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Are You Ready For A 40-year Mortgage?
By: Charles Essmeier
Real estate prices have been increasing steadily over the last five years,
particularly on the East and West coasts. In parts of California, homes are
selling for 33% more than they were a year ago. This has made it more difficult
than ever for first-time homebuyers to purchase a home.
Over the years, a number of new mortgage options have become available to
prospective buyers that ease the burden of buying a home. Buyers can now obtain
a mortgage with a variable interest rate that rises or falls with the market or
even a mortgage that requires only interest payments for the first few years of
the loan term. This allows buyers to make smaller payments early in the
repayment schedule while purchasing a more expensive home than they otherwise
might be able to afford. The payments would increase in later years, but so,
presumably, would the income of the buyers, so that the home would still be
within the buyers’ range of affordability.
A relatively new mortgage option that may soon adjustable rate mortgage and the
interest-only mortgage in popularity is the mortgage with a 40 year term. While
most mortgages offered today are for either 15 or 30 years, the 40 year mortgage
has been available for nearly 20 years, but few lenders offer it as an option,
as they are often reluctant to tie up their money for such a long period of
time. That may change, however, as Fannie Mae has announced their intention to
purchase more 40-year mortgages. With Fannie Mae purchasing more 40-year
mortgages on the secondary market, lenders will probably be more willing to
offer them to customers.
Interest rates will likely be somewhat higher for a 40-year mortgage than a
30-year mortgage, but the extra length of the loan term will keep the payments
lower than with a traditional mortgage. Prospective buyers should be aware that
they will pay more in interest on a 40-year mortgage than they will on a
traditional 30-year note. Studies show that most homebuyers do not stay in their
homes for anywhere near 30 years, let alone 40. This being the case, the market
for 40-year mortgages may remain fairly small. But for some buyers, it may mean
the difference between continuing to rent and buying the home of their dreams.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a Website devoted to debt consolidation information and http://www.HomeEquityHelp.net,
a site devoted to information on home equity loans. |
