Mortgage

In the last few years, the mortgage industry has seen a particular explosion of new loan programs. 1 is the 50-year mortgage. The question is whether you should use it to finance your new home.

25 years ago, there were limited financing options if you wanted to buy a property. You basically had the 30 including 15 year mortgage loan options. You additionally had to have good credit, low debt including a steady job history. Well, those days have gone the way pertaining to the horse including carriage. There are so many loan programs available now that you have to be in a pretty bad way not to obtain financing. While there are lots of programs, not all of them are worth applying to.

The 50-year mortgage is a new beast being offered in the mortgage loan market. Only a few lenders provide it including with good reason. I like to call these lifer loans. You are literally committing to paying a monthly payment for the rest of your life. Yes, the monthly payment could be less than with a normal 30 year loan, but it doesn’t actually work out in the long run. Assuming you live to be 80 years old, you will have paid so much interest by the time the loan was paid off that you could have purchased 5 other homes!

The obvious answer to the long term of the loan is refinancing. Most people enter the loans with the idea that they could refinance after a few years. Yes, the might happen. On the other hand, you have to keep loan to value ratios in mind. It might be difficult to refinance if you have little equity in the property. With a 50 year loan, your payments over 5 years could generate little or absolutely no equity in the home. It might appreciate, but then again it might not.

At the end pertaining to the day, the 50 year mortgage programs popping up are generally not a great choice for most buyers. If anything, you should be trying to go with the shortest term possible to minimize your total interest payments over the life pertaining to the loan.

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Sergio Haros is with Great Western Mortgage - providing stated income absolutely no doc loan borrowing solutions.

Written By: Sergio_Haros