terrible idea

This is it exactly. Remember what happened once two-income households became the norm - anybody who thought it would make it twice as easy to buy a house soon learned otherwise.

"100 year mortgages would make house prices explode upwards.."

LOL, like they did in Japan in the 90`s, that sort of explode? By all accounts Japan is due another massive property correction after managing to get their bubble back (it only took 30 plus years) This sort of stuff is just wishing on a Fairy for large mortgage holders, they are going to get crushed, even the governor of the BOE said so on TV today.

Since finding out about this, a Dutch friend says loads of his friends have them and they were normal in the Netherlands.

I'm dutch. Never heard of them. Frankly, I just did a quick google and most banks only do 30 years maximum. There's one bank (ASR) that has a 40 year maximum.

Is your friend confusing 100 years with 100%+ mortgage? Because that used to be the norm for starters till a couple of years ago. Now people need a deposit here.

I’m Dutch too and never heard of 100 year mortgages. Don’t think this exists in the Netherlands - maybe your friend is talking about interest only mortgages but the UK has these too?

Then you’d be paying back a mortgage that was for a couple of hundred pounds, even with sky high interest rates, the payments would be tiny.

See my earlier correction on this!

Apologies @shutthe I see you already rectified it.

They're quite common in Sweden. Or, more accurately, most mortgages there are repayment mortgages until you reach 50% LTV ratio, after that, they become interest only. So lots of people never pay off the remaining 50% of their mortgage. I think it's stupid, I don't understand why people like it, but I guess it's just what people are used to.

@Alaimo so does the repayment drop at this point or is it evened out over the term? Like you say it seems odd to choose to drop the payment at a time where it is likely to have become more affordable.

Before he was kicked out, Boris was looking at introducing them

What does that even mean? SInce when did he ever a) do any real work and b) have anything to do with introducing different types of mortgages?

Don't be silly.

That doesn't work though, as interest is such a large part of what you pay and will be payable the same regardless of the length of your mortgage, so will increase more the more you borrow. The repayment part is relatively so low that extending the term only allows you to borrow a certain amount more, not as much as you were calculating.

Eg, assuming a fictional interest rate of 4%, borrowing 500k over 20 years would cost £3030 a month but 2.5 million over 100 years would cost £8490 a month! Even interest only would be £8333 a month.

Extending the term to 100 years would mean if you could afford 500k over 20 years you could afford just under 900k over 100 years so borrowing could go up significantly but not by that much of a spiral.

In reality they'd sell the house, pay the debt, and keep the equity.

Not saying it's a good idea, but you're not going to leave them with a genuine liability.