The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
Are you looking to afford a new mortgage? A 50-year mortgage may be an option, but here are some things to consider when looking at a long mortgage term.
These loans are not bought and sold by Fannie Mae or Freddie Mac. They are smaller banks and portfolio lenders that offer unique financing and, as a result, will charge an additional premium. You can expect your interest rate and fees to be above market. By above market, we mean at least three quarters of a discount point higher in rate than the Freddie Mac mortgage market survey. This type of loan effectively is an interest-only mortgage that is similar to the interest on the loans that were available before the financial crisis.
The 50-year mortgage is pretty much what it sounds like — your loan is amortized over 50 years, similar to the way a 30-year, fixed mortgage is amortized over 30 years. At the end of the loan term, the loan is paid in full. A 30-year, fixed-rate mortgage typically translates to paying double the amount of money you originally borrowed. With a 50-year mortgage you will pay almost four times the amount of interest on the amount originally borrowed. Yes, such a loan term would be incredibly expensive — the cost of having a lower monthly mortgage payment.
If you are comparing a 30-year mortgage to a 50-year mortgage, you might be trying to purchase more than you can handle — not a prudent move if you’re trying to take on something affordable. While the mortgage payment might be affordable, it would also be an incredibly expensive financing vehicle. For all intents and purposes, this is practically an interest-only mortgage
Interest-only loans can be beneficial for a consumer who has big liquidity in the bank, excellent credit and is otherwise sophisticated in mortgage finance, while looking for cash flow. (Don’t know where your credit stands? You can get your two free credit scores, updated every 14 days, right here on Credit.com.) For everyone else, a 30-year fixed rate mortgage is substantially less expensive than its 50-year counterpart.
If you were thinking about this type of financing, you may want to reconsider and speak with a professional — someone who can guide you on what type of income may be needed to qualify for the purchase of a home.
Image: StockRocket
December 13, 2023
Mortgages
June 7, 2021
Mortgages