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Extend Mortgage Term

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  • 04-07-2011 12:47pm
    #1
    AlanPat
    Registered Users Posts: 41 ✭


    Just throwing this out to see peoples thoughts:
    Could banks extend terms of mortgages, (say 50 years), thus reducing monthly mortgage repayments for people. In turn, this would free up income for people to spend/save. This in theory would help kick our economy back into life, and generate some much needed employment.
    When we die, the house is sold and the proceeds are split between family and what the bank are owed.
    Would this work, is this too simplistic a view??? I'm not an expert but I'm just trying to think how to help people with mortgages, take the pressure off them, without losing their homes.


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    #2
    Toots
    Administrators, Business & Finance Moderators, Society & Culture Moderators Posts: 16,920 Admin ✭✭✭✭✭Toots


    As far as I know, they will extend them for people who are in financial difficulty as a way of reducing payments, however there is a max term that they will extend by. Usually this is only 5 or 10 years, basically they don't want you to die before paying the mortgage off so an extension of 50 years could mean that the mortgage is due to be paid back when you're 90!


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    #3
    soupdrinker
    Registered Users Posts: 66 ✭✭soupdrinker


    Did the OP mean extend out mortgages to a term of 50 years (maybe extend a 35 yr mortgage to 50) rather than extending it by 50 years?

    Regarding the bank doesn't want you dying before you pay off your mortgage, is that not what the life insurance that you have to take out when you take out a mortgage is for?

    Obviously extending the term of the mortgage would probably mean increased life insurance payments, but surely the life insurance will pay out to the bank if the mortgage holder dies before the mortgage is fully paid.

    Even if a young person takes out a mortgage there is no guarantee they won't die before the mortgage is repaid? Hence the requirement to take out the life insurance policy???


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    #4
    chris85
    Registered Users Posts: 4,502 ✭✭✭chris85


    Extending the term could have a detrimental effect in long and short term.

    In short term it means the banks will have less money coming in and thus will need to generate capital somewhere and since they are unlikely to be able to borrow on the market would more than likely come from the goverment which would mean increased taxes/reduced spending for all. This would counteract any disposable income from

    in the long term the customers would have to maintain payments into a much later ages. With cuts in pensions (public and private) this could mean people may end up defaulting on mortgage in later life and lose their home at a vulnerable age. Not good.

    I see your thinking to try free up money to get spending going but this really needs to be done by job creation to get people off the dole. This generates disposable income for people and also means less dole being paid by goverment which means they can spend this elsewhere.


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