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Further
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A Business Guide For The Very New Internet Entrepreneur - Francisco Aloy
Did you recently buy your first computer and just started surfing the Net? Isn't it fun? All the new websites and places to go, sights to see! Have you ever wondered if you can make money with your newfound toy? I think that thought is...
The Management Team Section of Your Business Plan - Dave Lavinsky
Even the best new concept or existing plan will fail if executed poorly. The Management Team section of the business plan must prove to the investor why the key company personnel are "eminently qualified" to execute on the business model. The...
When to get an Auto Refinance Loan - Tony Forster
Auto Refinance You have probably heard of auto refinance before. Or simply refinance. The term "refinance" actually refers to a financial situation wherein a borrower finds financing to pay off a current loan. Refinance is often put into practice...
Are Fractional Shares For You? - Leon Altman
Fractional shares (“fractionals”) are sometimes confused with other vacation property options, such as time shares and condo hotels. While there are similarities, there are a number of things that make fractional shares unique, and thus suited for a...
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40-Year Mortgages: An Alternative to Interest-only Loans?
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Written By:
Chris Rocks
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Interest-only loans are quickly becoming a mainstream loan product. Borrowers who were initially turned-off by the perceived risk associated with an “interest-only” loan are now starting to see the benefits: Lower payments, less money tied up in equity, more flexibility, etc.
For the savvy borrower, an “interest-only” loan can be an important component to an overall financial plan -- allowing them to divert principal payments to other financial goals.
“Interest-only” is typically an option only available on adjustable rate mortgages (although some lenders are now offering this option on 30-Year Fixed Loans). Borrowers who plan on keeping the loan for a long period of time and are uncomfortable with a loan product that has an adjustable rate component, may be interested in the 40-Year Fixed Rate Mortgage.
(Note: Some lenders do offer a 40-Year term on their adjustable rate mortgages)
The more flexible underwriting guidelines of a 40-Year mortgage may also attract some borrowers who are interested but do not qualify for an interest-only loan.
A 40-Year Mortgage is exactly as it sounds – a mortgage that is re-paid over a 40-year term. Due to a longer repayment period, 10 years more than the standard 30-Year Mortgage, the monthly payments are lower.
Until recently, these loans were difficult to find. Fannie Mae has now announced they will begin - continued below ...
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purchasing these loans from lenders which should increase their availability.
Let’s look at the numbers:
For a $250,000 loan with a fixed interest rate of 5.75% and a term of 30 years, the monthly payments would be $1,458.93; but a borrower could save $83.40 a month by taking out a Fixed 40-year mortgage. Even at a higher interest rate of 6.00%, the monthly payments would be just $1,375.53.
The monthly savings comes with an increase in overall interest:
If a borrower were to keep the Fixed 40-Year Mortgage for the entire term and make the minimum monthly payments, they would pay approximately $135,000 more in interest.
40-Year Mortgages may be attractive to those borrowers uncomfortable with adjustable rate periods or who have difficulty qualifying under the stricter guidelines of an interest-only loan, however, it is important to understand the impact a 40-Year term will have on the overall cost of your loan.
As always, it’s best to consult with your trusted loan professional. They can help you understand your options and determine which loan product is best for you.
About the Author
Chris Rocks is a successful Mortgage Consultant and writer based out of Chicago, IL.
Website URL: http://www.loansbyrocks.com
Contact Email Address: chris@loansbyrocks.com
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Increase Sales with Payment Solutions - Marc Singer
Take a second and imagine your shopping on a website, find the product you've been looking for, and as you go to the order form to purchase it, you find out that the company doesn't accept payment online. Instead, you must mail a check. If you...
Internet Marketing VS Forex Currency Trading - Amin Sadak
Have you noticed that when someone’s trying to sell you something - such as a system for making money - they always make it look far easier than it is? Let’s look at two Internet businesses, almost as diametrically opposed as it’s possible to be...
Home loans: – To substantiate financial possibilities on your land - Amanda Thompson
Availability of Home loans is in full bloom. They are uncomplicated, tenable, easily available, very flexible and tailor-made for homeowners. They are offered by almost every loan lending or financial institution. Home loans are like omnipresent...
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