40-Year Mortgage Loans Make Sense – When Do They Make Sense?
By Dan M. Kennedy

Do 40-Year Mortgage Loans Make Sense?

If you’re like most people, you spent most of your life without thinking about 40-year mortgage loans. But the current economy has changed your plans and 40-year mortgage loans have moved to the front of your awareness. Are they worth it?

On the good side, they spread the payments longer than the more conventional loans, so you get lower monthly payments. Currently, to get smaller, fixed monthly payments than you get with mortgages amortized over 30-years,, you’d have to get an interest only mortgage, a much riskier loan.

Since the monthly payments are lower, you might qualify for this type of loan when you cannot for a 30-year fixed rate mortgage. This situation would apply to a rather small number of people.

On the other hand, the longer the term of the mortgage, the more interest you pay.

With a 5% interest mortgage loan amortized over 30 years you end up paying $93,255 in interest. With a 5% interest mortgage loan amortized over 40 years you end up paying $131,456 in interest. That’s $38,200 more. But the 40-year mortgage does save you almost $50 on your monthly payments.

Obviously, the higher the interest rate, the higher the loan amount, the more interest you pay. The price is really high. The difference between the monthly payments for the two types of loans is not that great.

To make a good comparison, you should not only compare the 30-year and the 40-year mortgage loans but your other alternatives too.

For instance, if you rent right now and rents are high and you cannot qualify for a 30-year loan, maybe it makes sense to go for the 40-year one. Or if you’re already a homeowner with equity in your home but can only afford the payments on a 40-year loan and not accessing the equity would have bad consequences.

Maybe you can refinance later, if your income is higher or the mortgage rate you’d qualify for would be lower.

Of course, counting on future events is not good practice. They should be a bonus; you should be prepared to accept the loss resulting from 40-year mortgage loans from the start.

So 40-year mortgage loans make sense for a rather small group of people and are pricier than the more conventional 30-year mortgages.

Current interest rates are low. If you can get a mortgage, now it’s a good time to. do it. However, you should be well informed. Visit http://www.1-currentmortgagerates.com to get information.

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How would you do the math if you are looking for the best terms on your mortgage loan? Does it pay to go with a 15 or a 30-year mortgage? How does one measure up against another? 

Here, we will take a look at the numerous reasons why it pays to consider a 15-year mortgage as compared to other loan terms – be it a fixed or adjustable rate mortgage. 

Taking the First Step – Comparing Mortgage Rates 

As a homeowner, the first thing that you need to think about when considering whether you should go for a mortgage refinance or not is the current market conditions. Today, the real estate market works in such a way that interest rates on both adjustable and fixed rate mortgages are at historic lows. According to Freddie Mac, when you consider a 5-year, 15-year or 30-year mortgage – you will see that the interest rates are running at more than 75% lower. 

Whether you’re buying a new home or considering refinancing, you will see that this is the perfect timing for homeowners like you. Just remember that it is a must for you to weigh in all the possible options first. 

Make a comparison of the mortgage rates. Check on the weekly Freddie Mac market survey. What is the average interest rate for a 30-year fixed rate mortgage? How does this compare with the standard interest rates offered by private lenders? 

Based from the results, you can then come up with an intelligent decision as to whether now’s the right time to refinance or buy a new home – or if you have to wait for the market rates to ease a bit. 

When It Makes Sense to Go for a 15-Year Term 

So when is it more desirable for a homeowner to go with a 15-year term when refinancing or buying a home?  It is a particularly attractive option for homeowners who would like to shorten their 30-year mortgage while getting lower rates at the same time. Make rough estimates for the interest rate that you would have to pay for a 15 and a 30-year mortgage. As you do so, you will see that you can actually pay off the loan faster while saving you thousands of dollars in interest rate in the long run. 

But what if you have a mortgage loan with an adjustable interest rate? This is the time that you need to consider all your options carefully. Refinancing the loan might be a good idea if you are planning to stay in the house for a few years – although it would still depend on the market conditions. 

An adjustable rate mortgage also comes in handy if you would like to have lower interest rates as compared to fixed rate loans. For this, you would have to refinance within a certain period of time, after which the loan will be reset to new rates based on existing market conditions. 

Just remember that it is important for you to also have a solid credit standing when opting for a 15-year mortgage loan. When you have a good credit score, you will incur an even greater set of benefits like the savings that you will get from the lower interest rates.

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About the Author:
Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Oregon Mortgage Brokers and Lenders and provides reviews of national companies like AmTrust Bank Mortgage.
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Mortgage interest rate predictions are not the easiest thing to make. However, we do have some good information to work with that makes predicting interest rates for 2010 a lot easier. Here are my home loan interest rate predictions for 2010 and how I made them.

Right now a typical 30 year fixed rate mortgage can be had for around 5% which is near an all time low. This low interest rate is the result of a struggling housing market and economy. Another thing keeping interest rates low is a $75 billion housing stimulus plan enacted by President Obama. Low interest rates are needed right now to prevent more foreclosures and mortgage defaults. Since the rates are so low, many existing homeowners can easily save a lot of money, and their home, by getting a mortgage refinancing. In addition to just having low rates, there are also new options available because of the Obama stimulus plan that make refinancing a home mortgage easy for nearly any homeowner.

However, interest rates constantly change and I predict that later in 2010, home mortgage interest rates will increase. While the predicted rate increase will not be huge, it will be big enough to make refinancing a mortgage not beneficial to some homeowners, and cost every homeowner more money. I think that the housing market has seen its worst days and tings will be steadily getting better throughout the year. As the housing market and overall economy improve, interest rates will rise due to less people struggling. I predict that around June of 2010, interest rates will rise by around .5%. This is not a dramatic increase but makes refinancing less beneficial than it is now. I also predict another rate increase of anywhere between .5% – .75% that will happen around October of this year. These combined rate increases will bring the current interest rates up from 5% to around 6% – 6.25%. While this rate is still extremely low, it will make refinancing a home mortgage more expensive and less beneficial.

Homeowners should take action now and take advantage of the low interest rates that are available. There has never been a better time to get into a new home loan. Millions of people are struggling to make their monthly mortgage payments and are at serious risk of losing their home. Do not let that happen and get a mortgage refinancing today before the interest rates increase.

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About the Author:
For more articles on Mortgage Refinance check out my website
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