Lenders have developed what is now known as the 50 year mortgage. This is suppose to help keep the American dream of home ownership alive and well.

Banks are marketing them as a less risky alternative to the popular interest only or option mortgages as the loan does amortize so that the homeowner builds limited equity. The lenders expect them to be particularly popular with homeowners who have been making only the minimum payments on their option mortgages and are getting a little panicky as their rate adjustment date nears

Some banks are concerned that the loans would end up defaulting as a result of borrowers buying out of their price range, but the idea of the 50 year mortgage is still receiving attention in this highly competitive market.

Homeowners are often tempted to purchase more home than they can afford with a 50 year mortgage. You also have to pay an additional 20 years of interest on the loan. Not only are the interest costs going to be much higher over the life of the mortgage, but people in their 30’s will be paying into their 70’s

Options such as interest only loans or balloon mortgages offer initial lower payments, but these come with some very risky drawbacks. Unlike other low-initial-cost mortgage options such as the interest-only mortgage, there’s no possibility that you’ll end up with negative amortization with a 50 year mortgage.  Options are the key, less chance of finding yourself backed into a corner financially.

This entry was posted on Tuesday, April 7th, 2009 at 12:15 pm and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.