I hope that most people understand that an extra-long mortgage is a fool’s game. If not, check out 50-Year Mortgages: No Shelter for the Strapped at Yahoo! Finance. Author Laura Rowley hits the nail on the head:

A few lenders in California recently introduced 50-year adjustable-rate mortgages. The headline on the USA Today story was: “Need to keep house payments low? Try a 50-year mortgage.” This may be the worst possible way to portray this marketing ploy from the slowing mortgage industry.

Apparently these fifty-year mortgages aren’t even fifty-year mortgages at all; they’re five-year adjustable-rate mortgages with the repayment term extended to fifty years. And they’re terrible deals. Take a gander at how much it would cost to finance each $100,000 of a loan based on current interest rates:

 

5-year ARM,
30-year term

5-year ARM,
40-year term

5-year ARM,
50-year term

Interest Rate

6.41%

6.66%

6.96%

Monthly Payment

$626.16

$596.89

$598.62

Rowley, displaying a wry wit, admits “the 50-year mortgage is superior to an interest-only loan [...] because $5,000 in home equity is better than negative equity.”

I don’t know enough about fifty-year mortgages to say that they’re bad under all circumstances, but if you’re considering one of these products, please consult a competent accountant, financial planner, or mortgage broker. (And if your mortgage broker is recommending this to you, seek the advice of a second and third mortgage broker.) I’d be worried about any product the real estate industry loves, especially one that delays equity accumulation in your property.

MarketWatch named the fifty-year mortgage their Stupid Investment of the Week. Apparently an outfit called Statewide Mortgage in California is the only place currently pushing these loans. Be warned.