One question

[CJD]

(09-02-2023, 04:16 PM)Mike M (the other one) Wrote: To make houses MORE affordable, why can't we get banks to offer 60-80-100 year loans at a fixed 1% interest? and to help them get settled in, no payments for the first 12 mos (optional ofc).  First time buyers get help (via down payment).

Banks will still get their money, and many people will actually be able to cover those monthly payments easily enough.

The gov doesn't really need to do much but set the laws for interest on those lengths. Banks will jump in line for it (didn't say they will like it, but if it's the gov max they will do it). 

yea yea i get it, people don't live that long, but you can name a dependent to inherit and they can take over or sell or even better, afford the life insurance to cover the balance of the loan in event of death.

Doing some math on a 
300k/60 ys/1% purchase, puts monthly payment at $554.26
300k/80 ys/1% purchase, puts monthly payment at $454.12
300k/100 ys/1% purchase, puts monthly payment at $395.59. 

https://michigansaves.org/calculator/?gclid=EAIaIQobChMIyZOUoMyMgQMVZhmtBh3v-QC7EAAYASAAEgKBz_D_BwE

This is the only calculator i could find that does more than 30 years.

To Prevent people from trying to mass buy with this plan, you can limit the number of a person's loans at 1. With the only way to have more than 1 is to inherit it.

The reason 300k is currently the water mark for your typical "average home" is because a 300k home (with 10 to 20% down) over 30 years with ~3 to 4% interest comes out to about 1000 dollars per month, which is usually how much a typical family making an average household income can afford.

My concern with your plan is if they do this, then demand would rise, because more people have 554 dollars per month that people who have 1000 dollars per month (without supply increasing in kind), then the price of the home would just increase (be bid up) so that now the 60 year mortgage comes out to an average of 1000 dollars per month, which means the house went from 300k to 550k, costing the buyer hundreds of thousands of dollars without improving their monthly payment.