40 and 50 Year Fixed Rate Mortgages: May be easier to get approved | Loanbiz
Increasing home prices in some areas have created a need to make mortgage payments more manageable. While these extra-long-term fixed rate mortgages aren't for everyone, a fixed rate loan with lower payments than traditional 30 year fixed loan programs can help borrowers stretch their incomes to qualify for just a bit more house than they could otherwise afford. However, these 40 and 50 year mortgages are not the best loan option for most borrowers. Most people change properties every few years. For them, the savings afforded by the lower rates of hybrid ARMs provides a better way to lower their payments--and the 30 year amortization helps them accrue equity faster.
Advantages: For some buyers, the difference in a 40 year payment and a 30 year payment could be the difference between being approved or declined for their mortgage. If they don't intend to sell the property in the foreseeable future, don't anticipate a significant income increase, and are really uncomfortable with an ARM, long-term fixed rate mortgages can help the buyers get their home--and sleep at night, too.
Disadvantages: Adding 10 or 20 years to a mortgage means paying a lot more interest over the life of the loan. It also dramatically slows the accrual of equity. The difference in the 40 year payment and 30 year payment isn't usually dramatic enough to justify the added interest expense.
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