There are no more beautiful words than “generational wealth.” We should all strive to leave our families in better positions than when we first built them.
One of the main ways to create and maintain generational wealth is through owning your primary residence. Your kids and grandkids can significantly benefit from the compounding effect of holding real estate assets over the years.
However, it is becoming increasingly difficult for younger generations to purchase homes. This “friction” will open the door for 50-year- and 100-year mortgages, which will not be good.
Mortgage Positive: Make Cash Flow from Your Primary Residence
Understanding the origins of the 30-year mortgage. I wanted to gain some insight into how 30-year mortgages become the real estate standard.
Before the great depression, the usual way to buy a home was with a 5-year interest-only mortgage. At the end of the term, you would owe a balloon payment for the balance.
Many people would refinance before the balloon payment, kicking the can down the road. This method worked until the Great Depression when banks didn’t want to lend money.
The federal government gets involved, and the mortgages slowly move to 5-year, 10-year, 20-year, and 30-year commitments.
Banks wanted to avoid holding mortgages on their books for 30 years, so the government created Freddie Mac and Fannie Mae. These entities purchase mortgages from banks and create mortgage-backed securities.
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Since the banks started holding mortgages for 1-2 months after closing, they profit most from origination and other fees upfront.
Therefore, the larger the loan, the more fees they can obtain; they want bigger loans. Indeed, most of the Great Financial Crisis (2008) involved mortgages and poor lending standards.
Mortgages for everyone. Homeowners also become “house greedy.” They could afford a larger home because they could spread out the cost over 30 years.
In the meantime, the world convinced everyone that they should live in households where both parents worked. As soon as everyone got jobs, the price of housing doubled.
Elizabeth Warren predicted this lifestyle inflation scenario in her 2005 book “The Two-Income Trap.” Having two parents working was a way to get ahead temporarily, but it quickly became a permanent staple as housing prices increased ahead of wages.
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Today, institutional, foreign, and equity investors are buying single-family homes. With the advent of Airbnb, neighborhoods are beginning to look more like mini hotel communities.
All this is to say that the standard American is at the bottom of the totem pole when buying a home. Cash buyers can outbid almost anyone who works a W-2 job.
How is the average person supposed to purchase a home today or tomorrow? Shouldn’t there be an affordable way to get everyone into a house? Enter the 100-year mortgage.
Why the 100-year mortgage? The Capitalists convinced everyone that they each needed their own single-family residence to call themselves successful.
This belief in purchasing a home away from your parents will get us all in trouble. However, the idea of individual homeownership has taken hold at the root of the American dream.
Inflation vs. Dividends
With sky-high mortgage rates, housing prices, and rental costs, it’s a perfect time to introduce a 40-year mortgage.
I’d say in about 16 years (2040), capitalists will move to 50-year mortgages to ensure the everyday citizen can get into a house.
Make no mistake, the capitalists still need the average American to own homes. The housing industry is more than just getting a mortgage.
The housing industry comprises real estate agents, stores like Home Depot and Lowe’s, general contractors, house flippers, and more. Trillions of dollars are at stake, and they want maximum participation from everyone.
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Eventually, in about 30 to 40 years, we will move to 100-year mortgages. Why have a $2,000/month 30-year mortgage when you can have a $800/month 100-year mortgage?
How to avoid this scenario? If you already feel like an indentured servant today, wait until the arrival of 100-year mortgages.
History has shown that once the standard monthly mortgage payment decreases, housing prices will increase soon after.
So your $800/month 100-year mortgage will become $2,000/month in 20-30 years. We can’t fall for the same trap again.
The best way to avoid this is to work together as a family. Multi-generational housing should become a standard practice, as it is overseas.
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When we work together, the capitalists cannot strongarm us out of our future prospects. If you have kids, convince them to stay with you until they have enough to purchase a home in cash.
We all need to get to the point where we save 50% of our income. Does this sound impossible? It’s not if we work together as a family.
Instead of having a household of two working adults, what about four working adults? What if three people worked and one stayed home with the kids? How about only having two cars instead of four?
As a family, we can take back our futures. We see the future is bleak if we leave it to the capitalists. You already know the effect they have had on housing prices.
I Live Paycheck to Paycheck 2
Move forward with intention. I am moving my family to Turkey, where we can live an extraordinary life cheaply. Furthermore, we can save 60% to 70% of our retirement income.
I already have three homes in America, which I will keep. I have two sons who can move into the properties as they grow older. However, more is needed to insulate my grandkids from the housing crisis.
After living in Turkey for ten years, we will have enough cash flow to purchase more properties before the mortgage changes occur.
We are moving forward with intention, knowing the world wants to enslave us. The only way to beat the capitalists is to become one.
Questions to ask about your family. If this scares you, it should. We have already seen how the 30-year mortgage came into existence. The time is ripe for a 40-year and 50-year mortgage.
Run a Passive Airbnb Business
Banks and lenders operate to make a profit, not to help you get into a house. We can assume that they put their best interest ahead of yours.
Prices tend to rise quickly when the government gets involved (housing, healthcare, college). If you are a parent, ask yourself a few questions about your kids’ futures.
- How will your kids save a 10% downpayment for a $400,000 house?
- What kind of job would they need to afford a $4,000/month house payment?
- How can they obtain this job and save for a down payment before turning 35?
- How much will healthcare and childcare cost?
- Will they have student loans?
Conclusion. I can go on forever. The short answer is that without our help, they will quickly become indentured servants (by age 22). They will have no chance to escape, especially if they get into a 100-year mortgage.
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Knowing what you know now, how can you maneuver and position your family for success? Can you add an addition to your home or install some tiny houses in the backyard?
Can you start a business that will bear fruit when your kids take over? Can you purchase another home with your home equity?
These questions will guide you to move with intention. Let’s not fail our kids by losing focus on the future. The future will be 100-year mortgages. The more we consider this future, the better results we will obtain. Good Luck!
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