50 Year Loans - New to the market is a 50 Year loan, this allows you to stretch out your payments over 50 years allowing for a more reasonable payment especially in areas of high market values.
50 year loans are generally considered a band aid type mortgage loan and meant to be used short term until either credit or income levels increase to a point where the borrower can qualify for a conforming mortgage.
Some people a shocked to hear that someone would commit themselves to a mortgage for 50 years. First, most 50 year loans have the same term (or duration) as a 30 year loan. They are just amortized over 50 years with a balloon payment. Second, most people pay off their loan either because they sell their home or because they refinance far before the 30 year term is due. Don't worry, you're not stuck in debt for 50 years.
50-year mortgages are attractive to home buyers who cannot qualify for the high payments of 30-year mortgage loans. Most of them have no intention of keeping these 50-year mortgages for the entire loan term.
A 50 year loan can help a borrower qualify for a more expensive house because the payments are lower due to the fact that they are spread out over a longer time period.
50 year mortgages are among the best solutions for very bad credit debt consolidation refinance loans. You can qualify for 50 year mortgages even with a credit score of 500, and once you have taken out the money to pay off your debts and spend some time repairing your credit, your score may increase by 100 points or more! And due to the 50 year amortization, this can often be done without substantially increasing your monthly payment.
The 50 year loan is a great alternative for people that don't qualify for Interest Only programs.
With a 50 year amortization you will still be making principal and interest paymemts, so you will be paying down your mortgage balance.
A 50 year loan may be necessary to help a client qualify for a mortgage loan. The lower payment on the 50 year loan can sometimes become the difference between qualifying and not qualifying for a home loan. You can always make extra payments towards the principal of your mortgage payment so that you can pay the mortgage loan off much sooner than 50 years.
Getting a 50-year loan is a perfect way to avoid an interest-only or payment-option adjustable-rate mortgages.
As the interest rates increase and the refinance market struggles you will see many different programs become available. The 50 year loan is a great example. Lenders still need to offer products that will generate business in a difficult lending environment. This product is one that will keep payments low and still charge a decent rate for the investors. Certainly there will be very few if any who actually stick with a 50 year loan till the end. Most will refinance in the future for a lower term.
A 50 year loan can give you the payment stability of a fixed rate amortized mortgage (paying off some principle) Byt with the low payment benefit of an interest only loan.
Pros and Cons Of A 40, 45 or 50 year Loan - You may have heard that there are now 40, 45, and even 50 year mortgages being offered by some lenders. While some are happy to see the lower payments that these loans offer, others quickly dismiss them due to how long it will take someone to payoff the mortgage completely. If you are considering this type of loan here are the pros and cons to a longer amortization term.
These 40, 45 and 50 year mortgages are easier to qualify for than interest only loans. So depending on your credit situation it may be the best solution for you and you're paying down some of the principle every month.
To save a very minimal amount of money and add 10 or possibly even 20 more years to your mortgage does not make a lot of sense most of the time. On a 100,000 mortgage at 7% interest for 30 years your principal and interest payment would be $665/month. On that same 100,000 mortgage at 7% for 40 years, your principal and interest payment would be $621/month (a savings of $44/month for an extra 10 years of payments). On the same 100,000 mortgage, again at 7% for 50 years, your principal and interest payment would be $601/month (a savings of $64/month for an extra 20 years of payments). Adding an extra 10 years of payments based on the aforementioned numbers would add and extra $74,520 worth of payments to your mortgage for a whopping $44/month savings. Therefore, the savings are not nearly as grand as one might think by stretching your mortgage term out for an extra 10 or 20 years. However, sometimes the longer term may be necessary in order for you to qualify for the mortgage loan due to debt to income ratio restrictions and due to other reasons as well. Consult your mortgage professional to find out if a 40 or 50 year loan might be right for you.
The era of a homeowner sticking to their housepayments for 30 years and paying the house off completely is all but dead. Homeowners refinance every 3-5 years. Sometimes its for cash out and sometimes its for a lower term on the mortgage. So taking a 40 or 50 year term isn't all that bad. It is one way to reduce your payments and accomplish the objectives of the loan. Just keep in mind that you will probably refinance again to reduce your term.
Many renters prefer mortgages with longer loan terms because the monthly payments are not much more than the rent they otherwise pay. In states where the closing costs to refinance are high, many do not intend to refinance their loans once they move in to their homes. In this case, 50 year mortgage may be a prudent choice.
Mortgages with loan terms such as the 40, 45 and 50 year mortgage make home ownership easier to qualify for. First time homebuyers will be able to afford a bigger house or get a lower payment due to the longer payment schedule. Lenders favor these mortgage types over interest only loans because the principle balance of the mortgage is getting paid down. The 40 year fixed mortgage is a good option for those that do not plan to move out or refinance their property.
A benefit of a 50 year loan, compared to an Interest Only loan is that payment is fixed on a 50 year loan compared to an interest only loan which is fixed for 1,3,5,7 or 10 years.
With a 50 year loan you get the benefits of a payment similar to an interest only, but get pay of a little of the principle with every payment.