WASHINGTON -- May 12, 2004 -- A growing number of homebuyers opt for adjustable-rate mortgages over 15-year or 30-year fixed-rate loans in order to take advantage of lower interest rates and monthly payments. In turn, this financing option allows them to purchase more expensive homes.
However, many buyers do not realize that a 40-year loan can accomplish the same goals without the added risk of possibly higher borrowing costs after the fixed-rate term expires.
Usually a 40 year payment is very close to an interest only payment. Usually if you have a 10 year interest only payment then at the end of the 10 years it becomes a 20 year mortgage with a big jump in payment.
Although borrowers will not accumulate equity as fast and will be forced to shell out thousands more in interest, many would prefer the additional buying power or the ability to free up cash for other investments. Moreover, most homeowners relocate before the end of the loan term, anyway.
Those buyers interested in the 40-year mortgage will have to search for a lender that offers it, however -- it is not a common product.
Russ Ravary is a licensed real estate agent in the State of Michigan and a Realtor.
Photos, Comp and Listing Information Courtesy of Realcomp II Ltd, Properties shown have been listed and sold by various MLS member REALTOR® agents.
I do not guarantee or warrantee any of the above information. Please feel free to verify any of the facts. I recommend to always have a home inspection, always consult an attorney about contracts, Purchase agreements and any legal questions. Also consult a CPA or accountant about tax consequence regarding a Michigan home sale, or Michigan foreclosure.