Summary of Key Points
On August 28th, three departments including the Ministry of Housing and Urban-Rural Development introduced the "current sales system" to replace the "pre-sale system" that had been in place for 30 years (houses could only be sold after they were completed). Meanwhile, the central bank and other authorities issued six credit-related documents, including one that extended the maximum mortgage term to 40 years. This article, from the perspective of ordinary people, explains the logic behind mortgage calculations, analyzes the real impact of the extended terms, and discusses the trends of early repayment or purchasing homes in full. It points out that although the new policy offers more options, it is unlikely to fundamentally change the demand for housing unless underlying conditions such as housing prices and income levels change.
Detailed Explanation
1. **A Major Policy Change: The Current Sales System is Here, and Mortgages Can Now Be Up to 40 Years Long**
Previously, the real estate industry operated under a "pre-sale system," where developers could collect payments before the houses were even built. Now, with the introduction of the "current sales system," houses must be completed and delivered before they can be sold, marking a significant shift in the industry. Why are credit policies needed to support this change? Because real estate development requires substantial funding—developers need to pay for construction, and homebuyers need to take out loans. As a result, the central bank and others have issued six documents, with the most notable one being the extension of the maximum mortgage term to 40 years. This may seem like a reduction in the monthly payment burden, making it easier for ordinary people to afford a home, but the actual effects are more complex.
2. **How Are Mortgages Calculated? Understanding the "Little Secrets" of Equal Principal and Interest Payments**
Most people use the "equal principal and interest" repayment method, where the monthly payment remains constant. However, the amount of principal and interest changing over time is crucial. For example, with a mortgage of 1 million yuan and an annual interest rate of 3%, the monthly payment is 4,216 yuan over 30 years.
- First month: The interest is 1,000,000 × 3% ÷ 12 = 2,500 yuan, and the remaining 1,716 yuan goes towards the principal.
- Second month: The principal is now around 998,000 yuan, and the interest is 998,000 × 3% ÷ 12 ≈ 2,495 yuan, so the principal paid is slightly more (1,720 yuan).
- The monthly payment remains constant because the calculations ensure that the loan is fully repaid in 30 years, but the interest amount remains the same in the first month whether the loan term is 30 or 40 years; it's just the amount of principal that changes each month.
3. **Extending the Term to 400 Years? Don't Dream—The Monthly Payment Won't Decrease by Much**
Some joke that extending the mortgage term to 400 years would reduce the monthly payment significantly, but this is unlikely:
- 1 million yuan loan for 40 years: The monthly payment would drop from 4,216 yuan to 3,580 yuan, but the total interest would increase from 517,000 yuan to 718,000 yuan (an additional 200,000 yuan in interest).
- 400-year loan: The monthly payment would be close to 2,500 yuan (almost equal to the interest amount in the first month) because almost no principal is being repaid, and the remaining principal remains at 1 million yuan, meaning the interest is calculated based on that amount.
4. **Why Do People Choose to Repay Early or Buy in Full? Two Main Reasons**
Central bank data shows that mortgage balances have been declining year-on-year for 13 consecutive quarters. This is either because existing homeowners are repaying their loans early or because new homeowners are purchasing homes in full:
- Reason 1: Investment returns are lower than mortgage interest rates. In the past, investment returns were 6%-10%, higher than the 5%-6% mortgage rates, so people were willing to take out larger loans. Now, with investment returns below 3%, it's more cost-effective to repay the mortgage early to save on interest.
- Reason 2: Lack of confidence in the future. Many people are concerned about income instability and avoid taking on long-term debt. For example, in Shenzhen, 44.7% of second-hand homes sold cost less than 2 million yuan, and a large proportion were purchased in full due to the pressure of monthly payments.
5. **The Policy Offers Options, but Fundamental Issues Remain**
Although the extended mortgage terms provide more choices (such as a 40-year repayment plan), underlying issues like high housing prices and slow income growth have not changed. Jokes about extending the term to 400 years reveal a lack of understanding of mortgage calculations and a sense of helplessness regarding current housing and income levels. Good policies are essential, but for ordinary people to afford homes, the prices must be reasonable, and income levels need to increase.
In summary, the policy opens up new possibilities, but whether people can actually afford a home depends on their financial situation and their confidence in the future.
Each section is explained in simple language, using examples and data to help non-professionals understand the real implications of the new policies.