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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In today’s tight mortgage market there is no many loan products were you can buy a home with no down payment. The good old days were anyone with a pulse could get a mortgage with no money down. But there is still one great program left that has 100% financing and that program is for rural home loans by United State Agriculture Department.

Although this type of home mortgage loan has been around for years but most people are aware of it. Mainly because it was though to be for farmers only, it was known as a “farmer loan”. The USDA home loan program guidelines permits people to purchase a home with 100% financing at competitive interest rates, 30-year fixed rate mortgage, and mortgage insurance (MI). Does this sound too good to you to be true?

Yes, this great program does exist but it is not for everyone. There are some restrictions and guidelines both on household income and property eligibility. You household income can not exceed certain income limitations and the property has to be located in certain areas (mostly rural areas). These rural home loans are guaranteed by USDA and are not available in high population areas like big cites and towns. If you like in New York City then you are out of luck. But if you live in a city or town with population of less than 25,000 people then you may be able to find a home that is in an eligible area.

There are not a lot of “no down payment” programs that are left today.  The FHA Home Loan Program requires 3.5% down payment.  There is also a HUD Home $100 Down Payment Incentive Program that only has a $100 down payment, but you have to buy a HUD home foreclosed property in order to take advantgage of the HUD Home $100 Down Payment Program.

There are a lot of benefits to the USDA Rural Home Loans program besides the no money down feature. One is the closing costs can be rolled into the loan or you can ask the seller to may all of the closing costs including prepaid items such as property taxes and homeowner’s insurance. This means it is truly no money out of your pocket type of mortgage loan.

In comparison with a conventional mortgage if you do not pay at least 20% down then you will have to pay mortgage insurance thus increasing your monthly mortgage payment. The rural home loans of USDA do not have this private mortgage insurance requirement. This is one of the best financing methods available if you are eligible.

The USDA Home Loans Program is even better than FHA mortgage loans. FHA home loan requires a 3.5% down payment and they have an upfront private mortgage insurance cost plus a monthly mortgage insurance (MI) charge. If you want to buy a home in an area that is eligible for this program and you are also within the income guidelines, this would at least made sense to check into this program.

So what do you do now? This article only provides a brief description of the USDA Rural Home Loans Program. You need to get more information to see if you qualified and if you live or the area you want to buy a home is in a property eligible area. This is a great way and may also be the only way you can buy your dream home!

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About the Author:
You can get more information by clicking Rural Home Loans and you can find out if you meet income guidelines and if you live in an eligible area by clicking USDA Home Loans!
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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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Please Note... All links within articles are placed by their author-owners and not by this blog.Products with in those links may or may not be the best in the world.If it sounds too good to be true it could be a scam.Articles are posted for their info,ideas and or entertainment value only.

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