The Home Buyer's Korner

Information presented should be used for educational purposes only.

November 7th, 2013

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50 Year Mortgages ~ Are They the Right Financing Option

Hugo and MercadesWe’re all familiar with 15, 30 and even 40 year mortgages. However, there is a relatively new mortgage option that has been available to home buyers since 2006, it’s the 50 year mortgage loan. Although a half-century does seem like an extremely long time to amortize a mortgage, there can be some advantages.  In the Post we’ll discuss both the Pro’s and Con’s, so you can hopefully make the right decision for you and your family.

The primary benefit that someone benefits from with a 50 year mortgage is the ability to qualify for a larger mortgage loan.  This means that you can enjoy a better standard of living with lower monthly payments, which you might not otherwise be able to afford. On a monthly basis, it means you’ll have more wiggle room in your household budget for paying other living expenses.

The major disadvantage to a 50 year mortgage is that you will end up paying much more interest over the mortgage loan period, so I’d defiantly have an eye on refinancing at a later date and reducing your mortgage term when your income rises.

50 year mortgages also will come with higher interest rates than a lesser term mortgage and you can expect to pay 0.25% more in interest rate as compared to a 30 year mortgage loan. Also, you won’t be building much equity from amortization when choosing a 50 year mortgage loan term.

A 50 year mortgage loan can sometimes be the right mortgage, but think wisely and take time to consider all your options.  Most of all have an exit plan to get out of your mortgage for a better term with you can. Having a mortgage loan into your 70s or 80s before owning your home shouldn’t be part of the American dream.  Lastly, if a 50 year mortgage is the only way you can afford the home you’re considering, you might be looking at a home that is beyond your price range.

To find out more about the right mortgage term for you talk with a mortgage professional in our network. Have them provide you with several amortization schedules and think hard before committing to any terms that might give you second thoughts later.  

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