[CMF-checkins] Mark Tiernan, Are You Ready for a 40-year Mortgage?

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Mark Tiernan, Are You Ready for a 40-year Mortgage?


Real estate prices have been increasing steadily over the last five years,
particularly on the East and West coasts. In parts of California, homes are
selling for 33% more than they were a year ago. This has made it more
difficult than ever for first-time homebuyers to purchase a home.

Over the years, a number of new mortgage options have become available to
prospective buyers that ease the burden of buying a home. Buyers can now
obtain a mortgage with a variable interest rate that rises or falls with the
market or even a mortgage that requires only interest payments for the first
few years of the loan term. This allows buyers to make smaller payments
early in the repayment schedule while purchasing a more expensive home than
they otherwise might be able to afford. The payments would increase in later
years, but so, presumably, would the income of the buyers, so that the home
would still be within the buyers' range of affordability.

A relatively new mortgage option that may soon adjustable rate mortgage and
the interest-only mortgage in popularity is the mortgage with a 40 year
term. While most mortgages offered today are for either 15 or 30 years, the
40 year mortgage has been available for nearly 20 years, but few lenders
offer it as an option, as they are often reluctant to tie up their money for
such a long period of time. That may change, however, as Fannie Mae has
announced their intention to purchase more 40-year mortgages. With Fannie
Mae purchasing more 40-year mortgages on the secondary market, lenders will
probably be more willing to offer them to customers.

Interest rates will likely be somewhat higher for a 40-year mortgage than a
30-year mortgage, but the extra length of the loan term will keep the
payments lower than with a traditional mortgage. Prospective buyers should
be aware that they will pay more in interest on a 40-year mortgage than they
will on a traditional 30-year note. Studies show that most homebuyers do not
stay in their homes for anywhere near 30 years, let alone 40. This being the
case, the market for 40-year mortgages may remain fairly small. But for some
buyers, it may mean the difference between continuing to rent and buying the
home of their dreams.

(c)Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including
End-Your-Debt.com, a Website devoted to debt
consolidation<http://www.end-your-debt.com/>information and
HomeEquityHelp.net, a site devoted to information on home equity
loans.<http://www.homeequityhelp.net/>
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