The New 50 Year Mortgage

The New 50 Year Mortgage
Just a​ few short years ago,​ many people were amazed by the​ prospect of​ a​ 40 year mortgage .​
While 30 year mortgages had dominated the​ market for decades,​ the​ idea of​ being able to​ spread out your mortgage payments over forty years was just almost too much to​ comprehend .​
Now,​ there is​ the​ new 50 year mortgage and if​ the​ 40 year mortgage took the​ finance world by storm the​ 50 year mortgage is​ leaving many people speechless .​
But,​ is​ a​ half century mortgage really a​ good idea? Well,​ there are certain some advantages to​ a​ 50 year mortgage .​
The most obvious advantage is​ that it​ allows a​ homeowner to​ spread out the​ cost of​ a​ home purchase and lower monthly mortgage payments .​
In housing markets where prices have skyrocketed this can be a​ major pro because it​ may make it​ available for individuals to​ purchase homes who might not have been able to​ do so otherwise .​
Of course,​ there are also major disadvantages to​ consider as​ well .​
When considering a​ 50 year mortgage it​ is​ extremely important to​ consider your age at​ the​ time of​ the​ purchase .​
For example,​ let’s say you’re 30 at​ the​ time your purchase the​ home .​
With a​ 50 year mortgage,​ your home would not be paid off until you’re 80 .​
If you​ think you’ll still be able to​ meet those monthly mortgage payments long after the​ age by which most people have retired,​ this might not be a​ bad option .​
On the​ other hand,​ if​ you’re looking to​ be debt free by the​ time you​ retire,​ it’s best to​ consider another option .​
It is​ also important to​ remember that the​ longer you​ draw out the​ payments on​ your home purchase,​ the​ more you’re paying in​ interest .​
This is​ why many critics of​ the​ 50 year mortgage are referring to​ them as​ interest-only loans .​
When you​ stop and actually look at​ the​ numbers,​ you’ll see that with this type of​ mortgage you’re paying a​ lot more in​ interest for your home that you​ would with any other type of​ home loan,​ even a​ 40 year mortgage .​
That’s money you​ might be able to​ put toward something else,​ especially if​ you’re looking ahead toward retirement .​
On a​ $300,​000 home purchase at​ the​ going interest rate the​ monthly payments would be in​ the​ neighborhood of​ $1,​800 per month with a​ 30 year mortgage .​
Conversely,​ with a​ 50 year mortgage at​ the​ same interest rate you​ could drive down the​ price of​ the​ monthly mortgage payment by about $200 per month .​
Since,​ you’ll be paying for the​ home 20 years longer with the​ 50 year mortgage than you​ would with the​ 30 year mortgage; however,​ you’ll actually end up paying more than $300,​000 more for the​ home over the​ course of​ the​ 50 year mortgage than with the​ 30 year mortgage .​
If you​ went with the​ 30 year mortgage and the​ monthly payment that is​ $200 a​ month more,​ sure you’ll spend $72,​000 over the​ course of​ the​ next 30 years but then your home will be paid for in​ full .​
With the​ 50 year mortgage you’ll still be responsible for that $1,​600 a​ month house payment for the​ next 20 years.

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