Every So Often a lender or 2 will step forward with a different product or reemphasize one that has already been around for some time. While 50 year mortgages are not totally different, there does appear to be a fresh take on them. The housing market, which hasn’t done so well lately, is searching to get more people to buy a new house. Here are such things you may want to acknowledge about these 50 year mortgages before you undertake one.
As the market remains to tighten, creating it harder to receive a mortgage now, a 50 year mortgage is planned to facilitate individuals still get one. The key idea is to lower the monthly payments even more than what a 30 or 40 year mortgage would do.
The 50 year mortgages are adjustable rate loans. Having a fixed rate part of about 5 years, after that they become adjustable – after the lead of whatever the market rate is at the time. In most instances, the interest rate is adjusted each year.
The interesting thing about a 50 year mortgage, is that very few people these days live in one place for more than 5 years. This is a really mobile society. If you are not planning on staying in that same house for at least 10 years, it may not be worth it.
There are three problems with this type of a mortgage. The first thing is that it takes a long time to get any equity built up. This could make it really difficult to receive money that you need to move and buy another house later on. There is also the possibility that the market could take a serious dip and housing values take a nosedive. You could end up, even after a few years, owing more than the household is worth.
A second issue is the amount of interest that you will be paying. The difference between a 30 year mortgage and a 50 year mortgage means that you are now paying about two-thirds additional interest. The bottom line is that the house you wanted so bad has now cost you perhaps up to six times more than the house is worth, whereas, two to three times is regular.
The interest rate, which will reflect market rates 5 years from when you receive it, will probably increase. How much will it increase? – nobody can be sure. Of course, it might even receive better – but to assume that it will do so for the next 45 years is really taking a gamble.
Other mortgages can provide low rates, too. It may work well for you, nevertheless, if you are deliberating staying in the home less than 5 years. By selling it before the adjustable rate starts, it remains completely predictable up until the change at the 5 year mark.
So, while you think about whether you should get one or not, think back that you could probably be far better off finding one you can really afford and on easier terms. It may be smaller, but if you reside there long enough at least it will be yours.
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