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