That is absolutely bananas. Almost like a Chinese-style 99 year lease. Your kids might be dead by the time it's paid off, you'll never own it.
Edit: apparently the AVERAGE mortgage term is 140 years! Just recently the Swedish government limited the maximum mortgage term to 105 years. That is some absolutely stupid policy.
What's worse is that this is actually a huge subsidy for landlords, unless their mortgage terms are limited to be much shorter. A landlord can afford the downpayment to finance many homes at low interest rates, whereas a poorer person may be able to make the payments on such a mortgage, but can't save up enough to afford a down payment.
A 30 year loan is not much different really. Too long. It was rare in the US before various government subsidies and encouragements. First, Fannie Mae (1938), securitizing FHA backed home mortgages. Next, Freddie Mac (1970), securitizing home loans not backed by the US government.
In the US, we saw what happens when you make getting a mortgage "easy". People bought more house than they could afford and got screwed.
https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7...
Then again, there is the problem of refinancing when the end date comes due, which is probably why you have 100+ years mortgages in Sweden.
However I recognise that my gain is also a problem for my teenage daughter who will struggle immensely to get on the housing ladder. In the UK, it really does not help that housing is considered an investment opportunity. I have a feeling rent control is the only way we will ever get to the point where we remove this 'investment' opportunity.
More interestingly, it's within landlord's interest to work with developers to ensure whole developments are primarily bought up by landlords to maintain the value of housing stock.
And also remove the opportunity to live in the city. Rent-control is one of those policies that the economic community has consensus that its one of the worst things you can do.
"In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."
It is a bad situation. But on the other hand you can't just change the max mortgage to 30 years either, or remove the interest tax deduction over night, as that would immediately create the problem you were trying to avoid to begin with (an unstable housing market).
I think what they are doing to mortgage lengths is entirely sensible now: they are increasing the required down payments (effectively 25% now) and then requiring a higher pace of repayment initially. That's when it really matters to stability. E.g. if people pay off 3%/year for the first 10 years of their mortgage, it doesn't really matter whether they have a 30, 40 or 100 year mortgage. They will have paid it down to around half the valuation which lowers the risk.
Exactly right. I don't know anyone who buys with the intention to own.
Effectively you rent it from the bank. I don't mind, I mean I don't mind renting from the bank. I pay off my mortgage (2% per year, so 50 years) but only as long as its reasonably high, in order to lower interest rate costs and reduce the risk of being under water.
I have no interest in paying it off completely, so I'll stop paying 2% per year when the mortgage is down to e.g. 40% of the value. Obviosly as a banks have zero interest in your customers loans shrinking, it's lost revenue!
The big downside of very long mortgages is that it brings up nominal prices, and thus the volatility
A 140 year mortgage can't possibly be appreciably different from renting.
The fact that as a homeowner ("owner") you can deduct interest rates, means that by "renting from the bank" you have a 30% rebate compared to renting from a landlord, and obviously you have no landlord taking a cut on top of that. So apart from the risk of depreciation, people seem to have little interest in owning their homes outright. So people pay off quickly in the beginning to get some margin on their valuation, but after that when the loan is e.g. 50% of the valuation, people might prefer buying a car to paying off $10k per year on their home. And it's probably better to have a mortgage fixed at 50% forever with 2-3% interest rate, and avoid the car loan with 5% interest.
https://economix.blogs.nytimes.com/2013/09/03/taxing-homeown...
Would be interesting to simplify tax codes and handle homeowners as both renter-landlord on their own home.
As nominal marginal tax rates are somewhere in the 40-50 % range, this typically means <15 % actual reduction in taxes.