Best Mortgage

Lending experts are fifty-fifty on 50-year mortgages: some of them say as it can be risky, others say it’s good. Many men, many mind. Nevertheless, Statewide Bancorp in California is the first U.S. lender to introduce a 50-year mortgage. It means that a mortgage has been supersized. Half of first-time home buyers are 32 or older, according to the National Association of Realtors. If those buyers get 50-year mortgages and never refinance or make extra payments, they won’t pay off their loans until they’re in their 80s. Would they be crazy to get loans that amortize or pay off the balance over 50 years instead of the standard 30 years? No way. Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage.  Such loans only make up a small fraction of the market as you are not building wealth through homeownership with a 50-year mortgage. Although lenders offer 50-year loans, almost every company has variations: some have a straight 50-year mortgage, some have a balloon payment and some have adjustments. The customer is probably going to be charged a higher interest rate to have the privilege of paying 20 years more interest. Basically, a 50-year mortgage is the program of last resort and borrowers should remember that there will be a day of reckoning and maybe a bad day of reckoning.

Most 50-year loans are actually adjustable 30-year loans that are based on a 50-year repayment schedule. They are called “50s due in 30.” If carried to term, the loans have balloon payments due in 30 years. Some lenders offer adjustable home loans that can be repaid over 50 years. Because it is adjustable, the fully amortized 50-year loan is definitely profitable. Some buyers simply like the idea of having five decades to repay their loan.
As for taxes and insurance, the 50-year loan would begin with a monthly payment of $3,674 compared to $3,826 for the traditional loan. After 30 years, borrowers with the traditional loan would own their homes free and clear. Those with a “50 due in 30” would face a balloon payment of $388,036.  It’s expected that half-century mortgages will rapidly gain popularity. The advantage of a 50-year mortgage is that there is a lot of sizzle, but not much steak.

This entry was posted on Tuesday, September 5th, 2006 at 9:57 am and is filed under Main. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.