50 Year mortgage loans
50 Year mortgage loans - It seems like yesterday that the 30 year mortgage was the standard loan around. Welcome the 50 year mortgage. Yes, you read it correctly, 50 years.
The benefit of a 50 year amortized loan is not only the lower payments on a monthly basis but will include principle payments as well.
This new loan may be a good alternative to an adjustable rate mortgage since you get a low payment without the risk of your payments going higher. Although it is not available with all lenders yet, it is gaining popularity and should be an option with most lenders in the near future.
While your payments are going to be lower with a 50 year mortgage when compared with a 30 or 40 year amortization, you might be surprised at how small the difference is per month. For example a $200,000 loan at a 7.5% interest rate, your payments on a 50 year term will only be $118 lower per month on a 30 year mortgage.
So if you're goal is to pay off the home, you're probably better off in a loan amortized over 30 years. If your goal is to have a lower payment and still pay off some principle a 50 year loan is for you.
Another great alternative to the 50 year mortgage is the 30 year interest only, both have similar monthly payments
The difference in the monthly isn't that big between the interest only and the 50 year mortgage. But it might be that $100 to $200 difference a month which might be the difference in whether you're able to pay ALL of the bills at the end of the month.
One advantage of a 50 year loan is that your payments will never increase throughout the life of your loan. Interest only loans have a interest only period after which your payment will increase in order to payoff the loan during the remaining years of the term.
It's important you talk with your mortgage professional to see if this is an option thats open to you. Each program has its own qualifying guidelines and there are some changes that take place when going from a standard 30 year loan to instead taking a 50 year 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.