A 40-year mortgage, with fixed or adjustable rates, is starting to get more attention in the mortgage business. With interest rates
With rising and booming home prices in 2005, lenders are beginning to offer the 40-year mortgage as a viable option to purchase your dream home.
Although the 40-year mortgage has been around since the 1980s, it only offset a small percentage of loans, less than 1% in most cases. Now, with higher interest rates, borrowers are looking for a way to save money with lower monthly payments.
With interest rates on the rise, the 40-year mortgage gives buyers the opportunity to buy the home they want and receive a lower payment.
For those who are not interested in putting that many years into a mortgage or 40-year amortization, many are beginning to consider a combination of other ARMs and interest-only mortgages as well. These mortgages are currently recovering
a large percentage of mortgage origination and continue to rise as interest rates rise. These loans are often called option ARMs, or short-term ARMs that start with introductory rates as low as 1%, but provide buyers with 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 while buying a home. By extending the mortgage from thirty to 40 years, there is still the possibility of acquiring the home of your dreams.
The 40-year mortgage is also good for first-time home buyers or those who need additional help, such as young couples or people with
less than perfect credit. This will give home buyers the opportunity to continue investing in a home but without a large monthly payment. However, they must bear in mind that the disadvantage of these forty years
The mortgage is a higher interest rate in the long term. It also takes longer to accumulate equity in the home because the borrower is trying harder to pay off the home equity.
mortgage, which increases the value of a home.
Many lenders are still finding that there is not enough interest on the 40-year mortgage to hold the offer through the loan company, but this may change since Fannie Mae recently announced that they would start buying these loans. In September 2003, with a pilot program of 22 credit unions, Fannie Mae offered to buy back fixed and adjustable rate loans and will soon expand the pilot program to many others.
banks and financial institutions.
For borrowers who don’t have many options, consider starting with a
mortgage and then refinancing in the future. If you do not refinance the loan, there is always the option to send it
prepayments as your income increases.
Most experts point out that these longer mortgages are not good for older couples or an older person looking to invest in a home because it will take too long to build up and the person could be paying for the home into their seventies or eighties.
The retired person may not have the means to pay a mortgage.
The bottom line is that there are several options for home buyers and those options should be considered before deciding which mortgage is best for you. These new mortgage options also open the market to a variety of new borrowers, so this could always increase even further.
values in the real estate market. Also, a 40-year mortgage is not the best option for everyone, but there are viable alternatives that can help you.
buy the home you want. Make sure you know the pros and cons and always consider your options for refinancing in the future.