The Silent Trap of 50-Year Fixed Mortgages || Leigh Brown

Is the 50-year fixed mortgage a good idea? TL;DR, no. Now, for the rest of y'all that are gonna hang out with me for a minute, let me explain to you why it's a terrible idea. The first thing I want you to do is tag President Trump or Scott Bessant in this video because somewhere in Washington, D.C., we've lost touch with good economic policy. And granted, it's not just this administration, it's decades in the making. But we seem to have lost a good grip on supply and demand. When you look at a 50-year fixed mortgage, you know what that's adding into the equation of supply and demand, right? You're adding in demand. You're telling more people now you can buy. Okay, that's great on the surface because we do want our young people to have a chance at the American dream. We do want our young people to pursue homeownership. However, when we add a whole generation back into the buyer pool, That's a lot more demand, which is going to drive prices up. So if your goal is to make housing more affordable, you just made it less affordable because the payment might look like it's coming down, but the house prices are going to increase because more people are fighting over a limited commodity. It's just how numbers work, y'all. Now, if the administration would continue with the deportations of the illegals, that would actually reduce some of the demand. Because whether people want to admit it or not, we have illegals in the country that are taking up housing. And it's just not the job of America to house the whole world. Legal, illegal, whatever, people that are here are taking up housing, whether they're renters or buyers. It's just a fact of life. Get mad at me if you want to, but we have to look at the underlying metrics and the supply and demand. So when we have extra people here with limited housing and now you want to make it cheaper to buy housing, it's just gonna get more and more competitive, which drives prices up. That's not the goal of that 50-year fixed, but it's what the result's gonna be. The second thing you have to understand is that that 50-year note, that's debt slavery. Just call it what it is. And yes, the memes on the internet are probably right. Dave Ramsey is likely in cardiac arrest right now over the idea of a 50-year mortgage. Now I want you to think about it this way. In fact, on the podcast I did with Rob Hahn in our Under All Is the Land podcast, we talked about whether the 30-year is even a good idea. I maintain that it is. Rob thinks it's too long of a timeframe. And here's why that's a debatable question. When you have any timeframe on an asset, when you're talking about the debt underneath it, If you're on a 15-year note, you're going to still pay a bunch of interest at the front end until you start to chunk away at the asset later on. That 30-year fixed means you're paying even more debt service at the beginning before you start paying down the real note. On a 50-year, y'all, you would be paying interest for a long time before you ever start paying down your own debt. Now, if you were going to stay in the house 50 years, that would be fine. But nobody stays in a house 50 years except your grandparents and your great-grandparents. The younger the generation, the more likely they are to be mobile and want to go live somewhere else. That's cool and all, but if you have a 50-year note, you haven't paid down that chunk. So unless house prices go up, it's going to be hard for you to sell it because you haven't paid down the note. Now, we shouldn't be making that assumption. This is the other big challenge that we have in the market right now. A lot of people assume house prices go up over time. And historically they do. If you look at a 50-year window from day 1 to year 50, oh, house prices do go up. But in the interim, there are fluctuations. What might happen in your life to cause you to have to sell it during a fluctuation? Could it be death, divorce, job relocation, family change? There's lots of reasons people buy and sell houses, and those reasons happen regardless of the state of the market. If you're in a 50-year note, you're gonna have a harder time saying yes to selling when you're in the change. So maybe you become a landlord. I don't know, there's lots of options out there, but you're introducing so many hiccups into the market. When I'm looking at a mortgage timeframe with a buyer, I'm always gonna encourage them to go shorter if they can suck it up, because a 15-year note means you're paying less interest over time because you have the note for a shorter amount of time. You'll pay some front-end loaded interest, then you're gonna start chunking away at it. And hopefully if you get really dedicated, you can have it paid off in 10 or 12 years. If you have a 30-year note, if you start looking at that amortization schedule, which y'all don't look at and you totally should, go look at what's in your lender package, that amortization schedule. Look every month at how much of your note you're paying down. It's like a dollar in the first year. Year 2, it might be $2. By the time you get to year 15, you're making real progress on that note, and that's the halfway mark. You gotta realize, y'all, there is a cost to borrowing money, and those are real dollars that you're paying. Now, it's hard for me to break through this space right now because we're in a society that just everybody has debt. You've got credit card debt, you got house debt, you got car debt. I mean, our elected officials are obviously okay with debt, or we wouldn't be $38 trillion in the hole. But overall, that means you are at somebody else's beck and call. If the bank calls a note, you either have to come up with the money or do what the bank says. This is part of the reason I reference a 50-year debt as debt slavery. You don't own that house. The bank owns you. And yes, I do still think it's better than renting because then you don't have any stake in the ground. But the 50-year fixed is not the answer everybody thinks it is. So my suggestion, President Trump and Scott Bessant, don't be extending loan terms that are going to put more Americans at the risk of whatever the bank wants to do. What if instead we get more thoughtful about how we fix our immigration crisis and how we can reduce the government regulations that are in the way of building and development? Maybe if FEMA and the EPA and these other agencies would get out of the way with their made-up crises when it comes to development, we could see more yeses by local governments. Maybe if the federal government would stop some of the eminent domain stuff going on, you could return property rights to the people so that we could see a smart growth approach which says yes sometimes and no sometimes. Then we can start making some real improvements on the supply side while we also are smarter about the demand side. Come on, y'all. It's time we get more thoughtful about the long-term implications of our economic policy and realize that the problems of today were started decades ago. But we may as well get the smart people to the table and fix it instead of wild and crazy ideas, which aren't the best thing for this country. That's the Leigh Thomas Brown opinion on things. You got something to say? Drop it in the comments. I'm here to listen because I'm not in charge. But I do have things that I believe in, and this country is one of them. Homeownership is one of them. But your ability to be free of debt, man, that should be a goal for all of us.