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Is More Always Better?
Following close on the heels of the interest-only mortgage, the fifty-year
adjustable rate mortgage (ARM) is the new kid in the in-crowd of specialized loans.
Just as it sounds, this is a loan which has an end date fifty years from its inception,
which, for most people, means a lifetime of loan payments but at a considerably
lower monthly payment.
HSH Associates, Financial Publishers, refers to this type of loan as a “Hybrid ARM”,
of which there are many varieties. Without getting into the finer points of interest
adjustment ratios, the bottom line question is “What makes a fifty-year mortgage
attractive to home buyers?” The simple answer to that is that the payments are lower.
With the loan stretched out over fifty years, payments can be as little as half
of those for a 30 year mortgage, and even lower comparative to a 15, 10, 5 or 1-year
ARM.
A home valued at $500,000, for instance, with a 5/1 adjustable rate mortgage of
$400,000 at the current rate of 5% (many hybrid mortgages offer unusually low rates,
and this is just one example—check with your lender for current rates in your area),
your monthly payment would be $1816.56, of which $1666.67 will be interest at the
beginning of the payment series.
Now consider that a standard 30-year 1/5 ARM would cost far more initially--$2796.87
per month—but you would reach the halfway point in 265 payments (that’s a little
over 22 years) and would have paid $617,642.11 by that time. That’s a saving of
roughly $205,000. Run the numbers out to the end of the loan period and the difference
grows dramatically.
So as you can see this kind of loan is designed for the home owner that wants more
of a home with less of a monthly payment. If you are living in area where home prices
are still seeing considerable gains you should be fine. If you are living currently
in area where the housing prices have stalled or are not moving up you may want
to consider one of our other loan options that could save you more in the long term.
There is one fact you can’t ignore, 50 year mortgages are hear to stay and may be
just the ticket happy home owners need to sleep at night when they think of rising
interest rates. A 50 Year mortgage may just give you the peace of mind you need.
If you have lived in your home more than 6 months or signed without a pre-payment
penalty you may want to talk to one of the four loan specialists we match you up
with. They know all about 50 year mortgages and can help you decide if it’s right
for you. Best of all we give you a Free 50 year mortgage evaluation to help you
determine if it is right for you.
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