#real-estate

While on-time mortgage payments are known to increase one’s credit score, many renters don’t have any history of credit. Esusu reports on time rent payments to credit bureaus so renters can build their scores. Over 50 million Americans lack a credit history with the three major credit bureaus: Experian, Equifax and TransUnion.

HENRY GRABAR: Parking is the largest single land use in many American cities. If we were designing society from scratch, would we have placed car storage on the pedestal that it now occupies?

You know, one of the things that immediately jumped off the page for me when I was reading your book is the fact that, by square footage, there is more housing for each car in this country than there is housing for each person. And on its face, I have to say that statement feels incredibly problematic, but is it?

GRABAR: I don't think it's that surprising when you start to think about it. I mean, there are more - we build more three-car garages in this country than we build one-bedroom apartments. Almost every jurisdiction in this country requires parking as a part of every single building type, whether you're building a school, an apartment building or an office or a restaurant, the law requires a certain number of parking spaces. So we have parking minimums in every jurisdiction in this country, whereas for housing, we often have maximums. We say, on this plot, you can only put one unit of housing. You can only put two units of housing. So the fact that we've ended up with a surplus of parking and a shortage of housing is no surprise. In fact, it's by design.

For a $400,000 mortgage at a 6.5 percent interest rate, the monthly payment on a 50-year mortgage is $2,254.87 compared to $2,528.27 for a 30-year mortgage. And yet, this modest decrease in monthly payments will be offset by a dramatic increase in interest payments: from $510,177.95 on a 30-year fixed-rate mortgage to a staggering $952,920.53 on a 50-year mortgage.

The reality is that even 30 year mortgages don’t make sense and never did. A 30 year fixed rate mortgage would never be offered by private markets without government incentives. They nearly masked the fact that Americans couldn’t save and couldn’t afford housing. They went onto exacerbate the problem by making Americans primary if not so retirement investment in their home. This incentivize homeowners to value scarcity in housing as lower supply will create scarcity and drive up the price of their “investment”, but in this case, the investment is housing for others.

The 50 year mortgage is a scam. I’m just not sure if the administration actually knows that or not.

By the numbers: Consider someone taking out a $500,000 home loan. The current rate on a 30-year mortgage is 6.22%, per Freddie Mac. For these calculations, let's assume that a 50-year loan's interest rate exceeds the 30-year by the same margin that the 30-year rate exceeds a 15-year rate.

That translates to a 6.94% rate on the 50-year loan — which would then have a monthly payment of $2,985, only $83 less than the 30-year mortgage. Zoom in: In the early decades of the loan's repayment, the 50-year borrower's payments would almost entirely go to interest, paying down the debt much more slowly.

After five years, for example, the 30-year borrower would have paid off $33,481 of the loan balance, versus $6,707 for the 50-year borrower. After three decades, when the 30-year mortgage is fully paid off, the 50-year borrower would still owe about $387,000.

Interesting