A handful of lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low in the face of record home prices and rising rates.
Most big banks already offer 40-year mortgages, which account for about 5 percent of all home loans, according to LoanPerformance, a real estate data firm.
So far, only a few small lenders have rolled out the five-decades-long mortgages.
"One of the biggest things in California is the high cost of homes," says Alex Diaz Jr. of Statewide Bancorp in Rancho Cucamonga, Calif. "And with rates going up, there's demand from customers (for) longer loans."
Statewide, which introduced its 50-year loan in March, has received about 220 applications, Diaz said.
For cash-squeezed buyers, the longer-term loans are another option. In California, only 14 percent of people could afford a median-priced home in December, when the median was $548,430, if they had to put down 20 percent, the California Association of Realtors found.
The 50-year mortgage also signals that the cooling real estate market is heating up competition among lenders.
"Mortgage lenders are getting craftier to get the attention of consumers," says Anthony Hsieh, CEO of LendingTree. But, he says, "the consumer needs to slow down and understand the product."
Two issues a homebuyer should keep in mind:
A borrower with a 50-year mortgage builds equity very slowly.
Because rates on the loans are adjustable, borrower's monthly payments could rise.
Still, the 50-year isn't considered as risky as an interest-only loan or a mortgage that lets borrowers pay even less than the interest.
With those loans, a borrower might not build any equity and could end up owing more than a home is worth -- called negative amortization.

I'de give it a shot. Some people don't care about equity, just want their own home. I've got about 80K in equity in my house. Even in rough times, never thought of using it. Just want to own my own home. I'm for it. As long as there is no prepayment penalty.

***A handful of lenders have begun offering 50-year adjustable-rate loans to buyers who need to keep payments low in the face of record home prices and rising rates.
***

That would definitely get more good borrowers into decent homes around here. Actually, I think it would help to normalize things. In a normal market, you can't expect to have such a huge amount of equity within five years of buying your home. If you bought a home with a 40 or 50 year mortgage today you would be in that same position - if you think of selling in two or three years, you won't have much equity at all.

Another thing that is happening to get buyers in (other than interest only) is the 30 year loan that has a balloon due in 15 years. I'm not in that business, and I've only seen it once, and it wasn't for my client, so I don't know exactly what that's called. But since most buyers will sell in 5 to 10 years, they enjoy the lower payments without worrying about the balloon.
--A

So many young people are buying homes these days...even early 20's. I'm sure their parents would love for them to have lower payments, even if it was all going to interest. At least there is hope at the end of the tunnel. When you pay rent for 15 years, there is nothing at the end of the tunnel except a run down apartment that has changed hands several times and has potholes in the driveways and boomboxes on the balconies.

50-year loans deserve at least some consideration.

Crafty lending got us in this mess to begin with. Forclosures are at an all time high. Now they want to figure out how to make it worse!!
Lenders keep making home ownership possible for people who should be renters. I cannot tell you how many neighborhoods I have seen destroyed by renters and people who own that act like renters. If you make people actually SAVE THEIR MONEY!! and put a respectable down payment down it will soften demand for homes, prices will come down and we will see home ownership go to people who actually deserve it, not rift raft taking a zero down negative amortization 1% loan on a 350,000 house.

Banks never should have went below the 20% threashold on down payments. It has driven up prices because of course people will want the most house for as much as their payments can afford.
I personally blame the banks and their lending practices for driving up prices. It is somewhat similar to venture capitalist pumping money into .coms in the late 90's. The median price in CA is 548,000.00 glad I won't be near there when the bottom falls out!! Think it can't happen, look what happen to Riverside Ca back in the mid 80's. There were homes people bought owned a year and had to take a 100,000.00 loss.... It can and will happen again, only this time that 100K will be more like 200K.
Stock prices were grossly over inflated... now its the housing markets turn. We'll see a nice correction this year (or next after this 40/50 year loan garbage), then we'll see Gold finally settle down. Then of course you have the problem of the softening dollar, but that's another issue.

I sat down and did the math and it seems with all the extra interest and just a few bucks a month in savings, what's the point?

I was thinking the same exact thing, and they end up paying an outrageous amount for a home. There is really no point in this....