A 40-year mortgage, with either a fixed or variable rate, is getting more and more attention in the mortgage business. With interest
Rising home prices and booming home prices in 2005, lenders are beginning to offer the 40-year mortgage as a viable option for buying your dream home.
Although the 40-year mortgage has been around since the 1980s, it has only made up a small percentage of loans, typically less than 1%. Now with higher interest rates, borrowers are looking for a way to save money with lower monthly payments.
With interest rates rising, the 40-year mortgage offers buyers the opportunity to still buy the house they want and get a lower payment.
For those who aren’t interested in putting that many years into a mortgage or into a 40-year amortization, many are starting to consider a combination of other ARMs and interest-rate mortgages as well. These mortgages are currently being made up
account for a large percentage of mortgage origination and continue to rise as interest rates rise. These loans are often referred to as option ARMs, or short-term ARMs, which start with introductory interest rates as low as 1% but offer buyers a variety of mortgage payment options.
Other mortgage options offered by mortgage lenders include a
20-20 mortgage where interest rates would adjust after the first 20 years.
Another reason many borrowers are considering and lenders are offering a 40-year mortgage is so buyers can spend more money when buying a home. By extending the mortgage from 30 to 40 years, there is still an opportunity to purchase the home of your dreams.
The 40-year mortgage is also good for first-time homebuyers or those who need extra help, such as young couples or those with
less than perfect credit. This gives these homebuyers the opportunity to continue investing in a home but without a hefty monthly payment. However, you must remember that the downside of this forty year
Mortgage is a higher interest rate in the long run. It also takes longer to build equity for the home as the borrower continues to extend the principal payment
Mortgage that builds equity on a home.
Many lenders still find that the interest on the 40-year mortgage isn’t enough for them to offer them through the lending company, but that could be changing since Fannie Mae recently announced they would start buying these loans. In September 2003, Fannie Mae offered to buy back both fixed-rate and floating-rate loans in a pilot program with 22 credit unions, and will soon expand the pilot program to many others
Banks & Financial Institutions.
For borrowers who don’t have many options, start with a 40-year-old
Mortgage and then refinancing down the road. If you don’t refinance the loan, there’s always the option to mail it in
Advance payments as income increases.
Most experts note that these longer mortgages are not good for older couples or an older person looking to invest in a home, as it takes too long to build up that equity and the person will pay for the home into their 70s or 80s could.
The retiree may not have the funds to keep paying a mortgage.
The bottom line is that there are a number of options available to homebuyers, and these options must be considered before deciding on the mortgage that is best for you. These new mortgage options are also opening up the market to a number of new borrowers, so this could still increase
Values in the real estate market. Also, a 40-year mortgage isn’t the best option for everyone, but there are viable alternatives that can help
buy the house you want. Make sure you are aware of the pros and cons and always consider your options for refinancing later.