Recently some lenders started to offer 50 year fixed rate mortgages. This type of loan programs is for the borrowers who are not comfortable with the concept of the interest-only loan programs. There are pros and cons for this type of loan programs.
A 50 year fixed rate mortgage has the advantage of a lower payment because the loan is paid back over a longer period of time. This loan provides stability because the interest rate is fixed for the life of the loan. Because the loan is longer, more interest will be paid than on a shorter loan.
If you have an excellent history of making your mortgage payments on time, you may be qualified for a mortgage which allows you to defer interest rather than spreading it out over 40 or 50 years.
Interest only loans and 50 year mortgage plans provide a very low monthly payment without the risk of huge payment increases at the end of 2, 3, or 5 years.
50 year fixed rate mortgage programs are for borrowers who are looking to have a low monthly payment. This program is great for people with low monthly income that are unable to afford the home of their dreams if they were in a conventional thirty year mortgage.
50 year mortgage loans drop the mortgage payments down comparable to what interest only loan payments would be. Some borrowers and lenders are more favorable to this loan because principle payments are made to the loan.
The longer the mortgage term, the slower the rate at which you are paying down the principal on the home. For that reason it is important to note that while you are still paying down the principal, you are paying it down much slower on a 50 year mortgage than on a 30 year mortgage.
Interest only loans can be risky because of the payment adjustment following the initial interest only period. A 50 year mortgage provides a very similar payment without the risk of huge payment increases at the end of 2, 3, or 5 years. If you require a low payment but don't want to risk payments to interest only, ask your mortgage broker if a 50 year term is right for you.
A 50 year term mortgage will prove to be very popular in high priced areas such as California. People will always want to buy their own home but will need to use inovative mortgage products like this in order to get their monthly payments affordable. In many cases it all comes down to monthly cash flow and these kinds of loans provide cash flow help.
There are many different forms of 50 year mortgages. These could be 50 year fixed mortgages, to 50 year amortorized ARM mortgages to 50 year interest only. Talk with your mortgage professional to find out which one is right for you.
50 year mortgages are a very popular alternative to interest only mortgages for borrowers whose credit scores do not allow them to qualify for a regular interest only mortgage program. However, if your goal is to obtain lower payments, there may be alternatives. If you pay your mortgage on time and have at least 20% equity in your property, use your good history to qualify for an interest only or even a minimum payment option fixed rate loan no matter what your credit score looks like. Contact us at 415-617-5448 for more information.
50 year loans are great for areas of high housing costs, thus bring the payment in a more suitable reach by extending the term of your loan.
With the lower payment of the 50 year loan you have more purchasing power, which means you can qualify for a bigger home.
There are interest only loans available that are interest only for up to 15 years. In that time you can also make additional principal payments. A loan with this scenario would be a good alternative to a 50 year mortgage because it will be paid off in 30 years. This is when most 50 year mortgages payments balloon and are due in full.