| During the past few weeks several
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| | potential interest costs increase
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| mortgage lenders have announced that they
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| | substantially with time.Total Potential
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| will now offer 50-year mortgages. This is
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| | Interest:15-years: $170,397.9820-years:
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| a curious idea, but not as curious as it
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| | $236,812.6625-years: $307,686.4530-years:
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| could be: At the height of the real
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| | $382,633.4740-years: $543,057.8150-years:
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| estate boom in Japan some homes were
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| | $714,690.40The huge interest-costs over
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| financed with 100-year mortgages.The
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| | 50 years surely seem formidable, but is
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| 30-year mortgage that is now the gold
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| | that really the case?There are several
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| standard of American home finance was
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| | issues to consider.If you can buy an
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| once virtually unknown. In the early part
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| | appreciating property then a long-term
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| of the 20th century most mortgages in the
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| | loan may be advantageous when compared to
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| U.S. were "term" loans, mortgages that
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| | the alternative: No financing. If you
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| lasted just five years. Since most of the
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| | cannot qualify for other loan products
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| debt could not be repaid in five years,
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| | because the monthly cost is too high or
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| at the end of the term owners would go
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| | for other reasons, then 40- and 50-year
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| out and get replacement five-year
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| | financing may be attractive.If you get a
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| mortgages.This system worked fairly well
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| | fixed-rate mortgage you have protection
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| until the 1930s. Then the Depression
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| | against rising interest costs. In effect,
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| drove down employment levels and shredded
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| | a hedge.If you expect your income to rise
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| property values. In the west, the Dust
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| | in the future, a longer-term loan may
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| Bowl impacted many states.But then a new
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| | allow you to buy now instead of waiting
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| idea arose. The just-formed Federal
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| | until you have a larger paycheck -- or
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| Housing Administration (FHA) said it
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| | waiting until prices are higher.If you
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| would guarantee the repayment of 20-year
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| | have a fixed-rate mortgage and have the
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| loans if borrowers would pay insurance
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| | right to prepay, in whole or in part, at
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| fees. Private lenders followed with their
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| | any time and without penalty, then you
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| own longer-term mortgages and the result
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| | have two attractive options: First, as
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| was that term loans largely disappeared
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| | your income grows you can make monthly
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| from the U.S. marketplace.Over time the
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| | prepayments that reduce the loan term and
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| accepted definition of "long-term"
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| | cut potential interest costs. Second, if
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| financing changed from 20 years to 25
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| | rates decline you can refinance -- an
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| years and then to 30 years. Forty-year
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| | attractive choice given that loans today
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| mortgages have been available since at
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| | can often be refinanced without the need
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| least the 1980s.What's the attraction of
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| | for much (or sometimes any) cash at
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| long-term loans?Fixed-rate, long-term
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| | closing. (That's not to say there is no
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| financing represents stability. If times
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| | cost to close, but that you can finance
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| are tough you don't have to worry about
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| | closing costs and thus avoid the need to
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| qualifying for a new loan. And if rates
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| | come up with cash.)This is the biggie:
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| are fixed, then rising interest levels
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| | The potential cost over 50 years is not a
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| are not a concern.But longer-term loans
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| | worry if you only have the loan for five
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| also have another value: They may allow
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| | years, 10 years or whatever.
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| borrowers to qualify for more
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| | Would I get a longer-term mortgage?
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| financing.Suppose we want to borrow
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| | Actually, I have.Long ago I bought an
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| $300,000 at 6.5 percent interest. With
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| | investment property with a 40-year loan.
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| fixed-rate financing, the monthly costs
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| | Since then rental rates have increased
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| for principal and interest would be as
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| | and the property has long thrown off a
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| follows:Monthly Mortgage Payments:
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| | positive cashflow each month. No less
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| Principal & Interest15-years:
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| | important, the value of the property has
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| $2,613.3220-years: $2,236.7225-years:
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| | increased some 400 percent -- value I
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| $2,025.6230-years: $1,896.2040-years:
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| | would not have if the property could not
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| $1,756.3750-years: $1,691.15
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| | have been purchased.So the next time
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| The list above plainly shows that the
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| | someone mentions a longer-term loan,
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| longer the term, the lower the monthly
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| | don't laugh. Check rates, terms and
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| cost for principal and interest. The
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| | conditions; it may well be that a
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| practical advantage of longer monthly
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| | long-term loan is what you need to get
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| payments is that borrowers can obtain
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| | the property you want with the income you
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| larger loans. Compared with 15-year
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| | have
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| financing, using a 50-year loan would
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| | now.-------------------------------------
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| reduce cash costs by more than $900 a
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| | -----------------------------------------
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| month in our example.Monthly payments are
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| | --Peter G. Miller is a syndicated real
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| not the only consideration, however.
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| | estate and personal finance columnist who
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| Borrowers should also look at potential
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| | appears 70 newspapers.Search lenders
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| loan costs. Because longer-term loans
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| | offering 50 year mortgages or go here for
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| are, well, longer, money is outstanding
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| | online refinancing and second mortgage
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| for a greater period of time than with
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| | loans .
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| 30-year financing. The result is that
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|